11 ms·

Price gouging drastically reduces shortages because anyone with supply will be tempted to quickly move in to capture the high price on the curve. It also encour

Price gouging drastically reduces shortages because anyone with supply will be tempted to quickly move in to capture the high price on the curve. It also encourages people to actually plan ahead so the entire population isn't trying to buy a full tank of gas the same day. You think price gouging is unethical, I think price capping is unethical and harmful since it encourages hoarding and shortages.

monocasa 8y ago
Or, you know, crazy idea, maybe a market based solution to resource allocation in emergencies isn't the best idea.
- tfha 8y ago
  Can you elaborate? Just stating that the grandparent is wrong isn't great discussion.
- phil21 8y ago
  I've been alive a decent amount of time now and I've seen no evidence that price controls during disasters are anything more than political fluff for easy points. Everyone - even otherwise reasonable folks - love their 2 minutes of hate on "price gougers" even if the facts don't make much sense. As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk. And I'm not even in the generator selling business. Someone who is I imagine could be quite incentivized to keep the factory open a few more shifts and ship a bit more if profits were there to offset the additional expense and risk. Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't. The response of course to my complaints is rationing, which of course brings up a whole other giant can of worms.
  - zaarn 8y ago
    >Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't. What if the single dude has 1000$ and the family has 10$? The single dude can obviously just buy all the water and the family still gets none.
  - cimmanom 8y ago
    When it’s physically not possible to increase supply sufficiently (in the relevant timeframe) to meet demand at a price affordable by everyone who needs a good in order to survive; and if you want to distribute those goods in such a way that the maximum number of people do survive; your only option will be price controls and rationing. If it were possible to increase supply sufficiently AND the markets were perfectly efficient (and cows were spherical), price controls wouldn’t be necessary - but these controls were typically introduced after disasters where people died because other people were jacking up prices to levels most couldn’t afford. Even if it truly is possible to increase supply you may nevertheless have price increases because disasters induce demand and encourage hoarding. The solution here IMO would be to cap prices but subsidize them in order to incentive suppliers to increase supply.
  - jcranmer 8y ago
    > As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk. If you were really willing do to this, could you be so kind as to share your prognostication for where future disaster will strike with disaster planners? For you see, that task would require you at least 5 days of advance planning (assuming you were a champ at locating and ultimately selling them), probably more than a week in any actual executable plan. Even for well-forecast hurricanes, that is pushing it for advance notice.
- loeg 8y ago
  The market forces that make the option inferior don't disappear just because price caps are implemented. The "pro price gouging" faction just points out that caps provide even worse market incentives for increasing supply and lowering prices than allowing arbitrary and free pricing (i.e, "gouging").
tfha 8y ago
After a hurricane, water sometimes goes for $100 per bottle. While that seems like price gouging... At $100 a bottle I'm going to be loading up my SUV with as many water bottles as fit and I'll be driving to the disaster area. I'll take work off, maybe even risk getting fired for that type of payday. Is it unethical? Some people would say so, I did make tens of thousands off of a disaster. But on the other hand, if people were dying because of a water shortage, I made tens of thousands of dollars saving lives. I probably wouldn't have done that without the financial carrot. The free market is a very powerful thing.
- dv_dt 8y ago
  You forgot to mention any downside possibilities. You made tens of thousands selling water to people who had spare money and maybe just kept the water in reserve doing nothing, when people with no on-hand money potentially died for lack of clean water. IMHO, market transactions work poorly when both actors can't walk away from the transaction. ie. when the free market has significant constraints in the "free" precondition. Allowing gouging means resources go to people with money in an completely disjoint optimization function vs an optimization for valuing human life in an emergency. I think that's not only inefficient, it's unethical.
  - marme 8y ago
    when you price cap what you are doing is telling shop keepers and warehouse owners that there is no purpose to risk your safety and open back up until things return to normal because you cant make extra profit so they just stay home and no one gets the needed supplies. When you let them profit at least those with money get supplies. The choices really are either no one gets supplies with price caps or only those with money get supplies when gouging is allowed. If supply was capable of reaching everyone then prices would quickly return to normal. There is no fair system of delivering limited supply and high demand without raising prices. If you come up with one please claim your noble prize as you would have the solution to world hunger and poverty
    - inferiorhuman 8y ago
wwweston 8y ago
It's certainly true enough that high prices activate substitution & rationing, and are a powerful motivating force to bring more supply to bear. Whether shortages necessarily follow that depends heavily on whether there is any other motivating force in play along with institutions prepared to respond to it. In other words -- does a given society only have markets, or does it also have values? And of course, the higher the prices, the larger the number of people to whom whichever commodity we're speaking of is simply inaccessible. At some point practical effect isn't distinguishable from hoarding/shortage and it's not obvious that discriminating by price is ethically superior.
s73v3r_ 8y ago
By encouraging price gouging, you're saying only the rich deserve these life critical supplies. I find that far more unethical than price capping.
- eadmund 8y ago
  By capping prices, you're saying only those who live near water stockpiles deserve it (because that's what price caps lead to: first-come, first-served), which means more wasted water & fewer people surviving.
  - jakelazaroff 8y ago
    You can solve the waste issue by rationing. But more to the point, prioritizing rich people is every bit as arbitrary as prioritizing those who live near water stockpiles.
    - loeg 8y ago
      Do you like, not believe in monetary systems in general? This is how money works. With more of it, you can outbid people with less of it.
      - deleted 8y ago
        [deleted]
      - s73v3r_ 8y ago
        And in an emergency situation, that is a morally wrong system to have.
        loeg 8y ago
        Like democracy, it's the worst system to have except for literally any other system we've tried.
    - spacehome 8y ago
      You're 100% correct. Rationing by wealth leads to equal misery as rationing by who happened by the grocery store sooner. However rationing by wealth is the surest way to increase supply quickly.
Spooky23 8y ago
In the economics 101 fantasy land, sure. In reality profiteers attract a criminal element, both in terms of street criminals hawking $100 bottles of water and corruption of government and commercial officials. IMO controlling the demand side via rationing is the most ethical approach.

