Prices are Bounties
A man has just robbed a train. A Rock Island Rail car was held up in the desert of North Texas on route from Chicago carrying dozens of passengers and tens of thousands of dollars in a Wells Fargo express compartment. The men were slain and the women and children are kidnapped.
You’re the sheriff in charge of the investigation. In a case like this, tried and true procedure is to put a bounty on the man’s head. That gets everyone interested in looking and bringing this man to justice. An everyday 2-bit robber might get a bounty of a thousand or ten, but this is an emergency. You set the bounty at $200,000, dead or alive.
This bandit ain’t getting away easy.
With two major hurricanes in the last couple of weeks, “price gouging” is in the news. Whether it’s $10 for a gallon of gas in North Carolina or $2,000 flights out of Tampa, charging high prices during an emergency is extremely unpopular.
The reasoning is intuitive: when someone is in a desperate situation, they might be willing to pay high prices for basic goods like gas or water, but charging them these high prices is taking advantage of their misfortune.
But imagine if you were the sheriff of Ashville, NC, and it was your job to get more gasoline and bring it into town. You might offer a bounty of $10 a gallon, dead or alive. That’s a lot more than the usual everyday bounty, but this is an emergency. Anyone who can get gas into western North Carolina should be rewarded because that’s where people need it most.
Prices aren't just a transfer between buyer and seller. They're also also a signal and incentive to the whole world economy to get more high-priced goods to the high-paying area; they're a bounty.
Whether you’re chasing train-gangs or gasoline the last thing you’d want if you were the sheriff is a cap on the bounty price you’re allowed to set.
High prices on essential goods during an emergency are WANTED posters, sent out across the entire world economy imploring everyone to pitch in and catch the culprit.
The difficulty that many people may have in paying these higher prices is a serious tragedy, and one that can be alleviated through prompt government response e.g by sending relief funds and shipping in supplies. But setting prices lower doesn’t mean everyone can access scarce and expensive essential goods. In an emergency, there simply aren't enough of them to go around.
The central problem remains unsolved: A criminal is on the loose and a hurricane has made it difficult to get these goods to where they’re needed. Setting low prices might mean the few gallons of gas, bottles of water, or flights that are available are allocated to people who get to them first, or who can wait in line the longest, rather than based on who is willing to pay, but it’s not clear that these allocations are more egalitarian.
What is clear is that these allocations are less likely to bring the culprit to justice or to get more goods into where they are needed.
When there’s an emergency and a criminal is on the loose, we want the sheriff to set the bounty high, and catch ‘em quick. High prices during other emergencies work the same way. Let the price-system sheriff do his work!
Super high prices for water etc are GOOD because they incentivize increases in supply. But also they are BAD, not because they "take advantage of the misfortune" of the people in Asheville, but because poor people who might need the water more will be outbid by rich people who need it less but are more able to pay. Surely that's an injustice? Those who object to price gouging focus on this bad, and pointing to the good of incentives doesn't answer their complaint, unless you argue that the good outweighs the bad. Maybe it does--if so, how and why?
The assumption at the heart of this argument -- that the market is the only method of transmitting information about the needs of consumers -- leads you to conclude that prices are the best method of communication. I learnt about Hurricane Milton not from an increase in gas prices but from social methods of communication: news networks and social media. I am highly confident that you learnt though similar methods. As such, it is not necessary for an increased need to be communicated through price increases; any basic understanding of the devastation of a natural disaster would prompt the movement of aid.
The sole restraint on aid reaching the necessary areas given the necessary knowledge is hesitancy on the part of providers. For a government to do so is seen as a violation of human rights (c.f. Israel's attacks on UN workers recently), but you choose to frame the market's arbitrations of the value of these people's lives as a necessary response, rather than as a collective punishment of their misfortune. This gives agency to "the market" as an abstract concept, rather than the profiteers price-gouging victims of a natural disaster. They are the ones responsible for the hyperinflation of gas and water. The inflationary shock during COVID was also caused by greed on the part of PPE manufacturers and oil and gas companies, whose profits soared as millions died.
Your analogy, accurate as it is, underlines the inhumanity of the market, and how controls for the good of society are necessary for a healthy public life.