There is a crime being committed - a crime that harms people when they are most vulnerable; that makes it that much harder on people who, often due to circumstances beyond their control – and it must be stopped.

In the aftermath of Hurricane Fran, four men rented a refrigerator truck, drove into an area of Raleigh, NC, and began selling bags of ice for $8 a bag. In the aftermath of Katrina, stations in several states raised retail gasoline prices - in some cases to well above their pre-Katrina levels. Jason McBride, for example, raised prices to $3.49 per gallon at his Alabama station. John Shepperson tried to sell generators to people in an out-of-power area of Mississippi at a substantial markup. In the late 1990s, the price of generators in northern New York rose significantly after another storm. Similarly, after a November 2006 storm, a Farmington retailer raised prices on generators by as much as $697. And, as recently as this year, gas stations, hardware stores and hotels in the Springfield, MO, area responded to an ice storm by raising prices.

Then the crime took place. McBride, Shepperson and the North Carolina four were all arrested. In each of the other cases, settlements were obtained from those companies that had raised prices to “unconscionable” levels in the aftermath of nature’s fury. But, some may ask, isn’t it more reasonable to say that these actions were responses to the crime? Not a chance.

The crime of which I am speaking is the one that harms those most in need by making goods significantly less available when crises strike and penalizes those simply trying to meet those needs. It is called extortion – the shakedown – in which the victim, having done no harm to others, is subjected to sanction, deprived of liberty and or property generally for no other purpose than political gain. The attorneys general of New York (Spitzer) and Missouri (Nixon), for example, have been especially adept at obtaining annoyance level settlements from multiple businesses in order to make themselves look like “champions of the little guy”, when, in fact, that is exactly who they are harming.

But wait – and this is a point that has been made to me in the past by certain religious conservatives, as well - isn’t the moral stance that these individuals and businesses should have extended a helping hand to those in need? Perhaps. But, as a defense of intervention and/or penalizing those who engage in “price gouging”, it fails on every level.

Even if you accept the premise that it is appropriate to legislate morality – which I emphatically do not – the inescapable reality is that no one has been harmed by the actions of these private citizens. They were in possession of property that no one disputes was theirs. They chose to offer that property for sale to others in the complete absence of any fraud or coercion on their part. No one’s rights were violated. So, if the morality to be legislated is that you will be forced by the state to part directly with your property against your will, by means other than taxation, then let’s come right out and say it. All fans of theocracy signify by saying, “Aye”. I vote, “Nay”.

A better examination of the moral issue when discussing public policy is whether or not such policies make those in need better or worse off. The simple reality is that “price gouging” laws make people worse off. Consider the examples of arrests mentioned above.

After Hurricane Fran slammed into North Carolina, power was down in much of the region and many areas were facing days before power would be restored. This has very real consequences for people who have food in their freezers particularly in a time of scarcity such as inevitably follows a natural disaster. Four young men supplied 50-pound bags of ice to willing purchasers at $8 a bag. Obviously, to those who had freezers full of at-risk food, the ice was worth more to them than the $8. Once they were arrested, of course, the ice wasn’t available to anyone.

In the aftermath of Hurricane Katrina, James McBride worked very hard to find sufficient supply to meet climbing demand. His latest supply, purchased the very day that he was arrested for price gouging, cost him $3.29 per gallon. After selling gas to willing customers for about three hours, he was notified by the State of Alabama that they had received a complaint about his illegal price gouging and that they were investigating the matter. At the time, they could not give him any information about what the correct price should have been. As a result, McBride, being a responsible citizen not wishing to violate the law shut off his pumps and ceased selling gasoline until the state could provide him with the “correct” figure. Thus, in the midst of a localized gasoline crisis, McBride’s supplies were rendered unavailable to the public for a period of 18 hours.

The next day, the state finally informed him that he could sell his gasoline for as much as $3.09 per gallon – twenty cents less than he’d paid for it! – because the Alabama Unconscionable Pricing Act makes it illegal to “generally charge a price which is 25 percent higher than the average price during the last 30 days prior to [any] declared emergency unless attributable to reasonable cost factors”. Of course, the determination of “reasonableness” is entirely at the discretion of the DA’s office.

Despite his efforts to comply with the law, the district attorneys’ office arrested him and took him into custody. He made the front page of the newspaper; a reported murder made the same edition … on page six.

At about the same time, John Shepperson, who had purchased 19 generators and rented a U-Haul to carry them, began offering them for sale at a price roughly double what the local Home Depot had been charging until, that is, their inventory ran out. The reason that their inventory had run out was because of the significantly increased demand, hardly a surprise in an area of widespread power outages. But Shepperson sold none of his generators. He was arrested and all 19 of the generators he had purchased were confiscated, making them completely unavailable to meet the needs of local residents. The “correct” price was determined by arbitrary pricing before his arrival – no allowance for his time, his risk,etc.

Perhaps the silliest argument is that such “anti-gouging” laws are justified due to a “market failure”, that such prices can only be charged because of a constriction of supply grants the seller monopoly power. But think it through, by prohibiting sellers from charging whatever price they choose in the marketplace, you create a massive disincentive for others to make their products available and the handful who do show up either unaware or the risk or in spite of it are subject to arrest.

You don’t need to be an economist to see the foolhardiness of “price gouging” laws. Publilius Syrus put it simply more than two millenia ago: “Everything is worth what its purchaser will pay for it.”

[For more on this topic, the Council of Economic Advisors just published “The Economic Consequence of ‘Price Gouging’ Legislation”]