Mike Toomey Lobbyist News: Why Artificial Prices Fail Us
The following is a digest of a fascinating article by Congressman Ron Paul that appeared at his website. Mike Toomey is posting this summary as a public service for all interested in economic theory and discussion.
Ron Paul’s representatives have published an article on his website regarding the sky high prices that often follow a disaster. With Hurricane Sandy finally past, there has been a great deal of damage left in her wake. There is a complicating factor for citizens in the area who are experiencing the difficulties of living with excessive “price gouging”. Price Gouging is a term describing the tendency for prices to be raised on goods and services following a (natural) disaster. On the surface, this may seem very callous and unfeeling on the part of those raising prices. However, there are some redeeming aspects that lie beneath the surface level appearances. Business is often acting in a negatively affected environment, and price gouging is sometimes the natural effect of this. Sometimes, it may be for the best.
“In the wake of Hurricane Sandy, the supply of gasoline was greatly disrupted. Many gas stations were unable to pump gas due to a lack of electricity, thus greatly reducing the supply. At the same time demand for gasoline spiked due to the widespread use of generators. Because gas stations were forbidden from raising their prices to meet the increased demand, miles-long lines developed and stations were forced to start limiting the amount of gasoline that individuals could purchase. New Jersey gas stations began to look like Soviet grocery stores.”
If only things were so black and white, right or wrong. The fact is, they aren’t. Several weeks ago following Hurricane Sandy, a raise in prices on gasoline would have had only those who needed gasoline most using it. Others would have managed transport by other means, or made a point to use less gas. Increased prices are often a reflection of the difficult situations at hand, and preventing price increases can and do often have detrimental effects on progress in hard times. Supply can become a huge issue if prices are not increased in times of shortages. If price is not allowed breathing room, it will suffocate and ultimately fail to thrive.
Click here to read the original article.