The Right Opinion

Disaster Ignorance

By Walter E. Williams · Nov. 14, 2012

Here's a which-is-better question for you. Suppose a New Jersey motel room rented for $125 a night prior to Hurricane Sandy's devastation. When the hurricane hits, a husband, wife and their two youngsters might seek the comfort of renting two adjoining rooms. However, when they arrive at the motel, they find that rooms now rent for $250. At that price, they might decide to make do with one room. In my book, that would be wonderful. That decision would make a room available for another family who had to evacuate Sandy's wrath. New Jersey Gov. Chris Christie and others condemn this as price gouging, but I ask you: Which is preferable for a family seeking shelter – a room available at $250 or a room unavailable at the pre-hurricane price of $125? It's not the intention of the motel owner to make a room available for another family. He just sees an opportunity to earn more money. It was not the intention of the family of four who made do with just one room to make a room available for another evacuating family. They are just trying to save money. Even though it was no one's intention to make that room available, the room was made available as if intended. That's the unappreciated benefit of freely fluctuating prices. They get people to do voluntarily what's in the social interest – conserve on goods and services that have become scarce.

Gov. Christie told merchants that price gouging during a state of emergency is illegal because “during emergencies, New Jerseyans should look out for each other – not seek to take advantage of each other.” Christie warned: “The state Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties.” It's not just Christie who has threatened to prosecute sellers for raising prices. New York Attorney General Eric Schneiderman has launched an investigation into post-storm price increases after receiving consumer complaints about higher prices for everything from gasoline to hotel rooms.

Christie, Schneiderman and public officials elsewhere know better or have access to economists who inform them. But they're playing politics with people's suffering, emotionalism and economic ignorance. By the way, politicians would serve us better by focusing their energies on tax gouging.

Disasters produce ignorance in another way. Peter Morici is a professor at the University of Maryland and a former chief economist at the U.S. International Trade Commission. He argues that Hurricane Sandy may prove to be an economic boon, writing: “Disasters can give the ailing construction sector a boost, and unleash smart reinvestment that actually improves stricken areas and the lives of those that survive intact. Ultimately, Americans, as they always seem to do, will emerge stronger in the wake of disaster and rebuild better – making a brighter future in the face of tragedy.”

Professor Morici is not alone in this vision. Nathan Gardels, editor of New Perspectives Quarterly, wrote an article titled “The Silver Lining of Japan's Quake,” arguing the economic “benefits” of that disaster. Even Nobel laureates are not immune from this vision. After the 2001 terrorist attack, economist Paul Krugman wrote in his New York Times column titled “Reckonings; After the Horror” that as “ghastly as it may seem to say this, the terror attack – like the original day of infamy, which brought an end to the Great Depression – could even do some economic good.” He explained that rebuilding the destruction would stimulate the economy through business investment and job creation.

Let's set one thing straight: Destruction does not create wealth. The billions of dollars that will be earned by people in the building industry and their suppliers will surely create jobs and income for those people. But rebuilding diverts resources from other possible uses. Natural or man-made disasters always destroy wealth. Were that not the case, mankind could achieve unimaginable wealth through wars, arson, riots and other calamities.



Tod the tool guy in brooklyn ny said:

Great points made here, Mr. Williams. The greatest immediate help in Gerritsen Beach, was neighbors aiding neighbors. "Are you still in there, Mrs. Wilson?" She replied, "Yes, but I could use a little help." "Hang on, we'll help you." Pure libertarian assistance, w/o politics, is a beautiful thing to be a part of. Downsized, disheveled, divided, but certainly not defeated, Patriots-Freedom!!

Wednesday, November 14, 2012 at 6:26 AM

Kevin from Arkansas in USA said:

And all the time I thought the Broken Window Fallacy was discredited way back in 1850 by Frédéric Bastiat in his essay: Ce qu'on voit et ce qu'on ne voit pas (That Which Is Seen and That Which Is Unseen). One would think Krugman and Morici would know that.

Wednesday, November 14, 2012 at 7:37 AM

Ct-Tom in NC replied:

Kevin: Exactly what I thought when I saw the Morici piece on Fox. I am amazed that WW didn't mention it. Maybe he thought it too obvious?

Wednesday, November 14, 2012 at 10:01 AM

Ct-Tom in NC replied:

Actually, I think that this is a good illustration of the broken window case.

Wednesday, November 14, 2012 at 10:03 AM

Dave in SoCal said:

While the Governor has many admirable traits, and is certainly a vast improvement over his predecessors, as this story demonstrates he is a statist at heart. We should recall this when the inevitable calls come for him to be the next Republican Presidential candidate.

Wednesday, November 14, 2012 at 10:18 AM

richard ryan in Lamar,Missouri replied:

Absolutely right Dave. I have become disenchanted with Christie. He would be just another Teddy Roosevelt who was not exactly sent from heaven.

Wednesday, November 14, 2012 at 8:14 PM

p3orion in Midland, Georgia said:

Well, heck, if "disasters can give the ailing construction sector a boost" and ultimately lead to a stronger economy, then the most patriotic thing a liberal can do is to go home and set his house on fire.

Ah, but there's that old problem again: liberal theories always work better with someone ELSE's property.

Wednesday, November 14, 2012 at 12:28 PM

ThirtyNineWinks in Longmont, CO said:

When I lived in California I thought earthquake insurance was an expensive proposition. So I bet on the government. It always seems that FEMA is there with handouts in case of disaster. If my house ever got destroyed, I was pretty sure a weepy face on TV would get me as much as having paid for insurance would have. You can see that in what FEMA was doing this time. They were giving out free gasoline. I know it was hard to get, but I have to pay for their gas? The government handouts are making us all unwilling insurance policy holders for each other, insuring against all possible disasters....

Thursday, November 15, 2012 at 5:12 PM