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As taught by Thomas Sowell in his book "Basic Economics":

If the prices of hotel rooms remain what they have been in normal times, those who happen to arrive at the hotels first will take all the rooms, and those who arrive later will either have to sleep outdoors, or in damaged homes that may offer little protection from the weather, or else leave the local area and thus leave their homes vulnerable to looters. But, if hotel prices rise sharply, people will have incentives to ration themselves. A couple with children, who might rent one hotel room for themselves and another for their children, when the prices are kept down to their normal level, will have incentives to rent just one room for the whole family when the rents are abnormally high—that is, when there is “price gouging.”

Are there any countries or states that have fully embraced this economic principle and welcome/expect price gouging in case of natural disasters? Or at the very least countries where it's perhaps considered impolite but where the authorities don't interfere with sellers setting the prices as high as they want during times of need?

P.S. If you'd like to offer a frame challenge answer, please consider answering this related question on History.SE first.

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    In my memory the examples of price gouging in case of natural disasters all happened in the US, with some discussions on whether this was wrong or should have been prevented after it happened. Similar natural disasters striking Western Europe where resolved by the government stepping in to meet the increased demand so no real price gouging happened and there was no need to prevent it.
    – quarague
    May 29 at 17:09
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    "Price gouging" is a loaded term. The purpose of a price to represent the value that a person is depriving others of by taking a good or service. If someone is taking $10 of value away from other people by taking a gallon of gas, then $10 is a fair price.
    – Acccumulation
    May 30 at 0:34
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    @Acccumulation it goes both ways. The seller obtains more value from the money than they get from the good they own, while the situation is reversed for the buyer. The end result is a net win for both sides of the transaction. If it’s not a net win for both, the deal will fail to happen.
    – JonathanReez
    May 30 at 6:59
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    Yup, something amusing-ish happened last year. In the NWest there were fewer lettuce due to farming pbms. So $1 lettuces went for $8CAD. So far, so good. Then they started vanishing from menus - no more lettuce. And one chef told us that wholesalers ended up throwing away their $8 lettuces - which they probably acquired expensively from farmers. One wonders how many people will come to realize how utterly useless lettuce is in many recipes, like ones where it is just decoration. Like my gas example, with non-essentials/lavishly-used goods, there is a risk demand will not recover.
    – Italian Philosophers 4 Monica
    May 30 at 7:47
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    I guess it depends what you mean with the word "fully", but most countries seem to have embraced "price gouging". Outside of the US, anti-price gouging laws seem rare and those that exist, only apply to specific products. E.g. for the EU, the only general example of an "anti-price gouging law" that Wikipedia cites is a law that only applies to companies in a "dominant position" in the market, which seems more like an anti-monopoly regulation than an anti-price gouging regulation.
    – FrederikVds
    May 30 at 9:05

1 Answer 1

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(Well, it's a tiny embrace, but it was a big problem, so...)

A number of countries in Europe let gas prices rise in response to Russia-generated gas crisis, German among them.

Economist - Europe has shaken off Putin’s gas embargo

Benjamin Moll, Georg Zachmann and Moritz Schularick, three economists, recently compared the doom-mongers’ vision with reality in Germany. Far from falling into an abyss, Europe’s largest economy suffered only the mildest of technical recessions.

Rather, millions of firms and people in Europe have turned out to be unwitting heroes of making do. “Market economies have a tremendous ability to adapt to changing circumstances,” says Mr Moll, a professor at the London School of Economics. Households turned down the heating, at least in countries where politicians did not cap energy prices in a bid to placate voters. Factories once dependent on gas found ways to switch to other fuels.

More details on gas use drops by country.

gas drop by country

vs. cost increases:

gas price changes 2nd half 2022

(Note that the reduction vs increase is correlated, but not completely. Swedish prices don't go up much, consumption drops quite a bit. Ireland is the opposite).

Meanwhile, back in the UK (led by a government claiming descendence from St. Thatcher), which has capped gas costs *. Guess that's what happens when you're as unpopular as the UK Conservatives (note: see comment, this was a buyer cap, not a seller cap).

European countries such as Germany are leading the way in slashing their demand for gas, according to Drax Electric Insights.

The UK is showing no signs of changing its gas consumption levels, with an exceptionally mild autumn leading to its modest reductions year-on-year.

Or France:

According to a note from the Directorate General of the Treasury, the State will have borne 52% of the loss of real income (85 billion) suffered by France due to the increase in gas and oil prices in 2022. Households support only 6% and companies 42%.

* I agree with targeted help for the poor (who in any case don't use that much energy). But the UK went for a more generalized support for everyone, at great cost to the budget.

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    The UK hasn't exactly capped prices... It's capped the price paid by consumers up front and is paying for the rest through general taxation. So, in reality, what's happened is the government has endorsed price gouging by stealth whilst attempting to portray themselves as helping people. It's essentially been a massive transfer of cash from the exchequer to private shareholders. Actual price-capping wouldn't have the government making up the shortfall to massively inflated prices. It would likely just make up the shortfall to the point generators weren't losing money.
    – ScottishTapWater
    May 30 at 10:21
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    Pretty good answer, but can't upvote because even though German politicians didn't cap prices they still quite avoided appearing to "embrace" price gouging. Specifically, one thing they did do is reduce taxation on petrol to push the prices down (not that it actually accomplished much). Even here in Norway, most remarks that the energy rising prices might have their positive aspects focused on increased income to the energy-producing municipalities, not on the possibility of inducing reduction of consumption.
    – leftaroundabout
    May 30 at 14:40
  • @leftaroundabout Which is why I specifically used tiny. I realize that they tried to cushion a bit. But some countries were more open to rises than others. France? : govt absorbed more than half the rises (no surprise to an ex-French). Mixed feelings about taxes when they are % of gas prices (rather than qty): why should govt get windfall from suffering customers?
    – Italian Philosophers 4 Monica
    May 30 at 16:18
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    Whether taxing fuel by price-percentage makes sense is arguable in general. IMO the taxation should be based on the CO₂ emissions. In this case though, what would have been most effective is keeping the (price-percent) tax up but directing all that increased government-income towards targeted support for those who struggle most as a result of the prices, and as cash, so the receivers still have the full incentive to reduce their consumption as much as possible.
    – leftaroundabout
    May 30 at 16:42
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    @JonathanReez Dunno. For one thing different countries rely on different energy sources for different things: Ireland may be all-gas heating and cooking while Germany uses gas for industrial processes? How does demand evolve then? And Spain/Malta may not heat much in general, thus not amenable to "turn down the thermostat", but rely exclusively on gas for cooking? Maybe someone will do a thesis somewhere sometime.
    – Italian Philosophers 4 Monica
    May 30 at 17:55

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