After declaring a state of emergency in the wake of Hurricane Sandy, New Jersey Governor Chris Christie issued a forceful reminder to merchants: Price gouging during a state of emergency is illegal and will result in significant penalties.
Price gouging—raising prices during an emergency condition over their normal level—is illegal in many states. But is it unethical? Jordan Ballor addressed that question in 2005 after Hurricane Katrina:
Raising prices for scarce commodities during an emergency situation smacks of opportunism at best. So it seems on the face of it like an open and shut case in favor of state intervention.
But a greater understanding of how markets work and the price mechanism make the case somewhat more complex. An examination of the practical effects of price controls and limits shows the unintended consequences of such laws.
David M. Brown wrote a provocatively titled piece, “Price Gouging Saves Lives,” for Mises.org following Hurricane Charley in 2004. The thrust of the argument is essentially that to limit the prices vendors can charge is to reduce the incentive for vendors to go through the hardship and risk of transporting commodities to the afflicted areas.
