Question

During natural disasters such as the flooding in Burma one policy choice is to do nothing, i.e. let prices rise and fall according to increases and decreases in supply and demand.

A second policy choice is to interfere in the market, regulate prices, and prevent the price of goods such as corrugated steel roofing, gasoline, nails, water, food, etc. from rising. The argument frequently made to justify regulating prices is that owners of scarce goods are taking advantage of people in need----taking advantage of innocent people's misfortunes to steal their money and enrich themselves. This is immoral behaviour and should not be allowed.

This second policy usually includes a reliance on government rather than the free market to bring in supplies of scarce goods and distribute them for free or at below market prices to alleviate shortages.

The second policy is more moral and would be better at relieving the suffering of ordinary people during natural disasters.

During natural disasters, conditions are so extreme that the free market cannot be relied upon to supply critical goods. Government needs to intervene or people will die.

Exisiting owners of scarce goods in the natural disaster area will make a lot of money selling these scarce goods to desperate people.

Letting prices rise immediately after the disaster will shorten the period in which supplies of crucial goods such as food, gas, roofing, etc. are scarce.

The faster and quicker prices are allowed to rise the faster and quicker supplies of scarce goods will reach people in need.

Owners of scarce goods will hoard supplies when the natural disaster hits to drive prices up and make more money.

There is no need for international assistance if the market is allowed to operate i.e. prices are allowed to rise and the importation of goods into the disaster area are not inhibited.

More food, gasoline, roofing, etc. are likely to be shipped into the disaster area by people trying to earn a profit that by governents interested in "doing good".

Answer 1