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<time datetime="2017-08-25T15:35:01">August 25, 2017 3:35 pm</time>
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<div id="text-5" class="widget widget_text widget-author"><h4 class="widgettitle">About the author</h4> <div class="textwidget"><div class="entry-author"><p><a href="https://www.aei.org/profile/mark-j-perry/"><img width="300" height="225" src="https://www.aei.org/wp-content/uploads/2014/04/mark_perry_300x225.png" class="attachment-post-thumbnail size-post-thumbnail wp-post-image" alt="" srcset="https://www.aei.org/wp-content/uploads/2014/04/mark_perry_300x225.png 300w, https://www.aei.org/wp-content/uploads/2014/04/mark_perry_300x225-193x145.png 193w" sizes="(max-width: 300px) 100vw, 300px" /></a></p><p><a class="entry-author-link" href="https://www.aei.org/profile/mark-j-perry/" title="Posts by Mark J. Perry" rel="author">Mark J. Perry</a> <a class="entry-author-twitter" href="http://twitter.com/Mark_J_Perry" target="_blank">@Mark_J_Perry</a></p><div class="visualClear">Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan's Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.</p>
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<a href="https://www.aei.org/publication/handicapping-senator-markeys-net-neutrality-resolution/">Handicapping Senator Markey’s net neutrality resolution</a>
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<a href="https://www.aei.org/publication/from-the-archives-four-decades-of-alan-greenspan-at-aei/">
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<a href="https://www.aei.org/publication/from-the-archives-four-decades-of-alan-greenspan-at-aei/">From the archives: Four decades of Alan Greenspan at AEI</a>
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<p><a href="https://www.aei.org/wp-content/uploads/2017/08/Form.png"><img class="wp-image-955099 aligncenter" src="https://www.aei.org/wp-content/uploads/2017/08/Form.png" alt="" width="482" height="528" srcset="https://www.aei.org/wp-content/uploads/2017/08/Form.png 625w, https://www.aei.org/wp-content/uploads/2017/08/Form-132x145.png 132w, https://www.aei.org/wp-content/uploads/2017/08/Form-500x547.png 500w, https://www.aei.org/wp-content/uploads/2017/08/Form-267x292.png 267w, https://www.aei.org/wp-content/uploads/2017/08/Form-576x630.png 576w, https://www.aei.org/wp-content/uploads/2017/08/Form-292x320.png 292w" sizes="(max-width: 482px) 100vw, 482px" /></a>Using the blank &#8220;<strong>Fill-In-The-Blank Price Gouging Form</strong>&#8221; above that I learned about from <a href="https://mises.org/library/fill-blank-article-about-price-gouging-laws">Art Carden</a> almost ten years ago, I&#8217;ve started filling in the form below for Hurricane Harvey based on news reports that the attorneys general in both <a href="http://tpr.org/post/texas-attorney-general-warns-coastal-residents-look-out-illegal-price-gouging#stream/0">Texas</a> and <a href="http://www.theadvocate.com/baton_rouge/news/politics/article_490bcb4e-89ba-11e7-b900-c39f72e4c369.html">Louisiana</a> have pledged to prosecute businesses who engage in <del>&#8220;illegal price gouging&#8221;</del> <strong>charging market prices for goods that are in high demand and short supply</strong>.</p>
<blockquote><p>Fearing increases in the prices of ________________ (name of items in short supply) as a result of a <strong>HURRICANE HARVEY</strong> (type or name of disaster), officials in <strong>TEXAS and LOUISIANA</strong> (affected state or municipality) have declared a state of emergency whereby restrictions on “price gouging” are now in effect. According to <strong>LOUISIANA ATTORNEY GENERAL JEFF LANDRY and TEXAS ATTORNEY KEN PAXTON </strong>(names of politicians, attorneys general or law enforcement officials), the law is designed to protect innocent consumers from “unconscionable” increases in the prices of ______________ (names of specific items in short supply, e.g., water, food, gasoline, ice, electric generators, chain saws, plywood, etc.).</p></blockquote>
<p><strong>WARNING</strong>: The unintended and unseen adverse consequences of enforcing price gouging laws are predictable, unfortunate, and avoidable. While price ceilings may be motivated by an understandable desire to help consumers in Texas and Louisiana by keeping prices low, those artificially low prices exert secondary effects that are guaranteed to retard the recovery process following Hurricane Harvey. If the prices that are kept artificially low by government mandate, consumer demand for critical supplies (fuel, food, water, generators, plywood, hotel rooms etc.) will quickly outstrip the available supplies resulting in artificial shortages for those supplies. The price gouging laws that prevent prices from rising to reflect the true market conditions are also guaranteed to slow the flow of critical goods and supplies into the affected areas in Texas and Louisiana. Shipments that do arrive in those affected areas will likely be greeted by long lines of consumers, many of whom may end up without anything. What we know with economic certainty is that the price gouging laws in Texas and Louisiana are guaranteed to result in serious misallocations of critical resources at the exact time that an efficient allocation of those scarce, critical resources will be desperately needed.</p>
