Will ECON 101 professors now have to issue ‘trigger warnings’ when discussing the economics of price controls? (more on price gouging after natural disasters)

From Mark Perry.

"Boy, people are easily triggered these days! Who would have thought that a columnist writing about basic principles of ECON 101 would cause such a triggered reaction to basic economic logic that an organization like Forbes would remove Tim Worstall’s article “Hurricane Harvey Is When We Need Price Gouging, Not Laws Against It” from its website. That original link above to the article was taken down by Forbes a day or two after it first appeared on Sunday, allegedly in response to a hurricane of triggered responses, but you can find a cached version here.

What did Worstall write that was so “offensive” to Forbes readers? Here’s a sample of his “triggering” analysis of ECON 101 and price controls (emphasis mine):

Hurricane Harvey has hit Texas and is doing a great deal of damage to both life and property. Which is exactly when we need, positively desire, there to be price gouging, instead of the laws we have against it. The basic underlying economics being that we want whatever scarce resources there are to be applied to their most valuable uses. Further, we want to encourage the provision of more supply of them–both of these being the things which the price system manages for us. That is, allowing prices to rise in the aftermath of a disaster does exactly what we want to happen.
The economics of this is really terribly, terribly, simple. As a result of the disaster–of any disaster that is–some things are in short supply. Perhaps because some of the supply got damaged, or perhaps because people need to substitute. Floods could, for example, knock out the municipal water supply, leaving people needing bottled water. So relative to the available supply demand has risen. We now need some method of rationing that limited and scarce supply over that increased demand. Rationing by price is always the efficient way of doing this.
We also want something else to happen–we want supply to increase as fast as we can manage that. As we know from our basic Econ 101 supply and demand curves the way to increase supply is for the price to increase. We want, for example, people to start trucking bottled water from Louisiana to Texas. More money to be made by doing so will encourage people to do so. And as that extra supply arrives then prices will go down again as demand is met.
We want people to use less of the scarce resource, we want people to supply more of the scarce resource, allowing the price to rise is the one known way of achieving both those goals. So, why is it that we have these laws against it all? The answer is that we’re human, we are interested in both efficiency and equity and the people more interested in that equity are the ones who have written these laws. The balance, to my mind at least, going much too far toward that equity and against that efficiency.
My own version of dealing with price gougers would be to thank them for the good work they’re doing.

As Tim says, the economics of price controls following a hurricane are terribly, terribly simple, and also terribly, terribly non-controversial among economists and others who understand basic logic. And it’s not even a left-right political issue since left-leaning blogger/journalist Matt Yglesias wrote an article for Slate in 2012 following Hurricane Sandy (“The Case for Price Gouging: Trying to prevent merchants from hiking prices during disasters is futile and counterproductive“) saying basically what Worstall wrote in Forbes. Here’s Matt making the case for price gouging (emphasis added):

These [price gouging] laws are hideously misguided. Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.
The basic imperative to allocate goods efficiently doesn’t vanish in a storm or other crisis. If anything, it becomes more important. And price controls in an emergency have the same results as they do any other time:  They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isn’t a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.

So a defense of price gouging in 2012 from a left-leaning journalist in a left of center outlet is now too controversial and triggering for today’s readers of Forbes? Perhaps this calls for greater emphasis on economic education in the US so that adults won’t be so triggered by basic, simple, non-controversial economics! As evidence that the economics of price controls following disasters is really both terribly, terribly simple and non-controversial, here’s how it’s explained in a standard economics textbook, the one that I have used for 25 years, “Economics: Private and Public Choice,” 16th edition, by James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson. This is from Chapter 4 in the section on “The Economics of Price Controls” (emphasis mine):

