Price gouging laws are essential for helping low-income rural residents

The Robesonian, the largest newspaper in Robeson County, North Carolina, a community being hit very hard by Hurricane Florence, decided yesterday to publish an op-ed that extolled the virtues of price gouging. The op-ed, written by Joe Sanders of the right-leaning John Locke Foundation, opines that the empty shelves around North Carolina exist because laws prevent business owners from charging a price that matches the demand for the good. He goes on to say that if business owners were able to charge whatever they wanted, the shelves would not be empty and necessary supplies would still be there for people who needed them.

What Mr. Sanders says is not entirely inaccurate, higher prices would probably ensure that the items remain on the shelves. However, he neglects to mention that this would likely be true because the most economically vulnerable would be priced out of buying essential items. He also ignores that rural residents, already stymied by a lack of options, would be at the mercy of local business owners who could arbitrarily charge whatever price they wanted because they know that their customers have limited options and need what they are selling. The lack of options that a person in a rural community would have would likely exacerbate the effect of price gouging. In a rural community, a person may not have the ability to shop around at multiple retailers to find a price that they can afford. Lower income people are already living on tight budgets and paying exorbitant prices for necessary supplies in a natural disaster would likely create issues in other aspects of their lives.  Consider also that many low-income people work jobs that pay hourly and do not pay them while they're closed for natural disasters, a fact that further shrinks the available capital that a person would have to prepare for a hurricane.

He argues that higher prices would discourage hoarding and ensure that those who need the supplies the most are able to get them. However, he ignores the issue of having access to capital. After all, even without the mitigating factor of a natural disaster, we already have situations where people cannot afford to buy things that they need in order to survive. For example, 42 million Americans are currently experiencing food insecurity and lack consistent access to food. You can have a situation where the supply exists and can be purchased but yet those who need it are unable to buy it because they lack the means to do so. Without price gouging laws, this reality would exist for many low-income people during natural disasters.

Mr. Sanders's views are not unique to him and are shared by a sizable number of economists. In the wake of Hurricane Harvey, the US News and World Report also published a pro-price gouging op-ed. In their op-ed, they seem unable to rectify the issue of low-income people simply not having the capital to buy these supplies with their stated thesis, that price gouging laws hurt everyone because they artificially reduce supply. They outline the following scenario.

"Many times there will be a scenario when a person both needs an item and does not have the means to obtain the item. Grabbing your wallet may not be a priority during a category-4 hurricane, and paying $99 for a case of water may not be possible when there is only $40 sitting in your checking account. This is why price gauging needs to be paired with basic human morality. If a person is clearly in need during a natural disaster, individuals need to step up and help them. This is very different than government officials demanding that a person helps everyone. If a gas station manager is required to keep his prices low during a natural disaster, there is a good chance that he will run out of gasoline because he is required to help everyone equally, instead of being allowed to selectively help those who are the most in need – as most people would in a life-or-death situation."

In this situation, the writer is saying that the onus should be on other people, including the business owners themselves, to help low-income people afford supplies. But what if this doesn't happen? The author of this piece supposes that the very poor would be fine because others would step in to help but that is not a guarantee. In his piece, Mr. Sanders wisely avoids heading down this path.

It is my opinion that price gouging laws exist to protect people like the residents of Robeson County, which has the highest poverty rate in North Carolina. With almost a third of its population living in poverty, Robeson County is economically vulnerable and without these laws, its residents would be forced to make almost impossible choices during natural disasters. It is worth noting that even with this law, multiple instances of price gouging have been reported in the past couple of days. These laws are necessary to protect the most vulnerable and ensure that they are able to financially access the goods and resources needed to survive a natural disaster.