Gov. Christie told merchants that price gouging during a state of emergency is illegal because "during emergencies, New Jerseyans should look out for each other -- not seek to take advantage of each other." Christie warned: "The state Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties." It's not just Christie who has threatened to prosecute sellers for raising prices. New York Attorney General Eric Schneiderman has launched an investigation into post-storm price increases after receiving consumer complaints about higher prices for everything from gasoline to hotel rooms.
Christie, Schneiderman and public officials elsewhere know better or have access to economists who inform them. But they're playing politics with people's suffering, emotionalism and economic ignorance. By the way, politicians would serve us better by focusing their energies on tax gouging.
Here's a which-is-better question for you. Suppose a New Jersey motel room rented for $125 a night prior to Hurricane Sandy's devastation. When the hurricane hits, a husband, wife and their two youngsters might seek the comfort of renting two adjoining rooms. However, when they arrive at the motel, they find that rooms now rent for $250. At that price, they might decide to make do with one room. In my book, that would be wonderful. That decision would make a room available for another family who had to evacuate Sandy's wrath. New Jersey Gov. Chris Christie and others condemn this as price gouging, but I ask you: Which is preferable for a family seeking shelter -- a room available at $250 or a room unavailable at the pre-hurricane price of $125? It's not the intention of the motel owner to make a room available for another family. He just sees an opportunity to earn more money. It was not the intention of the family of four who made do with just one room to make a room available for another evacuating family. They are just trying to save money. Even though it was no one's intention to make that room available, the room was made available as if intended. That's the unappreciated benefit of freely fluctuating prices. They get people to do voluntarily what's in the social interest -- conserve on goods and services that have become scarce.