Policy Assignment: Should the federal government impose a price ceiling on essential items during emergencies?

 I believe that the federal government should not impose a price ceiling on essential items during emergencies. Price ceilings decrease supply during a time of increased demand. The result is a shortage of supply. Isn't it better to pay more for something you need than to not have the option to buy it at all? 

Consider the economic effects of a price ceiling on hotel rooms during a time of mass evacuations of a nearby area. We'll assume there are more people than hotel rooms (if there weren't, the price ceiling would probably not be binding), the hotel rooms would quickly fill most people could afford the rate and many families would be left without shelter. If hotels could charge higher rates, people would become more resourceful. They may share hotels rooms to divide the cost or find cheaper alternatives like staying with friends or family. Consequently there would be more hotel rooms available to those who most needed to stay and were willing to pay the price. Sadly, there would be families who desperately needed the hotel room but could not afford to pay the raised prices. However, a price ceiling would not guarantee that family a room, and would instead result in many families being left homeless. It does seem worth mentioning that by not imposing a price ceiling, wealthier people will benefit more than the poor. The point is that less people overall will be left without shelter if there is no price ceiling. 

There are ways to maintain fairness without running the high risk of shortages of essential items. Raising prices during emergencies is known as price gouging. At least 28 states in the US have anti-gouging laws (Burr). Though they vary from state to state and are incredibly vague and subjective, they do give pause to suppliers who may have done much worse. Many companies argue that these laws are unfair and too vague to abide by. These companies can, without a doubt still legally make a profit off of those less fortunate but when that profit becomes excessive, the law steps in. If a company is greedy enough to cross that line, they deserve to have some of those profits taken away. 

Price gouging is currently an extremely controversial topic in legal and ethical circles and I believe the laws will continue to evolve as a way to avoid the necessity of price ceilings during emergencies. While it is unfortunate that the victims of natural disaster and similar crisis can be exploited by sellers, by not imposing price controls, additional and unnecessary tragedy can be avoided.




Works cited:


Burr, Michael T. "Getting Gouged." Insidecounsel 16.174 (2006): 32. MasterFILE Premier. Web. 18 Sept. 2012.

LLAMONT, JULIAN, and CHRISTI FAVOR. "Price Gouging In Disaster Zones: An Ethical Framework." Social Alternatives 28.1 (2009): 49-54.Academic Search Complete. Web. 18 Sept. 2012.


Page, Edward J., and Min K. Cho. "Price Gouging 101: A Call To Florida Lawmakers To Perfect Florida's Price Gouging Law." Florida Bar Journal 80.4 (2006): 49-52. Academic Search Complete. Web. 18 Sept. 2012.