<p><strong>Bottom Line</strong>: A frequent claim we hear is that the laws of economics should be suspended, ignored or circumvented following a natural disaster like Hurricane Harvey, which then motivates laws against “price-gouging.” But you can make a stronger case that it’s during the period following a natural disaster like a hurricane when we want market prices to prevail and market forces to operate as forcefully and powerfully as possible. Reason? It’s the period immediately following a disaster like Hurricane Harvey when efficient resource allocation and addressing scarcity become more heightened than during a normal, non-disaster period. Disasters typically create huge economic disruptions that usually make certain critical goods much scarcer (water, plywood, fuel, ice, generators, chain saws, hotel rooms, etc.) than before.</p>
<p>To address those serious economic disruptions and disaster-related shortages, we only have two basic choices: a) market prices that accurately reflect true scarcity and market fundamentals, or b) price controls that ignore scarcity and market forces, and therefore transmit false information about scarcity. As cruel as it may sound to those who are <strong>long on indignation and short on economics</strong>, <strong>market forces and market prices</strong> will address the post-disaster shortages in Texas and Louisiana more quickly and more effectively than <strong>government-determined, non-market based prices that result from price gouging laws. </strong></p>
<p>&nbsp;</p>
<ul class="entry-tags">
<li><a href="https://www.aei.org/tag/price-controls/">Price controls</a></li>
<li><a href="https://www.aei.org/tag/price-gouging/">Price gouging</a></li>
</ul>
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<h3 class="comments-title">
<strong>Discussion:</strong>
(23 comments)
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<ol class="comment-list">
<li id="comment-184144" class="comment even thread-even depth-1">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184144">August 25th, 2017</a>
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<p>If you&#8217;ll forgive the shameless self-promotion, this reminds me of a blog post I wrote some time ago: <a href="https://force4good.me/2015/03/29/no-one-promised-youd-be-happy/" rel="nofollow">https://force4good.me/2015/03/29/no-one-promised-youd-be-happy/</a></p>
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<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184144" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184144">Share</a>
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<ol class="children">
<li id="comment-184155" class="comment odd alt depth-2">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184155">August 25th, 2017</a>
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<p>Wait. This contradicts what you were saying earlier: that it is baked into textbook price theory that when there is a shortage with inelastic supply and the demand greatly exceeds the supply, then it is guaranteed by textbooks that those with the highest willingness to pay for the item will get it.</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184155" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184155">Share</a>
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<li id="comment-184157" class="comment even depth-3">
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<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184157">August 25th, 2017</a>
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<div class="comment-content">
<p>Of course, that is not what I said. I really wish you would read things far more carefully than you do.</p>
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<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184157" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184157">Share</a>
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<ol class="children">
<li id="comment-184164" class="comment odd alt depth-4">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184164">August 25th, 2017</a>
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<p>Um, you&#8217;re memory&#8217;s pretty short. Allow me to refresh you:</p>
<p>&#8220;<i>[That the product is perfectly allocated to those with the highest willingness to pay] is the assumption built into the [textbook] model.&#8221;</i></p>
<p>So I&#8217;m confused: Now you&#8217;re saying that the textbook model is false?</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184164" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184164">Share</a>
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<ol class="children">
<li id="comment-184168" class="comment even depth-5">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184168">August 25th, 2017</a>
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<div class="comment-content">
<p>Of course, that wasn&#8217;t my objection.</p>
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<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184168" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184168">Share</a>
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</li>
<li id="comment-184171" class="comment odd alt depth-5">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184171">August 25th, 2017</a>
