The North Carolina law that requires kids under 8 years old and under 80 pounds to sit in a car safety seat — specifically a booster seat — kicked in on January 1st, and stores that sell the seats have been unable to keep up with the spike in demand. Even though there are no official price restrictions in this market, it is clear that retailers are not raising price, a move that would more smoothly allocate the available supply. The reason for holding price steady, despite a significant increase in demand? Americans have come to think of price as having some component of “fair” or “unfair.” Retailers have mostly caved to public and threatened legislative pressure. Add that “fairness” notion to the greatly increased demand for booster seats and you have a market bottleneck.
Ordinarily, when demand outstrips the available supply of a product at the going price, we call it a shortage. A shortage is created when price is prevented, by law, from rising high enough to cause some potential buyers to drop out of the market. Retailers could raise price enough so that sales would slow, or parents would be willing to seek much farther afield — including the Internet and other sources — to find the booster seats they need.
Retailers won’t raise prices, however, because consumers and politicians will charge “price gouging,” an accusation they would rather avoid for legal as well as marketing reasons. Too bad, because a price hike now would probably shorten waiting and compliance time; reduce the probability that some parents will wind up with traffic fines and points on their licenses for transporting kids without the seats; and decrease the need to shop at inconveniently distant locations or deal with unknown vendors. The reason higher prices might hasten the process is that merchants would be able to pay extra to have boosters shipped from Missouri, or California, or Idaho, for example. It is unreasonable to expect them to do so now if they are afraid to raise the selling price.
Charging higher prices during periods of high demand takes no unfair advantage of the consumer. Merchants can never charge a price higher than the consumer is willing and able to pay— even in “emergency” situations. If this were not the case, drug vendors could literally hold patients hostage for each vial of insulin or other life-sustaining medications they sell. So could grocers. It doesn’t happen because buyers establish the maximum price they will pay for any and every good. And substitute providers rush into the breach any time a seller attempts a pricing maneuver that appears exorbitant. They either want to get in on the high profit margin or they want to undercut the other guy, both of which are good for consumers. Not only is the maxim “everything has a [selling] price” true, it is also true that everything has a “no-sale” price.
Consumers are not responsible for the law that now forces them to buy one or more booster seats, but certainly consumer timing helped to create the short-run bottleneck we now see. The booster seat law was signed in August 2004; the compulsory element didn’t take effect until January 1st 2005. If they wished to avoid the crunch, consumers had five months to find and purchase a seat.
This tells us that many parents would not choose to use a booster seat if given a choice, so they delayed. The result? The cost of obtaining a seat will go up in the short run anyway: added waiting time, the risk of a citation (even if you discount the risk to the child that the seat is supposed to reduce) for not having the proper seat, or the extra expense of searching out and purchasing from a higher priced source, to name a few. The problem of moral hazard is another issue that deserves attention in connection with the new booster law, a topic for another discussion.
The booster seat regulation, and others like it, not only creates a forced demand in markets and increases the likelihood of a bottleneck in supply, it further muddies the line between good parenting and legitimate oversight of citizens’ health and safety. Markets might better handle this issue, for example, by allowing auto and medical insurance rates to fully reflect the added risk that insurers experience with unprotected children. The gamble on a punitive judgment, if caught, is less of a disincentive to parents than simply allowing them to elect safer practices at lower rates, vs. less safe practices at much higher rates. It is also more likely that rate schedules will reflect scientific studies of risk, and the consequences of numerous alternative choices (such as bigger, heavier cars).
Should parents use booster seats for children too small to ride safely in seat belts, and too large for traditional car seats? My own choice would be ‘yes.’ Will there be other market consequences now that the seats are mandatory? Again, yes. There will be problems faced by large families with compact cars, the need for multiple seats per child when kids ride with more than one driver, new avenues for litigation when accidents and injuries inevitably occur, and numerous other contingencies. Now that the gap between parenting and government nannying has been further narrowed, we can expect more regulation in this area, not less; and, less consumer freedom, not more.