General Equilibrium Effects of HK

Everyone around our office is discussing various aspects of how HK is effecting our lives.  Most notably we had the famous Atlanta gas run of Aught 5 last week as people hoarded gasoline because there was a rumor of a shortage. HK will have various general equilibrium effects ranging from increased prices for plywood and increased prices for imported goods as ports suffer increased congestion. I am looking at my crystal ball after reading E L  Eversman’s post on “Flood Cars”.  George Akerlof wrote a Nobel Prize winning paper back in the 1960s titled the “Market for Lemons”.  In it he suggested the reason that used car markets were so bad was because everyone had a belief that a used car offered for sale was a lemon as there was little ability to certify quality.  This depressed the price of used cars as everyone suspected (rightly or wrongly) that every used car was a bad car.  E L claims that because Louisiana’s law appears vague on proper loss titling it is quite possible that cars damaged by the Deluge of Aught 5 will be sold to unsuspecting consumers.  However, once some of the consumers become somewhat informed, then then all used car prices could fall.  However, thanks to car information services like Vehicleinfo  or Carfax we’ll know any car titled in Louisiana and perhaps Mississippi at some point will be suspect if it comes on the market in the next two or three years.  So, watch our for the sales pitch which says “This little cherry was used by a little old lady to canoe to church on Sunday.”