Skip to comments.The Case for Price Gouging [during natural disasters]
Posted on 11/02/2012 2:59:50 PM PDT by grundle
Stopping price hikes during disasters may sound like a way to help people, but all it does is exacerbate shortages and complicate preparedness.
Price controls in an emergency have the same results as they do any other time: They lead to shortages and overconsumption. Letting merchants raise prices if they think customers will be willing to pay more isnt a concession to greed. Rather, it creates much-needed incentives for people to think harder about what they really need and appropriately rewards vendors who manage their inventories well.
For customers to suffer from a gasoline shortage even while gasoline sat idle in the storage tanks of local businesses would be absurd. If higher operating margins are what it takes to tempt people to brave difficult driving conditions for the sake of opening the store on a day when customers are likely to be scarce, thats a small price to pay.
Indeed, many of the problems associated with weather emergencies are precisely caused by the fact that we cant count on shops to gouge their customers.
(Excerpt) Read more at slate.com ...
After (or maybe before) a hurricane hit Florida, lumber stores drove to Florida with loads of plywood and associated supplies from Georgia.
They charged a premium, maybe twice the regular price.
"Price gouging!" shouted the liberal Democrats.
The legislature passed a law making such practices illegal.
Next year, another hurricane hit a different part of Florida.
No plywood. For days and days and days.
The law was repealed.
This morning I saw a report on FOX where the reporter was pointing to a sign that showed gas at $5.99. I personally don’t think that was unreasonable considering the circumstances. (Incidentally, the station closed when the news crew arrived which I’m sure thrilled those who had been waiting for hours)
If they were charging $30 or $40 per gallon I might feel differently. HOWEVER, if someone were to offer that much, I certainly wouldn’t fault the station owner for taking it.
My wife worked for a lumber company in Florida during a hurricane.
They had to pay *premium* prices not only for plywood (the hurricane caused a national shortage) but it was nearly impossible to get any trucks to bring the plywood into Florida because of the conditions. Carriers wanted premium rates for the associated problems and risks. Justifiably so.
Her employer wasn’t making huge profits on the plywood.
This author must have read Thomas Sowell’s “Basic Economics: A Citizen’s Guide to the Economy”
Further imagine that a person just joining the line tells the first person, "My elderly parents are home alone and can't take care of themselves. I'll give you twice what you just paid for that gas so that I can return quickly to my parents.".
What is the fair price of the gas? Is the first person who purchased the gas expected to make a donation of his time in order to help the second? Is the first person allowed to sell the gas at whatever price he wishes?
Now imagine that the second man in the scenario above sends a friend to stand in line for him and proposes to pay him for standing in line. The friend will be reimbursed for the price of the gas and will be further paid for his time with an identical amount.
Just what is so different about the two scenarios? Are they both illegal? What's wrong with some people that they think the value of something is independent of the circumstances surrounding its purchase? What is wrong with some people that they think that an owner should part with his property at less than its fair value?
Funny, I remember numerous hearings and accusations re: execs when gas was $1.84 under Bush; They treated them like gouging, greedy oil men who got it out of the ground, got R&D, refining and trucks free for transport. No mention of the tax %’s in NYC. As many still wait hours to be told no gas (up to 15 minutes ago), they refuse to drill and stop projects.
Government determines how much you're entitled to; that's what's wrong with rationing. Some bureaucrat decides what's fair. And then, you have to go jump through some hoops -- standing in line, filling out forms, grovelling to the person-in-charge -- to get your "fair share."
That's what's wrong with rationing.
Government doesn't care or know who has a "desperate" need of something. Someone with a desperate need will get it.
Do you really advocate putting your fate into the hands of someone else?
No one filled out forms, no had to grovel, no hoops, lines were reduced saving gas and it was easier to stretch supplies that way than to simply raise the price temporarily to discourage use.
“Do you really advocate putting your fate into the hands of someone else?”
Say what? Your fate in an emergency is already in the hands of others. The worker who may or may not restore your power, the official who may close the road to traffic, the first responder who may give up the search for you or press on, the medical worker practicing triage.
What I suggested as an alternative to raising prices to restrict use which is a form or rationing, is to ration availability so everybody has a chance to obtain a share without deciding its “fairness”.
“Someone with a desperate need will get it”
Really? Might you suggest how that would occur if they get to the station and find it empty. What matter the price then? Then what's fair?
Suppose I need 1/3 of a tank of gas per day to get to work. With odd/even, I’m going every other day and filling up. I may frivol away the remaining 1/3 of a tank at 4 bucks a gallon. With no odd/even and unlimited prices, I go every 3 days and buy whatever I need, and not a drop more.
Suppose I can get a truck full of gas from flyover country to odd/even country. Why bother, I might as well sell it in flyover country, my profit’s the same.
Suppose there was a way to pump the gas twice as fast, but it cost 1,000 bucks to install. At 8 cents a gallon profit, why bother? At 80 cents a gallon profit, it makes a lot more sense.
A friend of mine complained that there were no 700 dollar generators left in the stores. I asked her if she’d prefer being able to buy the same generator for 1,500.
Suppose you have a fortune you inherited and don’t have to go to work and gas is five bucks a gallon.
Anything can be supposed.
While I am sure it did not intend to do so, the Slate makes a great argument for the free market (AKA gouging)vs. government planning (rationing).
Perhaps we could apply this something like HEALTHCARE.
No. You just had to sit there for hours. Technically, in my book, that's grovelling.
Might you suggest how that would occur if they get to the station and find it empty.
That's what allowing merchants to set prices is designed to prevent. And, after all, the gasoline is their property. Why shouldn't they have the right you'd claim to sell your own property at the price you determine?
I don't think you're following the discussion.
If reducing demand is the goal raising the price high enough will do it. But why is meeting the demand of a few better than meeting some of the demand of many? Or is it let them eat cake?
You’re quite right, the gasoline is the owners property. And in emergencies the authorities can make rules about how that property is used or disposed of.
As it happens I think the allocation by rationing the amounts of gas or times of purchase is a better way to maintain order and more humanitarian than rationing by raising prices until a large number of needy people cannot buy.
And that’s what the discussion is about: Rationing. Only the means varies.