While I understand where you are coming from, I have a hard time believing that it will ever become price gouging. New Orleans, in this example, is not a self-contained country/area where there are serious constraints on the market. If people are willing to pay for those services at inflated prices, then that’s what the market is demanding. If people do not feel like paying price X, and they are still forced to pay it, then you are on to something. These contractors aren’t going to be able to squeeze blood from a rock. If anything, I do agree that there will undoubtedly be some sort of jackass-ery about, contractors rousing up the public into a price war, but I believe that sort of stuff is self-regulating, and still not price gouging. People are still going to be pay what they can, for what they believe is worth it, and they will remember the behavior of these contractors and retaliate later.
I agree. If the prices are indeed that high, then more contrators are going to flood into the city to make a good living. Contracting and construction are very mobile industries. More contractors = lower prices. Of course, that dymanic will stabilize over time to a “fair market price”. That is the beauty of the thing.
I imagine much of the Gulf Coast isn’t going to be a terribly pleasant place to live for a while. Don’t contractors deserve some kind of hazard pay for living there while they rebuild and dealing with all the hassles and inconvenience of living somewhere with no amenities?
I think one of the missing ideas from this argument is that the folks that need to rebuild quickly, will have to pay a premium for rapid service.
If they want to pay “normal” rates, then they can wait. If they want their rebuilding to happen quickly and soonest, then they pay a higher rate. Nothing wrong with that!
If you call a plumber, at 9PM on a Friday night, you pay a higher rate if you want them there in an hour. If you’re willing to wait until Monday at 8AM, you pay a (lower) normal rate.
In this case, rebuilding through next May* is a “premium call,” and if you’re willing to wait until then, then you can pay “daytime rates.”
-Butler
- month chosen at random, no inference that it’ll be “all better” in May has been made
Okay, but since the conditions of competition aren’t obviously there, please explain why one should conclude that they are indeed competitive.
Economists are the ones trying to systematically understand a phenomenon that people have everything to do with.
Under normal circumstances, I do agree with the willing buyer willing seller policies of the free marketers (?) in this thread. I am convinced it is the most efficient way to allocatote resources, and that first world countries have benefitted from this efficiency with increased standards of living across the board.
Having said that, I believe a limited sort of intervention is appropriate in extreme circumstances. This is not an economic policy decision, but merely based on minimizing human suffering in extremely trying situations. I am glad there are laws against, for example, charging $20 for a gallon of drinking water in a hurricane ravished area, even though market forces may in some circumstances dictate a willing buyer and willng seller at this price.
If the cost of moving to New Orleans to do repairs is too high to attract people at their usual rates, we’ll probably need some compromise between regular rates and market rates induced by the desperate situation. But letting people charge five times the normal rates just because they know they have a desperate market seems unnessecarily cruel.
Um…they’re contractors. Unless there is some big corporation that can put all these people together (contractors, builders, labor, etc.), these contractors are individually going to come in and price their services according to demand, (not to be too snarky) hence “contractors.” 
When my parents contracted out to put the frames and drywall in their basement, our contract arrangements were simple: price, method of payment, and time frame to finish, then I ensured that there was a bond in place if there were any accidents, and for penalties if the job took too long. The arrangements in New Orleans should not be any different.
Let me be more clear: my definition of uncompetitiveness is strictly defined. If the actors in a transaction are influenced by price fixing, monopoly, or some other types of constraint on trade (similar to the other examples I just mentioned), then yes, there is lack of competition. In a general layman’s sense, I agree that there may be a lack of competition because the supply of contractors is lower than the demand for contractors. Assuming that everyone wants to rebuild, then yes, there is lack of supply, causing demand to increase (simply stated). This does not necessarily mean that the market is uncompetitive. People who can afford to have their houses/whatever rebuilt in the short term will pay the higher premium for it. Just because others can’t afford it does not mean that there is a lack of competition, even further from a condition of market failure. On the same token, a market signal is generated for the influx of more contractors. What you see as the market lacking competition, I see as the market working, responding to a need arising.
I don’t disagree with this. This is the job that government is supposed to do: provide medical aid, basic food and shelter, and repair the infrastructure and power.
I have strong reservations against interfering with the market rates. Does it seem fair that those with more money are able to have their house built first? Sure, when you don’t have money yourself.
I am, however, a huge believer in non-monetary/indirect incentives: offer contractors to work tax free, pick up the cost of transportation, provide them a place to stay – basically, anything short of paying contractors cold hard cash to come to New Orleans, in order to increase the supply of contractors.
The thing is even if good hearted contractor’s show up in New Orleans to build, they are going to have to deal with big businesses like Lowes and Home Depot charging an arm and a leg for things like plywood and dry wall. If cost of materials go up the cost of the job naturally goes up. I was speaking to my contractor buddy in CT yesterday and he weighed in on the subject. Saying that only a real asshole would charge an arm and a leg for a job at this time. He’s also talking about rebuilding people’s homes who live in middle classes or below…not the businesses and multi-million dollar estates - he’d rather work for the people who really can’t afford fast service, and give them an opportunity to rebuild sooner than later without gouging them with off the wall pricing. He also mentioned that materials are going to be a problem.
I know. But don’t you believe that one of the factors that should be included in determining whether a job is priced fairly is how much of a pain in the ass it is (yes, including intangibles like living somewhere unpleasant while you are working on it)?
I imagine the PITA Factor will be built into most people’s prices for NOLA rebuilding, and thus will help determine fair market prices, but I don’t think it’s fair to determine whether someone is engaging in price-gouging by comparing prices with ones for work done somewhere where the infrastructure is actually functioning.
Eva Luna’s nailed it. Several times in the past I have gone into disaster areas to assist in cleanup work.
You cannot travel away from home, stay in motels, buy supplies in an area and at a time when supplies are short, and charge what you would charge under normal circumstances at home. You’re lucky if 150% of normal gets you back to break-even with working from your normal base.
The Gulf Coast, from Mobile through New Orleans, will have to be rebuilt almost from the ground up. There will be plenty of work, but workers/contractors can’t afford to come from afar and not get paid a premium for their services.
To answer the OP, your friend will have to charge more if he heads south to work. This won’t be gouging, it’s just a fact of working on the road. There’s nothing wrong with charging enough to make a living, and living on the road is expensive.
I’m not arguing with you, I totally agree that contractors coming in to NO will be charging more than they normally charge, and I expect them to do that. I would think there was something wrong if they guy was charging less than normal, or even less than market (e.g. like the guy isn’t qualified, or is a newbie/rookie). When my friend put his basement together, he had someone fly in from CA to do the molding (my friend is obsessed with Roman architecture). Rather than charge a travel charge (as I was suggesting), my friend felt comfortable paying increased rates. A travel charge by these contractors might not make much sense/seem less “fair” if they are charging it and doing multiple jobs/for an extended period of time. People will, quite fairly, wonder why a travel charge is added when the contractor has been there 6 months. My cousin’s dad is in Taiwan right now, putting together subs (I think), and the rate he is charging is almost as much as I charged when I was at the law firm.