The Christie administration is on the warpath against so-called price gougers. Attorney General Chiesa has filed suit against gas stations and hotels and motels charging them with violating the state’s anti-gouging laws. As the Attorney General stated, “Safe, comfortable lodging is not a luxury when people have been displaced from their homes.” AG Chiesa obviously never took an introductory course in economics.
When a natural disaster occurs and the supply of goods and services is disrupted or costs rise to maintain services in motels and hotels, a rise in prices is not price gouging but reflects the new supply and demand relationship that exists in the marketplace. In other words, the drop in supply cannot fulfill all the demand at previous prices, hence prices rise to balance supply with demand.
For the state to mandate that prices should rise by X percent during an emergency is arbitrary and capricious. No law can dictate the “correct” or “fair” price for any good or service during “normal” times let alone during a natural disaster when there is a supply disruption. To think otherwise is to embrace the economics of the old Soviet Union.
Governor Christie got onto the anti-price gouging bandwagon spirit in the following statement, “The last thing people put out of their homes in a natural disaster should have to confront is price gouging from unscrupulous profiteers. It’s illegal, offensive and completely opposite the spirit of cooperation we saw from just about everywhere else in our state.” And the governor wants to attract businesses to the state. Lots of luck using the most left-wing rhetoric anyone can employ.
The governor and attorney general reflect the sentiment of the public at large that has been taught for generations that grandstanding politicians and their obsequious bureaucrats should— and must—override the laws of economics.
For all the kudos Governor Christie is getting for his performance as chief executive of the state during this difficult times, his true colors are showing when it comes to basic economic principles: to hell with supply and demand, might makes right.
Murray Sabrin, a professor of finance at Ramapo College of New Jersey in Mahwah, has been a candidate for statewide office on both the Republican and Libertarian Party lines.