Any government interference in price setting defeats a free market economy.
From the Huffpost:
So-called price gouging is a critical economic tool to ensure that supplies last and so can meet ongoing demand. Making it illegal is ridiculous, and here's why:
Without price increases, many people buy extra supplies "just in case", regardless of what they have tucked away at home already. If too many people do this, supplies run out and people who need them much more urgently miss out. With price increases, people who don't really need supplies will leave them on the shelf not out of the goodness of their heart, but out of concern for their wallet.
Price increases encourage conservation of resources people already have. Those who can most easily adjust their consumption will do so, leaving resources free for those who can't. People might, for example, use their cars more sparingly to avoid having to fill up while prices are inflated.
The ability to raise prices encourages businesses to stock excess reserves. Space in stores and warehouses is limited and products (even water) go off over time. If they're not allowed to raise prices on those items, they'll use that limited space for other products that have higher profit margins the rest of the time.
Allowing price gouging actually encourages citizens to be more prepared for disasters. Do you have enough food and water and other essentials stored at home for you and your family if disaster strikes your town? Or do you just assume you'll be able to go to the store and buy what you need when something goes wrong? Knowing that prices might double, triple, or more during a disaster is a pretty big incentive to go and stock up now instead of waiting -- even for that person who lives right next door to the store!
Finally, rising prices attract more resources from outside of the disaster area, where prices are lower. Nearby businesses, small or large, can easily profit by shipping essential supplies in and selling them at a premium. Without the ability to charge that premium, they would actually end up losing money through shipping costs, overtime wages, and inherent risks of operating is a disaster area. Without the profit motive, many don't take the risk.
Of course, people could do all of the above voluntarily and it would be nice if we could rely solely on the goodness of people's hearts. Plenty of this does happen in times of crisis -- people do drive supplies in from out of town at their own expense. But shortages still often happen in the real world regardless -- shortages that we could prevent.
In the United States, corporate giant Walmart -- a common target for anti-capitalist complaints -- actually hires a team of weather forecasters to predict extreme weather events, so they can ship extra goods to areas likely to be affected. Walmart does this to make a profit, but the end result is that they ensure critical supplies are available to the public when they're most needed.
In fact, the more people and businesses that attempt to "exploit" shortages, the less prices would actually increase as all the new suppliers compete against each other. One couldn't sell water for $5 a bottle, if Walmart was selling it for $3.
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