Forget Price Gouging: Businesses React Altruistically To Disasters

With Hurricane Irma and Hurricane Harvey in the news, the country is being treated to a real-time debate over the sins of so-called price gouging, or sharp hikes in the cost of food, water, fuel, and other essential items in affected areas.

Defenders of gouging, including many libertarians, stress that price hikes force customers to prioritize their purchases while incentivizing suppliers to bring necessities to market. So if jugs of water are selling at $10 a gallon, businesses have a motivation to truck them in. And at that price, no one's going to use them to wash their cars.

Critics, however, say that it's immoral to use the price mechanism to meter out essentials in a crisis.

Both sides ignore a far more-important reality: Local and national businesses routinely give away goods and services more efficiently than public-sector responders or charities can manage.

In the immediate wake of Hurricane Harvey slamming Texas, businesses pledged over $72 million in aid, with over three dozen giving more than $1 million a piece. Airbnb used its home-sharing network to set up places for people to stay, and the crowd-sourced mapping app Waze helped the displaced find shelters. Walmart, the left's favorite corporate bogeyman, pledged more $20 million and brought water and food to the needy. A dozen years ago, during Hurricane Katrina, the world's largest retailer trucked in relief long after FEMA convoys stopped running.

Private sector aid gets less press than empty shelves and gouging accusations, but it also makes good business sense.

In some cases, price hikes during a crisis are appropriate, but most retailers know they're better off showing that they care about their customers and aren't out to take advantage of a bad situation. Successful businesses safeguard their reputations.

In The Wealth of Nations, Adam Smith wrote that he had "never known much good done by" people motivated by charitable aims, but providing aid in disasters is every bit as much a part of the free market as more obvious forms of profit seeking.

If critics and defenders of gouging are really interested in creating a better society, they'd do well to help make this part of the Invisible Hand visible to all.

Edited by Mark McDaniel. Written by Nick Gillespie. Cameras by Jim Epstein and Alexis Garcia.

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