Prices are Bounties

[epistemic status: somewhere between steelman of the complaints and recognition that theory is correct but there's a lot of details that matter and are ignored in this piece. ]

This is true in theory, but for MANY goods and services, supply is artificially limited by regulations and restrictions on who and how something can be provided, or by emergency conditions that block travel and transport.  When these restrictions are controlling (the main reason that marginal supply is slow/difficult), price signals can't actually get used, and don't change behavior.  This is especially true for short-term shocks, when the price isn't expected to last long enough to pay for investments.  

It's perfectly reasonable to be angry at the sheriff who spends public funds on a bounty that doesn't change anything (say, the guy is already in custody, and the bounty is just a giveaway to the lucky person who has him).  

Setting low prices might mean the few gallons of gas, bottles of water, or flights that are available are allocated to people who get to them first, or who can wait in line the longest, rather than based on who is willing to pay, but it’s not clear that these allocations are more egalitarian.

If the sellers put caps on how many items can be bought by any given buyer, that makes it more egalitarian. Price gouging obviously makes things far less egalitarian by capping by willingness to pay, which varies massively.

The main question is whether willingness to pay correlates with need or with wealth or with mental illness or with greed, to which the answer probably is "all four", though it's unclear how much, and the quantities really matter. "Everyone works together" seems like a plausibly-good heuristic during a natural catastrophe, both to minimize conflict, and because natural catastrophes impact a geographic area and so plausibly everyone has similarly high needs.

I guess it depends on your stance on monopolies. If you think monopolies result only from government interference in the market, then you'll be more laissez-faire. But if you notice that firms often want to join together in cozy cartels and have subtle ways to do it (see RealPage), or that some markets lead to natural monopolies, then the problem of protecting people from monopoly prices and reducing the reward for monopolization is a real problem. And yeah, banning price gouging is a blunt instrument - but it has the benefit of being direct. Fighting the more indirect aspects of monopolization is harder. So in this branch of the argument, if you want to allow price gouging, that has to come in tandem with better antimonopoly measures.

The possibility of sudden spikes in prices during a crisis also incentivize "speculators" to stockpile the good in advance. If they buy during normalcy in anticipation of a crisis, they smooth out the price curve by raising the price before the crisis has hit. As they hold the inventory in the mean time, these speculators are effectively creating a buffer in a potentially otherwise just-in-time supply chain.

Setting low prices might mean the few gallons of gas, bottles of water, or flights that are available are allocated to people who get to them first, or who can wait in line the longest, rather than based on who is willing to pay, but it’s not clear that these allocations are more egalitarian.

If that last sentence can be rephrased as "the counterfactual benefit is unclear", then given that the counterfactual cost is clear (beneficiaries need to pay more, potentially a lot more) doesn't this show that price gouging is probably net negative i.e. aren't you arguing against, not for, it here?

(Genuine question, not a gotcha. I'm admittedly biased because I dislike the idea of profiting off others' misery, suspect that purchasing power is moderately anticorrelated with need via wealth/income i.e. fewer DALYs are averted per person helped this way, and find the bounty reframing uncompelling, but I'm willing to change my mind. Another personal bias: I work in the market-shaping for global health space, which is about redressing market failures due to e.g. mismatch between need and ability to pay for it, and I suspect a similar dynamic is at play after hurricanes have devastated an area.)

A classic that seemingly will have to be reargued til the end of time. Other allocation methods are not clearly more egalitarian and are less efficient (depends on the correlation matrix of WTP, need, time budget, etc., plus one's own judgment of fairness, but money prices come out looking great a lot of the time). In some cases, even prices don't perform great (addressed in some comments on this post), but they're better than the alternatives.

For more reading: https://www.lesswrong.com/posts/gNodQGNoPDjztasbh/lies-damn-lies-and-fabricated-options?commentId=nG2X7x3n55cb3p7yB [LW(p) · GW(p)]