President Bush today declared that there should be “zero tolerance” for looters and price gougers.
Bush warns against price gouging on gasoline prices (Reuters) (see CNN version here)
President Bush warned against price-gouging of gasoline on Thursday in reaction to the aftermath of Hurricane Katrina and said looters should be treated with zero tolerance. “I think there ought to be zero tolerance of people breaking the law during an emergency such as this, whether it be looting, or price-gouging at the gasoline pump or taking advantage or charitable giving, or insurance fraud,” Bush said in an interview on ABC’s “Good Morning America.”
What does that mean, exactly?
Obviously, people who break the law should be punished. That’s true even when there’s not a hurricane. I even agree that a natural disaster is no excuse for stealing from one’s neighbors.
Presumably, though, the president means something more than that. Is he saying that looters and price gougers and the like should be shot on sight? Or merely that the flooding constitutes aggravating circumstances that would add to the penalties imposed after due process of law?
Update: While most of us are focusing on the looters, others are more concerned about the villification of price gougers.
Mark Kleiman notes that “price gouging” may be precisely what’s needed right now:
So there’s going to be less gasoline in the southeast and midwest than people were planning to buy at last week’s (already very high) prices.
The natural result of that situation is that the price of gasoline goes up. In the short run, that doesn’t result in any additional supply, but it does reduce the quantity demanded, allowing the market to clear. Unfortunately, the short-run price-elasticity of demand for gasoline is low, so even a modest-sized supply crunch will naturally cause big price increases.
In economics, this is called “market clearing.” In politics, it’s called “price gouging.”
True. Of course, the same is true for other commodities. It’s expensive to send surge capacities of, say, lumber to an area hit by a natural disaster. So, if the margins are low, there’s no incentive–indeed, it may actually cost more than the break even point–to meet the demand surge in the short run.
Tyler Cowen adds, “When such a disaster comes, should we waive price gouging laws, and temporarily repeal liability for those helping strangers?”
Bryan Caplan sums it up nicely: “Note to politicians of the world: For the last time, if you want supplies to flow to disaster areas, let prices rise !”
