Yes, if there is a disaster driven short-term supply shock, where supply is constrained by infrastructure failure and the sought optimal result is the widest possible distribution of basic-need goods.
First, as anyone who saw people buying cases of wine in Brooklyn Sunday observed, people are boundedly rationality at best, and so while this sort of theoretical behavior might conform when aggregated at the macroeconomic level, it generally does not conform at the micro level that assumes a generalized single rational decision making individual.
Second, natural disasters are TEMPORARY supply shocks and TEMPORARY demand increases. Prices are supposed to be signals. “Hey, people are buying more of this shit, so let’s make more of this shit to satisfy that demand.” The problem is, if you’re buying 5 cans of pinto beans before a storm it’s likely because you don’t think the store will be open for a few days, not because you plan to permanently increase your pinto consumption, presumably because you plan to crop dust more people on the subway from now on. Your demand has not increased, you’ve simply fast forwarded future consumption. Increasing prices to satisfy temporary demand and supply shocks, only encourages overproduction through price signaling. It distorts the market process.
Third, in the case of something like, say, a broom or gasoline, there’s usually enough information or signaling beforehand that demand is going to spike and that there may be a run, in which case it is prudent to source all available supply that can be sourced or stocked and even increase prices to hedge against the supply shock not materializing, dropping prices after the non event to clear inventory. But even in this case, there will be constraints on how much can be sourced in time from distribution points or stocked prior to the event so if it does materialize you are still likely facing a supply shortage.
Lastly, I would challenge ANYONE to empirically find that temporary prices increases produces a more optimal result than fixing current prices, and if necessary, rationing the amount any individual can purchase; optimal results meaning that the most people possible get needed supplies instead of first comers hoarding statically priced goods or the wealthy hoarding and the poor being locked out of purchasing needed supplies due to temporary price increases. The normal concept of shortages is baseless in the context of basic supplies needed by all to weather a natural disaster. To infer so is to commit the fallacy of composition. (Likely, you will seek out what you can’t find at smaller stores at who already have naturally occurring higher prices.)
Increasing price so that supply satisfies demand at that price is exactly how a normal market should function, but a disaster is not a normal market. Temporary shocks can distort the market through prices after the shock is remedied. Besides, supply meeting demand at a market clearing price where there is no excess demand at that price remaining misses the point. Preventing shortages necessarily implies that some people will not get needed goods because the market has rationed supply through prices. That is not an optimal market result to this particular (and non-common) market. It confuses “want” with “need” in applying a generalized theory of market function in normal times to a non-normal market condition. It is a massive logical composition error.
(In response to Yelgesias’, who’s thinking I’m rather fond of, article in Slate (to pick a bit for fun); If he had Yelped his Safeway on L St. NW in D.C., he clearly would have see pictures of the produce section from customers showing shortages in normal times that would indicate that that Safeway is a market failure all the times. Besides (as evidenced from his twitpic on the subject) who considers avocados a staple?)
I call bullshit
