Review & Outlook: Craigslist Crime Wave - WSJ.com
EXCERPTS:
"Hurricane Sandy and its aftermath continue to offer lessons in Economics 101, if not in political good judgment. One of them flows from the widespread notion that it is somehow wrong to allocate scarce resources to those willing to pay for them.
First we had the contrasting spectacles in New York and New Jersey over gasoline. New Jersey rationed the supply with some degree of success by declaring that cars with odd and even license plates could buy on alternate days. But New York Governor Andrew Cuomo decided residents of hard hit areas would be getting an allotment of 10 gallons for "free." Chaos requiring National Guard intervention was the result. New York City and Long Island have now imposed a version of the New Jersey rationing scheme, to much better effect.
Now comes word that the Attorneys General of both states intend to prosecute people for "price gouging." New York Attorney General Eric Schneiderman has subpoenaed the Craigslist website for the identities of people who advertised gas for sale at high prices. Mr. Schneiderman is doing this in the name of a New York law that forbids charging an "unconscionably excessive price" during an "abnormal disruption in the market."
But "unconscionable" isn't exactly the clear red line one might want in something calling itself a law. One man's unconscionable price might be another's job-saving gasoline supply. So among all the potential crimes he might look to prosecute, Mr. Schneiderman is throwing his department's scarce resources in pursuit of the mobster housewives selling their surplus gas. Maybe we need a law against "political gouging."
New Jersey's law is clearer, but more draconian and as wrong-headed. It says merchants can't charge more than a 10% mark-up for a 30-day period following a state of emergency. State Attorney General Jeffrey Chiesa announced cases against eight businesses, including gas stations and a lodging provider, on Friday.
The danger of all this is obvious. Why would you want to discourage the private sector from moving goods to a needy region in crisis? The cost of doing so might easily justify a mark-up well in excess of 10%. Natural disasters are precisely when we most need market incentives for the provision of things like gas, power, clean water and lodging.
It's not as if the Federal Emergency Management Agency has shown itself up to the job. Price gouging suits are an awfully convenient way for government to point the finger of blame away from its failures to provide even basic services in emergencies. Ask John Shepperson, who was jailed for the crime of trying to bring generators from Kentucky, at a mere double his cost, to the victims of Hurricane Katrina.
Which makes us wonder: If "unconscionable" is going to be the standard, might New York taxpayers have a case against the government for the high taxes that couldn't produce a competent response to Hurricane Sandy?
