Exactly how bad does the gasoline shortage in New York and New Jersey have to get before the governments of these two states suspend their insane price-cap policies?
Both New Jersey and New York impose stiff penalties on merchants who raise prices during a declared disaster. In New Jersey, this means that gas prices on existing stock cannot rise more than 10 percent. The restrictions in New York are less specific but may actually prevent any increase at all.
The results have been totally predictable. Demand for gasoline continues to rise despite falling supplies. Stations run dry; long lines at stations still operating disrupt economic productivity; people are increasingly unhappy because the situation grows more dire by the day.
Gas is a good that is extremely susceptible to the temptation to hoard. It doesn’t go bad under any reasonable period of time, which means that there’s no penalty for purchasing excess stock in a time of shortage. The only way to discourage this is by explicit rationing or by allowing the price to increase, making people pay a higher price during the shortage.
I haven’t been able to find one economist in favor of the anti-gouging laws. My explicit call for an anti-gouging law supporter on Twitter was met with silence. People from across the political spectrum—Matt Yglesias at Slate toHolman Jenkins at the WSJ—have condemned the laws.
There’s good reason for the widespread condemnation of anti-gouging laws: they are—almost—universally harmful. There’s no public good or special interest benefited by the laws. And especially when it comes to necessities like gasoline, the harm they do is sharply felt by a large part of the population.
So why do we have these stupid laws at all? [It may not be the reason you think]
I'm a Mises capitalist, but while higher prices may be part of the solution, IMO, likely not the best one.
ReplyDeleteSome thoughts:
1. Any gas station, or other vendors who gouge, are likely to lose the mass of their customers after the shortage, so will either soon go out of business, or more likely, not part-take in the gouging;
2. The wealthy would likely buy much of the gas, almost at whatever price. More than a decade ago, I put in a $100k solar system, so I did not have to depend upon public utility, in an emergency, but my action did not impact negatively on other consumers, as gouging is likely to do.
3. Even those willing to pay the highest prices for gasoline, would likely realize that very impt is for various industries, consumers to have priority. For instance, having gas in ones personal care, would not be helpful if the truckers did not have gas to delivery groceries to stores; nor if hospital workers could not get to work, should a medical emergency arrive.
I'm not suggesting a non-market approach, but just that price alone may not allocate the gasoline where it would be useful. Some ways to handle this might be for a members-only gasoline station, where not only would back-up generators be in place, but only members who paid fees in advance (truckers, hospital workers, cabs, etc.,) would have access. Essentially I'm viewing this as a sort of insurance policy, where groups bind together to spread-the-risk.
Above just a few thoughts, rather than merely jumping to conclusion that highest price will be best outcome.
Easy answer, governments love to create problems. Crisis brings more power grabs.
ReplyDeleteI agree that price caps without rationing encourage hoarding.
ReplyDeleteHowever, rationing is a better response during a crisis. Otherwise, both the rich and creditcard carrying can still hoard.
Letting the market work is the only solution. Any attempt by government to distort the market only makes a bad situation worse. You've got to be blind as a bat not to see that.
DeleteThe free market prevents hoarding.
DeleteThe lack of a free market creates rationing.
Delete