In Defense of Price Gouging

American Enterprise Institute | John Lott

[George Smiley]

Do you think they are making big profits above and beyond what they need to replace supplies as well?

Define "big" profits.

You see, that's an emotional rather than a quantitive term.

Just like that hypothetical "fair share" of taxes that we're supposedly not paying.

I certainly hope that they're making more than just what they'll need to replace current inventories with more expensive product.

After all, they have other things they have to pay for such as rents, utilities and salaries.

[HiTech RedNeck]

Paybacks are not just a bicht. They are a hugh, vey series bicht.

I wish there was much less prevalence of environuttiness in the gasoline biz. Environuts deserve a large portion of the payback. All of this fussiness about blends, and madness about never drilling for oil on the California coast or building more refineries anywhere in the USA, is buying us exactly what?

[flashbunny]

So I've guess you've run out of phony, emotion based economic theories now?

You keep calling economics a "god". You even give it a cute god name.

But you're sorely mistaken. Economics is not a god, it's a law.

You can try to ignore it, to act like it doesn't exist, and you will suffer the consequences.

Just like you'd suffer the consequences if you thought people talking about the laws of physics as "God" as you jumped off a building yelling "YOUR GOD GRAVATIUS DOESN'T CONTROL ME!!!!"

If you believe in a God who created the universe, he's the once who created the laws of enconomics, of supply and demand, just as surely as he created the laws of physics.

And you scoff at his creation out of your ignorance!

[VRWCmember]

And who don't give a d*mn that God forbade usury.

What does charging excessive interest rates have to do with this article.

[HiTech RedNeck]

Other conversation has made it clear that he has contempt for the bible. The bible, in that sense, is a mirror.

[Rodney King]

It is a sad day when the most right wing bulletin board on the net is a place where one has to ARGUE for free markets.

I wish they would just be honest, and rather than make up claims about how evil the oil companies are without facts, they would just say "Gimme Gimme Gimme" which is their real position.

[HiTech RedNeck]

There is one thing for there to be a "law" or "principle" -- there is another thing to view the end as the summum bonum. You are disingenuously confusing the two.

[antivenom]

The gasoline station who provides a SERVICE to gasoline consumers is NOT getting rich...you will see in the next few days MANY small gasoline providers with NO GAS making no money...therefore not getting rich!

The reason is simnple...they can NOT scrape up the money on the front side to purchase the product and turn around and sell it to cover the last tanker and make enough money for the NEXT tanker purchase. Each new tanker load is getting MORE expensive and with acts of G-d or unplanned events (damaged pipelines for example or refinery fires or explosions) suddenly the price of gasoline can rocket out of control...

SOON the only people selling gasoline will be the ones who refine their own and limit their sales to the Ma and pa stations...you won't see Kroger (grocery stores) selling gas or small convenience stores...THEY CAN'T come up with the money to pay for it up front...and stay ahead of the expense.

AND while you are worried about feeding your gas guzzling automobile...have you thought about the real problem...heating oil...bad winter = dead people up north.

[meyer]

I disagree. It requires faith to put your fait in the hands of a system that no one person can understand. I understand why people want authorities to make the decisions. They are wrong but I understand it.

It's not really hard to understand. The buyer wants the lowest price possible, and the seller wants the maximum price possible. Where they meet is the market price. Lower it and you reduce the incentive to sell. Raise it and you reduce the incentive to buy.

[chronic_loser]

Other conversation has made it clear that he has contempt for the bible. The bible, in that sense, is a mirror.

I think maybe he just has contempt for you, although all the damn smoke in the thread between you two makes it hard to tell.

[Hemingway's Ghost]

You miss the point. He wants to fix the illness with the poison that created it. He just substitutes one force for rigging the market with another bigger, less accountable, and more powerful one.

Trust me, friend, I'm not one who'd look to the government for a solution to this problem. I'm simply suggesting that those here on FR who trust that the great laws of economics will best solve the gasoline problem might be overlooking the fact that this particular market isn't a textbook free market. This market is just a bit unusual---thus, the laws of economics might play in this market unusually.

[Racehorse]

In a free society, absent any other force, it is impossible to gauge a persons "need" for a gallon of gas in any other way but price.

All other things being equal and keeping all variables constant, I'd say "absent any other force" is the crux of the matter.  :-)

The political force of people ticked off at paying what they believe is an outrageous and unfair price for a necessity will result in an unwelcome intervention by government.  The only question is at what level of outrage will people act to force politicians to intervene?

Markets are not inherently rational.  They simply work better when they come closest to being rational.  But, the psychology (politics) of buyers and sellers cannot be factored out.  It has to be factored in.

If he were around to talk about it, Nixon might provide unhappy testimony to the power of political demands upon a once economically conservative president.  Remember his wage-price board?  Such foolishness most certainly could happen again.

Gouging, or the mere perception of gouging, is not only possible, it is an enemy of the free market and a free society.

IMHO, of course.  :-)

[cinives]

should have a role in providing say, fire departments that don't ask you what credit cards you have while you kids are dying.

No, that's why you join or contribute to the local fire company. Remember those iron wall placques on people's chimneys ? All to let the local fire co know you support them financially, so you get good service. Don't want to contribute every year ? Then why would they want to help you. Rather pay taxes for service - so your contribution is "forced". Any way you look at it, you'll pay. I'd rather it be voluntarily. There are many creative ways around a problem if you leave people alone to find it.

[HiTech RedNeck]

I think maybe he just has contempt for you

Indeed there appears to be quite the personal vendetta in many of his charges.

[antivenom]

That was pretty good funny come back...

[Hemingway's Ghost]

Just because you feel dizzy doesn't mean that the laws of physics have suddenly changed.

Economics is a social science, my friend. Not much different than political science. Drawing an analogy between its laws and the laws of physics is somewhat disengenuous, don't you think?

[George Smiley]

It requires faith to put your fait in the hands of a system that no one person can understand.

Might I suggest a good immersion in the works of Adam Smith and F.A. Hayek, who seem to understand it quite well.

I consider "The Road to Serfdom" to be the most important book written during the Twentieth Century.

[Alberta's Child]

This was exactly the kind of situation Spanish philosopher Jose Ortega y Gassett envisioned when he penned his timeless classic "The Revolt of the Masses" in the 1930s. He went to great lengths to describe the perils of a society in which so many people -- even despite their competence in areas of work such as medicine, law, etc. -- were so utterly ignorant about an increasingly complex world that they were a threat to social stability.

"A society will not last long," he said (I paraphrase), "if it is filled with otherwise intelligent people whose response to a bread shortage is to burn the bakery to the ground."

[flashbunny]

It is not merely a principle - it is a law. Men and governments have tried to go against it, and have failed every time. Sometimes quickly, sometimes over generations because they backed up their failed policies with guns.

You are the one getting confused. The laws of economics existed long before they were given names or studied in academia. The only way around them is either with infinite supply or zero demand - and neither will happen on this world or this life.

Of course, now this discussion has evolved from your complete ignorance of the economics of commodity sales to your general ignorance of universal laws that have existed for as long as life has.

[Alberta's Child]

LOL. Thanks for the compliment.