While the magnitude of the epic flooding in southeastern Texas from Hurricane Harvey is only beginning to emerge, and is likely to get much worse over the next few days, it is not too early to consider with apprehension the responses by government at all levels.
Ronald Reagan taught us that perhaps nothing was more dangerous than the government official who said: “I’m from the government, and I’m here to help.”
Will the authorities, at all levels, impose draconian “relief” measures? Will they ration various commodities like potable water? Or gasoline? Or even confiscate goods?
Recently, in 2012, the New Jersey coast and New York City suffered some of the worst flooding in years from the storm surge from Hurricane Sandy. (That was the storm which led to President Obama and New Jersey Governor Chris Christie having that infamous arms-embracing stroll on the beach, only days before the presidential election.) The response from the blue-state, government-power-loving authorities was gasoline rationing which made gas shortages worse, the lines longer and general hardship even deeper.
From personal observation, it appears that rationing does little to reduce overall demand, the impulse to hoard, or the gross inefficiency caused by waiting hours for gas.
The logical first reaction is to get a full refill in order to wring as much inefficiency from the wait time. It may, over time, reduce the amount people drive — as social engineers rejoice! — because some people will weigh the costs and benefits of any car usage against the ultimate inconvenience of a wait.
But what of people in the suburbs or rural areas, or people whose job necessitates driving around? How much economic activity is lost — never to be regained? (Note that commercial vehicles are generally exempt, but many independent contractors drive personal, noncommercial vehicles for business use and are quite vulnerable to any rationing games).
Also consider whether such disasters and sure-to-be embellished shortages will be used by the environmental or behavioral zealots whose fingers are on the levers of government power, as “teachable moments.”
As in: disasters are always a good excuse to teach a certain group a “lesson.”
Commodity rationing in times of disaster has costs. Assuming the absence of nefarious reasons to cause, permit or delay alleviating a shortage, let’s look at the immediate and easily recognizable costs of lost time, the related inefficiency, and a seriously degraded lifestyle.
There are downstream economic costs. A business owner who spends 70 hours, up from 60 hours a week, to make the same net income will either pass that cost down to consumers, or cut back on other expenses. The expectation (or objective) that the owner will willingly sacrifice his most precious commodity — his time — for the public good is both naive and, frankly, contemptuous.
Somewhere, someone will lose his or her job when owners cut back due to revenue declines or physical fatigue, or even demoralization at continued government policies that reduce or eliminate the marginal benefit of added work. This is a perfectly rational decision. Other businesses will pass on costs, and the price increases or declines in service quality, quantity or variety of offered goods and services will reduce the savings or standard of living of downstream consumers.
Somewhere, somehow, the price is going to be paid. But there are more problems.
A typical government response is an anti-gouging law. is intended to protect the consumer from presumed exploitation by a business owner who raises prices at all following a natural disaster or other emergency event. But the government presumption that businesses and their owners are exploiters leads to further, unintended — and unproductive and harmful — consequences.
The government scrutiny fuels (no pun intended) the public perception that gas retailers are greedy and somehow profiting unfairly. This encourages the consumer to cheat the gas station owner, run out on the bill, cut the line, and so on. The rule of law, based on the larger cultural value of a shared sense of fairness, will deteriorate further.
In a society where our former President Obama shamed Americans to “pay their fair share” and where First Lady Michelle Obama remarked during the 2008 campaign that some had to do with less so that others could have a little more, government policies which inflict hardship or create a sense of injustice threaten to produce more lawbreaking and antisocial behavior, not less. The danger is that more and more people will feel that they are being robbed. The result? A degrading in behavior, from harsher reactions, to reduced sympathy, to a heightened moral rationalization for greed, to less hesitancy to pass on costs or to simply withhold benefits from others just because one can.
You can imagine charitable contributions and investments drying up, in both an economic and emotional reaction. We will have hoarding, not merely of gasoline but of almost any asset or resource.
Command and control economic policies spark an uncontrollable chain reaction of misery. The solution is not to fight people, or their demand. A real solution is to open up supply. Let gas station owners and other businesspeople charge whatever they want. Those who abuse consumers will soon pay a heavy price when they are shunned by their former customers. This will encourage gas station owners to stay in business, wholesalers to deliver gas, and refineries to get back in business.
Areas hit by disasters will not experience any recovery or economic revival when their governments act like the savage bikers out of the dystopian, post-apocalyptic movie “The Road Warrior.” Elected leaders should use their authority to work on supply preservation and supply chain problems, and on intergovernmental relations among various authorities to preserve basic public order and infrastructure. These are some of the simplest, and core, functions of government. Governments must serve their people, not treat them like the enemy for the sin of wanting to drive. Otherwise, we may see a new form of “road rage.”