I never know quite how to deal with tragedies like the destruction wrought by hurricane Katrina. It hits closer to home than tsunamis and hurricanes overseas, closer even than 9/11 — while I’ve never been to New York City, I’ve been to New Orleans twice, and enjoyed the hell out of the place each time. My brother spent a couple of years in Mississippi, for that matter. (I fully acknowledge my egocentric tendencies here.)

But what to write, if anything? I don’t have any close friends or relatives down there. I don’t have any special insight into conditions there, or any particular ability to channel the grief of others. Anyone who might be willing to donate to relief funds will do so whether or not I chime in. But still, I watch footage of an entire city covered in water and feel like a callous bastard because I don’t really have anything to say — worse still that this thought keeps rising unbidden in the back of my mind: “I wonder if New Orleans will recover in time for next year’s Jazz Fest.”

Yeah.

At the very least, I can use this space to remind everyone not to fall prey to the bad economic ideas that proliferate, like wild mushrooms in a damp forest, every time a disaster occurs. Tom Palmer has a post about the broken window fallacy — the competely absurd idea that disasters are actually good for the economy because they spur industries central to reconstruction. And Russsell Roberts chimes in over at Cafe Hayek.

Bumper Hornberger reminds us that price “gouging” is one of the best ways for the market to allocate goods and services to those who really need them during an emergency:

The price system is nothing more than the intricate message-sending part of the free market. Skyrocketing prices send an urgent message to consumers: “Conserve!” and they (along with the prospect of high profits) send an equally urgent message to suppliers: “Supply!”

When government officials impose mandatory price controls, they screw up this intricate messaging system. By enforcing artificially low prices, the wrong message is sent to consumers: “No need to conserve,” and the wrong message is sent to suppliers: “No need to supply.

Already today I’ve heard reports that Georgia’s governer plans to strictly enforce the state’s anti-gouging laws. And not long after I heard this, President Bush appeared on TV railing against price gougers and requesting that people not buy gas if they don’t really need it. Idiots. If you want people to conserve, let the prices rise as high as consumers are willing to pay. If you keep the prices artificially lower than the gas is actually worth under these new market conditions, then people who don’t really need the gas will keep buying, causing shortages. This reminds me of a quote from Steven Landsburg’s Fair Play: What Your Child Can Teach You About Economics. I’m not sure where my copy is at the moment, but I found an online review that includes the quote (part of a passage in which Landsburg gives economic advice to his young daughter):

“If you are ever in a position to sell water for $7 a gallon, I want you to sell water for $7 and not a penny less,” he writes, “That’s not because I want you to make a lot of money… It’s because it’s your social responsibility to get that water to those who need it most desperately, and if you charge less than the market will bear then the wrong people will claim the water.”

This piece by Sheldon Richman from last year is also worth noting, as is this post, and this one, both by Don Boudreaux at Cafe Hayek. Cato’s Jerry Taylor and Peter VanDoren wrote a succint and effective defense of gouging in 2003. And here’s a nice paragraph from another gouging piece by John Lott:

Stamping out “price-gouging” by hotels merely means that more of those fleeing the storm will be homeless. No one wants people to pay more for a hotel, but we all also want people to have some place to stay. As the price of hotel rooms rises, some may decide that they will share a room with others. Instead of a family getting one room for the kids and another for the parents, some will make do with having everyone in the same room. At high enough prices, friends or neighbors who can stay with each other will do so.

Correct market prices allocate resources more efficiently. It’s a point that can’t be stressed enough, especially during emergencies.

A few other notable links: Tyler Cowen on why more people didn’t leave town and Nola’s chances for recovery; Slate’s Daniel Gross puts the damage in perspective; the Reason Foundation‘s Adrian Moore takes on America’s counterproductive energy policies in light of the hindsight Katrina now provides; and Glenn Reynolds provides an array of donation possibilities for those who want to kick in.