NY Attorney General Subpoenas Craigslist For Post-Sandy Price Gougers

TheSync writes "In the wake of Hurricane Sandy, the New York State Attorney General has subpoenaed Craigslist, demanding that the site identify more than 100 sellers whose prices on post-Sandy gas, generators and other supplies were of an 'unconscionably excessive price' during an emergency. AG Eric Schneiderman said: 'Our office has zero tolerance for price gouging [and] will do everything we can to stop unscrupulous individuals from taking advantage of New Yorkers trying to rebuild their lives.'"

Comments

Morons.

[Anonymous Coward]

Price controls have exactly the same effect in an emergency that they have at any other time. If you prohibit higher gas prices, you guarantee shortages.

Re:Morons.

[Z34107]

An illustration, from Gwartney and Stroup. TL;DR: If ice is going for $10 a pound, you'll have people trucking it in from out of state. If you declare that illegal "price gouging," your grocer won't be able to keep his inventory from spoiling at any price.

In the fall of 1989 Hurricane Hugo struck the coast of South Carolina, causing massive property damage and widespread power outages lasting for weeks. The lack of electric power meant that gasoline pumps, refrigerators, cash registers, ATMs, and many other types of electrical equipment did not work. In the hardest hit coastal areas such as Charleston, the demand for such items as lumber, gasoline, ice, batteries, chain saws, and electric generators increased dramatically. Stores that remained open using backup gasoline-powered generators sold out of most items immediately. Goods that began to flow in from other cities were being sold by some sellers at much higher prices. A bag of ice that sold for $1 before the hurricane went up in price to as much as $10, plywood went up in price to about $200 per sheet, and gasoline sold for as much as $10.95 per gallon. Individual citizens from other states were renting trucks, buying supplies in their home state, driving them to Charleston, and making enough money to pay for the rental truck and the purchase of the goods, and to compensate them for taking time off from their regular jobs.

In response to consumer complaints of "price gouging," the mayor of Charleston signed emergency legislation making it a crime, punishable by up to 30 days in jail and a $200 fine, to sell goods at prices higher than their pre-hurricane levels in the city. The price ceilings kept prices down, but also stopped the flow of goods into the area almost immediately. Shippers of items such as ice would stop outside the harder hit Charleston area, to avoid the price controls, and sell their goods. Shipments that did make it into the Charleston area were often greeted by long lines of consumers, many of whom would end up without the good after waiting in line for up to five hours. Shortages became so bad that military guards were required to protect the goods and maintain order when a shipment did arrive.

The price controls resulted in serious allocations of resources such as electricity, which, during the emergency, could only be gotten from emergency generators. Grocery stores could not fully open because of the lack of electric power, and inside the stores, food items were spoiling--thousands of dollars' worth, in some stores. Gasoline pumps require electricity to operate, so, although there was fuel in the underground tanks, there was a shortage of gasoline because of the inability to pump it. Consumers were faced with problems of obtaining money, as ATMs and banks could not operate without electric power. Hardware stores that sold electric generators before the hurricane typically had only a few in stock, but suddenly hundreds of businesses and residents wanted to buy them. The price ceilings would not allow the store owners to ration the few generators they had by raising the price, so the owners had to allocate the sale of their generators in other ways. It was not uncommon for the owner fo the store to take one generator home, and to sell the others to his or her friends. While these families used the generators for household uses, gasoline stations, grocery stores, and banks were closed because of their inability to buy a generator. Thousands of consumers could not get goods they urgently wanted because these businesses were closed. Without price controls, we would expect the price of generators to be bid up to the point that they would (a) be purchased by those who had the most urgent uses for them, and (b) be imported into the city rapidly enough to keep the price from rising still further.

The secondary impacts of the price controls used during Hurricane Hugo in Charleston, South Carolina, highlight the importance of understanding economics and the role of prices in our economy. Despite pleas from economists in local newspapers and in The Wall Street Journal, the price controls remained in effect, increasing the suffering and retarding the recovery of the areas most severely damaged by the hurricane.

Supply and demand

[JBMcB]

If I remember the first thing we learned in Macro 101 correctly, if supply goes down, price remains the same and demand remains the same or increases, you run out of supply pretty quickly.

If you increase prices, you can afford to resell more expensive gas, trucking it in from further out of state.

What would you rather have: expensive gas, or cheap but non-existent gas?

Re:Cracking Down On Free Enterprise?

[Reverand Dave]

How is it not exactly? It really is kind of text book free enterprise. That is taking advantage of the market when it benefits you most and guarantees the highest rate of return on your investment.

Re:"Better yet, leave it to the private sector."

[PrimaryConsult]

or for individuals to sell generators that they had bought before the storm at double their retail value.

By making that illegal it becomes better for someone who has an extra generator to simply not sell it. While the generator would be doing no one any good, it is still available to the person holding it in case he needs it - to him the $700 generator is worth $1400 (the risk of needing it and not having it is worth $700 to him) but by not being allowed to sell it at that price, he would be taking a perceived loss for no reason. I fail to see how this is better than allowing supply/demand to take over.

As for gas, keep in mind this is the NY metro area. Very few people actually *need* gas. If the prices at the stations were allowed to rise to $10, people who do need the gas would be able to get it, and people who don't would take the bus/railroad/subway. Right now, the commodity being sacrificed is time: people who have more time on their hands and can sit on a line for 5 hours are better able to get gas than those working 3 jobs. How is that right?