Friday, August 26, 2011

NC Sentences Citizens to Shortages and Misery

We are all very aware that hurricane Irene is coming to North Carolina.  As we prepare for the coming storm, the NC government has declared a state of emergency.  The effect of this declaration is that law GS 75-38 comes into full effect.

What's GS 75-38? you ask.  Good question.  It is the NC Anti-Price Gouging law.  If "the price charged by the seller exceeds the seller's average price in the preceding 60 days before the triggering event" then the seller can be fined $5,000 per violation and the injured parties can attempt redress.  Additionally, the law stays in effect for another 45 days after the "triggering event" is over.

If the hurricane does hit NC and suppose that it does knock out basic services like electricity, water, etc. then what is the best way to communicate to the rest of the economy that we are in desperate need of water, etc.?  The market uses the price mechanism to alert everyone that we need these supplies.  The price rises and screams to the world that we need water.  It shouts that we need food.  It raises a ruckus that we need generators. 

When these evil laws come into effect they completely shut off this market mechanism.  It not only cuts off the encouraging signal to entrepreneurs to send these vitally needed supplies to NC, but it actively discourages such behavior.  "If you dare go to NC, we will be watching you!"

When the price is not allowed to rise, shortages occur.  That means there is nothing left to buy at any price.  Period.  Some people think that at least the price won't be too high.  SO WHAT!  If there is nothing to buy, then who cares what the price is?  We have to shed this idea that a high price constitutes someone ripping someone else off. 

The price is a signal.  Getting mad at a high price is like getting mad at the thermometer for it being a hot day.  "How dare you get so red, thermometer.  I don't want it to be so hot!"  Ridiculus!  The price is a reflection of the scarcity of the good in question.  When the price goes up, it is because it is more scarce.  Without the high price, the goods are sold out and then there is nothing left.  These Anti-Price Gouging laws are a sentence to shortages and misery. 

Do not be fooled into thinking that the politicians are doing this to protect the "little guy."  In fact the result of this law is to make the government itself (e.g., FEMA) the major supplier of relief.  In other words, I am unable to look forward to my neighbors in Tennessee coming to my aid, instead I will have to rely on FEMA and the other bureaucratic state agencies to relieve my suffering and that of my family and neighbors.  The bottom line is that we become more dependent on the government and less on our neighbors.

The science of political economy is a powerful tool because it demands that we look beyond the stated intentions of the politicians.  It forces us to look at not just what is seen, but we need to imagine the unseen.  We are forced not to be content with looking at the intended consequences, but the unintended consequences need to be considered as well.  It is in this manner that we can find a true path to recovery and protect our liberties as well.


Post a Comment