Price gouging is an opportunistic behavior designed to take advantage of an unforeseen opportunity. Sounds pretty rough, right? Unfortunately it’s an act that here in America we have to deal with. However, it might not be as bad as you think.
Here in America we just dealt with a great natural disaster, Hurricane Sandy. This devastation left over 100 people dead, 8 million people without power, and an estimated $50 million in damages. Luckily FEMA approved $158 million in individual assistance for families and individuals without power. More than 182,000 individuals in Connecticut, New York, and New Jersey have registered for assistance from FEMA, making the approved cost from FEMA roughly $850 worth of supplies per individual.
But, with the assistance comes a consequence – price gouging. A week after Hurricane Sandy hit, there were 600+ price gouging complaints of essentials in storm-stricken areas. The prices of these essential items increased, making a box of matches $10, a loaf of bread $7, generators around $1,100 and people were bartering and selling gas on Craigslist for around $8 a gallon.
Is this price gouging legal though? At least 13 states have specific laws to deal with price gouging in the event a state of emergency is declared. A few of these states include Alabama, Tennessee, Louisiana, Florida, South Carolina, New York, Indiana, and West Virginia. Definitions are different state by state, generally gouging is a 10 to 25% increase over prices 30 days before an emergency. The General Business Law prohibits charging more for essential items and services during emergencies including food, water, gas, generators, batteries, flashlights, and transport such as taxis.
So, is the Government helping by banning gouging? Economists say no. Since demand is greater than the supply, it’s obviously going to cause a shortage of supplies, anti-price gouging laws are really guaranteed shortage laws. When the supplies are difficult to obtain, raising the prices will reduce the demand and will in turn encourage conservation and prioritized thinking. In the end, who is right?
Check out the infographic below presented by Best Criminal Justice to learn more.