As recent survivors of Superstorm Sandy, my family has been focused this week on being thankful for the things we have. As I tell my kids, gratitude is largely a matter of attitude, but it’s especially poignant when you see the struggles of our neighbors and friends in Long Beach, south Queens, and Staten Island. Maybe the most frustrating single aspect of this entire Sandy experience has been watching politicians pat each other on the back while they posture over ridiculous consumer protection laws designed to prosecute price gougers.
In the aftermath of the storm last week, when I realized that my family was safe and our home largely undamaged after Long Island Sound crept up into my front yard only to recede and leave my home intact, I was overcome with relief. I think my next sentient thought was probably what needed to be done to return to normal. Generators were not to be found, along with extension cords, batteries, gas cans, and a whole host of other predictable items. But I don’t think anyone could have predicted the immense inconvenience of gasoline scarcity. The lines to get gas have been, and remain, despite rationing, hours and hours long.
The scarcity of gasoline, and the resultant lifestyle changes that have been forced upon us, made me start thinking, why can’t we get gasoline? A day or so later, I heard about the first prosecutions and fines for price gougers selling gasoline in New Jersey at what the government alleges are inflated prices. Governor Christie sounded so pleased with himself, protecting consumers by fining the evil profiteers who would dare to sell gas at prices determined by someone in Governor Christie’s administration to be too high. But what the media hasn’t done a very good job of explaining is how these kinds of prosecutions, and indeed the entirety of the price gouging laws themselves, actually prevent needed goods and services from being available in an area affected by a disaster like Sandy.
How so, you say? Well, let’s take an example. Right now, if I want to get gasoline, I have to wait three to four hours in a line in order to pay $4.00 a gallon or so for it. A fillup costs me about $50. Of course, the problem is that, at $4.00 a gallon, I cannot realistically get gasoline. It just isn’t widely available. If I’m running my house on a generator, then access to gasoline may well be the difference between my family sleeping in a heated house or not. I’d be happy to pay a premium for gasoline right now.
So let’s just pretend that some enterprising and profit-motivated individual is sitting in Pittsburgh, or Boston, or Harrisburg, and decides to take advantage of the situation. Maybe this individual (let’s call him a gouger) rents a tanker, and fills it with 25,000 gallons of fuel bought in Pittsburgh at $4.00 a gallon. Then let’s say the gouger drives the truck to Long Island and sells the gas to people like me, who are happy to buy it, for $6.00 a gallon. If the crisis ends before he gets to Long Island, he’ll be out a significant amount of money on his travel, and he’ll have a tanker of gas no one wants; the gouger will be gouged. But if the crisis continues until he gets to Long Island, he’ll make a profit of $50,000 less expenses on his $100,000 investment. He’ll provide much needed fuel to residents who are happy to have fuel and he’ll sell only to those willing to pay $6.00 a gallon to get it. And then he’ll most likely be prosecuted as a price gouger.
Because of that, there are no risk-taking truck drivers with tankers full of fuel headed for Long Island, to our immense frustration. As a Long Islander, living a life full of irony in a nation founded by smugglers and profiteers, I can rest assured that I’m not being overcharged for gas, thanks to the laws that protect me from the very product I need. What a relief.
The reality is that price gouging laws don’t really protect anyone. What is price gouging, anyway? How is it defined? Most gas stations sell gas at a two to three percent gross profit, while many software companies run consistently for years at a 30+ percent profit margin. Is Microsoft gouging us? Or are they simply charging what the market will bear?
In a disaster situation like the one I’m living through right now, a community needs people who are willing to take risk in order to get back on its feet. It’s heartwarming when someone does something like the guy from Bensonhurst who went and got 250 gallons of gasoline and gave it all to his neighbors. But a society can’t rely on acts of charity and altruism to function. The bulk of the services provided to Sandy victims will be done at a profit, and the price gougers and opportunists can play as big a role in providing those much needed services and goods as do charities and government; probably even more so.
It’s a guarantee that the wildcat trucker with a load of gasoline worth maybe $40,000 in profit, if it gets here in time, will be hurrying to get the gas to the people who need it. It’s no guarantee he’ll make money, because if he doesn’t get here in time, he’ll end up with a tanker full of gas and no one to sell it to. And that’s what we really need here on Long Island: providers of goods and services who are in a rush to get lifesaving supplies to us. Because we need them badly.
Delivering goods and services to people who need them and charging what the market will bear should not be a crime. But making laws that prevent the free market from helping us recover from a disaster should be.