As someone who has lived all over the country, from California to New Hampshire and everywhere in between, I have had the opportunity to experience most natural disasters. I have hidden in the basement during tornadoes. I have stood in door jams during earthquakes. I have covered my face while ash came down like snow and I have hunkered down during blizzards. But the most interesting experience I have had, and the most recent, was during Hurricane Matthew in 2016.
Hurricanes were nothing new to me, but I had never experienced the full force of a major storm. I left New Jersey before Hurricane Irene made landfall and experienced a category one storm after moving to Daytona Beach. Hurricane Matthew, however, was the strongest storm I had seen and was making a beeline for Daytona. It was not until after the roads and shelters had closed that I was informed that I needed to evacuate. With nowhere to go, I secured the house and slept with my boots on in the closet underneath the staircase.
Empty Shelves and Wawa
After leaving work and running to the hardware store, I had a day to fully prepare. The windows and doors were taped and secured, and I scrambled to the local Publix for food and water. As I walked through the parking lot, I noticed something interesting: someone loading nearly a dozen cases of bottled water into their car. I cannot speak to their situation; perhaps they had a large enough number of persons in their home to justify the amount of water, but I had my doubts.
Once inside, I found empty pallets marked with a price tag for those same cases of water; they were marked at the normal price that I saw during my weekly shopping trips. Most of the dried food was gone, as well as basic supplies. None of the prices had changed significantly and many shoppers had carts that were overflowing. I grabbed what I could and made my way back to the car. Fortunately, I was able to go to the Wawa down the street and found plenty of liter bottles of water; I bought enough for three days (two per day) and extra food. Gas stations can be hidden gems during emergencies.
Price Gouging Legislation
Florida is a remarkably unique state and is repeatedly struck by such disasters. As a result, complaints are often heard from people claiming that stores and suppliers are taking advantage of the situation by drastically increasing their prices for a quick profit. The state has implemented heavy restrictions on such actions and encourages consumers to report instances before, during, and after the emergency.
The law remains in effect up to sixty days after a state of emergency is declared. Penalties range from heavy fines for each offense, disciplinary action taken by state licensing boards, and civil suits from consumers. During a state of emergency, different municipalities release announcements and press releases via social and traditional media; throughout Hurricane Matthew, we were repeatedly reminded to watch for price fluctuations.
Supply and Demand
The Law of Supply and Demand is remarkably simple, but an incredibly powerful indicator of the status of the marketplace and a predictor of consumer behavior. When supply exceeds demand, prices fall. When demand exceeds supply, prices rise. When considering a predictable emergency, like a hurricane or blizzard, Supply and Demand applies greatly.
Essentials that are normally purchased in smaller amounts on a regular basis, suddenly become the primary focus of consumers, driving a major increase in demand. However, supply remains limited as stores and suppliers can only carry so much inventory. The general logistics of supplying inventory is also disrupted as roads close and law enforcement takes over. This would normally drive prices up, but Florida’s laws prevent this process from taking place.
With such an increase in demand, combined with public panic, people can go a little overboard with their purchases. Consider the person I saw loading the pallet of water into their car; without the natural increase in pricing, there is no signal to consumers to focus on what they need, rather than what they want. Self-preservation is a powerful motivator and tends to short-circuit the rational part of the brain, but an increase in pricing can limit this impulse.
There is also the supply chain to consider. Increased demand, signaled by increased prices, acts as a red flag to retailers and manufacturers. It lets the full chain know what needs to be replenished immediately and what can wait. It also lets suppliers know that an increase to the standard inventory may be needed. Additional resources can then be called upon to ensure that resupplies can be planned for and take place as soon as possible.
The marketplace is not merely a spreadsheet with arbitrary numbers, but a living organism made up of all people. Our behavior in response to different stimuli shapes the market to fit with the changes. If consumers begin to demand increased fuel economy in their vehicles, manufacturers begin to research new technologies to fit that demand. If an oil refinery catches fire and supply drops, fuel prices increase until inventory returns to normal, which tells consumers to ration fuel. Our behavior dictates the terms of the marketplace far more effectively than any law.
Without natural increases to pricing during emergencies, individuals are at risk to purchasing more than is necessary, putting others at risk of not getting enough. What many consider predatory pricing is merely the natural forces of the marketplace taking over, protecting consumers from the panicked greed of others. Everyone wants to ensure that they have enough for themselves and their families, which is completely reasonable. But if we are unable to consider our neighbors during such situations, the marketplace can provide the necessary corrections to curb harmful impulses.