Price Gouging Laws Wasted Resources During the Hurricane Irene Emergency

Michael Giberson

In a post at the Master Resource blog I point out another problem with anti-price gouging laws: during actual emergency conditions both state governments and consumers likely have much more important things to do that worry about whether particular price increases are unconscionable under the state’s understanding of that term.

Among other points, I note that just before Hurricane Irene hit New Jersey the state was warning consumers about potential gasoline price gouging, among other imminent threats.  When the storm was over, the state reported receipt of 103 price complaints. The result:

The investigation ended up finding no stations guilty of price gouging, though three stations allegedly violated the state’s law against changing gasoline prices more than once in a 24-hour period. The three stations have been cited by the state.

Several persons died in New Jersey due to flooding, and the damages may reach “billions of dollars” according to Governor Chris Christie. These are real emergency issues. In response, among many other actions, the state had investigators out counting how many times gasoline stations may have changed prices within each 24-hour period since the emergency was declared.

Concerns over price gouging can also lead to short-term gasoline shortages and consumers waiting in gas lines.

Waiting in line for gasoline is about as useful a response to an emergency as sending out state investigators to count the frequency of gasoline price changes, but with spot shortages and prices unable to go up to limit demand, gas lines and waiting are almost inevitable.

As the note at the end of the piece adds, “For more on price gouging, see Giberson’s article in the Spring 2001 edition of Regulation magazine and his op-ed appearing in the Washington Times on June 6, 2011. In addition, Giberson blogs frequently on price gouging law at Knowledge Problem.”