In my previous post, I discussed price gouging a little bit. In particular, I commented on John Stossel's column last week In Praise of Price Gouging. Two more recent columns do an excellent job explaining the economics behind the situation.

Walter E. Williams discusses price gouging in his column this week, The role of prices. "Rising prices get people to voluntarily economize on goods and services rendered scarcer by the disaster." Great column, check it out.

Now read Larry Elder's column, 'Gouging' and 'dumping'. In it, he reports:

For example, the city of Baton Rouge, almost 80 miles from New Orleans, saw its population double as a result of the people displaced by the hurricane and flood. Practically overnight, housing prices in Baton Rouge increased some 20 percent. Yet one reporter explained, "In a phenomenon familiar to Southern California's housing market, prices are rising not so much because sellers are gouging, but because buyers are bidding up the prices." "Not so much"? Apparently, the reporter's keen, psychic instincts recognized that the home seller perhaps only "gouged" to a small degree, because "buyers are bidding up the prices." But doesn't this describe exactly what happens when -- in the case of a natural disaster -- the price of gas climbs rapidly?

If you don't get it after reading these three great columns, then I don't know how to communicate it otherwise. What's obvious is that politicians don't get it - or more likely, that they know most voters don't get it, and are tinkering around with economics in order to appeal to voters. Politicians don't really care about hurting the economy (or the environment, or education, or other things that may be really important) if it means they'll get re-elected.

Labels: politics