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Hurricanes Don’t Blow Away Economic Law

9th September 2017

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The debate over the morality and efficiency of so-called “price gouging” during natural disasters and other emergencies provides a unique opportunity to explore some of the most fundamental ideas in economics. Understanding those ideas is important not just for the economics of emergencies, but for how market economies operate in more normal times and why they are superior to the alternatives.

The biggest advantage of market economies is the way in which they tie together how we decide who will get to purchase and consume goods with the way in which those goods are supplied. Market prices are not only a good way of determining who should get goods. They also work to encourage people to supply more or less of the good depending on how much in demand those goods are.

The laws of economics are not suspended in an emergency, no matter what the laws of politicians attempt to do. When goods are more scarce, they will be costly to obtain, whether those costs are in terms of money or something else. The importance of letting market prices do their job and determining who gets what is that this process is also the way in which we make sure that there is stuff to be allocated in the first place. The only way to make sure we have sufficient production is to let market prices determine consumption.

One Response to “Hurricanes Don’t Blow Away Economic Law”

  1. Elganned Says:

    There is no such thing as “economic law”.
    Economics is merely a function of people interacting; if people interact differently, the “law” changes accordingly.

    There is, however, such a thing as people whose lack of empathy means they don’t mind profiting off the suffering or even death of others. They are not compelled to do so by any “law”, but by their own lack of empathy. Such persons are usually identified as sociopaths, but only after their actions identify them as such.