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Why price gouging is a good thing
Write on Nevada ^ | November 2, 2012 | Andy Matthews

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."

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.

Ideas have consequences. And anti-"gouging" laws have very bad consequences — for the very people these laws are intended to protect.


TOPICS: Business/Economy; Government; Politics
KEYWORDS: economics; hurricanesandy; sandy; supplyanddemand
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1 posted on 11/02/2012 12:06:43 PM PDT by NevadaPolicyResearchInstitute
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To: NevadaPolicyResearchInstitute

make price gouging legal, sure, as long as you make beating merchants who price gouge legal as well


2 posted on 11/02/2012 12:08:53 PM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: NevadaPolicyResearchInstitute

Only good I can see in it is you know who to avoid spending money at in the future. Payback is a b*tch.


3 posted on 11/02/2012 12:09:19 PM PDT by DonkeyBonker (Clinging to my guns, stocking up on ammo.)
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To: NevadaPolicyResearchInstitute

“Gouging” is good because market prices are good. They tell us best how to ration scarce resources. If you don’t like them, change supply or demand. Rail against nature or God. But don’t penalize sellers, who are only telling us the way things are. And don’t control prices, which can only redistribute relative benefit and hurt.


4 posted on 11/02/2012 12:11:18 PM PDT by Tublecane
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To: NevadaPolicyResearchInstitute

How would anyone know how much they would need before this storm? In the south coast, where storms are common, people get to do this every year just about, so they would have some kind of an idea. This has never happened up there. If you went to the store on friday, how much water do you think you would need for this storm? If you used public transportation and lived on the 11th floor, how much water would you have bought?


5 posted on 11/02/2012 12:12:09 PM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: Tublecane

During normal periods I would agree 100%. In events like this certain merchants have a monopoly and there is no other source.

When people can’t get certain things they die.

You’re just making excuses for being greedy.


6 posted on 11/02/2012 12:13:40 PM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: NevadaPolicyResearchInstitute

So you’re saying having people not being able to buy water because the price has been increased is better than having people not being able to buy water because the store sold it all? Yeah, no good. Price gouging is the most distasteful form of profiting from a captive audience, because this audience is captive due to disaster, it’s punishing people for living in the wrong city in the wrong week.


7 posted on 11/02/2012 12:14:43 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: NevadaPolicyResearchInstitute

This is one of those things some people simply cannot be convinced of, like the damage caused by minimum wage laws. The only result of anti-gouging laws are empty tanks.


8 posted on 11/02/2012 12:15:22 PM PDT by Da Bilge Troll (Put me down for 350+)
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To: discostu

“So you’re saying having people not being able to buy water because the price has been increased is better than having people not being able to buy water because the store sold it all? “

Strawman argument.


9 posted on 11/02/2012 12:16:12 PM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: DonkeyBonker

“Playback is a b*itch”

Playback for what? Selling you something? Well, if you don’t wanna pay don’t buy. This is why it’s crazy to criminalize “gouging,” aside from the economic stupidity. Charging a higher price doesn’t harm anyone because exchange is voluntary.

Unless you think the items on their shelves are community property and they hold them in trust and are morally obliged not to bake a profit off them in times of disaster. That’s a moral system of some kind, I suppose, though I don’t recognize it nor really understand it. But then we come back to the economic side. If you think it’s wrong to profit off of misery and that refusing to sell at below market prices is somehow harming the buyer, just know that customers will take advantage if lower prices by not showing concern for the community in refusing to ration according to need.

It especially irks me that government ties after “gougers” and sits idly by watching looters. Lesson: violence works.


10 posted on 11/02/2012 12:21:23 PM PDT by Tublecane
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To: Tublecane

“Charging a higher price doesn’t harm anyone because exchange is voluntary.”

Yep - it’s better than the alternate alternative (no product at all...)


11 posted on 11/02/2012 12:28:52 PM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: stuartcr

excuses, excuses


12 posted on 11/02/2012 12:37:57 PM PDT by Rusty0604
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To: NevadaPolicyResearchInstitute

I guess this just lets the price-gouging merchants off the hook for not having a conscience and caring about their neighbors.


13 posted on 11/02/2012 12:42:14 PM PDT by jeffc (The U.S. media are our enemy)
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To: driftdiver

It’s not a strawman at all. That’s what he’s saying. He’s saying with the prices up to gouge level people will buy less because they can’t afford to buy as much. I just pointed out that some of those not being able to afford as much will not be able to afford any. One way or the other somebody is not getting water, either because they were too slow or too poor. Pick your poison.


