Jeffrey Tucker at Laissez Faire Today points out Peter C. Earle’s blog on the emergence of a black market in gasoline in northern New Jersey and New York City during the post-Storm Sandy period. A few days after the storm swept through, when politicians began reasserting their willingness to enforce price gouging limits on gasoline sales, Earle went looking for signs that the price caps contributed to gasoline sales shifting to the black market.
Without too much trouble Earle found the black market: tweets naming offer prices or bid prices much higher than legal retailers could legally charge; on-line want ads with prices asked at $15 or $25 per gallon, and other ads with buyers suggesting $5. He tracked bids and offers for a few days, noticing a kind of rough fumbling for a mutually workable price–the way price discovery works when it has to work in the shadows. As news stories noted at the time, some persons were offering a variety of personal services in exchange for gasoline in place of a cash payment.
I wish news organizations with their teams of reporters and camera crews would have explored these market developments more carefully-not just going for the “sex for gas” titillation, but also reporting the more ordinary money trades. It would be great to have price, quantity, and location data for all of the black market exchanges, too, so as to get a clearer picture of the costs of price gouging policy’s price caps. But Earle’s reports provide some useful insight into how people creatively respond to politicized efforts to control prices. Earle has performed a real public service.
It is interesting to note that consumer bids tended to anchor around $5/gallon, perhaps near the highest that consumers could imagine being willing to pay under most circumstances, and yet sellers were often offering at a much higher level. (This $5 stickiness in buyer bids may be evidence of an anchoring effect, that is to say a behavioral bias that causes the market to function less efficiently in that consumers resist transactions that would contribute to consumer surplus. See related issues raised here.)