GOUGE ME -- PLEASE! -- Let Market Prices Do Their Job

Iconoclast.ca ^ | R. BASTIAT

[clintonbaiter]

As Hurricane Isabel made its way up the East Coast a few weeks ago and threatened to inflict major damage on the region where I live, I headed for the nearby grocery after work to stock up on bottled water in the face of an impending cutoff of tap water and electricity. Too late. Spurred by the initial storm warnings, frenzied early-birds had stripped the shelves at that shop -- and at every supermarket and convenience store in the neighborhood -- not only of all the bottles of Evian but of every conceivable "emergency" item, from canned tuna to toilet paper. There was nothing available for me to purchase -- at any price I might offer -- that could see me through the water and power outages that lay ahead.

It's hard to blame the panicky hoarders for stocking up on everything they could fit into their shopping carts and leaving their late-shopping neighbors empty-handed. In the face of a surge of demand, the posted prices of essential items should have risen immediately, to signal an incipient shortage and foster compensating behavior on the part of producers, distributors, and customers. But unfortunately, that didn't happen -- for the most part, prices stayed right where they were, giving sellers little or no incentive to re-provision. So demand outstripped supply, goods were rationed on a first-come-first-served basis, tempers flared, neighbor was set against neighbor, and chaos ensued as almost every usable item quickly disappeared from the shelves.

It needn't have turned out that way. Had sellers been willing to exercise their social responsibility to raise prices (you read that right) under crisis conditions, a properly functioning market mechanism would have fostered cooperative activity, a quicker replenishment of supplies, and a broader distribution of critical goods and services. A sharp spike in prices would have served to discourage mindless impulse-buying and hoarding, encourage civilized behavior among consumers, draw in provisions from outside the affected region, and reduce the number of households that were forced to do without.

Still, it's hard to blame the store managers, who calculated -- probably correctly -- that in terms of public relations, they were better off just selling out their inventories and shutting down rather than marking up prices to reflect actual market conditions. By raising prices, they would have maintained the smooth flow of goods and services and maximized the availability of emergency items for a broad customer base. But they would have risked being attacked for "price gouging" -- an ill-defined but apparently unforgivable sin in the eyes of much of the public.

In the wake of Isabel, opportunistic politicians and hostile media up and down the Atlantic Coast lumped together the few price spikes that occurred with some of the more egregious instances of criminal fraud being perpetrated by some predatory home-repair scam artists. But it is absurd to equate the two activities. There is nothing fraudulent about adjusting prices in response to sudden changes in supply and demand conditions, and -- especially during a natural disaster -- it is not only appropriate but essential and socially beneficial....

[clintonbaiter]

Free market economics at its most extreme.

[Support Free Republic]

Aww man! Enough of the fundraiser posts!!!

Only YOU can make fundraiser posts go away. Please contribute!

[NotQuiteCricket]

It is difficult to feel sorry for someone who has no supplies laid in when they live in a hurricane prone area. When the season starts, the TV stations will put out a flyer with information on what you should have on hand AT ALL TIMES, in case of an emergency situation.

[Scott Mahrle]

I love this article! And I have bookmarked the Iconoclast.

Thank you!

[Hodar]

How loud do you think this individual would be yelling if he hadn't put off provisioning until the last minute, and paid $5 for a bottle of water? As far as stating that the stores had no incentive to re-provision .... what planet does this idiot live on? I don't know about you, but where I shop, grocery stores don't shut down when they sell out of soup. They order more, so they can sell more.... I think it's a money 'thing'.

[stainlessbanner]

Blame the paranoid news casters for scaring everyone into hoarding water, d-tape, and batteries - they'll make a class 5 storm out of a sunshower. (not to belittle those hit by isabel)

We still can't find generators in FLA - they've been shipped north. Plywood can't be moved out of state either.

[nevergore]

I remember a story from my dad who owned a bakery in Boston in the 40's and early 50's....

They would limit customers to two loaves of bread prior to a Blizzard warning so that they could serve all their customers...

They wouldn't raise their prices (although many others were). For a impending crisis, they considered that a social responsibility to their neighbors, friends and customers. BTW, that was their philosiphy and they didn't try to impose it on others...

NeverGore :^)

[Mears]

Interesting about your father. During the Blizzard of 78 in the Boston area we couldn't drive,by law, for about 4 days and the grocery stores,even the major markets,limited the amount of milk and bread you could buy.