14 posted on 11/02/2012 12:44:19 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: driftdiver

“During normal periods I would agree 100%”

But during disasters it’s all the more important.

“When people can’t get certain things they die”

Exactly. And what woukd prevent them from getting what they need to live? Below market prices, that’s what. I don’t know why people can’t see this. Sentiment blocks reason, I suppose.

“In events like this certain merchants have a monopoly and there is no other source”

People have various misconceptions concerning monopolies, but perhaps the biggest is the delusion that they can set prices completely arbitrarily. But they do still have to worry about demand, and they do still want to dispose of their remaining stock in the most profitable means possible. And in this situation as in others profit is your friend. It ensures that information about scarcity is broadcast, and it ensures yesterday’s prices do boot screw desperate customers put of sorely needed items.

The danger of monopoly is when it bars the entry of competition, which requires government collusion. Arguments have been made, also, to preempted what are known as “natural monopolies,” which has gifted us public utity companies and the like. A local monopoly on selling bottled water during a hurricane us a sort if natural monopoly. Would you prefer state-run hurricane convenience shops to preempt evil, greedy price gougers? Or should stores be confiscated by the national guard in times of trouble? If you think price fixing works I guess that’d work.

“You’re just making excuses for being greedy”

Am I? Is it greed that makes selling in a disaster extra profitable? Try hacking up prices under normal conditions and what happens? Customers run away. What’s different during a crisis? Demand is higher and future supply in doubt. Steve Jobs became a kabillionaire fulfilling demand for various electronic gizmos. How come that’s okay but not the corner grocery store to make money off more essential goods? And furthermore, to fulfill the much needed function of rationing goods so that those who need them most can get them (yes, by paying more, as if that’s evil)?

I should think the fact that they can make such a profit would be proof that their goods and services are needed. But I guess you want them suddenly to be a charity. Who needs the profit motive? It’s not as if it ever induced anyone to do needed things which they otherwise wouldn’t. And it’s not as if we should expect people to pay for their own survival. It’s not as if we’re responsible for ourselves or anything.


15 posted on 11/02/2012 12:52:26 PM PDT by Tublecane
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To: Rusty0604

legitimate explanations, legitimate explanations


16 posted on 11/02/2012 12:54:45 PM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: NevadaPolicyResearchInstitute
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.

Price gouging is a non-issue for anyone with a brain. Front or back of the line for water the day before the storm...they are all to stupid to live. Why wouldn't these folks get their shiite together a WEEK before the storm? Why not a month? Why not a year?

I was unaffected by this storm. It made a nifty hairpin turn around Massachusetts. Yet even if it had not veered, I was not concerned. Generator? Check. 80 gallons of stabilized gasoline? Check. Huge number of gallons of fresh water? Check. Food, alternate lighting, alternate cooking solutions to last years? Check. G & A to protect it all? Check.

And people call Preppers crazy? Screw 'em.

Cold hearted and cynical? Check.

17 posted on 11/02/2012 1:00:22 PM PDT by Bloody Sam Roberts ("The heart of the wise inclines to the right, but the heart of the fool to the left." Ecclesiastes 1)
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To: NevadaPolicyResearchInstitute
But the problems with anti-"gouging" laws aren't just philosophical; they also hurt the very disaster victims they're supposed to protect.

In a free society, with a free market,the price of good in limited supply in a free market always tends to be set high enough to level down the quantity of the good demanded - that is, the quantity of it that buyers are seeking to buy - to equality with the limited supply of it that exists.

18 posted on 11/02/2012 1:14:36 PM PDT by mjp ((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
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To: jeffc

Are you for freedom or not?

On the one hand, the gouger provides a service/good that might not otherwise be available.

On the other hand, the beauty of the free market - supply and demand - always wins out. The gouger may make a buck screwing his neighbors, but when he gets robbed - or worse - by a surly customer, his neighbors might be less inclined to help him out.

Not to mention the fact that businesses/individuals known for gouging will find themselves black-listed when the market returns to normal.

There is no free lunch. Either for the gouger - or his patrons.

One more thing; take the guy who sells his stock at the same price as before the “event” - even though supply has dropped and demand is up. He now becomes in essence, a “whole-saler”. His patrons will over-buy, then sell their surplus at a profit. Seem fair to him?


19 posted on 11/02/2012 1:16:13 PM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: discostu

I have no idea why you phrase it that way, better for people not to be able to buy because of price or because of absence of supply. I thought the point was that greedy sellers are making obscene profits, in which case they must have set the price well enough. The real choice is between the shelves being g empty and having the choice to pay what you’d never pay under normal circumstances. But to answer your question, the former case is better because then more people, and the more desperate people, get more water.

