Price gouging: Much ado about nothing

As Floridians rebuild and recover from Hurricanes Helene and Milton, the issue of price gouging always captivates politicians and the media. Headlines after both storms declare hundreds of incidents reported to state officials in Florida and across the Southeast.

Florida law defines price gouging as an “unconscionable” price hike during a declared state of emergency and for what it deems essential goods, including food, water, gasoline and transportation. 

The attorney general’s office says it investigates every claim, most of which come through a dedicated hotline “activated” in the run-up to each storm where consumers provide tips. Businesses can be slapped with a misdemeanor and fines of up to $1,000 per act and $25,000 in a single day.

Vice President Kamala Harris brought the issue into her core economic message to voters in the final days before the presidential election. In addition to stern warnings to businesses before the hurricanes, she increasingly mingled the term with rhetoric about corporate greed and inflation.

The idea of charging high prices to desperate consumers evokes anger in many, but most economists warn against price controls even in the face of potentially large hikes after a disaster. While not unanimous, the prevailing view is that government price controls create new problems while trying to solve what is really no problem at all. Shortages of essential items such as gasoline are made worse, not to mention longer, by reducing the incentive of sellers to rush the product to affected areas.

A reporter in an October National Public Radio report noted, “It can be tricky to draw the line between illegal price gouging and just the normal forces of supply and demand.” 

Most economists would respond that they are one and the same. The supply and demand curves indelibly associated with economics explain this intuition quite elegantly, making the example of price gouging in the wake of a hurricane a mainstay of economics textbooks. Higher prices increase incentives to supply goods and end the shortage faster.

But economists remain frustrated that their broad agreement fails to make an impact in politics or popular opinion. Florida and more than 30 other states have laws against price gouging. And at least in the vice president’s estimation, the recent hurricanes made the term a useful attack for any price increases she may not like.

We often spend so much time debating the idea of price gouging that we forget to ask what the fuss is about. States no doubt receive tips revealing some amount of consumer exploitation and other unsavory business practices. Considering how much we hear from politicians and media about the practice during emergencies and their recoveries, we hear little about the hundreds of misdemeanor investigations after storms have passed. What few specifics on consumer complaints we do hear look little like the textbook case we debate.  

In the wake of Helene, media outlets reviewed limited samples of the complaints, most that took place in the areas hardest hit by storm-surge flooding. Turns out most were related to fuel and occurred before the disaster rather than after.

Maybe there were complaints of gas stations selling at high prices, but none has been reported by the state or the media. Instead, complaints focused on stations being out of fuel — up to 75% of gas stations in these areas were sold out of gasoline before Milton hit.

Examples of actual allegations included a seller only leaving his premium pump on before storms and another of a 10-cent price increase. As a whole, consumer complaints appear more the product of chaos, frustration and most importantly many gas stations entirely sold out.

In early October, Florida Attorney General Ashley Moody reported a “rapid response team” investigating 160 consumer complaints. As of late October, the office’s website remained  emblazoned with a red banner reading “STATE OF EMERGENCY IN EFFECT. REPORT POSSIBLE PRICE GOUGING.” 

There is no evidence that the resources put into hotlines and investigations during the most serious of emergencies ensnare anything more than angry consumers looking for sellers with any stock. In effect, the current system is taking in mostly reports of too little price gouging, leading to shortages, than too much of it. 

So while politicians love to talk about price gouging to rile up voters, there is scant evidence of anything like price gouging. One of us was here in Sarasota through both Helene and Milton and did not witness any gouging — places that ran out of things charged normal prices once they got resupplied. 

The government waste and media overhype might be cause for amusement were they not occupying significant resources and far more than their share of public attention when everything and everyone is stretched to the limit. 

From local officials all the way up the chain to the vice president, one struggles to find benefits from state anti-price gouging laws like Florida’s other than false badges of honor sought by those enforcing the law.

Adrian Moore, a Sarasota resident, is vice president and Max Gulker is senior policy analyst at the Reason Foundation.