Don Boudreaux writes a nice letter to the Washington Post, questioning why the media encourages speculation before Hurricane Sandy's arrival in the U.S., but then denigrates it at other times.
In the aftermath of what is turning out to be a very devastating hurricane, we will soon hear people denigrating businesses that raise the prices of their goods and services that suddenly are more scarce as a result of the hurricane. We will hear terms like "price gougers" and "profiteers" and "greedy capitalists."
Here is what I said in an op-ed in the News & Observer on September 24, 2008, after Hurricane Ike caused a disruption in the supply of gasoline to North Carolina, driving the price of gasoline higher. (For some reason, the N&O did not publish this online.)
Prices convey important information about scarcity. They direct scarce resources from where and when they are desired least to where and when they are desired most. The higher price of gas related to Hurricane Ike informed us to stop making frivolous trips and to find other ways of conserving gas when we have a lot, so that we would have more next week when supplies were expected to be less. Prices also informed outsiders that if they satisfied our greed by reducing their consumption of gasoline and shipped some to us, we'd satisfy their greed by compensating them more for each gallon.
Market conditions change as a result of some event, often weather related, which caused prices of goods and services to increase becasue they are now suddenly more scarce than they were prior to the event that caused the change. As consumers, we deride these greedy business owners for taking advantage of the changing market conditions. (Well, I don't.)
But what's the difference between business owners raising their prices due to a change in market conditions (typically weather related) and buying something on sale because it's no longer in season? Market conditions changed (summer is over, driving sales down of shorts and short-sleeved shirts and the like) and I got to gouge the store that consequently marked down their prices.