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Hurricane Lane Price Caps Will Worsen Shortages | Honolulu Civil Beat

Hawaii Gov. David Ige declared a state of emergency this week, which among other things, triggers a state law that caps the prices of all goods in the state during the duration of the emergency. Although well-intentioned, the price cap is likely to exacerbate shortages and lead to a misallocation of emergency goods.

Hawaii state law requires that, “Whenever the governor declares a state of emergency for the entire State or any portion thereof … there shall be prohibited any increase in the selling price of any commodity, whether at retail or wholesale level.”

These types of “price gouging” laws have typically worsened shortages and led to a misallocation of resources, according to a study published by the Journal of Competition Law & Economics, which examined the effects of price-gouging laws on gasoline during Hurricanes Katrina and Rita. According to the study, the price controls typically resulted in either shortages or long lines, disproportionately affecting lower-income families and consumers in rural areas.

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Hurricane Lane Price Caps Will Worsen Shortages – Honolulu Civil Beat.