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My
family and I were lucky.
The worst blow that hurricane Isabel dealt to
us was to snap the cap from our chimney and fling it
harmlessly to the ground.
Because
our chimney rises 30 feet in the air, however, I
refused to risk my own neck to snap the cap back on.
Instead, on the morning after Isabel passed,
I called a home-repair firm.
“Sure
thing,” I was assured.
“The charge will be $175.”
That
price seemed high, so I called other repair firms.
Every one quoted prices between $150 to $250.
Figuring
that the services of such firms were then in
unusually high demand, I guessed that these prices
would fall in a few weeks.
So I waited.
Sure
enough, within three weeks of Isabel’s visit the
prices quoted to snap my chimney cap back on were
all around $50.
This
little anecdote contains a big lesson that Gov. Mark
R. Warner, Attorney General Jerry Kilgore, and the
entire Virginia General Assembly should heed –
namely, the market works beautifully in the
aftermath of natural disasters.
Any legislation, such as that proposed
jointly by the Governor and the Attorney General, to
prevent firms from raising prices in such
circumstances will only worsen the devastation.
To
see why, suppose that such legislation were already
in place when Isabel struck.
When I called the chimney-repair firm on the
morning after Isabel, I would have gotten a price
quote of $50. I
would have said “Deal!
When can I expect you?”
Whatever
the answer, it would certainly not have been
“we’ll be right over!”
One
reason for delay in the first few days following a
hurricane is that the inconvenience and risk that
must be borne by repair firms is abnormally high.
Driving on roads strewn with fallen power
lines and trees, and that are without working
traffic signals, is hazardous.
Similarly, working on chimneys (or on trees,
roofs, and anything else outdoors) in the immediate
wake of a hurricane also involves bearing unusual
levels of risk.
Without higher pay, it’s foolish to expect
repair firms to expose their workers to such
conditions.
Of
course, it seldom takes more than a few days to
re-hang power line and to clear streets of storm
debris. Would
I have gotten my chimney cap replaced, say, a week
after Isabel’s visit?
Perhaps. But
if so, such quick service when prices are controlled
would only prove the folly of such controls.
Price
increases that appear in unregulated markets
following natural disasters do more than compensate
repair firms for extra risks.
These price increases direct repair firms and
suppliers to attend first to those who need their
services and supplies most urgently.
In other words, these price increases perform
the vital task of economic triage.
Even
if no extra risk or inconvenience had afflicted
repair workers in Isabel’s immediate aftermath,
the demand for their services would still have been
much higher than normal.
Everyone with damage to their homes and
property wants repair services.
If firms aren’t allowed to raise their
prices in response to this suddenly higher demand,
by what means do these firms decide which repairs to
perform immediately and which to postpone?
One
means is bribery: homeowners with no scruples about
violating the regulation will offer illegal payments
in exchange for rapid service.
It’s foolish to suppose that such bribery
won’t occur.
However,
with prices capped, even lawful ways of selecting
whom to service first are flawed and even dangerous.
Friendship and family ties will loom large.
A repairman with triple the number of normal
job calls, each paying the same price, loses nothing
by repairing his sister’s garden gazebo rather
than rushing to repair a stranger’s collapsed
roof.
First-come,
first-served also operates: because I telephoned the
repair firm early on the morning after Isabel, I
might have gotten someone to replace my chimney cap
within a few days, even though the greatest risk to
my family was that birds might have built a nest in
our uncapped chimney.
The homeowner whose chimney had blown off, or
whose roof had collapsed, but who contacted the
repair firm after I did, would have been serviced
after me. One
general result of price caps is that many minor
instances of damage are repaired before some major
and even dangerous instances of damage receive
attention.
Fortunately,
because the misguided statute proposed by the governor
and attorney general isn’t yet enacted, prices did
indeed rise after Isabel blew through.
And lucky people like me who suffered only
minor damage were led by these high prices to avoid
squandering the services of repair firms and
suppliers whose skills and inventories were needed
much more urgently by others.
--
March 1, 2004
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