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<p>This is what you said: &#8220;the assumption [that the goods are perfectly allocated to those with the highest willingness to pay] is baked into supply and demand equations [such as P = 200 &#8211; Q; S = 100]&#8230; There is no deadweight loss.&#8221;</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184171" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184171">Share</a>
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<li id="comment-184174" class="comment even depth-5">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184174">August 25th, 2017</a>
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<div class="comment-content">
<p>Again: of course that wasn&#8217;t my objection to your comment.</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184174" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184174">Share</a>
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</li>
<li id="comment-184156" class="comment odd alt thread-odd thread-alt depth-1">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184156">August 25th, 2017</a>
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<div class="comment-content">
<p>Matty Yglesias on inelastic supply shortages:</p>
<p><i>&#8220;But consider that declining to raise prices in the face of spiking demand and inelastic supply is a very odd form of charity: it doesn’t create any new resources, just allocates them arbitrarily to whoever shows up first.&#8221;</i></p>
<p>Hmmm. A liberal economist just doesn&#8217;t get it. The product <i>always</i> goes to the consumer with the highest willingness to pay. ALWAYS. Textbooks say so.</p>
<p>Someone should show Matty (and Mark) this chart: <a href="https://i.imgur.com/adtezYR.png" rel="nofollow">https://i.imgur.com/adtezYR.png</a></p>
<p>Look ma! No deadweight loss!</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184156" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184156">Share</a>
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<li id="comment-184158" class="comment even depth-2">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184158">August 25th, 2017</a>
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<div class="comment-content">
<p>Yglesias gets it. You don&#8217;t.</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184158" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184158">Share</a>
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<ol class="children">
<li id="comment-184165" class="comment odd alt depth-3">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184165">August 25th, 2017</a>
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<div class="comment-content">
<p>Hmmm&#8230;. Let me think about that for a minute. Yglesias says that it is an odd form of charity that &#8220;allocates&#8221; goods &#8220;arbitrarily&#8221;&#8230; That almost sounds like he is suggesting that goods would be allocated randomly&#8230;.</p>
<p>I wonder what that would be like? </p>
<p>Yes, I can see clearly now. Not raising prices would result in a big fat deadweight loss after all. So my previous chart is incorrect. My apologies to both Matty and Mark. </p>
<p>If you think about it, there is only a Qs/Qd chance that any given consumer who wants the goods will be able to get it. Therefore, the chart should be more like this:</p>
<p><a href="https://i.imgur.com/KHFFYcf.png" rel="nofollow">https://i.imgur.com/KHFFYcf.png</a></p>
<p>What do you think Jon? Is that better?</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184165" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184165">Share</a>
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<li id="comment-184169" class="comment even depth-4">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184169">August 25th, 2017</a>
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<div class="comment-content">
<p>Of course, you don&#8217;t understand the difference.</p>
</div>
<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184169" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184169">Share</a>
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<ol class="children">
<li id="comment-184186" class="comment odd alt depth-5">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184186">August 26th, 2017</a>
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<p>The first chart comes from <a href="https://force4good.me/2017/08/17/the-good-vs-the-bad-economics-part-2/comment-page-1/#comment-4760" rel="nofollow">your blog</a> (I can&#8217;t find it in any textbooks), but if what is depicted in that chart, there wouldn&#8217;t be any problem, right? </p>
<p>That is, the goods are allocated precisely as they would be if price &#8220;gouging&#8221; was allowed. If price gouging is allowed during the disaster-induced shortage, goods are distributed precisely as depicted in your chart: only the people with the highest willingness to pay get it. </p>
<p>And if that were the case, then there would be no problem. Price gouging laws should be left in place in that case, since goods are distributed exactly as if the actual price was the market price.</p>
<p>But as Yglesias points out, in practice, goods are handed out randomly, according to whoever gets to the store first, and many people standing in line will be SOL. </p>
<p>And as Mark points out, the unintended and unseen adverse consequences of enforcing price gouging laws are entirely predictable. The second chart shows why: the inefficiency results in a societal deadweight loss.</p>
