‘Unconscionable’ unconsciousness
State senator believes the way to fix fevers is break
thermometers
By Doug French
Nevada Policy
Research Institute
The Nevada Legislature
has been in session but a few weeks and already lawmakers are
trying to repeal the laws of economics. Senator Dina Titus
seeks to make outlaws out of businesspeople who charge “too
much” for their goods and services when consumers need these
products most—during an emergency.
Senate Bill 82 calls it a “deceptive trade practice” for a
person to sell or offer — during a state of emergency — a
service or product for an “unconscionable” price (defined as a
price greater than 25 percent over that good’s or service’s
price during the 30 days before the emergency).
However, the measure does not consider it unconscionable if
price increases can be attributed to the costs related to
providing that good or service. Also, the bill allows for
local governments to adopt their own, so called, price-gouging
ordinances.
One can just imagine the blizzard of lawsuits that SB82,
combined with competing local ordinances, would stimulate
should heightened demand cause an unsuspecting entrepreneur to
raise his or her prices too much just before or during a
period when the Governor, or the Legislature or the President
of the United States has declared an emergency.
La Titus admits she can’t define price-gouging, probably
because there really is no such thing, but according to the
Senator: “Whatever definition you use, it’s a problem and it
should be addressed.”
On the contrary, price increases provide valuable signals to
the marketplace and benefit each and every one of us. All
goods are scarce. Thus, prices are how these scarce goods are
allocated. In an emergency, demand for certain goods will
increase given the nature of the emergency. This increased
demand will signal suppliers that the market requires more of
that good. Because of this pricing mechanism, we don’t all
have to store canned goods, drinking water and other emergency
supplies.
If the city of Las Vegas was suddenly without drinkable water,
prices for bottled water would likely double or triple or more
overnight; causing truckloads of water to be heading this way
within minutes as entrepreneurs come to the rescue of the
thirsty Nevadans.
But with SB82 in place, there would be no incentive for local
water sellers to order more supplies than normal. The result
would be shortages, and in turn, parched, and likely dying
people, as well as, of course, a very vibrant Black Market.
So, put quite simply, what Senator Titus calls price gouging,
saves lives.
Nevada’s Deputy Attorney General Kathleen Delaney also
testified in favor of SB82, making the point that rental car
companies took advantage of customers after September 11,
2001, by charging more than fives times their normal rates and
gas prices surged to $5 per gallon in some states.
Titus and Delaney believe that business owners take advantage
of consumers during an emergency by being deceptive. But as
economist Murray Rothbard explained: “Businessmen do not
determine their selling prices on the basis of whether they
feel greedy or ‘responsible’ that morning.” Anyone trying to
get anywhere in the wake of 9-11 was happy to pay anything to
obtain a rental car or the gas they needed. Just who was
taking advantage of whom? Sellers don’t set prices. Prices are
set to clear the market by matching supply and demand. Thus,
it is consumers that set prices with their demands. And in an
emergency their demand for certain goods and services is
heightened. Thus the drastic increases in those prices.
By allowing the market to work, we can all be assured that
necessities will be available during an emergency, without us
having to constantly being stocked-up with goods. All we have
to do is save our money for that rainy day emergency.
Entrepreneurs are rewarded when they forecast accurately and
have necessities at the ready for sale in the event of an
emergency.
Price gouging measures, like SB82 are akin, as Rothbard
explained, to “trying to cure a fever by pushing down the
mercury on a thermometer. They work on the symptoms instead of
the causes.”
Older lawmakers will remember the gas lines of the 1970s
caused by price controls. Hours of time were wasted queuing up
to buy gasoline, and there were even drivers shot at for
attempting to cut into line. But, when the price controls were
lifted, the lines magically disappeared.
Let’s hope Nevada lawmakers don’t make the same mistake that
pandering legislatures in 30 other states have made — passing
laws that, in an emergency, will make that emergency even
worse.
<746 words>
Doug French is executive vice president of a Southern Nevada
bank and a policy fellow of the Nevada Policy Research
Institute.
Las Vegas Review-Journal
STATE LEGISLATURE 2007: Lobbyists assail bill on prices
Nevada Resort Association voices ‘serious reservations’
By ED VOGEL
REVIEW-JOURNAL CAPITAL BUREAU
CARSON CITY—Gaming industry and gasoline company lobbyists
complained Monday that a bill to prevent price gouging is so
poorly written that it would have prevented Las Vegas hotels
from jacking up their room rates for the National Basketball
Association All-Star Weekend.
“Our industry has serious reservations,” said Nevada Resort
Association lobbyist Greg Ferraro. “It would prevent a hotel
operating in Elko from charging what the market will bear
during Cowboy Poetry and in Las Vegas prevent adjusting rates
for the NBA All-Star Game.”
“It is totally unworkable,” petroleum industry lobbyist John
Sande added during a hearing before a Senate Commerce and
Labor subcommittee.
[Continued]
