More than 8,000 complaints have been made to the Florida attorney general's office over price spikes for items like food, gas and ice following Hurricane Irma. While most Americans scorn companies for raising prices after a natural disaster, some economists believe price gouging is actually beneficial, according to The New York Times.
Here are four things to know.
1. Economists well-versed in the Milton Friedman school of free-market theory argue anti-gouging measures eliminate the incentive for individuals to conserve crucial supplies following a disaster.
"Price caps discourage extraordinary supply efforts that would help bring goods in high demand into the affected area," Michael Giberson, PhD, an instructor at the Rawls College of Business at Lubbock-based Texas Tech University, wrote in a 2011 opinion piece cited by the Times. "[Y]ou discourage conservation of needed goods at exactly the time they are in high demand."
2. Matt Zwolinski, PhD, director of the Center for Ethics, Economics, and Public Policy at the University of San Diego, used a hypothetical situation to exemplify the pro-price-gouging argument in a 2008 paper:
If a hotel was allowed to double its typical room rate from $50 per night to $100 during an emergency situation, "a family that might have chosen to rent separate rooms for parents and children at $50 per night will be more likely to rent only one room at the higher price, and a family whose home was damaged but in livable condition might choose to tough it out if the cost of a hotel room is $100 rather than $50 … as a result of consumers' economizing behavior, more hotel rooms are available to individuals and families who need them most."
3. Tyler Cowen, PhD, an economics professor at Fairfax, Va.-based George Mason University, believes anti-gouging laws can also promote black market situations during a disaster, such as customers buying up the whole stock and reselling it or store employees funnel the goods to their loved ones, according to Bloomberg.
4. "Maybe there's something to be learned in this thought experiment, but national emergencies are the ultimate distortion in daily economic activity and, as appealing as the free-market may be in certain circumstances, it will likely make economic distortions during a disaster worse, not better," the article's author Andrew Ross Sorkin, a financial columnist for the Times, concluded.
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