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<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184186" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184186">Share</a>
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<li id="comment-184187" class="comment even depth-5">
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<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184187">August 26th, 2017</a>
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<p>Of course, you don;t understand the difference. Otherwise, you wouldn&#8217;t have said:</p>
<p>&#8220;Hmmm. A liberal economist just doesn’t get it. The product always goes to the consumer with the highest willingness to pay. ALWAYS. Textbooks say so.&#8221;</p>
<p>and </p>
<p>&#8220;This contradicts what you were saying earlier&#8230;&#8221;</p>
<p>You seem to have a real hard time understanding the difference between models and reality.</p>
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<p class="comment-links">
<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184187" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184187">Share</a>
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<li id="comment-184189" class="comment odd alt depth-5">
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<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184189">August 26th, 2017</a>
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<p><i> (I can’t find it in any textbooks)</i></p>
<p>Of course, it&#8217;s in every Econ 101 textbook that covers deadweight loss. Just because you don&#8217;t understand the models doesn&#8217;t mean it&#8217;s not there. </p>
<p>But there&#8217;s a larger issue we need to address, namely you <b>begging the question.</b> Why are you assuming a perfectly inelastic supply curve? That doesn&#8217;t make much sense in this context. You seem to only be doing it in order to reach a pre-conceived answer (just like you do with the LCT).</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184189" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184189">Share</a>
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<li id="comment-184210" class="comment even depth-5">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184210">August 26th, 2017</a>
</time>
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<p><i>Of course, you don&#8217;t understand the difference. Otherwise, you wouldn’t have said:</p>
<p>“Hmmm. A liberal economist just doesn’t get it. The product always goes to the consumer with the highest willingness to pay. ALWAYS. Textbooks say so.”</i></p>
<p>Jon, I was being sarcastic. Come on man! </p>
<p><i>&#8220;But there’s a larger issue we need to address, namely you begging the question. Why are you assuming a perfectly inelastic supply curve? That doesn’t make much sense in this context.&#8221;</i></p>
<p>Probably for the same reason Matty Yglesias said the same thing: because in a disaster-induced shortage, the store owner isn&#8217;t getting any more deliveries. During Katrina, ALL lanes of the interstates were devoted to outgoing traffic. Incoming supplies couldn&#8217;t come in even if a driver was crazy enough to try it.</p>
<p>Therefore, whatever inventory the store owner has on hand, that&#8217;s Q. His supply is inelastic. If he&#8217;s got 50 generators, he&#8217;s got 50 generators, and no matter how much or how little people pay him, the supply ain&#8217;t gonna change.</p>
<p>Thus, this little discussion we&#8217;ve been having is actually of a bit more than mere academic importance.</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184210" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184210">Share</a>
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<li id="comment-184228" class="comment odd alt depth-5">
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<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184228">August 26th, 2017</a>
</time>
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<p><i>Probably for the same reason Matty Yglesias said the same thing: because in a disaster-induced shortage, the store owner isn’t getting any more deliveries.</i></p>
<p>That&#8217;s not a perfectly inelastic supply curve. That&#8217;s the supply curve shifting to the left. </p>
<p>It&#8217;s ok that you don&#8217;t understand this. It&#8217;s difficult at first. If you actually put effort into learning the models, you&#8217;d quickly understand your mistakes. Instead, you spend valuable time concocting crazier and crazier ways of making your arguments, each step moving further and further away from reality. </p>
<p>If you just devoted that time to serious study&#8230;</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184228" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184228">Share</a>
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<li id="comment-184253" class="comment even depth-5">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184253">August 26th, 2017</a>
</time>
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<p>No, you are incorrect as usual. Yglesias said it himself: inelastic supply. What happened is the demand curve jumped up due to the shortage, while at the same time, resupply for suppliers dried up, shifting the slope of the supply curve upward (i.e., lowering the elasticity to near zero).</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184253" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184253">Share</a>
