Because part of setting the price for something very high is pricing some people out of the market.
It’s not about setting the price “well enough”. When you have a captive audience you always get to artificially inflate prices because people lack the ability to buy from somebody. The problem with that in a disaster area is the audience is captive because of the disaster, rather than because they chose your amusement park.
The shelves are going to be empty one way or the other. That’s what happens when a disaster is predicted, the shelves get emptied. The question is did you inflate prices to take advantage of the people that are trying to survive the disaster or not.
No the guy that jacks up the prices of his goods by hundreds of a percent is punishing them. Almost everywhere faces some form of natural disaster, so the idea that it’s punishment from God or nature is just stupid. The punishment comes from the guy who has decided this is a profit making opportunity. He’s basically a looter that decided to do his looting first.
You might find it distasteful, but that’s the distaste of truth. When people jack up their prices like this they are deliberately taking advantage of people in a bad situation. They know there are people that will have to stay, they know those people need supplies, they know they’re going to sell out their entire store to these people. And knowing that they have this group who MUST shop from them they decide to drastically increase their price. That’s taking advantage of people, that’s punishing people.
It’s not a good thing they’re doing. They’re taking advantage of people in a bad situation. That’s not good. Good would be giving it away free, like WalMart did after Katrina. Evil is quintupling your prices because you know they have no other choice. They aren’t saving lives, they’re GOUGING. Selling somebody $1 of water for $5 hasn’t saved a single life anywhere ever.
Here is a simple thought experiment. Assume no laws against price gouging. For the first time there is the delivery of ice by truck after a storm knocks out power to an area.
Assume a truck load of ice is 4000 blocks of ice. Normal price .60 with a profit of .50/blk or $2000.00
The storm hits in the heat of Summer. Power is out, people are badly in need of ice. Some entrepreneur gets an ice truck and delivers the 4000 blocks of ice into the affected area. People are desperate. He first tries to see at $30/blk, few takers. He finally settles on a price that moves the product. The price is $8.00/blk. His profit is nearly $32,000!
In a free society, the media reports unbiasedly. People grumble, but buy the needed ice. The media reports the fact of the $8 price and make an assumption of the profit. They say he likely profited nearly $40k. The guy is interviewed and strongly supports his position and the fact of the delivery of a vitally needed product.
The simple fact that his profits are reported widely is a good thing. Others see his "profit" and say to themselves, "we need to get in on the action."
The next storm hits and lo and behold, there are quite a number of trucks delivering ice. Because of competition, the price falls to $3.00/blk. Some guys decided it isn't worth it for the next storm. Assume the profits for all those delivering are $12k for this storm.
It is realized that the guys first on the scene sell the most. The media reports the activities and other enterprising people gleam an opportunity.
Still for the next storm even more suppliers want to sell product. The greed is a good thing. One smart guy knowing those first profit the most preposition his trucks right near the storm's edge. He moves in first and is able to charge $4/blk before dropping his price back to the common price of $3/blk when the competition arrives a few hours later. At $4/blk for half his product, his profits are higher.
Other sellers late to the scene sell their blocks are only $2/blk, but still make a good profit. Other sellers see this and take note.
The flip side is the suffering buyers. knowledge is power. Over time people gain knowledge of the process. They realize that if they really don't need the ice they can wait few hours and have confidence that enough ice would be delivered that they can get it at $2-3 per block. The would have great confidence that there would NOT be a shortage of ice.
In a true free society we wouldn't call the sellers greedy. We would realize they are providing a needed service. What would happen over time is some people would form companies that would deliver ice, water and other commodities.
In a truly free society, after natural disasters the peoples needs would be most efficiently met by people delivering products and services at the greatest profit possible.
What would reduce the high prices that most people associate with "greed" would be the brutal competition that would arise between those wanting to sell.
Instead, we have sadistic bureaucrats running around saying only government can truly help. All the while, people are stressed waiting in long lines for needed goods. Imagine the hard earned taxpayer money sucked up by the vast Federal bureaucracies such as FEMA, TSA: salaries, pensions, material cost, energy. That's the evil greed of the State. Government at all levels works to prevent the rise of companies that could solve the current problems associated with the aftermath of natural disasters.
The same thought experiment applied to ice can be made to all other things people need. Freedom is a wonderful thing! Sorry for the long post, maybe I should have made it my first vanity -- lol.
“part of setting the price for something very high...”
What is “very high”? There’s the market price, which no one ever really knows. Then there’s above and below the market, which out themselves through surpluses and shortages (ceteris paribus). While a price might be “very high” relative to yesterday, if supply and demand changed since then it might be just right.
“...is pricing some people out of the market.”
Good. Some people should be priced out. Ideally the supply should go to those who value it most highly.
“When you have a captive audience you always get to artificially inflate prices”
There’s nothing “artificial” about it. Like I said, they didn’t kidnap the customers. The customers aren’t legally mandated to buy from them. This is a “natural disaster,” and therefore the prices are naturally inflated.
Why is it that people have terms like “captive audience” or “monopoly” do their thinking for them? As if once you’ve established normal market operations are out of whack, bam! No economic laws apply whatsoever, and we can tell sellers to do whatever we want them to do. But even if one man controls the world’s supply of oxygen, for whatever reason, rules would still apply. He’d still want to make the most of it.
“The problem with that in a disaster area is the audience is captive because of the disaster”
So? I’ve got news fir you, customers are never in a store solely because the seller is so damnable inarguably good that he attracted them with hus efforts alone. Nevertheless, just because extraordinary conditions gave a boon to the seller outside of anything he did to deserve it aside from being in the path if the storm does not mean profit should be redistributed from him to tgr customers. And it certainly doesn’t mean the laws of supply and demand aren’t in effect in his store.
“The shelves are going to be empty one way or another”
Yeah, no one ever heard of distributing goods more or less efficiently. Gone is gone. “Rationing”? What’s that?
“The question is did you inflate prices to take advantage of the people that are trying to survive the disaster or not”
If you did, good for you. You did the community a kindness.
By the way, I love the “take advantage” part. Would you say they took advantage however they set prices before? No, that was when economics applied. Now is a free-for-all.
What you’re actually advocating is some customers taking advantage of the seller, whether or not you realize it. That’s what anti-gouging amounts to, aside from causing shortages and depriving needy people of what they want.
As for the rest if your “punishing people” nonsense, it reminds me of how Marx used to refer to “wage slavery.” Which is simply condemning things as they aren’t by redefining words. Okay, they were paid beyond subsistence level and could quit if they felt line it, but they’re “slaves.” The idea was that competition for work and employers’ desire to buy laborious as cheaply as possible depressed wages sufficiently to make it little different than slavery. Also, enclosure laws and the crushing mass of the proletariat made it impossible to light out for the territories, so you were stuck begging for pay.
In that situation it wad not so much the employers that were enslaving you, or even the economic system as a whole. It was the population explosion of the 19th century, the demographic revolution, and the lag time in capital formation to provide a better living.
Same with disaster zones: it is not the greed of sellers or the free market to blame for high prices, it’s the disaster. Granted, the seller will benefit from it without any particular personal virtue. But that’s his the market works. It does not reward on any basis other than fulfilling market needs. You can dream up all sorts of more morally righteous systems of allocating scarce resources but not ones more efficient.
Just because the seller is rewarded a.orally does not mean he us immoral. Pretending he’s punishing customers because he happens to benefit from the storm’s punishment is as wrongheaded as Marx’s “wage slavery.” But of course to understand that you have to understand the economic system as a whole. And if you dud that you couldn’t pretend the rules don’t apply in an emergency.
“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?
“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.