“profiting from a captive audience”

It’s not as if the sellers of bottled water kidnapped people and locked them in a cellar. They are being held captive by God or Mother Nature, not the local convenience store. So long as they are being held captive it is to the collective benefit that supplies are rationed in the mist efficient and just manner, which is the free market.

“it’s punishing people for living in the wrong city in the wrong week”

No, it may be profiting off them being so situated. But God or Mother Nature or whatever is punishing them, not the guy who sells them water. Blame the storm.

This whole punishment line of reasoning I find distasteful. I can understand a heroin pusher being seen as punishing a junkie, but would you say a farmer is punishing the eating public by growing corn when corn futures are up? Or any enterprise punishing customers fulfilling a need when supply is lacking anywhere in the market? Probably not. It can’t be bad to take advantage of market conditions anytime because then we’d all be guilty all the time.

Oh, I see, it’s only evil if you do it in times of especially acute need. But I might remind you that the more desperate was the need the better a thing it is that the seller did. Possibly saving lives is nobler than satiating the munchies late on a Sarurday eve, or whatever is their usual sale. And why shouldn’t they profit from doing good? Because it should come out of the kindness of their heart? Why? Nevermind, let’s pretend there’s a reason. Okay, then goodbye profit motive.


20 posted on 11/02/2012 1:24:01 PM PDT by Tublecane
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To: discostu

“He’s saying with the prices up to gouge level people will buy less because they can’t afford to buy as much”

Some people will buy less, yes, which means more people will be able to buy. Not only that, the ones who do buy will value it more.

“I just pointed out that some of those not being able to afford as much will not be able to afford any”

Some, surely. But mire will buy with higher than lower prices. Your posts make it sound as if the same number of people will go thirsty with empty shelves due to underpricing than with the price being too high fir some. Which is wrong.

That is, assuming the seller hasn’t set the price above market. But since this is all about obscene profits, again, we can assume it was set to where the supply still ran out.


21 posted on 11/02/2012 1:31:48 PM PDT by Tublecane
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To: discostu

“One way or another somebody is not getting water”

Can you understand the concept if more or less people getting water? Yes, in both cases probably not every person who wants water will get it. But one way (higher prices) more people get water, and another (lower prices) less people do. Do you understand why the former way might be preferable?


22 posted on 11/02/2012 1:34:34 PM PDT by Tublecane
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To: driftdiver
You’re just making excuses for being greedy.

I belonged to a free-market economic discussion group years back. We had heated discussions with people over this exact issue.

We had complex thought experiments that went through the entire process under the conditions of a truly free market-system and true Liberty. We used only ice as the product delivered.

What was concluded was that a system without any government interference whatsoever (i.e. let prices be what the may) that what your call greedy was in fact the superior method to deliver needed goods in the most timely fashion and at the least cost.

Space does not permit me to explain in detail, but the fallacy of blaming "greed" is strictly the result of the indoctrination of progressive ideas.

23 posted on 11/02/2012 1:34:49 PM PDT by sand88
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To: discostu

“One way or another somebody is not getting water”

Can you understand the concept of more or less people getting water? Yes, in both cases probably not every person who wants water will get it. But one way (higher prices) more people get water, and another (lower prices) less people do. Do you understand why the former way might be preferable?


24 posted on 11/02/2012 1:34:58 PM PDT by Tublecane
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To: Tublecane

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.


25 posted on 11/02/2012 1:37:31 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: stuartcr

Gee, is it really so difficult for people in the Northeast?

Even picking up some water for an emergency is too difficult for them to figure out?

They don’t know how to rinse out jugs or pull out the lobster pot and fill it for water from the tap in case the storm shuts down the power?

Are they really tormented and overwhelmed by trying to decide between having 3 day, or 5 days worth of drinking water and juices and soda pop?

Do they have trouble figuring out how much beer, chips and ribs that they want for a 2 day weekend, or a 3 day weekend, do you think many of the smokers ran out of cigarettes?

How helpless and stupid are you claiming that these people are?

I just spoke to my son in Brooklyn and he said it didn’t effect him at all, he already had food and water, and he filled his car tank and an extra 5 gallon gas can before it blew in.


26 posted on 11/02/2012 1:38:25 PM PDT by ansel12 (Vote, but don't pretend.)
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To: Tublecane

It’s not more or less. Charging extra doesn’t mean more people get water, it just means DIFFERENT people get water, and you make a bunch more money on it. The overall math on how many live or die stays the same, the gouger is just making money picking and choosing.


