Why do people find this luck objectionable? In a “proper” disaster, there is a feeling that everyone should help. We all chip in to help others. If a building collapses and someone is trapped, we don’t stand around negotiating how much we will get paid to dig them out, we just get on with it. I suspect that even the most ardent free-marketeer would agree with this. Someone who denies emergency life-saving aid to another in order to make few bucks is surely in the wrong? So we have this ideal of how we should behave in an emergency.

We also have an idea that it is good for people to be paid for their labors and acumen. So we have a conflict – we encourage altruism in life threatening emergencies, and profit maximising in other situations. However, we do not try to enforce altruism – there is no requirement to come to someone’s aid. That would infringe freedoms too much. (Although I think there is in France). If we can’t make people behave well, perhaps we can at least discourage “bad” behaviour by preventing people profiting from it. We stop people charging $1 million to dig people out of buildings so as not to encourage this “bad” behaviour.

Laws are blunt instruments, and (if we are to have such a law) someone has to draw a line between the good and bad profit. We might wish to prevent profiting from life threatening situations, perhaps even situations where there is extreme pain or discomfort. Perhaps even where the discomfort is not extreme. To make life simple, we seem to have a law that bans windfall profits even where there is quite mild discomfort as long as the cause is an event big enough that it would affect prices. It may have some justification for material already in the disaster area, as this does not affect supply. It also affects prices of materials brought into the area after the disaster, which must reduce supply. I suppose it prevents people going into areas and charging for their labor.

So, it is a law which is inspired by a sense of fairness and to encourage “good” behaviour, but has unintended consequences, and could make things worse.

Folks who distribute food, batteries, ice (as in the link above), or water in disasters are doing more than I have done. It is crazy that they could be criminals for providing when I am innocent for choosing not to offer anything to people in need. On the other hand, state legislatures that write such laws should be charged in court and hung as human rights violators.

If your goal is to make poor people better off after a disaster, the best way to do that is to give poor people the money to buy goods instead of giving subsidizing water. Why does water rule supreme over all other things people might want?

Waiting in line is also an unproductive use of peoples’ time. A person can be working instead of standing around.

This is interesting, in that it’s clearly not a government failure, but perhaps a market failure caused by a lack of understanding of economics. If people boycott a firm for doing something socially beneficial in the mistaken view that it is socially harmful, then rational firms will respond by doing the socially harmful practice.

“No-one makes “unusual” profits. In this case, the retailer had already paid for his water. His price increase goes straight into his pocket as “unusual” profits”

What you’re referring to (”windfall profits”) must be internalised in the original price in any reasonably efficient market. Suppose I grow crops that normally retail for $1 per unit, but 1% of the time they can be retailed for $6 per unit. Therefore their expected retail price is actually $1.05 per unit, and thus their wholesale price must be the same as other goods that always retail for $1.05, minus a risk premium. I as the grower will not earn above-normal profits for this, because so long as growing is a competitive industry, others will enter the market until my profits are normal.

It is true that the sellers earn above their expectation whenever a disaster does hit. They pay for this by earning slightly below their expectation whenever a disaster does not hit though. Still, some people might find this luck objectionable. However, if price increases would really hurt you hard, it’s not terribly difficult to hedge against them. If you’re worried about a worldwide shock, futures in the commodity will suffice. A localised shock is a bit harder but you could presumably come up with some form of contract.

Now, almost no-one does this even when there are no price controls. Transaction costs make it hardly worthwhile, sure. But surely they’re not so high to stop you from hedging against really devastating risks? After all, other forms of insurance have transaction costs and people still use them. My suspicion is that hardly anyone is ever devastated by temporary price shocks. Paying twice the price for certain necessities may be annoying but it’s hardly going to bankrupt you if it’s only for a week or so. Talk is cheap though, so people feel free to whine about how greedy it is.

This is kinda like how they do things at amusement parks nowadays. For the day, you can pay $60 or so to get you to the front of the line. Any thoughts? I think it’s a pretty good system.

I have no idea what you’re objecting to, but I doubt very much that most voters understand that price ceilings cause shortages.

People face different incentives as consumers than they do as voters. As a consumer, a person bears all of the costs and benefits of their decision. As a voter, this is no longer the case. We should expect people to act more rationally as consumers than as voters.

Landsburg had an earlier post on why people don’t have the incentive to act rationally as voters. See Bryan Caplan’s ‘The Myth of the Rational Voter’ for a more detailed argument.

So a $12 bag of ice represents the rational actors of the market but when those same actors pass a law preventing the practice it doesn’t?

The people passing those laws (or electing the people who pass those laws) understand the value of those laws