Price gouging in Haiti

Michael Giberson

Reports from Haiti suggest that prices for many useful and necessary goods have jumped considerably since the earthquake.  Candles, matches, ice, water, food items, bus trips from the capital, petrol, plastic sandals, charcoal, rice, sugar – the list of items now selling at dramatically higher prices seems endless.  Last week I suggested that claims of price gouging that were heard in Venezuela and Alaska were stretching the meaning of the term a bit, but if anything represents pure price gouging it is sharp price hikes on necessary items amid the current devastation in Haiti.

I don’t know whether or not Haitian law prohibits or limits price increases on necessary goods during emergencies, but surely the ethics of price gouging are the same in Haiti as in other places.  Consider some of the episodes that are described as price gouging in news articles.

  • Wall Street Journal: “The Hotel Oloffson, where many journalists are camped out, was charging up to $100 per night — for a mattress in the parking lot. A bottle of Gatorade at the hotel was going for seven dollars.”
  • New York Times: One vendor mentions was a Manouchka Wendiwou, described as “a vendor in La Saline who raised her candle prices by 60 percent and made no apology for charging what the market would bear.”  The article also notes that matches, foodstuffs, gasoline, and ice are showing dramatically higher prices in Haiti.
  • Philadelphia Inquirer: Mentions “price-gouging for gas and water” hampering relief efforts.
  • Boston Globe: “Price gouging was rampant at the main bus terminal. Fortune and others said the cost of a ticket out of town more than doubled since the quake hit. But it was a price that hundreds were willing to pay after nearly a week of living on the streets….”
  • Ottowa Citizen: “About 30 per cent of gas stations in Port-au-Prince have opened, and officials say there is no longer a fuel shortage. But prices have tripled from pre-earthquake levels.”

If price gouging is unethical, then we ought to condemn these reported behaviors right?

But I find it hard to condemn these actions, which generally appear to be pro-social commercial responses to abnormal social and economic conditions. Higher prices motivate more careful use of existing supplies as well as extraordinary efforts to secure additional supplies. Changing relative prices help guide the efforts of suppliers and merchants to the most vitally needed items. Both the incentive and information aspects of prices are critical to guiding decentralized responses to human needs in this rapidly changing situation.

The New York Times article observes that, “Haiti’s huge informal sector reacted faster to the quake than did established companies and banks. Outdoor markets like La Saline are already filled with goods from the countryside, including salt, cornmeal, fruits like mangoes and used clothing from the United States.”  How fast would that informal sector have reacted if the government felt an obligation to enforce some notion of anti-price gouging policy?

NOTE: Chris MacDonald discusses a bit of the ethics of price gouging in Haiti at his Business Ethics Blog.  See Business As Usual (plus Price Gouging) in Parts of Haiti.

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3 thoughts on “Price gouging in Haiti

  1. It is not a question of “gouging” being ethical or not. The g-word word is a rhetorical device used by anyone unclear about supply and demand.

  2. Price Gouging is an unqualified social good. I learned that in Econ 101, and observed it in practice during the hurricanes that hit my own home town of Texas City, Texas and nearby Lousiana. Price Controls, especially during emergencies, deprives those who need things the most of what they most need, everwhere, every time. During emergencies like the one in Haiti, to be against price gouging is to be pro-death and pro-suffering for the greatest number.

  3. Peter, admittedly the g-word is an emotionally loaded and pejorative term. Can’t do much about that, I don’t think, but try to improve the sophistication of the thinking that surrounds it. Eventually, like “usury” for example, the concept will become less prominent in everyday economic discourse, the emotional response will be moderated, and less motivating for policy action.

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