Home Judge’s Opinions Hug a Price Gouger The public doesn't want to hear it, but the public also doesn't like empty shelves.

Hug a Price Gouger The public doesn't want to hear it, but the public also doesn't like empty shelves.

by Andrew P. Napolitano
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Wall Street Journal October 30, 2012  Hurricane Sandy not only confronted businesses with biblical helpings of wind and rain. Many had to ask themselves whether they wanted to be perceived as price gougers.

The choice, by and large, was not whether to play nice or whether to surrender to the urge of shameless profiteering. The choice was whether to confront customers with empty shelves or make it possible for everyone to find what he came for at a price.

At one New Jersey supermarket, shoppers barely paused for a public loudspeaker announcement urging them to buy only the provisions needed for a couple of days of suburban paralysis. None seemed to be deterred as they loaded their carts to the gunwales with enough canned tuna to last six weeks. A can of Bumblebee will keep for years: Shoppers take no risk in buying out a store's entire supply at the normal price.

What might have changed their behavior? Doubling the price would have given pillagers a reason to take only what was necessary. Did Shop-Rite double the price of tuna? Of course not. The store cares about its reputation with customers more than it cares about its customers.

Millions who live in the Northeast and endured Irene and last October's snowmageddon raced to their local hardware store for a portable generator. The store owner cares about his reputation with customers, so he didn't boost the price by 50% to curb demand—with the result that some people walked out with two or three because, what the heck, better safe than sorry, and anyway an extra generator can be unloaded on Craigslist for twice the retail price.

Gas stations post the most visible price in the economy, and are target No. 1 for politicians looking for innocent entrepreneurs to scapegoat. One Florida station owner during Katrina told investigators the universal truth of all gas station owners: He raised prices because he had "too many customers" and was running out of fuel. For his honesty and good sense, he was slapped with the state of Florida's first gouging subpoena.

On Bloomberg TV, a reporter taxed the chief of Generac Power Systems, a maker of portable generators, about whether he was profiteering off this week's apocalypse. "No, we don't raise prices at all. We make sure our distribution partners aren't doing that at all." He quickly changed the subject to the unwisdom of people waiting until a storm hits to buy what everyone else is trying to buy at the same time.

What if the price of generators were allowed to reflect supply and demand in a weather emergency? Standard rhetoric might have you believe only the rich would buy generators. Really? Generators would sort themselves according to the socioeconomic status of the would-be customers? Or would they go home with those who value them most, while other shoppers would think twice about whether they really need one?

We're not about to bleat, "Let the market decide." A teensy, realistic hope, though, would be that politicians and the public might pause before assuming that political intervention is always preferable to a market solution. Then again, what are we smoking?

Gov. Chris Christie, a straight-talk hero in some respects, gave cavernous voice to the accepted political wisdom. Mr. Christie might even know better, but neither public understanding nor his political fortunes would be enhanced by his going against the prevailing winds on gouging. He'd just be consigned to the political outer darkness never to be seen again.

Instead he went to town on gougers: "During emergencies, New Jerseyans should look out for each other—not seek to take advantage of each other. The State Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties."

That law, by the way, prohibits price hikes of more than 10% during or within 30 days of a declared emergency. Yes, the law allows some accommodation when a retailer's own costs go up. But the retailer better have receipts to prove it.

This is a law for a world without Sandys. In the aftermath of this week's storm, how long before the Northeast's refiners and fuel distributors are back in action? Gasoline may well be in short supply for days or weeks. Nothing would be as therapeutic to the public interest as letting retail prices rise to $5 or $6 or whatever might help motorists make better decisions about whether to fill up or not.

Crackdowns on gouging are plausible only because the advantages of not prosecuting price gougers belong to the category of the unseen—the public can't see the supplies that would be available but for price-gouging laws. A good statewide New Jersey gasoline panic might correct that myopia, at least for a while.

A version of this article appeared October 31, 2012, on page A13 in the U.S. edition of The Wall Street Journal, with the headline: Hug a Price Gouger.

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