When the Super Bowl comes to town hotels increase prices for rooms. Bars increase prices for drinks. Restaurants increase prices for food.
So why when the Super Bowl of hurricanes comes to town would we expect anything less?
When they checked rates online as Hurricane Harvey was strengthening and about to make landfall in Texas, a room with two queen beds was between $120 and $149 a night.
But when a KXAN TV crew from Austin showed up on Saturday to get a room at that same hotel—a Robstown, Texas Best Western Plus, 20 miles from Corpus Christi—the clerk at the front desk quoted a price nearly triple what the crew had seen online: a staggering $321.89 a night, according to KXAN.
“But, why is it so much?” KXAN reporter Wes Rapaport asked of the $321.89 charge.
Why? Econ 101: That's why!
When demand increases, prices rise. It's that simple. Without an increase in prices there would be a shortage (the quantity demanded would be greater than the quantity supplied). The price serves a function: to ration scarce goods. As goods become more scarce, the price rises to alleviate the shortage.
I get it...higher prices are unpopular. And higher prices during times of need give us all an icky feeling. But consider the alternative: prices don't rise. If prices don't we need to find another way to allocate an increasingly scarce resource. Shortages lead to tensions and tensions lead to bad outcomes (think doorbuster sales on Black Friday). Rising prices during natural disasters are the worst outcome...except for all of the other outcomes. How else should we allocate scarce resources other than allowing prices to ration the goods?
It always strikes me as disingenuous when authorities, concerned with perceptions, step in with superficial solutions.
Hotels aren’t the only ones guilty of price gouging as Houston grapples with continued rainfall and flooding from Hurricane Harvey, the most powerful storm to hit Texas in more than 50 years. Over the weekend, more than 500 complaints of price gouging were lodged with the Texas attorney general’s office, according to CNBC—including $99 cases of bottled water, gas at $10 a gallon and hotels tripled or quadrupled in price.
"These are things you can't do in Texas," Texas Attorney General Ken Paxton told CNBC in an interview Monday. "There are significant penalties if you price gouge in a crisis like this."
Rather than grandstanding how about we address the real issue and find ways to increase supply more quickly--which will hold prices down, increase the number of people served and reduce tensions. A focus on rapid response and readiness will benefit far more people than legislating against markets.
