Sunday, August 30, 2015

Prices are Information, Mass Grave Edition

There was recently a nasty, fatal heat wave in Karachi. Around 1600 low-income residents died thanks to an unfortunate confluence. Here's how one resident wrote of the tragedy at Cracked (ATSRTWT):
Morgues were faced with shortages of space, and with so many people dying so rapidly, the graveyards found themselves in a seller's market. But would they stoop so low as to gouge poor? Grieving people whose loved ones had died so tragically?

You know the answer to that already. You've seen reality TV. You know the world is a horrible place.

Taha says that a grave plot is often a bargain, sold for the equivalent of 15 USD. But like a morbid version of Uber, graveyards responded to the demand by jacking up their prices several times, all the way up to 150-500 USD. For many of the bereaved, 150 USD is an entire month's salary. With the demand for grave plots and their prices soaring, there was only one logical solution: communal graves. Over 500 mass graves were dug to handle the corpses, with some holding as many as 100 bodies.
 Burial space is scarce. And it has a very inelastic short-term supply. Much as you might like, conjuring new plots quickly is not easy. Luckily for the bereaved, cheaper alternative exist. That is, indeed, one of the functions of the price mechanism. Raising prices to more than a family can afford robs both buyer and seller of a potential transaction, so when it's done, it's done to coordinate competing claims. If I have only five open spots in my cemetery, but ten people come to bury their dead, what other choice do I have? I must turn five away. And yes, this means they'll need to find a potters' field, but I'm just as surprised as you are about this act of God.

Price gouging may seem venal and parasitic, but those high prices encourage people on both sides of the transaction to bring to bear their cleverness and their industry to solve human problems. Sometimes, it's how to bury the dead. Let's hope that for the next time, it includes bringing economic growth to the poor and desperate of Karachi. No one should have to die because they can't keep cool in the summer.

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Do you have suggestions on where we could find more examples of this phenomenon?