I’ve noticed that as part of the listing of things North Carolinians need to know in advance of Hurricane Isabel, the news media is helpfully informing them about the state legislature’s new law banning “price gouging” after a natural disaster. The law is somewhat vague about what would constitute a gouging price, but essentially it resurrects the old notion that a rise in the price of a good that has already been produced is, on its face, unfair. The price is assumed to be determined by the cost of production.
This is poppycock, of course. Generators are manifestly more valuable when the power is out than when the power is on. Bottled water is more valuable when the spigot doesn’t work, and so on. Prices are set by subjective preferences of consumers and not by the cost of production, at least in the short run.
Here’s a fun thought. Typically, ratings and readership soars for the news media before and after a major storm (and for the same reason: watching the news is deemed much more valuable when there is real news to hear). These soaring numbers then get averaged into the ratings or circulation numbers that are used subsequently to set ad rates. Will the media agree ahead of time to exclude any storm-related increases in their audience from their ad-rate base? If not, aren’t they guilty of something very close to price gouging themselves?