Major hurricanes, such as Sandy (northeastern United States in 2012), Katrina (Gulf Coast in 2005), Andrew (south Florida in 1992), and Hugo (Charleston, South Carolina, in 1989), not only cause massive property damage and widespread power outages but also dramatically increase the local demand for items such as lumber, gasoline, ice, batteries, chain saws, and gasoline-powered generators. As a result, the prices of these items rise significantly in the wake of a hurricane. After Hurricane Hugo, for example, a bag of ice went up in price to as much as $10, the price of plywood rose to about $200 per sheet, chain saws soared to the $600 range, and gasoline sold for as much as $10.95 per gallon.
The higher prices play two important roles. First, they encourage suppliers to bring more of these items quickly to the disaster area. Second, they allocate the supplies to those deriving the greatest value from their use. The higher prices will begin to subside as additional quantities of critically needed supplies flow into the disaster area, but it is precisely these higher prices that encourage this response.
It is a natural reaction to think that the higher prices are unfair and that price controls should be imposed to prevent “price gouging.” State and local officials have often imposed price controls for precisely these reasons. After Hurricane Hugo, the mayor of Charleston signed emergency legislation making it a crime to sell goods in the city at prices higher than their pre-hurricane levels. Similarly, Mississippi’s attorney general announced a crackdown on price gouging after Hurricane Katrina and after Hurricane Sandy, Governor Chris Christie’s administration filed lawsuits alleging price gouging against more than 70 businesses, including hotels and gas stations that had raised prices; convictions are punishable by fines of $20,000 per transaction.
While price ceilings may be motivated by a desire to help consumers by keeping prices low, they exert secondary effects that retard the recovery process. At the lower mandated prices, consumer demand quickly outstrips the available supplies creating artificial shortages. The controls also slow the flow of goods into the area. Shipments that do arrive are greeted by long lines of consumers, many of whom end up without anything after waiting for hours.
The price controls result in serious misallocation of resources. Electric generators provide one of the best examples. The lack of electric power after a hurricane means that gasoline pumps, refrigerators, cash registers, ATMs, and other electrical equipment do not work. Grocery stores can’t open and thousands of dollars’ worth of food spoils. Although gas stations have gasoline in their underground storage tanks, it can’t be pumped out. ATMs and banks can’t operate without electricity, so people can’t get to their money, which is critical because almost all transactions in post-hurricane environments are made with cash.
Hardware stores that sell gasoline-powered electric generators typically have only a few in stock, but after a hurricane suddenly hundreds of businesses and residents want to buy them. In the absence of price controls, the price of these generators would rise and individual homeowners would generally be outbid by businesses, which can put the generators to use operating stores, gas stations, and ATMs. It is these uses that would yield enough revenue to cover the high price of the generators because they facilitate the provision of other goods and services that people desperately want. Given the large sums such businesses would be willing to pay, some with generators at home would even find it attractive to sell or lease them to buyers willing to pay attractive prices.
Market prices would allocate generators and other urgently needed supplies to those most willing to pay for them. Price ceilings keep this from happening. In the absence of price rationing people keep their generators at home, and it is commonplace for hardware store owners with a few generators on hand to take one home for their family and then sell the others to their close friends, neighbors, and relatives to run televisions and hair dryers. Moreover, the incentive of people to take action and bring generators in from other areas is slowed. For example, John Shepperson of Kentucky took time away from his normal job to buy 19 generators, rent a truck, and drive it 600 miles to the Katrina-damaged area of Mississippi. He thought he would be able to sell the generators at high enough prices to cover his cost and earn a profit. Instead his generators were confiscated, Shepperson was arrested for price gouging, held by police for four days, and the generators kept in police custody. They never made it to consumers with urgent needs who desperately wanted to buy them.
The dramatic change in conditions that often accompany a hurricane highlights the role prices play. It also illustrates how the secondary effects accompanying price controls can magnify the damage generated by hurricanes.

MP: As you can see, the economic analysis of price ceilings and anti-price-gouging laws that students learn in the third week of an ECON 101 class is terribly, terribly simple and should be terribly, terribly non-controversial. Except of course to those who are “long on indignation and short on economics, ” as Thomas Sowell wrote in a column about price gouging in September 2004 following two major hurricanes in Florida, and featured on CD yesterday.

Q: Are we now in an era of such escalting indigation and emotional fragility that college professors will have to issue “trigger warnings” when we discuss basic economics principles of price controls in ECON 101? If the readers of a business magazine like Forbes are easily triggered by basic economics, what about today’s young college students? And if the economics of price controls is now too controversial for Forbes, what other terribly, terribly simple and terribly, terribly non-controversial topics will be next to be considered “too triggering to publish”?"