I recently read an article found on The Library of Economics and Liberty website. The article was entitled, "They Clapped" and addressed the issue of price gouging. The author addressed a situation in North Carolina that happened to his family in 1996. The situation took place after a hurricane ripped through the area and claimed a lot of property and goods from the local populous. North Carolina had laws that prohibited people from selling a good to the victims of the hurricane for any more than 5% above the usual price. Well some people from a neighboring community heard that the residents in Raleigh needed ice, so they loaded up their truck with ice and headed to Raleigh to make money. Many residents lined up to buy ice and some were upset that the people were selling ice for $8 a bag, which was obvious price gouging. Someone reported the deliverers to the police and the individuals were arrested. The author was upset with the situation not because of the price, but because people cheered as the deliverers were incarcerated. The laws prohibiting such gouging prices kept a lot of people from receiving ice that they needed. I agree with the author in that the people who needed the ice would have paid any price, but I do not agree with astronomical price gouging. I do not think that the government needs to regulate the market so tightly that nobody wants to provide the goods or services. People would rather deal without than pay the higher price. I also agree that the prices would be driven back down again if government would have allowed more entrance into the market. Businesses would want to make money and not lose it to some other guy who went down with the same idea, so one seller would drop prices, the others would follow and the war would go on like everywhere else. The regulation of the government has cut the competition out and set up a virtual monopoly after a disaster, and therefore, nobody wants to help in the cause. Perhaps government needs to regulate certain sectors like power and other necessities, but not luxuries like ice. However, where do we draw the line?
Posted by Jessica at 2/15/2007 09:00:00 PM