(p. A17) . . . price hikes are a response to scarcity, and signals that reveal the true severity of scarcity are critical during storms and other crises. Price hikes let consumers know that fuel is scarcer than it was. Price hikes prompt consumers to use fuel more judiciously, buying less gasoline than they would at a lower price. They take fewer unnecessary trips, diminishing pressure on supplies. Price hikes also create a financial incentive for suppliers from outside the area to move their product into high-demand zones. As supplies return to normal, so do prices.
. . .
Year’s revelers in New York City welcomed 2015, Uber’s surge-pricing algorithm stopped working for nearly 30 minutes. Without the guarantee of extra pay, drivers had little incentive to brave New Year’s traffic. Requests spiked 300%, wait times doubled, and the rate of completed trips fell 80%. People who really needed Ubers–and would have been willing to pay surge pricing–couldn’t get a ride.
. . .
Price increases are an important means of encouraging as many people as possible to cope as well and as creatively as possible with natural disasters. True, the rising price of goods like gasoline can create problems for consumers, particularly the poor. But these drawbacks are negligible compared to the life-threatening shortages that can result when ill-informed public outrage keeps prices artificially low. Even a poor person is better off being able to buy a bottle of water for $10 when the alternative is to have $10 and go thirsty.
For the full commentary, see:
Donald J. Boudreaux. “‘Price Gouging’ After a Disaster Is Good for the Public; If government prohibits suppliers from charging more, consumers hoard, exacerbating shortages.” The Wall Street Journal (Weds., OCT. 4, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date OCT. 3, 2017.)