More Regulations for Victims of Hurricane Sandy

In a previous post I explained how it wasn’t Hurricane Sandy, but government price controls, that were causing the long gas lines in New Jersey and New York. As usual with government regulations, they caused problems that the government then swooped in to “fix,” patting itself on the back. In this case, allegedly pro-business officials Governor Christie and Mayor Bloomberg instituted license plate restrictions, and then praised the wonders in reducing the harmful effects of their own policies.

Look for example at this news story:

New York drivers woke up Friday [November 9] to the first widespread gas rationing since the fuel crisis of the 1970s, as the Northeast struggles to recover from the devastation of Superstorm Sandy and a subsequent snowstorm.

Officials said the gas rationing was imposed because something had to be done to ease the long waits for fuel, which they say has caused panic-buying and hoarding.

Police officers were assigned to gas stations to enforce the new system, beginning their shifts at 5 a.m. in Long Island and 6 a.m. in New York City.

“This is designed to let everybody have a fair chance, so the lines aren’t too oppressive and that we can get through this,” Mayor Michael Bloomberg said. Officers would also make sure people “don’t get pushy in line,” Bloomberg told WOR-AM radio on Friday morning.

…

New York City’s program of gas rationing is modeled on one New Jersey implemented last week — allowing drivers to fill up on alternating days depending on their license plate number — that has reduced lines dramatically…

“The last two days, I’ve barely seen any fuel lines anymore,” Christie said. “There’s order, there’s easy access to gas.”

In New York, however, Bloomberg indicated that the city had little choice but to implement the policy.

“It now appears there will be shortages for possibly another couple weeks,” Bloomberg said, later adding, “If you think about it, it’s not any great imposition once you get used to it.”

To repeat, the long lines for gas—which the article above admits is one of the primary culprits for the residents’ panic hoarding—were not caused by the storm per se, but by the government’s threats to crack down on any retailer who raised prices. When the supply of gasoline drops drastically, and the demand goes up, the market-clearing price rises too. If the government doesn’t allow the actual price to rise, then you get a massive shortage—more people trying to buy gas than can be accommodated by the available supply. This is literally textbook stuff.

What’s interesting is that even the policy of license plate rationing doesn’t reduce lines as much as one might initially suppose. Another blogger has given numerical illustrations, but here’s the intuition: In the absence of the license plate restrictions, people would have a natural tendency to smoothen the length of gas lines. For example, if someone has half a tank left, and on his way to work sees that the lines are all 3 hours long, he’ll probably keep driving and hope to fill up later in the week. But, if he sees a particular line that happens to only have 10 cars in it, he might pull off and get in that line, since the opportunity is too good to pass up.

This type of process would have naturally occurred in the absence of formal government restrictions on who could buy gas on a given day. It wouldn’t be perfect, of course, but there would be a natural tendency for the people lining up on any given day, being the ones who really needed gas then and couldn’t wait—with everybody else biding their time to fill up on a later day of the week.

But now if we introduce an arbitrary restriction on which cars are eligible to receive gas, this natural sorting process is upset. Now, if a guy with a half a tank of gas is driving past a station with a short line (perhaps it’s late at night), he only has a 50 percent chance of even being legally eligible to fill up.

On the other hand, if a couple know they need to go on a long road trip on Wednesday, without the license restrictions they could fill up either on Tuesday or Wednesday. If the lines were too long on Tuesday, they could wait and fill up Wednesday morning, before their trip.

But now with the license restrictions, suppose this couple’s car is only eligible to get gas on a Tuesday. They have to get in line that day, since Wednesday is no longer a legal option.

These considerations show the various ways in which the license plate restrictions can actually make the “queuing” process less efficient; generally speaking you don’t have people by introducing arbitrary constraints. The mere fact that lines were reduced after the introduction of the license plate restrictions by itself overstates their effect, because the lines would have naturally receded as people’s panic subsided and they got a sense of how long the “average” line would be during the crisis.

Now in practice, it is possible that the license restrictions really did reduce average wait times. But if you think it through, the only way this is possible is if there were lots of people who would line up multiple days in a row. Thus, the license plate restriction makes half of them ineligible on a given day, reducing the lines.

Thinking through the logic of the situation, you realize that this only makes sense if people were arbitrarily limited by how much gasoline they could buy once they reached the front of the line, either by the police or by the station owners (perhaps because they didn’t want to run out with so many people still waiting in line).

At best, the episodes in New Jersey and New York show that one form of government intervention—price controls—inevitably gives rise to further ones, to deal with the previous intervention’s ill effects. At worst, the situation shows that the government keeps making things worse with further rounds of intervention. Even if it’s true that the license plate restrictions reduced average wait times (and again, a simple measurement of times would overstate the savings), we are still missing all of the individual hardship cases where someone really needs to buy gas on a Wednesday (say), but now has to wait till the next day because of his license plate. This is a ridiculous situation in a country priding itself on economic freedom.