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Hurricane Harvey And The Failure Of The Free Market

This is a life-or-death situation.

08/30/2017 10:56 EDT | Updated 08/30/2017 12:34 EDT
Detail of a photograph taken at a Houston Best Buy. Best Buy later apologized for gouging prices.

Two days ago, libertarian-leaning Forbes blogger Tim Worstall published a post titled “Hurricane Harvey Is When We Need Price Gouging, Not Laws Against It.” I would link to the story, but Forbes seems to have pulled it after the post received tremendous blowback from people who were outraged by Worstall’s pro-price-gauging post.

Luckily, because mistakes live forever on the internet, you can read a cache of the article. Worstall explains why he thinks businesses should be able to raise prices on goods and services when disaster strikes. He suggests that when prices go up during a disaster, the people who need the goods and services the most will get them because they’ll be most willing to pay the inflated prices. And the high prices will encourage others to deliver goods and services to the region in the most efficient manner possible, so they can get a cut of those giant profits. He writes:

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.

So these images of a Houston Best Buy selling water for exorbitant sums of money is the kind of “efficient” solution Worstall believes the market provides during a disaster:

What Worstall doesn’t address, though, is what happens when someone simply can’t afford that high price of bottled water? An economics wonk who blogs at the Big Picture under the name Invictus asked Worstall just that question on Twitter:

Invictus repeatedly asked Worstall the question, and Worstall struggled mightily to parse his way out of it. At one point, he claimed that “We’re not arguing about whether supplies should be provided. We’re arguing about how.” Finally, the Forbes blogger refused to respond:

In other words, Worstall prefers his arguments to remain academic. This is how libertarians and trickle-downers like their economics: without any real-world consequences. If they keep the situation broadly rhetorical and they refuse to address the real-world consequences of their policies, they can continue to ‘win’ arguments using trickery and pedantry.

But here’s the thing: People on the ground in Houston are right now living in the academic thought experiment that Worstall and others are bloviating on about. Prices are being gouged on food and water and gas and hotels. And not everyone can afford those prices. What would Worstall have hungry and thirsty poor people do? He refuses to say.

So let’s consider the real-world options that people are left with in Houston right now:

  1. They can find help. (I’d advise them to look to their local mosques and not wealthy Houston evangelist Joel Osteen for assistance, though Osteen was eventually shamed into opening his megachurch to hurricane refugees.) But the system is overwhelmed right now, which means help might not be available. In that situation…
  2. They can muster enough money to pay for the essentials. (Water is reportedly going for as much as $99 a case.) But poverty is on the rise in Houston, and some might not be able to gather that kind of cash. So this means that…
  3. They can take the law into their own hands and loot local businesses. But if they’re too weak and/or infirm to do that, or if they don’t want to get killed by law enforcement or by an armed store owner over a bottle of water…
  4. They can die of thirst.

These are the options. This is a life-or-death situation, and the free market simply can’t provide solutions for everyone. (As I’ve argued in the past, the free market doesn’t care if you live or die.)

But trickle-down pundits like Tim Worstall have devoted their lives to arguing that the free market is a godlike, omniscient force that always provides the best outcomes. So rather than revise their arguments, or acknowledge that sometimes the free market fails, they simply plug their fingers in their ears and ignore the suffering of their fellow human beings.

Even in cases like this — when tens of thousands of Americans are rising to the occasion and helping their fellow citizens because they know it is the right thing to do — zealots like Worstall simply can’t refute the profit motive. And yet they also refuse to accept the inhumanity of their own arguments. So they have to do what hundreds of thousands of Texans are doing right now: they hunker down in the dark and wait for the storm to pass.

(If you can, please donate to the victims of Hurricane Harvey.)