Censoring Pleas for Help; D. Lee

The communication permitted by market exchange and the resulting prices creates a remarkable degree of social cooperation. There are no better examples of the benefits of this communication and cooperation than natural disasters. The victims need not only the assistance of people outside the disaster area, but also the cooperation of one another if they are to recover as soon and completely as possible. Unfortunately, when natural dis asters strike, governments are most likely to outlaw the price signals that make this coop eration possible-and to do so with the sup port of public opinion. Dwight Lee is Ramsey Professor of Economics and Private Enterprise at the University of Georgia. 49 After a natural disaster, prices generally increase sharply for labor, construction mate rials, electric generators, and a host of other products needed for recovery and comfort. The common explanation for these price increases is that unscrupulous suppliers are profiteering at the victims' expense. Suppliers may be profiting, but not at the expense of the victims. Those whose homes are damaged and lives disrupted are victims of the natural dis aster, not of those who supply them with needed goods and services afterward. High prices are better explained as the best way for victims to communicate their need for help to those who are most able to provide it. High prices also insure that pleas for help will be met with a quick and effective response.

Sending Lumber to Miami I heard an interesting example of such a response when I was giving a talk in Ohio in 1992, not long after Hurricane Andrew ripped through southern Florida. I had mentioned the storm and its aftermath to illustrate the impor tance of price communication, and a gentle man in the audience told a story about his son, a building contractor outside Cleveland who had started building the house he and his wife had dreamed of for years. The foundation had been laid and the lumber was being delivered as Andrew hit Miami. With the news of the disaster, he decided against using the lumber himself and (despite his wife's opposition) shipped it to Miami instead. Why? Because the news he found most compelling came in 50 THE FREEMAN/IDEAS ON LIBERTY • JANUARY 1999 the form of high prices for lumber, informing him that the demand for his lumber was greater in Miami than in Cleveland.

Was the Cleveland contractor an unscrupu lous profiteer? Hardly. He did far more good for the victims of Hurricane Andrew than those who sat around expressing contempt for price "gougers." True, a few people helped the hurricane victims by sending supplies to Miami for free. Certainly these people should be commended. But their help was insignifi cant compared to the help given by suppliers from all over the country (indeed, the world) who responded to higher prices by providing more of the things Andrew's victims indicated (through higher prices) they most desperately needed. Those who express contempt for people who sell products to natural-disaster victims at high prices should look closer to home for someone to criticize. Their criticism (born of economic ignorance) and the public opinion they inflame frequently provoke price con trols, which muzzle those crying out for help. The Atlanta Journal-Constitution pointed out last April that Georgia has a "price gouging"

law that forbids suppliers from charging "one penny more than they charged the day before the disaster struck." This law was favorably mentioned, with no hint of irony, in an article reporting that building contractors and con struction supplies from several states had poured into Atlanta i111ri1ediatelyafter it suf fered massive tornado damage. Can anyone seriously believe that this help would have poured in from far away if the "price goug ing" law had been perfectly enforced, or that the help was not reduced by the enforcement that had occurred? (Penalties for price goug ing in Georgia range from one to ten years in prison and fines of $5,000.) The Electric Shaver Victims of natural disasters need to com municate with one another also. Market prices are the only practical method. Everyone in the stricken area will value the products being made available, but people will want those products to go to those they believe can put them to the best use. Price controls prevent this from happening by censoring communi cation among victims.

A friend of mine who lived in Charleston, South Carolina, when Hurricane Hugo hit in 1989 saw firsthand the harm done by this cen sorship. Electricity was out for several days in my friend's area, and so lots of people were anxious to get gas-powered electric genera tors. Unfortunately, the local hardware store had only two and was unable to get more because ofprice controls. But there was anoth er problem with the price controls-one that actually benefited my friend's family, though at great cost to others. Because his father was a good friend of the local hardware-store owner, he got one of the electric generators at the controlled price. The store owner couldn't legally sell the generator to anyone else at a higher price, so why not let his buddy have it? My friend's father was delighted because he could continue to shave with his electric shaver. Unfortunately, grocery stores in town required electricity desperately to prevent thousands of dollars' worth of food from spoil ing. Without price controls, one of those stores would have offered a higher price for the gen erator, effectively communicating (on behalf of customers) that it had a more urgent use for it than my friend's father had. One person would have had to suffer the inconvenience of lathering up to shave, but hundreds of his neighbors would have persuaded him, through a high price for the generator, that their desire for fresh food should take precedence. Of course, without price controls, all the stores and my friend's father (had he still wanted one) would have quickly secured electric gen erators because they would have been able to communicate with suppliers outside the disas ter area.

Natural disasters provide a particularly vivid example of the harm done by price con trols. Unfortunately, governments do not need natural disasters to justify undermining social cooperation and destroying wealth by dictat ing prices. Governments have a long history of imposing price controls on a wide range of goods and services. And they will continue to do so until it becomes widely recognized that such controls are a particularly pernicious form of censorship. D Let'sPiercethe GovernmentVeil by Karen Selick O NTARIO, CANADA-Although multiple births are becoming almost common place in the 1990s, quintuplets were consid ered a miracle in 1934 when the Dionne sis ters were born in a small northern Ontario town. Their father, a poor farmer with five other children in the family to feed, soon dis covered that his five baby girls might bring in some extra income during those tough Depression times. He accepted an invitation to exhibit the girls at the World's Fair. Hastily, the province of Ontario stepped in and made the quintuplets wards of the province, ostensi bly to protect them. They were taken away from their parents and deposited in a hospital compound that was soon transformed into a virtual theme park called "Quintland."