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The Economics of Tragedies

STATES IN EMERGENCY

As of the time of this writing, Hurricane Irma just made landfall in Miami, Florida as a Category 4 Hurricane and is on a path to wreak havoc as it proceeds northwest across the state. Although the state of Georgia will thankfully be spared the full force of Irma’s destructive power since it will most likely be a tropical storm by the time it reaches the Peach state, President Trump still declared a state of emergency in Georgia on September 8, 2017. This designation allows the Department of Homeland Security and FEMA to provide equipment and resources with which to handle not only the people of Georgia who may need help in the days ahead, but the thousands of evacuees from Florida who have poured into Atlanta. Mandatory evacuation orders for Georgia’s coast began on September 9, 2017, and shelters began opening across Georgia the same day.

PRICE-GOUGING

Declaring states of emergency and mandatory evacuation zones were not the only actions being undertaken in the build-up to Irma. As of September 9, 2017, the office of the Florida Attorney General had received an incredible 7,000 complaints of price-gouging. Two days earlier, several airlines had been sharply criticized for increasing their ticket prices on one-way flights out of Miami. For September 8, 2017—most likely the last day the airports would operate before Irma hit Miami—United Airlines had flights out of Miami listed for as much as $2,000, and Delta Airlines had flights out of Miami listed for as high as $3,258. After these listings went viral, and complaints were lodged with the Attorney General’s Office, the listings were removed, and United, Delta, and several other airlines voluntarily capped the price of one-way flights out of Miami at $399.

State laws typically prohibit price-gouging of “essential items.” Airline tickets are not usually deemed to be essential items, and therefore do not always fall into the category of items protected from price-gouging, which was why voluntary compliance by the airlines was helpful, although not critical. In Georgia, during a state of emergency the Governor can prohibit price increases on items he/she considers “necessary” to preserve, protect or sustain the life, health or safety of persons or their property. The Governor must designate the items that are “necessary” for the price protection to apply. The Georgia Department of Laws’ Consumer Protection Unit has authority to investigate allegations of price gouging. Violators can be fined from $2,000 to $15,000 per violation.

NECESSARY ITEMS

Drinking water and fuel are two necessary items, and a run on these supplies began early in Florida. By September 8, 2017, hundreds of gas stations were out of fuel and many grocery stores were out of bottled water. What is more, the price of both of these necessary items had gone up substantially. The increase in gas prices may be partly due to Hurricane Harvey’s disruption in fuel supply. Whatever the cause, the price per gallon was up 23 cents as of September 8, 2017 in Florida, with 40% of stations in West Palm Beach out of gas, 58% of stations in Gainesville, 38% of stations in Ft. Myers-Naples, 35% in Tampa-St. Petersburg, and 32% of stations out of gas in Orlando.

People trying to find bottled water online, at Amazon e.g, were shocked to see that a 24-pack of Aquafina which typically costs less than $6 now cost $20, and to have it shipped (presumably in one day to beat Irma) cost a whopping $179.25.

Some argue that raising the price of items such as gas and bottled water serves a purpose since it prevents hoarding and therefore allows all people access to scarce resources. The theory is that if the price of gasoline is high, people will be less inclined to fill up extra cans to store in their garage at a time when those gallons are needed for evacuees. Similarly, if bottled water prices are high enough, people will be deterred from buying extra cases at the local grocery to store at home and there will be enough water for basic needs during an emergency.

This theory is attractive on its face, and appealing in its logic, but may ultimately fail in its implementation. The fact is that some people may simply not be able to afford the price increase even though they desperately need the fuel and water. Or, some people may still hoard the scarce resources because they are financially able to do so. Great inequity in financial resources will result in great inequity in basic resources if no attempt to regulate their distribution is made.

CONTACT YOUR ATTORNEY

If you think a business is engaging in price-gouging, contact Georgia’s Department of Law, Consumer Protection Unit at (404) 651-8600 or 1-800-869-1123. If you want legal advice or have questions regarding a specific business transaction, contact Dave Thomas at The Thomas Law Firm for a free consultation.

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Thomas Law Firm
Located at 945 East Paces Ferry Road, Resurgens Plaza, GA 30326.

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