Coyote Blog

In an earlier post, I wrote a defense of price gouging.  Incredibly, one of the best simple summaries of why "profiting off disaster" is actually a good thing comes from the NY Times of all places:

All this, of course, is capitalism at work, moving quickly to get
resources to where they are needed most. And those who move fastest are
likely to do best.

Exactly (by the way, the above is quoted from an Austin Bay post, which was aimed more at criticizing the NY Times for dropping such pro-capitalist sentences from its European version.)

Higher prices for generators and lumber in the disaster area is what tells Home Depot and others that it makes sense to shift lumber and generator inventory to Louisiana from California.  High prices for gas give the following two messages simultaneously and unambiguously to hundreds of millions of people:  "you can make some good money if you can figure out how to get more gas to consumers right now" and "you might want to drive a little less right now". 

Think about that last statement.  Congress has over the last 30 or so years generated numerous energy "plans" and has spent billions of dollars to figure out ways to promote conservation and increased supply.  All of these plans have been expensive failures.  But now, post Katrina, in less than 48 hours, with no one in charge, the market has achieved what Congress could never do.  The least valuable auto-miles will be eliminated, without years of study by Congress to figure out which miles are the least valuable.  The most economic new sources of gasoline will be tapped, without debating in Washington what those sources are.  All bottom-up, with no one ruling the process, by the voluntary self-interested efforts of hundreds of millions of Americans reacting to a simple price signal.

(previous paragraph best read out-loud with someone humming America the beautiful in the background)

Postscript:  Apparently, according to Austin Bay, Texas and more specifically Houston are now the great Satan.   Since I am a white male in my forties who is fairly well-off, still believes in free markets, and was born Houston, Texas, I guess that makes me the ultimate oppressor.

Technorati Tags:  Katrina, Economics