In Dwight Lee’s essay, “Censoring Pleas for Help,” the Georgia-based economics professor notes the strange contradiction between popular opposition to censorship and widespread support of price controls. Lee’s primary contention with this political dissonance is that it is not only ethically inconsistent, but reflects an oversight of how markets help communicate economic needs, particularly with regards to the sudden needs which emerge in the wake of natural disasters.
Much of the support for price controls stems from fear of “price gouging,” which is essentially occurs when suppliers attempt to take advantage of sudden demand by raising prices to maximize profit during the period of demand. Lee notes that in his home state, there exists a price gouging law which is designed to prevent such a situation from happening by forbidding suppliers from charging more for their goods than they did the day before a disaster strikes. Lee notes that:
“[…] building contractors and construction supplies from several states had poured into Atlanta immediately after it suffered massive tornado damage. Can anyone seriously believe that this help would have poured in from far away if the “price gouging” law had been perfectly enforced, or that the help was not reduced by the enforcement that had occurred?” (Lee 1999)
The crux of Lee’s argument is that price controls are essentially a form of economic censorship which restricts the ability of prices to communicate market demands. To that end, he argues that prices are better understood as the most efficient means by which markets, such as disaster victims, communicate their need for help in the form of resources and supplies.
This is not to devalue the contributions and assistance that some have provided for free, but the economic distinction made above between humanitarian aid and supply-demand response is not a trivial one. While those who provide supplies for free are to be commended, it is important to recognize the potential mistake in relying on altruism and humanitarian sensitivity as the primary forces driving resource redistribution.
Such a view presumes that humanitarian aid is an objective force that responds to the needs of disaster victims efficiently. In effect, Lee’s argument is that while high prices should not be raised to wildly disproportionate levels, allowing them to fluctuate free of price controls ensures that they can communicate needs more efficiently, for “high prices […] insure that pleas for help will be met with a quick and effective response.”
Complementary to his point, Lee observes that price controls censor this economic communication and effectively disrupt the ability of customers to express their needs. He notes that in Charleston, price controls prevented a local hardware store from legally being able to sell generators at a higher price nor could the locals communicate their demand to outside suppliers of generators. The result was that one hardware store owner sold one of only two generators in his possession to a friend, at the expense of groceries with a greater demand in the form of thousands of dollars worth of food that needed refrigeration.
Simply put, humanitarian aid relies on the initiative of those with the resources and the sense of philanthropy to contribute to disaster relief, which is all well and good, but does not compare to the efficacy of free moving prices in expressing the demands that emerge in the wake of a natural disaster. As far as economics are concerned, price controls merely censor the ability of these sudden emergent markets to communicate those demands.
Lee, Dwight R. “Censoring Pleas for Help.” The Freeman, January 1999. Retrieved online on February 25, 2009 from: http://www.thefreemanonline.org/columns/censoring-pleas-for-help/
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Topic: Censoring Pleas for Help
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