Reports are being investigated in New York City, the Hudson Valley and on Long Island by state Attorney General Eric Schneiderman.
Schneiderman said Monday that he's investigating an increasing number of reports of spikes in prices for essential goods including gasoline, food, bottled water, generators, batteries and flashlights. The probe can include sharp, unwarranted increases in the cost of prices by retailers including supermarkets, hardware stores, bodegas, delis, hotels and taxis, he said.
Now, here's the definition for unwarranted: lacking justification or authorization.
In one report, the cost of a bag of potatoes jumped to $7, up from $3 before the storm hit. The cost of the box of matches appears more than three times the usual cost, and the loaf of bread is more than double the usual cost.
New Yorkers can report price gouging by telephone at 800-771-7755 or through his office website.
What's the phone number for reporting public officials who break the laws of supply and demand?
"We are actively investigating hundreds of complaints we've received from consumers of businesses preying on victims of Hurricane Sandy," Schneiderman said. "Our office has zero tolerance for price gouging."
And I have zero tolerance for offices with a blatant disregard for economics.
No arrests were reported as of Monday. Schneiderman wouldn't discuss details of the reports or the investigation.
Wait...what? You can be arrested for raising prices in light of dramatically increased demand and inelastic supply?
Vendors may defend higher prices if they can show an increased cost of obtaining goods from wholesalers or in delivering services, making prosecutions difficult.
Supply is very inelastic in the very shortrun--but really that's really only one side of the story. Think of it this way, if the area hot by the hurricane is completely isolated for a couple of days, the supply of essential goods and services is fixed. That is, there is no way to increase the quantity supplied in the very short run. But, during a disaster, the demand for essentials (you know, those things that are absolutely essential and indispensable) increases quickly and dramatically for a short period of time. This increase in demand puts quick upward pressure on prices. Failing to raise prices will result in what we economists like to call shortages.
A telltale sign of a shortage is more people wanting/needing a good than is currently available. Costs may be an issue, but prices are the markets' means of rationing a limited supply. Restricting the price rationing mechanism during a warranted increase in demand (see the definition of unwarranted above) is a highly inefficient way to try to ration the available goods.
No one likes higher prices. And no one is comfortable with having to deal with higher prices at a time when everything else in their life is in turmoil. But what is the alternative? Failing to raise prices simple makes the shortage worse. How high should we allow prices to go?
I have no idea...retailers have a much better read on what the market will bear than I do, and for that matter than any government official does. In an attempt to maintain the appearance of 'doing something' what the officials are doing is making the problem worse by restricting the rationing ability of markets. Now who is doing something unwarranted?
State law should prohibit unconsionable excessive lack of understanding of how markets work. And don't get me started on fairness. Nothing about this is fair. But that's really irrelevant. Because no matter how fair you want to be, in the immediate short run, there simply isn't enough of the essential goods to go around. One way or another the price is going to rise until supplies are restored and demand decreases.