Burns: Smithers, we're at war!
Smithers: I'll begin profiteering, sir.
Burns: And hoarding. Leave it to the Democrats to let the Spaniards back in the pantry.
-- The Simpsons, "Brother's Little Helper"
It sounds like state and federal officials are taking a measured approach to accusations of price gouging over gasoline and other essentials in the wake of Katrina.
Meanwhile, attorney's general from a number of states held a telephone strategy session to discuss the rapidly escalating gas prices and possible investigations into gouging. Prosecution for price gouging is generally a state matter unless it involves some form of collusion or other activity in violation of federal antitrust laws.
Gas prices jumped 35 cents to 50 cents a gallon overnight in some areas pushing to well over $3 a gallon after Hurricane Katrina shut down nine Gulf Coast refineries, disrupted gasoline pipelines to the Midwest and East and stopped 90 percent of the oil production in the Gulf of Mexico.
"If we get consumer complaints about (gasoline) prices, we'll look at those complaints to find evidence of anticompetitive conduct," said John Seesel, the FTC's associate counsel for energy issues.
Collusion among suppliers to jack up prices should be punished, since it undermines the competitiveness our markets rely on, but it's only prudent for the people and companies who supply essential products and services to hedge against present or future disruptions by raising prices. Most libertarians (I'm not one) dispute that the concept of price gouging is useful and argue that suppliers should be able to charge whatever price they want at any time, and theoretically I agree. The problem is that, as with many libertarian theories, in practice price gouging can lead to the breakdown of civil order; once violence erupts, suppliers may be robbed and killed, and it's unlikely that anyone can accurately account for the cost of that possibility when they're setting prices. The Wikipedia entry on price gouging gives four reasons why anti-gouging laws are a good idea, even in a free market:
In a market economy, laws against price gouging are justified as a valid exercise of the police power to preserve order during an emergency, and may be combined with anti-hoarding measures. The usual argument is fourfold.
1. The community as a whole may well possess sufficient stocks to sustain it through the emergency, provided that panic can be avoided. Sharp increases in price may trigger such panic.
2. When people's resources are strained by a situation beyond ordinary prudence, the corrective tendencies of the market are too slow and communication too uncertain.
3. In an emergency, ordinary legal protections are impractical. Thus, refusing to sell lumber at an advertised price may constitute fraud and refusing to honor a reservation may constitute a tort, but the harm is likely to be irreparable long before a case can be brought.
4. Regardless of theory, when people become desperate, public order becomes precarious. Emergency services are likely to be strained by both increased need and reduced capacity. Riots by otherwise law-abiding citizens could prove overwhelming.
Though most libertarians hate to admit it, there are cases on the fringe of experience in which the survival of the group depends on limiting the freedoms of some of its members. Yes, it's a slippery slope; welcome to real life.