Posted on 11/02/2012 12:06:38 PM PDT by NevadaPolicyResearchInstitute
One unfortunate aspect of tragedies, like this week's Hurricane Sandy, is that wrong-headed government policies so often prolong the pain experienced by disaster victims.
Exhibit A are laws, like those in New York and New Jersey, prohibiting "price gouging" — defined as a merchant using the demand created by a natural disaster to charge more for items like gasoline, bottled water or generators.
Before the hurricane hit, New Jersey Gov. Chris Christie issued a stern warning against raising prices, stating, "The State Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties."
While this makes for good politics — with news stories portraying Gov. Christie as standing up for the "little guy" — it's terrible policy. Especially for the "little guy."
It should be noted that, in a free country, the government has no business telling private parties what they can or can't charge for an item.
But the problems with anti-"gouging" laws aren't just philosophical; they also hurt the very disaster victims they're supposed to protect.
Before Sandy hit, many stores in the storm's path ran out of food, bottled water and emergency supplies, and the customers who didn't get to the store earliest faced empty shelves. This makes sense. If the demand for bottled water skyrockets (as it does before a storm) and the price stays the same, stores will run out of bottled water quickly. That's because early-arriving customers will take more than they need to survive the storm, since there's no financial reason not to.
Now consider the unseen: the customers at the back of the line who aren't able to purchase any bottled water because it's all gone. There will be no news stories written about these folks. Yet they face real danger.
But what if the price of bottled water were to increase exponentially? You must remember that prices serve as a signal telling customers how scarce a product is compared to the demand for that product.
If a gallon of water went from $1 to $5 or even $10, customers at the front of the line would be forced to decide how much water they really needed to survive the storm, and would purchase accordingly. This would leave more resources for the customers at the back of the line.
Now in this case, the business owner would start making a large profit. And this is a very good thing. Just like high prices serve as a signal to consumers that a particular product is in great demand, profits signal to an entrepreneur that he or she can make money by providing more of that good or service.
So allowing high prices is the most efficient way to ration goods, and allowing high profits incentivizes others to provide more of those goods — which will eventually drive prices down.
The same is also true after a storm hits. This story from John Stossel perfectly illustrates the folly of anti-gouging laws.
After Hurricane Katrina, Mississippi Attorney General Jim Hood announced a crackdown on "gougers."Ideas have consequences. And anti-"gouging" laws have very bad consequences — for the very people these laws are intended to protect.John Shepperson was one of the "gougers" arrested. Shepperson and his family live in Kentucky. They watched news reports about Katrina and learned that people desperately needed things.
Shepperson thought he could help, so he bought 19 generators. He and his family then rented a U-Haul and drove 600 miles to an area of Mississippi left without power.
He offered to sell his generators for twice what he had paid for them, and people were eager to buy. But police confiscated his generators, and jailed Shepperson for four days. The police kept his generators.
Did the public benefit? No.
“Good would be giving it away free”
I see. It always comes down to this. So you admit you’re not making an economical argument. You’re merely declaring that businesses must become charities, for whatever reason.
“He’s basically a looter that decided to do his looting first”
Now your just throwing bad wires against the wall. Or are you as confused about how property and theft works as well as economics?
“He’s basically a looter that decided to do his looting first”
Now you’re just throwing bad words gainst the wall. Or are you as confused about how property and theft works as well as economics?
Not at all. You really need to stop lying about what I said. You’re the guy that brought in good and evil. And I didn’t say businesses should become charities. I’ve got no problem with businesses selling at their pre-panic prices. But if you’re going to talk about price changes as good or evil the good price change is to zero the evil price change is the jack up.
Nope, just pointing out reality. The difference between profiting off disaster before and after is merely timing. Both the looters and the gougers have decided the disaster is a profit making opportunity.
I don’t know why it is about money.
In post 29 I was showing that limiting the number of items purchased is common, routine, everyday, so gouging is not the only way to limit purchases by an individual(s).
“knowing that they have this group who MUST shop from them they decide to drastically increase their price”
No, they increase the price because they think people will pay it. If they do it is they market price, or at least within range of it. His people can present thus as immoral is beyond me. How do you think the market price is set? Why would a seller stop short of what people are willing to pay, unless he decided suddenly he’s running a charity?
Oh, I get it, the storm set the price so it’s unfair. But that’s Hid being unfair, not the seller. And the storm price is the market price. There’s no getting around there being a storm, not even price controls.
By the way, all thus is to ignore the function of price in attracting supply. There is the guy with U-hauls full of generators in the article, but that store will be restocked with water at some point, and what’s the best way to get the water where it’s most needed? That’s right, high prices.
Captive audience pricing IS artificial pricing. Normally pricing has to deal with competition, part of having a captive audience is a lack of competition, thus an artificial situation, and artificial pricing. When you run a theme park (the usual model for a captive audience) you can charge prices for drinks that in a normal market would result in 0 sales, but because you’re in an artificial market you can make tons of sales. Disasters are theme parks without the voluntary attendance and fun. The people might not be legally required to buy from them, but they do tend to be PHYSICALLY required to. A lot of people can’t leave a disaster area, a good chunk of the people that can’t leave have first responder jobs, should we really be charging these people more because they’re here to save lives? Really?
The big thing you’re deliberately missing is that disasters are a time to pull together. You want them to be a profit opportunity, business as almost usual. But it’s not business as almost usual. It’s a disaster, people are dieing out there, people are trapped in the area, the food in your store might be the only food in the area for days or weeks. This is why you have a captive audience, but treating that way, deciding now you can do Disney Land pricing, is just plain wrong.
