My letter to the editor published in the Record today,
Regarding “8 businesses sued over price gouging” (Page A-1, Nov. 10):
The devastation caused by superstorm Sandy was in many ways unprecedented. Homes were destroyed, some communities were flooded, power outages blanketed the state and commerce was disrupted, including the distribution of gasoline. And even if gasoline made it to many service stations, there was no power to pump it into cars. In short, demand has exceeded supply for many days.
When demand exceeds supply, prices tend to rise for any good or service. This is the foundation of a market economy. So instead of market forces (higher prices) balancing the available supply with the demand of drivers, Governor Christie and Attorney General Jeffrey Chiesa invoked the state’s anti-gouging laws to prohibit prices increasing more than 10 percent during the emergency. This is the wrong medicine for the temporary disruption of gasoline or any other product or service.
If the price of gasoline had been allowed to rise to balance supply and demand in the state, drivers would have had to conserve the gas they already had in their tanks and purchase only the gas they needed at the higher prices to get them through the supply disruption. In addition, suppliers in other parts of the country would have had an incentive to divert gasoline to New Jersey because of higher (temporary) profits, thereby alleviating the gasoline supply shortfall.
Unfortunately, Christie has made matters worse for the people of the state when he asserted that “profiteers take unfair advantage of people at their most vulnerable.” So in the governor’s view, it is better to have little gas at pre-crisis prices than more supply at market prices, whatever they may be, to increase gasoline supplies.
Fort Lee, Nov. 10
The writer, a professor of finance at Ramapo College of New Jersey in Mahwah, has been a candidate for statewide political office as both a Libertarian and Republican.