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The Libertarian

Vin Suprynowicz

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Even though she admits the “problem” has not arisen in Nevada in recent memory, ever energetic state Sen. Dina Titus, D-Las Vegas, now offers Senate Bill 82, which seeks to ban “price gouging” by classifying as an illegal “deceptive trade practice” the sale of a consumer good or service “for an unconscionable price before or during a state of emergency.”

What’s “unconscionable”? Selling at a price 25 percent higher than the average price of said good or service over the past 30 days “unless approved by an appropriate government or governmental entity.” Or so the bill says.

Though, reading further down, there’s an exception if the price hike is justified by “an increase in the costs incurred” by the seller.

Sound complicated? Government wage and price controls always are.

Obvious questions arise, starting with how many new busy-beaver bureaucrats it would take to enforce this measure -- at precisely those times when we might instead hope to see all our “public servants” busy putting out fires, rushing injured parties to the hospital, or whatever else the hypothetical future “state of emergency” might require.

But why descend into that logistic morass? Not only is this submission a classic case of a solution in search of a problem, it also manages to demonstrate an appalling lack of knowledge of the almost magical way a free market can function to deliver temporarily scarce goods and services where they’re needed most, without any “government supervision” at all. (Though perhaps that willful ignorance should not surprise us, coming from a career government employee who seems to instinctively favor “rationing by government favor” to the much simpler and more effective “rationing by price.”)

As “recovering aerospace engineer” and space commercialization consultant Rand Simberg pointed out in his 2005 essay “Three Cheers for Price Gougers,” prompted by the same Hurricane Katrina dislocations that Sen. Titus cites (www.techcentralstation.com/0902055.html):

“Consider -- if a gas station owner has gas, someone has to decide who gets it. If the price remains at pre-hurricane levels, many will fill their tanks, because they can afford to do so, against the chance (and even likelihood) that gas will later become completely unavailable (a self-fulfilling prophecy if the price is not allowed to rise).

“Many will do so even if they have no immediate need for it. But after the first few people do this, the gas will be gone, and none will be available for those who come after, because it’s now tied up in the gas tanks of those who didn’t really need it.

“Those who didn’t get any may include emergency workers, or truck drivers who need it to go out and find other goods to bring in. It is likely worth more to them, but they didn’t get it, because the price was artificially fixed.

“Moreover, had the price been allowed to rise, they would have been able to afford it, because they would have been able to demand more resources with which to pay for it -- the emergency worker might have had aid from local agencies to pay for it, or the truck driver might have been willing to make the investment in order to recover it by bringing in necessary goods (assuming, of course, that prices on those weren’t capped).

“Similarly, if ice prices rise to the market, the man who needs to keep his insulin cold for his diabetes treatment will place a higher value on it than the man who wants to keep his beer cold, and will have a better chance of getting it. The man who might rent two hotel rooms for his family for additional comfort might, in the face of appropriately higher prices, inconvenience himself and only get one, releasing one for another whole family.

“This works for the supply side as well. Making and transporting ice costs money. When the local ice plant is out of commission, it has to be brought in from other locations, in refrigerated trucks, at higher gasoline costs. Who would bother to take the trouble, expense and risk to deliver it at a loss when they can only get the same price for it as before the hurricane? ...”

These are hardly new revelations. These mechanisms are now covered in many an introductory economics class. Presumably her employer would allow Professor Titus to audit one, at no charge, if they’re all new to her.

The best -- in the long run, the only -- way to sustain price-gouging is to give the activity the imprimatur of a government guaranteed monopoly -- which Sen. Titus and her cohorts do, all the time.

If you don’t believe this, just try to offer some lower-priced competition to Nevada’s taxi cab operators, or barbers, or any of a hundred other “regulated” professions, without first seeking a government license or permit -- a permitting process which often requires you to demonstrate to a regulatory board made up of the very people with whom you hope to compete, that you won’t hurt the people with whom you want to compete, by stealing away any of their customers or undercutting their prices!

And the best way to prevent or remedy price-gouging -- by the same token -- is to relax government rules which bar entry into markets.

If doctors or gas stations or grocery stores or anyone else are perceived to be charging too much, simply make it easier for would-be competitors to open their doors and undercut them without onerous and expensive “licensing” procedures.

But this is anathema to Sen. Titus and her pals. In fact, most state governments seek to limit, regulate, license and thus ration by edict anything that moves -- offering to “protect” the profits of the regulated businesses in exchange for their willingness to cut in our masters in Carson City for a share of the take.

Yet here come the biggest “price-gougers” of all, offering to make it illegal for some small-time entrepreneur to load his pickup truck with bottled water and baby food, race the stuff to the scene of a disaster days before bumbling government bureaucrats can get there, and compensate himself for the risks thus sustained by selling these life-saving supplies to those who need them most for whatever the traffic will bear.

All to “protect Nevadans” by making sure that instead of being charged more for vital supplies at times of emergency ... there won’t be any to buy, at all.