Evacuations are not a benign process. Twenty-four people were killed when a bus carrying 38 Houston nursing home residents and six employees caught fire in a traffic jam. It’s thought that oxygen tanks used by elderly evacuees had a role in the fire. Given the hurricane predictions for Houston and Galveston, one can’t blame officials for ordering evacuations, but the lesson to be learned is evacuations can be costly. In addition to injuries and loss of life, when evacuations are ordered, there are costs associated with opportunistic criminal behavior such as looting, which there were reports of in Houston.
Hurricane Rita provided us with another evacuation lesson as millions sought to leave Houston and Galveston. Gasoline stations ran out of gas leaving hundreds of motorists stranded. Many abandoned their cars. Police officers were deployed to carry gas to motorists whose tanks were empty. Texas authorities also asked the Pentagon for help in getting gas to stranded motorists. Much of the blame for the shortage rests at the feet of Texas Attorney General Greg Abbott, who recently ordered that penalties of up to $20,000 be imposed per incident of price-gouging. You say, "How come you blame Greg Abbott?" Let’s look at it.
When the hurricane evacuation order came, there was an immediate change in the demand conditions for gasoline; namely, demand became much greater than the available supply. Retailers, in fear of prosecution by the attorney general, didn’t do what would have brought demand more in line with the available supplies of gasoline — raise prices.
Suppose a family evacuating Houston chose to make a 146-mile drive to stay with relatives in Austin. Their car has a half a tank of gasoline — plenty to get to Austin — but just to be safe, they decide to fill up. What do you think they might do if they expected to pay $2.75 a gallon but when they got to the gas station they found the gas selling for $3.75? I bet they’d say, "The heck with that; we’ll fill up in Austin." That’s wonderful; they’ve voluntarily made gas available for someone running out of gas. In my book, for a motorist who’s running on empty, gas available at $3.75 a gallon is preferable to gas being unavailable at $2.75 a gallon.
Attorney General Abbott also threatened legal action against what he called "unconscionable pricing" by hotels. Take that same family. The husband might have said, "Honey, I don’t feel like driving all the way to Austin to stay with your mother and father; let’s rent a room." When they get to the hotel, the rooms are no longer $75 a night but $150. The husband says, "Okay, I’ll put up with the in-laws." That’s wonderful, too. They’ve made a room available for a family who has no other alternative.
Market allocation isn’t the only way to make sure people economize on resources that have suddenly become scarce. Texas officials resorted to pleading with motorists not to top off their tanks. Their pleas were ignored. What Texas officials could have done was to place anti-top off officers at every gas station to make sure people weren’t buying more gas than they needed to get to their evacuation destination. Texas officials also could have stationed hotel officers at every hotel. The job of the hotel officer would be to query potential guests as to whether they had nearby relatives or friends with whom they could spend a night or two. If they had relatives or friends within a reasonable distance, such as my example of the husband and wife with relatives in Austin, the hotel officer would tell them to hit the road. Would measures such as these have been preferable to rising prices or the unavailability of gas and lodging?
Don’t get me wrong. There’s nothing pleasant about rising prices in the wake of a disaster. My argument is that not allowing the market mechanism to allocate suddenly scarce resources produces the inferior outcome.