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Killing the Messenger

Posted By Don Boudreaux On August 18, 2004 @ 11:03 am In Regulation | Comments Disabled

As surely as ferocious hurricanes raze trailer-home parks and power lines, merchants raise prices in the immediate aftermath of such destruction – and people and politicians complain [1]. Economists then arrive with admonitions against admonitions against so-called “price-gouging.”

Like physicians, firemen, claims adjustors, and some other professionals, economists often find other people’s folly or bad luck to provide the best stage for displaying their professional talents.

I can’t resist.
……

Complaining about “price-gouging” is useless (except insofar as it furthers a demagogue’s political aspirations). In the aftermath of a natural disaster, such as Hurricane Charley, the unalterable fact is that the value of existing supplies of things such as lumber, bottled water, electricity generators, and tree-trimmers is much higher because of the destruction. This fact is unfortunate, but it’s a fact that must be dealt with.

The higher prices charged by merchants are best thought of as a series of communications – clear messages to consumers that existing supplies must now be economized on more rigorously than before, and clear messages to suppliers that extra profits are available to anyone who can speed to the scene of the disaster goods and services that people desperately want.

Criticizing merchants who charge these higher prices is much like criticizing messengers who bring unwelcome news. The news ain’t the fault of the messengers. And if messengers who deliver unwelcome news are silenced – if they are prevented from delivering it, or punished for doing so – then those who should know the reality of the situation remain in the dark, unable to respond in ways that minimize long-term harm.

Here’s [2] an op-ed I wrote on price-gouging after my home suffered minor damage from Hurricane Isabel in 2003.

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[1] people and politicians complain: http://www.nytimes.com/2004/08/18/national/18scams.html?hp

[2] Here’s: http://www.virginiainstitute.org/viewpoint/2004_04.html

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