Price Gouging During Hurricane Irma: Anti-American or Free Market at Work?

What’s the story?

On Wednesday, in anticipation of Hurricane Irma, the Miami Herald reported that "prices for flights out of South Florida skyrocketed as high as more than $3,000 per person for domestic flights that would otherwise cost a fraction of the price during what’s typically one of the slowest times of the year for air travel."

Likewise, in the wake of Harvey, multiple Texas stores were accused of price-gouging. As the Washington Post reported, "One station sold gas for a whopping $20 a gallon. A hotel reportedly charged guests more than twice the normal rate. One business sold bottles of water for a staggering $99 per case—more than 10 times some of the prices seen online."

Both Texas and Florida have laws against price gouging. But should they? If you support a free-market system, why shouldn’t businesses be allowed to charge whatever price consumers are willing to pay?

In Support Of Anti-Price Gouging Laws

Texas Governor Gregg Abbot released a statement last Friday saying the state will "identify and vigorously prosecute" any price gougers under the Texas Deceptive Trade Practices-Consumer Protection Act. The law prevents “selling or leasing fuel, food, medicine or another necessity at an exorbitant or excessive price."

Texas Attorney General Ken Paxton said that price gougers could face penalties of $20,000 per violation. If the victims are 65 or older, the penalty rises to $250,000. "These are things you can't do in Texas," Paxton said. "There are significant penalties if you price gouge in a crisis like this."

Florida has similar laws. According to the Sunshine State’s Attorney General, the price-gouging statute makes it illegal to raise the price on "essential commodities, dwelling units, or self-storage facilities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency." Essential commodities include food, ice, gas and lumber.

Despite these laws, as of Thursday, over 3,000 calls accusing stores of price gouging have come into the Florida AG’s office.

Even the White House has weighed in. In the aftermath of Harvey, homeland security adviser Tom Bossert said that price gouging "would not be tolerated."

"Anybody that's going to go out and try to take advantage of a disaster victim ought to expect the law enforcement to come down [on] them with a hammer. That's not acceptable on a regular day. It's certainly not acceptable when people are suffering. We'll use the latitude under the law and provide a fair market value, rental rate that's a little bit higher than a 100 percent to accommodate the natural demand and supply."

Against Anti-Price Gouging Laws

In response to the White House’s threats of crackdowns on price gougers, the Libertarian National Committee released a statement warning that "Such heavy-handed government intervention in the aftermath of natural disasters makes conditions worse and hampers decentralized relief efforts."

Ryan Bourne, with the Libertarian-leaning Cato Institute, said that by "holding down the price, it actually discourages entrepreneurs, discourages other companies, discourages people that might have some of the product hoarded to actually bring that product to market."

Rafi Mohammed shared a similar sentiment in a Harvard Business Review piece titled "The Problem with Price Gouging Laws". For Mohammed, the question of price gouging is not moral but economic.

"Doubling the price will make customers think twice about buying another gallon of milk, for example, thus leaving supply for those who didn’t arrive at dawn," Mohammed wrote. He also warned that laws against price gouging discourage “Businesses from Boosting Supplies.” If prices are capped, Mohammed wrote, “there’s little incentive for businesses to hustle to increase supplies.”

Mark Perry, an economics professor at the University of Michigan’s Flint campus, said that recovery after a disaster is

"going to be a mess no matter what, but from an economic standpoint, if you want to speed up the recovery process and minimize pain and suffering, then you’re going to want market prices to play a role more than you’re going to want artificial price control or price gouging laws that really then have negative and adverse secondary consequences."

Perry is also concerned about government overreach with anti-price gouging laws.

"If water used to be $10 and somebody’s charging 11, is that price gouging?" Perry asked. “Or what about Minute Maid [Park] where the Houston Astros play? They charge $10 for a glass of beer. And is that going to be considered price gouging?”

As the L.A. Times noted, defenses of price gouging "cross ideological boundaries" and are favored by “conservatives and liberals alike.”

What do you think?

Are anti price-gouging laws "heavy-handed government intervention"? Or is price-gouging, like Texas Attorney Ken Paxton said, a case of “bad actors taking advantage of victims and their circumstances”? Should states relax their price-gouging laws? Hurricane Irma is closing in fast: hit the Take Action button, tell your reps what to do, and comment below.

If someone suspects price-gouging during Hurricane Irma, they can call the Attorney General’s Price Gouging Hotline at 1-866-966-7226. They can also report violations online at myfloridalegal.com.

Texans who’ve been the victims of price gouging can submit their complaints here.

—Josh Herman

Related Reading

• Memo to economists defending price gouging in a disaster: It's still wrong, morally and economically — The Los Angeles Times

• Reasonable profit or price gouging? State attorney investigating complaints —Miami Herald

• John Stossel: Prices should rise during emergencies such as Hurricane Harvey —Fox News

(Photo Credit: hsun337 / iStockphoto)