27 posted on 11/02/2012 1:39:22 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: jonno

“The gouger may make a buck screwing his neighbors”

I’d normally say there’s no such thing as gouging, but it is possible to screw customers, in a manner if speaking, if you knowingly take advantage of their hysteria over certain future events which you know to be a fantasy. Then it’s somewhat akin to a con game, though far short of criminal. After all, information is never equal throughout the marketplace, and we’re always trying to get one up on the other guy by better predicting the future in trade.

Getting back at the seller later for capitalizing on your ignorance is another form of hysteria. It’s not their fault you were wrong, and if like I said it was knowingly on their part that they “screwed” you it was really your fault for being stupid. We are responsible for our own stupidity.

Then again, in a free market sellers are responsible for their customers’ irrational grudges. No getting around it if they want to punish you for their stupidity, and I guess you gotta take the bad with the good.


28 posted on 11/02/2012 1:46:08 PM PDT by Tublecane
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To: discostu

As someone who buys in bulk when I can, I know that stores limit purchases on many items that are temporarily a good buy.

Our neighborhood store knows that we rich hoarders would clean out the shelf if we could, so they make limit rules to have the goods reach a larger number of their customers and get wider dispersal.


29 posted on 11/02/2012 1:47:41 PM PDT by ansel12 (Vote, but don't pretend.)
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To: driftdiver
During normal periods I would agree 100%. In events like this certain merchants have a monopoly and there is no other source.
When people can’t get certain things they die.
You’re just making excuses for being greedy.

You apparently can't read and process when it comes to an issue that raises an emotional note... the article is quite clear. That generator... or medical kit, or box of food... won't magically save more people just because it retains a certain price. It is still just ONE item. It's price is irrelevant, and it will not save more lives simply because there is a lower price tag on it.

However, as the article states, higher prices WILL cause those who are buying the items to make some measured decisions, and leave more available for OTHERS. THIS is how MORE lives are saved... and NOT by just allowing those who are first to the store to grab all of the supplies.

(Although, I think what could be the wisest pricing system would be to have the price increase for every subsequent item purchased. The first gallon water jug is $1. The second is $2. The third is $4. That will make one pause before buying the 8th gallon jug for $128. That leaves many more jugs for the rest of the people that have not yet gotten to the store, but does allow a somewhat rationed purchase for the ones who got there first. Just my idea formed on the spur of the moment.)

Note: Removing the "gouging" laws also allows for the "greedy" folk OUTSIDE of the disaster zone to bring their supplies in! Just like the Kentucky man who brought those generators down to NOLA, as mentioned above. Without the very moderate 100% increase in price, he never would have done that. The price increase used the simple mechanics of capitalism to draw MORE life-saving goods to the area! But instead of listening and processing an important and interesting point, you read the word "gouging", form pre-conceived conclusions, and refuse to allocate a single brain cell to the actual point being made. Typical of a Lefty, to be honest. See the Global Warming debate sometime. That's you, here.

30 posted on 11/02/2012 1:51:08 PM PDT by Teacher317 ('Tis time to fear when tyrants seem to kiss.)
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To: ansel12

Which is great. I don’t have a problem with that, even right before a disaster. It’s the argument others are putting forth that jacking the price way up acts as a limiter that I’m pointing out as false. Folks who come in to buy all the water they can carry will so long as they can afford it, jacking up the price just changes who buys all the water they can carry from the people there first to the people there with fatter wallets, in the end there will still be a bunch of people who don’t get any. If an owner wants to spread their stock among more people the limit is the way to do it, they don’t take advantage of people in a bad situation AND they accomplish what the gouging defenders say gouging will do but it actually doesn’t.


31 posted on 11/02/2012 2:00:54 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: discostu

“Charging extra doesn’t mean more people get water”

Yes, it does. Price has an effect on demand, and it discourages people from buying more than they need. Are you not aware of the rationing function of price? How long has it been since you cracked an economics book?

“it just means DIFFERENT people get water”

Not just, but yes, they are different. Namely, now the people who more highly value water will tend to get it. Also more people overall will get it, because below market prices ensure the market will not clear where supply meets demand, but rather demand will suffer and remain unfulfilled when supply runs out.

“the gouget is just making money picking and choosing”

But his does he make money? What is the mechanism whereby who he chooses bakes him more money under higher prices if more people aren’t buying? Or in other words, what color is the sky in your world?


