Inspired by events following Hurricane Harvey, how about a “Maximum Temperature Act”? Specifically, couldn’t the government intervene in the market for temperature-reading equipment to counteract unconscionable “excessively high” summer temperatures (“temperature gouging”) just like state and city governments intervene in local markets to counteract unconscionable “excessively high” prices (“price gouging”) following natural disasters like Hurricane Harvey?

Let me explain, and start with a typical non-economic “Defense of Price Gouging Laws”:

Many residents in Texas and Louisiana have suffered from the devastating effects of Hurricane Harvey in recent days, and some of those residents are now being unfairly subjected to further suffering from the unconscionable actions of businesses and individuals who are engaged in illegal price gouging for essential goods like gasoline, water, and food. To prevent residents from being victimized by ruthless and greedy price gougers, Texas law prohibits businesses from charging “exorbitant prices” for gasoline, food, water, clothing, and lodging following natural disasters like Hurricane Harvey. Despite those price gouging laws, one large Texas retailer was allegedly charging $42 for a case of water and a gas station in the affected area was reported to be charging $99 for a case of water according to the Texas attorney general. Those retailers are now subject to legal prosecution and fines for charging “excessively high” prices in violation of price gouging laws in Texas.

Based on the “logic” of price gouging laws presented above, I will now present a “Defense of Maximum Temperature Laws”:

During the summer, many areas of the country are affected by “excessively high, exorbitant temperatures.” For example, Phoenix had 19 days of 110-plus summer heat in June and July of this year, and the area could see 100 days of temperatures of 110 degrees or more over the next several decades according to one forecast. Earlier this month, AccuWeather Chief Meteorologist Elliot Abrams said that “The current heat wave in the Northwest may end up being the most notable event of the entire summer for the U.S.”

And with many expecting global warming to be getting worse in the coming decades, something has to be done about this unacceptable situation of excessive heat. Without some kind of government intervention to address high-temperature readings being registered on existing thermometers and thermostats during the summer months, Mother Nature will continually and ruthlessly expose us to unbearable summer conditions of unconscionably high temperatures.

Who among us wouldn’t agree that these excessively high summer temperatures are unfair, unreasonable, unjust, and maybe even “immoral”? To counteract this ongoing hot weather injustice and Mother Nature’s ongoing lack of concern for overheated Americans, our collective sense of fairness and justice should motivate us to support legislation that will force all thermostats and thermometers sold in the United States to have a maximum, reasonable and fair temperature reading, of let’s say 90 degrees Fahrenheit. As part of my newly proposed Fair Maximum Temperature Act of 2017, all existing thermometers and thermostats in homes, offices, and businesses will be immediately replaced with new temperature-reading equipment with a maximum reading of 90 degrees Fahrenheit (see graphic above).

Any temperatures above that maximum (e.g., 110 degrees in Phoenix) will now be considered unfair, immoral and unconscionable acts of “temperature gouging” and will be outlawed by the Fair Maximum Temperature Act of 2017. Violators will subject to penalties, fines and possible jail time for thermostat manufacturers who continue to sell thermostats with temperature readings above the government-mandated maximum temperature. Further, all news and weather reports, all TV and radio stations, and all newspapers and websites will be prohibited from quoting any temperatures above the federally mandated maximum of 90 degrees F.

If successful, subsequent legislation for a Fair Minimum Temperature Act should be considered for winter months, e.g., a minimum allowable temperature reading of 0 degrees Fahrenheit on all thermostats to control Mother Nature’s unfair and unconscionably low temperatures during the cold summer months, frequently leading to weather-related deaths.

Bottom Line: If the proposed Maximum/Minimum Temperature Laws seem ridiculous, that’s because they are totally ridiculous. And so are price gouging laws equally ridiculous. Setting maximum prices to prevent “excessively high” and “unconscionable” prices following Hurricane Harvey with price gouging laws won’t change the underlying supply and demand conditions one iota, and will in fact significantly distort information about those conditions and shortages that are guaranteed to significantly retard the recovery process. The artificially low, government-mandated prices will cause distortions and inefficiencies in Texas and Louisiana because the artificial prices won’t accurately and truthfully reflect the economic reality that supplies of critical goods are extremely low at the same time demand for those goods is extremely high. Price gouging laws create a government-mandated fantasy world with prices that create a complete disconnect between the true measure of a scare good’s value and a fantasy measure of that good’s value.

Likewise, imposing a maximum (or minimum) temperature law would create a government-mandated fantasy world about weather conditions, creating a disconnect between the true temperature (e.g., -20 degrees or 100 degrees F) and an artificial government-mandated minimum or maximum temperature (0 degrees or 90 degrees F). And just like price gouging laws create distortions in areas affected by a natural disaster, so would a maximum (or minimum) temperature law create havoc for Americans, because thermostats would be conveying inaccurate measures of the true temperature when it is extremely hot or cold. Artificially low prices that result from price gouging laws won’t change the true conditions of scarcity in Texas and Louisiana any more than artificially restricted thermostats change the true temperature.

When it comes to the weather, what we want is the most precise measure possible of the temperature, and we get those readings from accurate thermostats and thermometers, not from artificial, fantasy readings from instruments regulated by government-mandated minimum or maximum temperature laws. When it comes to maximizing the efficient allocation of resources following a natural disaster like Hurricane Harvey, what we want are accurate, truthful and precise measures of market conditions (supply and demand), and we can only get those measures from market prices, not from artificial, government-mandated price gouging laws.

To address the serious economic disruptions and disaster-related shortages from Hurricane Harvey, we only have two basic choices:

a) market prices that accurately reflect true scarcity and market fundamentals (like an accurate thermostat provides the true temperature) or

b) price controls that ignore scarcity and market forces, and therefore transmit false information about scarcity (like a thermostat subject to minimum/maximum temperature laws).

As cruel as it may sound to those who are long on indignation and short on economics, market forces and market prices will address the post-disaster shortages in Texas and Louisiana more quickly and more effectively than government-determined, non-market based prices that result from price gouging laws.

Prof. Mark J. Perry teaches economics and finance at the University of Michigan-Flint, and is a scholar at the American Enterprise Institute.

 



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