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Accurate weather information vs. inaccurate economic information before, during and after natural disasters – Publications – AEI

Summary:
AEI Accurate weather information vs. inaccurate economic information before, during and after natural disasters Proposition 1. It almost goes without saying that there is near-unanimous agreement with the following proposition: Before, during and after a natural disaster like Hurricane Dorian, it’s in the public interest to provide the most accurate, up-to-date weather information, measured as precisely as possible about factors like the path of the hurricane, predicted areas and times for landfall, wind speed, hurricane category, rainfall estimates, water levels, power outages, areas affected, etc. And there would also be near-unanimous agreement that it would be reprehensible for politicians and government bureaucrats to falsify or report inaccurate weather information for political

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Accurate weather information vs. inaccurate economic information before, during and after natural disasters

Accurate weather information vs. inaccurate economic information before, during and after natural disasters - Publications – AEI

Proposition 1. It almost goes without saying that there is near-unanimous agreement with the following proposition: Before, during and after a natural disaster like Hurricane Dorian, it’s in the public interest to provide the most accurate, up-to-date weather information, measured as precisely as possible about factors like the path of the hurricane, predicted areas and times for landfall, wind speed, hurricane category, rainfall estimates, water levels, power outages, areas affected, etc. And there would also be near-unanimous agreement that it would be reprehensible for politicians and government bureaucrats to falsify or report inaccurate weather information for political purposes, e.g., to misreport that a Category 4 hurricane is actually only a Category 3 hurricane to minimize the public’s safety concerns or to misreport it as a Category 5 hurricane to artificially increase financial aid for an affected area.

Bottom Line: It’s even more important during periods of natural disasters than during periods of normal weather to report the most accurate up-to-date weather information, measured as precisely as possible to serve the public interest, maximize the preparations needed, minimize the recovery period, and therefore minimize human suffering and property damage. Periods during and following natural disasters would be the worst times possible to convey false, misleading or inaccurate weather information, especially for political purposes.

Proposition 2. It also almost goes without saying that there is general agreement with the following proposition: Before, during and after a natural disaster like Hurricane Dorian, it’s somehow in the public interest to provide the least accurate, most out-of-date and falsified economic information, measured as imprecisely as possible, about the market conditions for critical supplies like bottled water, plywood and other building supplies, generators, gasoline, hotel rooms, etc. That is, a frequent claim we hear is that the laws of economics that transmit truthful information about economic conditions should be suspended, ignored or circumvented following a natural disaster like Hurricane Dorian, and replaced with government price controls in the form of anti-price gouging laws. Unfortunately, those anti-price gouging laws are guaranteed with 100% certainty to transmit false, misleading and inaccurate information about important factors like the relative scarcity of critical goods like the ones mentioned above: water, plywood, gasoline, etc. In contrast, allowing truthful, market-based prices to rise would accurately reflect the most recent up-to-date information about the current supply and demand conditions for critical goods and services that have changed significantly from the pre-disaster period.

Despite the misinformed public opinion, it’s during the period following a natural disaster like a hurricane when we want market prices to prevail and market forces to operate as forcefully and powerfully as possible, which is to say we want the most accurate and precise economic information possible to reflect the economic reality of the true market conditions. Reason? It’s the period immediately following a disaster like Hurricane Dorian when efficient resource allocation and addressing scarcity become more heightened than during a normal, non-disaster period. Disruptive weather events lead inevitably to disruptive economic conditions that make certain critical goods (bottled water, plywood, fuel, ice, generators, chainsaws, hotel rooms, building supplies, etc.) much scarcer than before. Higher market prices accurately and precisely transmit truthful economic information about the relative scarcity of those critical supplies and services. But when anti-price gouging laws prevent market prices from rising to accurately and truthfully transmit economic information following a disaster, the result is the transmission of false information.

In contrast to the understandable objection that it would be reprehensible for politicians and government bureaucrats to use a natural disaster like Hurricane Dorian to disseminate inaccurate information about weather conditions for political purposes, there is nonetheless general support among the public for politicians disseminating inaccurate information about the economic conditions when they loudly and vigorously endorse enforcing government “anti price gougingguaranteed shortage and maximum suffering laws.

Bottom Line: It’s even more important during periods of natural disasters than during periods of normal weather to report the most accurate, up-to-date economic information, measured as precisely as possible to serve the public interest, maximize the necessary preparations and minimize human suffering and property damage. Periods during natural disasters would be the worst times possible to convey false, misleading and inaccurate economic information for political purposes with anti-price gouging economic misinformation laws that are guaranteed to maximize human suffering and delay recovery times.

See Venn diagram above for a graphical illustration of this inconsistency.

 

 

 

Accurate weather information vs. inaccurate economic information before, during and after natural disasters
Mark Perry

Mark Perry
Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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