Prices Should Rise

Officials in states hit by Hurricane Florence are on the lookout for "price gouging."   

People who engage in "excessive pricing" face up to 30 days jail time, said North Carolina's attorney general. South Carolina passed a "Price Gouging During Emergency" law that imposes a $1,000 fine per violation.    

"Gouging" is an issue during every disaster because when supplies are short, some merchants raise prices.    

These are "bad people," said Florida Attorney General Pam Bondi angrily during a previous storm.   

Bad people?   

I thought Republicans were the party that believed the market determines prices.    

"Gougers deserve a medal," Nobel Prize-winning economist Milton Friedman once told me. That's because higher prices are the best indicator of which goods people want most.    

This is a hard concept for people to understand.    

"They're not heroes. They're scabs who prey off the desperate," wrote James Kirkpatrick in the comments after watching my latest video about this. "Only Stossel would praise greed," added Paul Nadrotowski.    

I don't praise greed. Pursuing profit is simply the best mechanism for bringing people supplies we need. Without rising prices indicating which materials are most sought-after, suppliers don't know whether to rush in food, or bandages, or chainsaws.    

After Hurricane Katrina, one so-called gouger was John Shepperson of Kentucky. Watching news reports, he learned that people desperately needed generators.   

So Shepperson bought 19 of them, rented a U-Haul, and drove it 600 miles to a part of Mississippi that had no electricity. He offered to sell his generators for twice what he paid for them. People were eager to buy.   

But Mississippi police said that was illegal. They confiscated Shepperson's generators and locked him up.    

Did the public benefit? No. The generators sat in police storage (I suspect some cops took them home to use while Shepperson sat in jail).    

Who will bring supplies to a disaster area if it's illegal to make extra profit? It's risky to invest in 19 generators, leave home, rent a U-Haul and drive 600 miles.   

"Being moral is loading up supplies and donating them to people in need," a person named Meirstein wrote on my YouTube page.   

Yes, but in real life, not enough people do that to satisfy the needs of thousands of desperate people.    

You can make a law against someone like Shepperson making extra profit, but you can't force apathetic people to bring in supplies.    

Prices are not just money. They are information.    

They are what signal entrepreneurs to go into a given business. Rising prices are the clearest indicator of what most customers want.    

Without extra profit, suppliers tend to stay home. That's easier and safer.    

If prices don't shoot up during disasters, consumers hoard. We rush to gas stations to top off our tanks. Stores run out of batteries because early customers stock up. Late arrivals may get nothing.   

America should have learned that when Richard Nixon imposed price controls on gasoline. That gave us gasoline shortages and long gas lines. But politicians don't learn.    

Fortunately, kids who learn about free markets via the Stossel in the Classroom charity know better.    

We ran a contest inviting students to write an essay or make a video about price gouging.    

Some pointed out that price controls make it hard for people everywhere to get the goods they need.   

"In modern day, you see countries like Venezuela suffer from the fact that their governments place price controls on all items," said 17-year-old Annelise Kofod of Raleigh, North Carolina. She won the high school video award.    

After researching prices and disasters, Maggie Hroncich of Grove City, Pennsylvania, winner of the high school essay contest, said, "actually, the price gougers are the moral ones."    

I won't make claims about their morality. But I do know that allowing prices to rise, even sharply, is the best way to help desperate people get supplies they need.     As supplies rush in, prices quickly return to normal. We shouldn't call it gouging. It's just supply and demand.    

The best thing "price police" can do in a disaster is stay out of the way.   

John Stossel is author of "No They Can't! Why Government Fails -- But Individuals Succeed." For other Creators Syndicate writers and cartoonists, visit www.creators.com.

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