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<li id="comment-184262" class="comment odd alt depth-5">
<div class="comment-header">
<cite class="fn"><a href='http://force4good.me' rel='external nofollow' class='url'>Jon Murphy</a></cite> <time datetime="2017-08-27">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184262">August 27th, 2017</a>
</time>
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<p><i>inelastic supply&#8230;lowering the elasticity to near zero</i></p>
<p>Exactly. So, not perfectly inelastic. You are wrong, QED.</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184262" addthis:title="Comment by Jon Murphy on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184262">Share</a>
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<li id="comment-184263" class="comment even depth-5">
<div class="comment-header">
<cite class="fn">Warren Platts</cite> <time datetime="2017-08-27">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184263">August 27th, 2017</a>
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<p>This from the guy who gets a hardon from a 0.02 correlation! LMAO&#8230;</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184263" addthis:title="Comment by Warren Platts on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184263">Share</a>
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<li id="comment-184162" class="comment odd alt thread-even depth-1">
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<cite class="fn">Not Sure</cite> <time datetime="2017-08-25">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184162">August 25th, 2017</a>
</time>
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<p>Mistaking intentions for results is rarely productive.</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184162" addthis:title="Comment by Not Sure on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184162">Share</a>
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<li id="comment-184255" class="comment even thread-odd thread-alt depth-1">
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<cite class="fn">Lyle</cite> <time datetime="2017-08-26">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184255">August 26th, 2017</a>
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<p>Note that these restrictions last longer than the storm so that the resupply issue becomes less important if a few days have passed, and the business has a good logistics system such as WalMart. Then the bigger issue for stores is do they have electricity so they can sell stuff. Big box stores essentially have to close where the mom and pop store might be able to get by with paper and a calculator.</p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184255" addthis:title="Comment by Lyle on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184255">Share</a>
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<li id="comment-184260" class="comment odd alt thread-even depth-1">
<div class="comment-header">
<cite class="fn">Ron H.</cite> <time datetime="2017-08-27">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184260">August 27th, 2017</a>
</time>
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<p>And of course Customs and border Patrol will ensure that inspections stations stay open during the hurricane because &#8211; well, because the most important thing during a hurricane is to ensure that no illegal immigrants sneak in.</p>
<p><a href="https://reason.com/blog/2017/08/25/border-patrol-will-keep-checkpoints-open" rel="nofollow">https://reason.com/blog/2017/08/25/border-patrol-will-keep-checkpoints-open</a></p>
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<a class="comment-share-link addthis_button_expanded" href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184260" addthis:title="Comment by Ron H. on It&#8217;s time to start filling out the &#8220;Fill-in-the-Blank Price Gouging Form&#8221; for Hurricane Harvey" addthis:url="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184260">Share</a>
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<li id="comment-184351" class="comment even thread-odd thread-alt depth-1">
<div class="comment-header">
<cite class="fn">Lyle</cite> <time datetime="2017-08-29">
<a href="https://www.aei.org/publication/its-time-to-fill-out-the-fill-in-the-blank-price-gouging-form-for-hurricane-harvey/#comment-184351">August 29th, 2017</a>
</time>
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<p>Interesting news report that implies that if you are a big chain store and even one location raises prices thru an error in a disaster zone you get crucified in the media. A Best Buy which ordinarily sells only single water bottles was selling them in case lots for $42 when the price should have been $27, an employee took the single bottle price and multiplied by the number of bottles <a href="http://www.businessinsider.com/best-buy-water-hurricane-harvey-2017-8" rel="nofollow">http://www.businessinsider.com/best-buy-water-hurricane-harvey-2017-8</a><br />
So for larger enterprises apparent price gouging can potentially affect an organizations reputation far more than any fine, since the media loves to crucify large organizations.</p>
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