32 posted on 11/02/2012 2:09:16 PM PDT by Tublecane
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To: discostu

“Charging extra doesn’t mean more people get water”

Yes, it does. Price has an effect on demand, and it discourages people from buying more than they need. Are you not aware of the rationing function of price? How long has it been since you cracked an economics book?

“it just means DIFFERENT people get water”

Not just, but yes, they are different. Namely, now the people who more highly value water will tend to get it. Also more people overall will get it, because below market prices ensure the market will not clear where supply meets demand, but rather demand will suffer and remain unfulfilled when supply runs out.

“the gouget is just making money picking and choosing”

But how does he make money? What is the mechanism whereby who he chooses makes him more money under higher prices if more people aren’t buying? Or in other words, what color is the sky in your world?


33 posted on 11/02/2012 2:10:30 PM PDT by Tublecane
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To: discostu; Tublecane
I know you concern about greed. Greed is considered bad only because of progressive indoctrination.

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.

34 posted on 11/02/2012 2:19:31 PM PDT by sand88
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To: discostu

See my #19...


35 posted on 11/02/2012 2:20:43 PM PDT by jonno (Having an opinion is not the same as having the answer...)
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To: discostu

“hacking up the price just changes who buys all the water they can carry from the people there first to the people there with the fatter wallets”

That is unmitigated BS. I knew someone would dig up this stale, old argument. It doesn’t happen that way for the same reason rich people don’t outbid us the rest of the time: there are more of us. There’re only so many rich people, and they can buy only so much. With fatter wallets I’d imagine them having more options and less need to stock up, but anyway our only guard against ones who are ignoring common sense and setting their hearts on buying as much as pleases them is to raise the price. Whatever else is there to disuade them?

Higher prices impose thrift, even on fat wallets. Numbers outbid deep pockets, as you’d know if you’ve paid attention in times of extreme scarcity instead of to your wild theories about what happens.


36 posted on 11/02/2012 2:24:29 PM PDT by Tublecane
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To: Tublecane

It’s not about rich, it’s just about not poor. That’s the key to the gouge. If you jack up the price to $100 yeah the people have to be rich, and now even at that price you’ll be finding a way to not sell stuff. But if you only jack a $1 bottle $5 plenty of non-rich people can still buy all they can carry, you just happen to get 5 times as much money. There’s gonna be a small handful of people that can’t afford the new price, they’re screwed. So the same number of people don’t get water, only instead of it being only the slow that arrived too late you add some poor that got there early.

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 while not actually doing anything that helps any more people that you were before.

The higher prices don’t impose thrift, they just keep some people out of the market. The people that can afford your new prices will still buy all they can carry. All that you do is swap early people who could have afforded your old prices with late people who can afford your new.


37 posted on 11/02/2012 2:32:43 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: Tublecane

I thought the definition of this argument was that there was a true, life threatening shortage of everyday needs, like water in a 7-11, or ice at the Safeway to save food in the fridge, someone could definitely buy all of the product off the shelf, say ice for luxury and partying, under that condition.


38 posted on 11/02/2012 2:56:09 PM PDT by ansel12 (Vote, but don't pretend.)
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To: ansel12

Obviously there are quite a few stupid and helpless people in nyc area.


39 posted on 11/02/2012 3:06:01 PM PDT by stuartcr ("When silence speaks, it speaks only to those that have already decided what they want to hear.")
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To: discostu

“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.


40 posted on 11/02/2012 3:06:51 PM PDT by Tublecane
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To: discostu

“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.


41 posted on 11/02/2012 3:09:12 PM PDT by Tublecane
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To: discostu

“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?


42 posted on 11/02/2012 3:11:25 PM PDT by Tublecane
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To: discostu

“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?


43 posted on 11/02/2012 3:11:57 PM PDT by Tublecane
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To: Tublecane

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.


44 posted on 11/02/2012 3:13:15 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: Tublecane

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.


45 posted on 11/02/2012 3:15:01 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: discostu

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).


46 posted on 11/02/2012 3:15:10 PM PDT by ansel12 (Vote, but don't pretend.)
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To: discostu

“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.


47 posted on 11/02/2012 3:19:56 PM PDT by Tublecane
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To: Tublecane

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.


48 posted on 11/02/2012 3:23:39 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: ansel12

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.


49 posted on 11/02/2012 3:25:56 PM PDT by discostu (Not a part of anyone's well oiled machine.)
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To: discostu

“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


50 posted on 11/02/2012 3:26:06 PM PDT by Tublecane
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