The Atlanta Journal-Constitution
Economists criticize state’s price-gouging law,
They say price controls can make problems worse.
Georgia Gov. Brian Kemp has kept a brisk and proactive pace ahead of Hurricane Dorian, issuing mandatory evacuation orders and emergency declarations, and authorizing a call-up of the Georgia National Guard.
He has also enacted price controls.
“Businesses may not sell, or offer to sell at retail, any goods or services identified by the governor ... at a price higher than the price at which the good or services were sold or offered for sale before the declaration of the state of emer- gency,” according to the state’s law meant to combat price gouging.
Economists say that’s exactly the wrong approach.
“Restrictions on price goug- ing make the problem worse by creating shortages,” said Art Carden, associate profes- sor of economics at Samford University’s Brock School of Business. “They actually make it a lot harder for people to get their hands on supplies. The reason we have shortages of bottled water and plywood is we don’t allow the price to change.”
The state encourages residents to report suspected price gouging by filling out a form on the Georgia Department of Law’s Consumer Protection Division’s site, consumer.ga.gov.
“We do appreciate as much detailed information as you can provide and copies of any and all relevant documentation, including pictures,” the instructions read.
Carden calls this a “socially corrosive” measure that “siphons people’s attention from responding to the disas- ter to snitching on each other.” When the state forces prices to remain static despite a surge in demand, he added, “You almost certainly get black mar- kets. It encourages hoarding.”
Georgia’s price gouging law mirrors those in neighboring states. Florida Attorney General Ashley Moody, who said her office has been deluged with reports of violations in recent days, posted photos taken inside a Broward County gas station. A 24-count case of bottled water that usually retails for $3.98 was being sold for $9.
“Bad move!” Moody wrote. Kemp’s post about Geor- gia’s price gouging law was met with appreciation from many on social media.
“Thank you sir!” wrote a woman aggravated by the rising price of accommodations. “Hotel rooms went up really high!”
That’s actually for the best, Carden said.
If hotel room prices don’t change, maybe a large fam- ily fleeing the storm “comes to Atlanta, and they get two rooms,” Carden said. “If the price of rooms doubles, that family might say, ‘OK, we need to bite the bullet and stay in one room.’ That frees up another room.”
Steven Horwitz, distinguished professor of free enterprise at Ball State University’s Department of Economics, likens long queues for gasoline or plywood in hurricane zones to Soviet bread lines. Disaster conditions can create free-market opportunity if the government will resist intervening, he said.
“If the goal is to get more water or ice or whatever, letting the price rise is the best way to do that,” he said. If selling bottled water or other commodities suddenly becomes more profitable, he explained, those conditions may entice enterprising sellers to enter the temporarily hot market. Retailers that charge extortionate rates during a crisis face the wrath of consumers afterward, he added.
Both Carden and Horwitz pointed to the goodwill Walmart engendered after Hurricane Katrina in 2005. Rather than raise prices, the big-box discounter responded with cash donations, free merchandise and meals. Similarly, Atlanta-based Home Depot mobilizes its Disaster Response Command Center.
“These price gouging laws end up hurting small businesses,,” Horwitz said.