Why High Prices After Natural Disasters Isn’t Price “Gouging”

Prices are a factor of supply and demand, and after a natural disaster, demand is through the roof and supply is usually scarce, which equals higher prices, plain and simple. Refusing to let prices rise to their natural level will only bring about shortages, as the scarce supply is snatched up greedily by those who don’t really need as much as they are taking, and there is no incentive for new producers to bring new supply to the market. As non-intuitive as it seems, high prices ensure that more people get scarce resources, and that the resources become less scarce more quickly.

Read these articles for more wisdom on this issue:

On Price Gouging, by Don Boudreaux

They Clapped: Can Price Gouging Laws Prohibit Scarcity? by Mike Munger

Defining Gasoline Price Gouging, by Thomas Sowell

And listen to these two podcasts by Russ Roberts: Munger on Price Gouging, and Munger on Shortages, Prices and Competition.

And if you don’t own it, sell some shirts and buy Thomas Sowell’s Basic Economics, if only for the few chapters at the beginning on prices and shortages.

The Farmer


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