I love profit when it’s business as usual. Under business as usual everybody should charge every penny they can get away with. But this ain’t business as usual, and anybody thinks this is a time to price like a theme park is just plain a scumbag.
It’s about money because that’s what the original article is defending, charging more as a form of rationing. Rationing in these situations is good. Charging 5 times as much isn’t rationing, even though the article (and people defending that position) thinks it is.
“The difference between profiting off disaster before and after is merely timing. Both the looters and the gougers have decided the disaster is a profit making opportunity”
The righteous man becomes the moral ignoramous. The difference between “gouging” and looting is not timing. Loitered steal, whereas gougers participate in voluntary exchanges. Do you truly not recognize the moral difference?
Oh, and horror of horrors, a profit making opportunity! They dare name a profit off of people’s misery? The monsters! It isn’t as if the profit motive ever benefitted anyone. From each according to their abilities, I say./s
“The difference between profiting off disaster before and after is merely timing. Both the looters and the gougers have decided the disaster is a profit making opportunity”
The righteous man becomes the moral ignoramous. The difference between “gouging” and looting is not timing. Looters steal, whereas gougers participate in voluntary exchanges. Do you truly not recognize the moral difference?
Oh, and horror of horrors, a profit making opportunity! They dare name a profit off of people’s misery? The monsters! It isn’t as if the profit motive ever benefitted anyone. From each according to their abilities, I say./s
That is their reputation among the self-sufficient, I'm glad that my son was prepared, as he said, outside of the gasoline, he was prepared just by his normal living.
I started my personal prepping as a teen, driving $50.00 dollar junker cars. I learned that if your car broke down at night, it was better to eat some canned food that you kept in the car, drink some water from your canteen, get into your sleeping bag, and worry about it in the morning.
Being prepared to eat, sleep, and drink, for the near future, should be a natural part of anyone's thinking and normal living.
“Charging 5 times as much isn’t rationing”
No, no potential buyer was ever turned off by 5 times higher prices. Whoever came up with that insane notion?/s
No, they increase the price because they KNOW the people will HAVE TO pay it and they see this as an opportunity to dramatically increase their profit.
This ISN’T about market price. This is about seeing disaster victims as a source of dramatically increased income. In a disaster situation people will give you all their money for stuff that 2 weeks ago would have cost next to nothing. That doesn’t mean you should charge it.
You clearly just don’t want to get it. Which is sad. But we’re done now. There’s good reasons why gouging is illegal, and your arguments actually show why. Because gougers are filth. Bye now, hope you never get to find out why your position is vile and disgusting first hand.
“Captive audience pricing IS artificial pricing”
Not if the audience isn’t being held captive by human artifice. For prices to be artificial dies not merely bean there is no competition. There has to be a man-made reason for the lack of competition. Since storms are not made by government labs as conspiracy nuts would gave you believe, the limited supply and increased demand off of which “gougers” profit is not artificial.
Must I direct you to the dictionary?
“You’re the guy that brought in good and evil”
You have been talking in highly moralistic terms. Actually, it’s kind of me to ascribe such views to you as your arguments make zero sense economically or otherwise.
“You apparently can’t read and process when it comes to an issue that raises an emotional note.”
You apparently are a rude pig who jumps to faulty assumptions and makes an ass out of yourself.
The article is crap.
This article is one big excuse for greed. Bunch of bs.
thats nice, some people think anarchy is great too
Having lived through hurricanes where stuff gets destroyed and supplies are extremely limited I know that real life is different than book learnin.
Monopolies are bad, whatever their form.
“If you only jack a $1 bottle $5 plenty of non-rich people can still buy all they can carry”
Then the “gouger” didn’t set the price high enough. Ideally it would be where bilk buyers were turned away in favor of the more eesperate. But surely less people will buy at 5 than 1, and more will get water. The best way to ensure a maximum of unnecessary bulk buying is to leave prices at pre-disaster levels, which is what you’re advocating.
Also, you are still pretending as if all that matters is the brief window in which the supply masts. What do you think attracts more supply where it’s mist needed? It isn’t low prices.
“The only difference is your profit. That’s why it’s called price GOUGING, because you’re using the unusual market situation to maximize your profit”
At least you’re admitting it is a market situation, and at least fir the moment not calling it “artificial.” What’s the matter with “using” it in this way, praytell? Market situations can only be usual for you yo make a profit? Why, when your profit making provides a public service—and we know it does because if it didn’t you wouldn’t be making money?
I see where you’re coming from, truly. Firstly you don’t think it’s right to profit off misfortune. Secondly you can’t see or don’t admit the efficiency if higher prices. Because of that you view “gougers” the same way progressivejournalists and historians managed to paint the “robber barons” of old. The original robber barons were thieves who controlled strategic points on rivers and were able to extract tribute from passing boats. Stretching the metaphor allowed people to imagine as if 19th century captains of industry stole from customers by carving out a niche in the market and holding up traffic until they extracted their tribute.
It wasn’t the same, except for when they partnered with government. Disaster profiteers aren’t thieves for “taking advantage of” unique market conditions. Even if they didn’t serve various beneficial economic purposes they wouldn’t be thieves. For that which they take advantage of is the market, and it is not artificial, though it is unusual. Their goods are theirs and they are free to sell at what price and with whom they want.
It so happens that their wanting profit, as is only natural, benefits the public through more efficient rationing. You and those like you wouldn’t have it that way because it seems wrong. Profiting off disaster must be wrong, and so you wrap your brain in circles arguing against common sense, like pretending raising the price won’t lower demand.
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