People Are Weird
In the weeks following Katrina, gas stations in Atlanta remained open, but many were not selling gas. Those that were sold out removed the prices from their signs and put yellow tape over their pumps. Those few stations that were selling gas often only had premium available, and were charging upwards of $4/gallon, if not more.
None of this is surprising. The governor of Georgia, Sonny Perdue, quickly issued a statement condemning "price gouging" and promised to investigate and prosecute any incidents of this vicious crime.
This answers the economist's initial question: Why would there ever be a shortage in the absence of price controls? Answer: the anti-price gouging rhetoric had the same effect as a price control. Rather than raise prices to match the increased demand and decreased supply, many gas station owners found it in their interests to not offer gas at all.
What is surprising, to me at least, is why anyone would prefer this state of affairs to the alternative. Were gas stations permitted to raise their prices, we as consumers would at least have the option of spending $5 or more for a gallon of gasoline. Instead, we were deprived of this option altogether. How does that make any of us better off?
This is a flaw in human psychology. During times of crisis, we have a tendency to ask, qui bono? Who benefits? We have an emotional need to blame someone, and those who seem to profit off the misery of others are as good a culprit as any. And since gas station owners who charge more than the usual market price appear to benefit while owners who are sold out do not, we get angry at the former and not the latter. Yet who wouldn't rather have the option of buying expensive gas over no option at all?
People are weird.
Update: For Carnival of the Capitalists visitors: check out Patri Friedman's interview with economist/author Tim Harford here.