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In defense of price-gouging

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The long lines and shortages we're seeing at New York and New Jersey gas stations in the aftermath of Hurricane Sandy are a direct effect of anti-gouging laws that preclude gas stations from charging prices that reflect the disparity between supply and demand. If retailers could charge $12/gallon, people who don't absolutely have to have gasoline would be willing to defer purchases to when supply was back to normal; everyone would buy only what they need; suppliers would be willing to incur exceptional costs to bring in more supply after the storm; suppliers would have an incentive to stock up before the storm and make post-storm shortages less likely; and people would be more likely to carpool, thus reducing congestion on the highways and bridges and reducing enforcement time on the three-per-car rule. Instead, Governor Christie is calling for rationing.

Even if you're concerned about windfall profits to gasoline retailers, then just split it with the government: take advantage of the Pigouvian opportunity and add a $3/gallon tax for post-hurricane emergencies.

More at Reason. Earlier: 2006 Republican posturing; Spitzer overenforcement.

(h/t to J.M. and A.G. for additional advantages of expensive gas)

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

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