Mike Munger on Price Gouging
Mike Munger on price gouging
In the podcast “Munger on price gouging”, Russ Roberts and Mike Munger discuss the idea of government intervening with anti-price gouging laws and how it relates to specific situations in the past. Munger brings up a past situation in his life during Hurricane Fran in 1996 when the storm hit Raleigh, NC. He speaks about how the city was unprepared for storm and took it very lightly until they awoke to all the destruction in the morning. Many people realized they were going to be out of power for a long time and that it was impossible to get out of the city because of all the trees down in the road. Once this was realized, there was a panic to get much needed ice to keep their perishable items cool. But many stores had stopped selling it so the supply off ice was virtually zero. Many people were desperate to get ice but had no means of getting it.
Some people from the neighboring city of Goldsborough saw a good opportunity to drive over with a large amount of ice and sell it to make a huge profit. There was one problem though; the state of North Carolina has an anti-price gouging law that makes it illegal to sell a good much higher than the original market price. The men were selling the ice for $12 when the market price for a bag was around $1.75. People were upset at paying the $12 but were still buying the ice because of their demand and need for it. The police ended up coming and arresting the men based on the price gouging statute. Once they arrested the men they impounded the trucks and ice. As the men were getting arrested the people waiting in line to get the ice clapped because they felt they were being taken advantage of and that what they were doing was not right. But now there are people who would have paid $20 or $30 per bag who are not able to buy ice. The people did not understand that the prices would adjust if they allowed more people to come and sell ice to them because