What do economists think of anti price gouging laws?

With hurricane Milton about to hit Florida, there is the possibility that some sellers might greatly increase the price of things like gas and water.

Below is a poll of economists that was done in 2012 by the Kent A. Clark Center for Global Markets, which is at the University of Chicago Booth School of Business. Following that are statements by some of the leading economists who voted.

But first, to get some background on why economists are often against these laws see How Milton Friedman Can Help Us Get Through Hurricane Milton: To give storm victims the best chance at recovery, let local knowledge and markets guide decisions by Jack Nicastro of Reason.

I wrote an article that was printed in The San Antonio Express-News in 2017 titled Price-gouging laws can backfire.

Then this past August I had a post titled Kamala Harris Wants to Ban Price Gouging. What Do Economists Say? The line between gouging and normal market forces can be pretty thin. And stopping it is no easy feat either. 

Now the economist poll.

See Price Gouging. The poll was done by the Kent A. Clark Center for Global Markets, which is at the University of Chicago Booth School of Business.

"Connecticut should pass its Senate Bill 60, which states that during a “severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive.”"

51% disagreed or strongly disagreed. Only 8% agreed or strongly agreed. 20% did not answer. So, of those that answered, over 60% disagreed or strongly disagreed. Here is what some of them said:

"David Cutler: Without defining "unconscionably," I don't know what to think about this.

Darrell Duffie: I'm unsure how the courts will define "unconscionably excessive." Efficient allocation by market prices is good, absent monopoly effects.

Aaron Edlin: statute is vague. also statute could put goods in hands of those with limited need who hoard them.

Pinelopi Goldberg: Torn about this. The term "unconscionably" seems too loose - is it a 20% or 500% markup? But the goods need to be allocated somehow.

Michael Greenstone: unconscionably excessive is VERY imprecise. extreme weather can disproportionately hurt poor and this could be efficient redistribution.

Robert Hall: Goal is to allocate suddenly scarce goods optimally. Prices are only a tool, but often the right tool. Law doesn't have a good alternative.

Caroline Hoxby: I sympathize w the intention but goods must be allocated in some way & prices are better than first come or fights breaking out among people

Kenneth Judd: The vagueness of the law means more businesses will shut down, which is the same as setting price to infinity, a legal price.

Anil Kashyap: Seems like pandering, "post-storm cleanup or repair services" are included. It seems like those prices could reasonably soar after a storm.

Pete Klenow: Would presumably lead to misallocation and lower supply than optimal. There are better ways to redistribute

Edward Lazear: Inefficiency from short term monopoly that results in "gouging" is secondary to losses in efficiency from a getting items to right users.

William Nordhaus: At best, symbolic. At worst, would return to price controls of the 1970s.

Richard Schmalensee: Seeks to prevent prices from clearing markets; never a good thing. Standard is hopelessly vague so increases risk for affected businesses.

Nancy Stokey: State legislatures should focus on more important questions.

Richard Thaler: Not needed. Big firms hold prices firm. "Entrepreneurs" with trucks help meet supply. Are the latter covered? If so, bad."