When it comes to making the last week unpleasant, Hurricane Sandy got some help from government officials.
As the water from the storm began to recede, people in the New York metropolitan area wanted to repair, rebuild and get back to normal, But one of the most visible obstacles has been 1970s-style lines for gasoline. Many customers waited in line for hours only to learn that fuel had run out. Gasoline was rationed in New Jersey, where license plate numbers determined which days drivers were permitted to purchase fuel.
Waiting in line is a waste of time. The people there were certainly not helping bring more gasoline to the region and could instead be helping rebuild or could be productive in other ways.
Economists on the right and on the left agree that market prices – prices that reflect both supply and demand location by location – are much better at allocating scarce resources in extreme situations like the storm’s aftermath. But state and local government regulations, in the form of antigouging laws, effectively outlawed market pricing.
Early on, Steve Bellone, the executive of Suffolk County on Long Island, warned suppliers that he would punish anyone charging prices that were too high. Gov. Chris Christie of New Jersey sent similar messages. In New York City, federal officials interfered with the market by giving gasoline away; those lines were so long and contentious that New Jersey decided not to use that strategy.
If officials had allowed the price system to work, it would have alleviated lines in a number of ways. As suppliers seek the maximum profit, temporary and extraordinary prices encourage them (and make it affordable for them) to go to extraordinary lengths to get the electricity and fuel needed to have gasoline available to customers where it is needed the most.
Were they permitted, high prices would also have encouraged customers to economize creatively on their usage and acquisition of gasoline. If it had cost $10 or $15 a gallon, some people on those lines might have been willing to delay vehicle usage, leaving more for people who were willing to pay that price or who had no other choice.
Of course, many suppliers and customers take prudent steps because they want to be helpful during a time of emergency. But why not let the market bring forth more supply and more customer conservation by adding a financial reward?
Instead, officials resorted to begging customers to conserve – Gov. Andrew Cuomo of New York said, “Now is not the time to be using the car if you don’t need to” – and spending law enforcement resources dealing with hoarding, gouging and other crimes that would not exist if the price system had been allowed to work.
Mistakes of economics will happen sometimes, but it is too bad that government officials in the New York area are making so many when residents can least tolerate them.