Should prices be allowed to rise after a disaster?

 
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In the aftermath of Hurricane Sandy, the New York and New Jersey areas of the US suffered shortages of gasoline and other necessities for several days. This is not unusual as almost every major
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Bad idea to mess around with basic supply and demand...

 

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Price movement is necessary to get products to the community

 

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Price gouging can be the difference between life and death during an emergency

 

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  • Scott Hillyer user photo

    3

    Scott Hillyer Nov 06, 2012

    Bad idea to mess around with basic supply and demand...

    Prices should absolutely be allowed to rise after a disaster. Take Uber in NYC after Sandy, by letting prices rise they made sure more cars were on the road which enabled more people to get transportation with other options were non-existent. (Their communications strategy was horrible, but that's a different story) If prices were not allowed to rise - how many drivers would have shown up ready to brave flooded Manhattan roads?

    Also, by not letting prices rise you set an expectation of future availability for supplies for the next disaster which negates the need for being prepared by stocking up. When you ignore the invisible hand it slaps you... hard.

     

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    • Cristina Dawson user photo

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      Cristina Dawson Nov 06, 2012

      Generally I agree, but there is a difference between natural supply and demand and exploiting natural disasters for private benefit. There should be some regulation to prevent exploitation. In your specific example, Uber took way too long to send out that message however their premise made a lot of sense. They doubled the payments to drivers, but eliminated their markup. The way I interpreted that is they combined capitalism with some sort of charitable contribution. All in all, the more people get to 'normal' quickly, the faster the recovery will proceed. We need to make up for the economic hit that's been taken. Hopefully many people will gain employment in the repair process of the coastline.

       

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      • Juan Benegas Lynch user photo

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        Juan Benegas Lynch Nov 06, 2012

        Cristina's comment should be on the dispute side. 'messing a little' = messing with it (using Scott's words)

         

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      • Jon Adler user photo

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        Jon Adler Nov 08, 2012

        Hey Cristina, the problem with "regulation" is best explained by Hayek in "The Road to Serfdom" - central planners do not have access to all the information that would be needed to set prices, and even if they did they are themselves imperfect. That is not even taking into account the cost of paying for inspectors etc who would essentially be substituting their own value judgements for the judgements of the market. Most users of Ueber are middle-class who could have afforded it - and if Ueber was overpricing then it would have received no business, that is the best "punishment"! Hearing Chris Christie threaten and berate businesses was disappointing but expected from a politician who seeks to pander and a lawyer who has essentially been a state employee all his working career and has little or no grounding in economic fundamentals.

        Yes, there will be increased employment because of the storm, and that's good (albeit short-term), but it's unfortunate that many of the mainstream media have expounded the economically illiterate view that the storm is for that reason economically beneficial - Bastiat's "broken windows" fallacy exploded this myth more than 100 years ago but it is ill-understood by those who seek to shape opinion.

         

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    • Jon Adler user photo

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      Jon Adler Nov 08, 2012

      Agreed - even lefty bloggers like Yglesias understand this. Higher prices also make consumers more discriminating - "do I really need two generators?"

       

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  • Luis Perez user photo

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    Luis Perez Jan 10, 2013

    Price gouging can be the difference between life and death during an emergency

    By increasing prices during a disaster you may be leaving many individuals, particularly those in the lower economic class.

     

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  • Luis Perez user photo

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    Luis Perez Jan 10, 2013

    Price movement is necessary to get products to the community

    Allowing prices to rise brings products to those who most need it - those individuals who are most willing to pay for them. It also helps filter more resources to the affected area, as higher prices diverts these resources from non affected areas (where prices are lower) to the areas that most need them.

     

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