Gas panic hit Atlanta on Wednesday. Prices went from $2.65 in the morning to $3.10 by mid-afternoon. Some stations were selling gas for nearly $6.00 per gallon. Some have called this “price gouging.” A rumor, factual or not, had been circulating that gas supplies were limited and new inventory was hampered because of pipeline disruptions. Uncertainty figures into economic decision making. How does a gas station owner weather a financial storm if he can’t get his number-one commodity to sell for a week or more? He’ll still have to pay his taxes, insurance, rent, and the utility bill. He may have to lay off workers. He raises prices to compensate for future lost revenue and the uncertainty of the future. High prices slowed the rate of consumption and left gas for others.

Motels and hotels often raise prices during times of crisis. This can be a good thing. If rooms are cheap, families might decide to take two or three rooms. Higher prices will force some families to take only one room, making more rooms available for other weary travelers. Paying an extra twenty or thirty dollars a night for a room with a bed, running water, air conditioning, and a bathroom is a bargain when thousands of people are roaming what used to be streets pushing carts through sewer water.

The poor were hit hardest by the hurricane. Mississippi hoped to benefit from a tax windfall and job bonanza by legalizing gambling along the coast. This meant building hotels, casinos, restaurants, and everything that goes with the influx of a new industry on the beach and in the water. Casinos operate on barges. Most of the more than 10,000 jobs are service oriented. Those with the poorest education and fewest skills tend to fill these jobs. The same is true in New Orleans. Tourist havens need lots of low skilled workers to function. The lure of a good job led people to relocate to a part of the country that is known to have devastating storms. Hurricane Camille, which slammed into the Gulf Coast on August 17–18, 1969, at the time, was the worst storm ever to hit the United States.[1] The winds were in excess of 200 mph with a storm surge of nearly 25 feet. Even after the empirical evidence of the effects of the storm and the recent memory of residents describing what happened, people returned, rebuilt their homes and businesses, and set up a gambling empire on the edge of the ocean almost daring the next storm to hit.

Government insurance has made it easier for people to take risks with dangerous geography. Standard homeowners insurance policies do not cover losses due to floods in some areas. Many (most? all?) coastal cites participant in the National Flood Insurance Program, which makes it possible for property owners to obtain federally backed flood insurance at dirt cheap prices. If there is minimal risk of loss because someone else is going to pay for the damage caused by a hurricane, then there is little property risk to build in a hazardous area prone to flooding and storm damage. If people could not get insurance, or insurance was too high, more people would live inland to avoid the risks. John Stossel tells how he was lured into building a beach house because his architect told him, “Why not? If the ocean destroys your house, the government will pay for a new one.” Stossel writes:

The insurance, of course, has encouraged more people to build on the edges of rivers and oceans. The National Flood Insurance Program is currently the biggest property insurance writer in the United States, putting taxpayers on the hook for more than $640 billion in property. Subsidized insurance goes to movie stars in Malibu, to rich people in Kennebunkport (where the Bush family has its vacation compound), to rich people in Hyannis (where the Kennedy family has its), and to all sorts of people like me who ought to be paying our own way.[2]

Then there’s New Orleans. This is a below-sea-level city surrounded by water. Homes are built next to precarious looking levees. We will hear in the next few weeks how the federal government didn’t spend more money reinforcing the levees. I have a question: Why should I, a taxpayer, have to pay for people to live in the biggest flood zone in the United States? Even the dead have better sense. They’re buried above ground.


[1] The hurricane that hit Galveston, Texas, in 1900 killed nearly 8,000 people. Some put the estimate at 12,000. [2] John Stossel, “Confessions of a Welfare Queen: How rich bastards like me rip off taxpayers for millions of dollars,” ReasonOnLine (March 2004):