Consider price fixing on goods as necessary as water. During the Texas floods of last year, the price of water rose to heights of $99 per case, from the average of $5 per case. The cruelty of a store owner to do this during a time of emergency offends us all, but to people that think empathetically, it’s especially offensive. This was counterbalanced by Puerto Rico that had strict price controls on water.
In spite of the fact that per capita, there were more emergency responders sent to Puerto Rico and more funds sent to Puerto Rico than Texas, their problem persisted while the Texans very quickly received aid. The answer to the question why is: because of price fixing.
The free market, in seeing the price jump recognized the shortage of supply and responded quickly supplying Texans with an abundance of water cases because of the excessive profit margins – the increased supply eventually caused market competition and the price quickly dwindled to a more reasonable price.
Meanwhile, the market ignored Puerto Rico because the market was asked to ignore them by their own leaders through price fixing. Texans received water, quickly, and at reasonable prices, while Puerto Ricans didn’t.
If water is selling for $99/case, by the end of the day someone will have airlifted water into the region at $50/case, and the next morning water will be selling for $30/case. This will go on for a day or so, and the water crisis is quickly resolved. This was never permitted to happen in Puerto Rico.
Brandon Kirby, “Why Women Generally Aren’t Libertarian”, Being Libertarian, 2018-06-27.
October 2, 2020
QotD: Price “gouging” in emergencies
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