It worked out fine,no complaints from anyone.

[joesnuffy]

Have your own water filters...
Maintain a supply of food and emergency supplies stocked up a few weeks ahead
(use them up and replace)
When Hurricane season is upon you-your stock up ahead of schedule
Sell the surplus to your neighbors...

[Onelifetogive]

I agree with you...Great article.

I am a bit disappointed with the other FReepers who don't seem to get it.

When presented with the options of "low prices and no availability" or "high prices and availability"...How is anyone hurt by "high prices and availability"???

The Soviet Union under communism maintained prices at extremely low levels for basic goods...the only problem...EMPTY SHELVES!!!

[Onelifetogive]

But they would have risked being attacked for "price gouging" -- an ill-defined but apparently unforgivable sin in the eyes of much of the public.

crime...Not sin...CRIME!

[Onelifetogive]

the grocery stores,even the major markets,limited the amount of milk and bread you could buy.

It worked out fine,no complaints from anyone.

Similar to the USSR, where they weren't allowed to complain either.

Instead of $1 a loaf for bread and you can only have one (no matter how many your family needs), how about $3 per loaf and you can have all you want.

[Moonman62]

In Florida, state and local laws define gouging as an "unconscionable" increase in the prices of essential goods and services when an emergency has been declared. Price increases are allowed to cover increased costs. There is plenty of leeway to allow the market to work, yet a mechanism remains to punish the gypsies and libertarians who are purposely preying on people in dire need.

[Mears]

It worked out fine. I had five kids and my freezer was full of bread,but milk was another thing.

You could buy just one gallon at a time,so I sent three kids to the store,they each got in line separately, and got three gallons.

They weren't checking ID's for heaven's sake and it was just for a few days.

[Prodigal Son]

Have we been sued by the Iconoclast? I note all the articles people post from this source are excerpted. Odd that.

[Hodar]

I am a bit disappointed with the other FReepers who don't seem to get it.

Have you been through a natural disaster? Have you run to by plywood to protect your family from broken glass (in the event the huricane takes out the picture window) only to see that the $12 sheet of plywood is now selling for $75? This was 3 days before the storm hit, the plywood wound up at $225 the next day. How many sheets do you want? Now, you wish to not only defend opportunism, you are saying that it should be done everywhere. How about the hospital? A unit of Blood is $25 if you are healthy, but if you are bleeding to death ... oh, say $750.

[Lee_Atwater]

Excellent illustration of the importance of prices!

[Renfield]

Boy, do I have a deal for this "iconoclast". Isabel took the roofing off of my front porch. It's not a large porch, and should be easy to fix. My insurance claim adjustor valued the claim at $207.50, which is obviously too low. I called about 15 contractors and could only get two to come and out and give me estimates (most wouldn't even return my calls). One of them quoted me $1200 to fix the porch. Another quoted me $2250 to fix the porch and a problem of leakage around my chimney. Now, I figure that two reasonably competent roofers should be able to fix the porch roof in about 4 hours.....meaning the first man wanted an effective labor rate of about $125/hour...and I don't even want to think about the second roofer. I could get a decent lawyer or doctor for these prices. I went to the roofing supply place today, spent about $250 on roofing materials and tools, and will spend tomorrow working with a friend to fix my own darn porch roof. However, I would be glad to send the phone numbers of these roofers to the author of this article....he can then gouge himself to his heart's content.

[Onelifetogive]

Have you been through a natural disaster?

Hurricane Andrew, Louisiana.

How does $12 plywood that is sold out help me!!! The first guy to show up buys more than he needs because, hey...it's cheap.

Hurricane hits, power is out...and the first guy to the store buys all the ice to keep his beer cold for the next few days. You, on the other hand, are unable to refrigerate lifesaving medicine, or to save $1000 worth of ribeyes in the freezer.

I'll ask again...How does charging me regular prices for something you are sold out of help me???

[fjsva]

We are always ready for Hurricane season or any other disaster. I was sarcastically called a "Boy Scout" by a co-worker who did nothing to prepare for Isabel.

I had to listen to him whine while he was w/o power, food, gas etc for a week. I took the opportunity to let him know "Boy Scouts" can live quite comfortably during difficult times.