monocasa 8y ago

Or, you know, crazy idea, maybe a market based solution to resource allocation in emergencies isn't the best idea.

tfha 8y ago
Can you elaborate? Just stating that the grandparent is wrong isn't great discussion.
phil21 8y ago
I've been alive a decent amount of time now and I've seen no evidence that price controls during disasters are anything more than political fluff for easy points. Everyone - even otherwise reasonable folks - love their 2 minutes of hate on "price gougers" even if the facts don't make much sense. As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk. And I'm not even in the generator selling business. Someone who is I imagine could be quite incentivized to keep the factory open a few more shifts and ship a bit more if profits were there to offset the additional expense and risk. Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't. The response of course to my complaints is rationing, which of course brings up a whole other giant can of worms.
- zaarn 8y ago
  >Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't. What if the single dude has 1000$ and the family has 10$? The single dude can obviously just buy all the water and the family still gets none.
- cimmanom 8y ago
  When it’s physically not possible to increase supply sufficiently (in the relevant timeframe) to meet demand at a price affordable by everyone who needs a good in order to survive; and if you want to distribute those goods in such a way that the maximum number of people do survive; your only option will be price controls and rationing. If it were possible to increase supply sufficiently AND the markets were perfectly efficient (and cows were spherical), price controls wouldn’t be necessary - but these controls were typically introduced after disasters where people died because other people were jacking up prices to levels most couldn’t afford. Even if it truly is possible to increase supply you may nevertheless have price increases because disasters induce demand and encourage hoarding. The solution here IMO would be to cap prices but subsidize them in order to incentive suppliers to increase supply.
- jcranmer 8y ago
  > As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk. If you were really willing do to this, could you be so kind as to share your prognostication for where future disaster will strike with disaster planners? For you see, that task would require you at least 5 days of advance planning (assuming you were a champ at locating and ultimately selling them), probably more than a week in any actual executable plan. Even for well-forecast hurricanes, that is pushing it for advance notice.
loeg 8y ago
The market forces that make the option inferior don't disappear just because price caps are implemented. The "pro price gouging" faction just points out that caps provide even worse market incentives for increasing supply and lowering prices than allowing arbitrary and free pricing (i.e, "gouging").

tfha 8y ago

After a hurricane, water sometimes goes for $100 per bottle. While that seems like price gouging... At $100 a bottle I'm going to be loading up my SUV with as many water bottles as fit and I'll be driving to the disaster area. I'll take work off, maybe even risk getting fired for that type of payday. Is it unethical? Some people would say so, I did make tens of thousands off of a disaster. But on the other hand, if people were dying because of a water shortage, I made tens of thousands of dollars saving lives. I probably wouldn't have done that without the financial carrot. The free market is a very powerful thing.

dv_dt 8y ago
You forgot to mention any downside possibilities. You made tens of thousands selling water to people who had spare money and maybe just kept the water in reserve doing nothing, when people with no on-hand money potentially died for lack of clean water. IMHO, market transactions work poorly when both actors can't walk away from the transaction. ie. when the free market has significant constraints in the "free" precondition. Allowing gouging means resources go to people with money in an completely disjoint optimization function vs an optimization for valuing human life in an emergency. I think that's not only inefficient, it's unethical.
- marme 8y ago
  when you price cap what you are doing is telling shop keepers and warehouse owners that there is no purpose to risk your safety and open back up until things return to normal because you cant make extra profit so they just stay home and no one gets the needed supplies. When you let them profit at least those with money get supplies. The choices really are either no one gets supplies with price caps or only those with money get supplies when gouging is allowed. If supply was capable of reaching everyone then prices would quickly return to normal. There is no fair system of delivering limited supply and high demand without raising prices. If you come up with one please claim your noble prize as you would have the solution to world hunger and poverty
  - inferiorhuman 8y ago

wwweston 8y ago

It's certainly true enough that high prices activate substitution & rationing, and are a powerful motivating force to bring more supply to bear. Whether shortages necessarily follow that depends heavily on whether there is any other motivating force in play along with institutions prepared to respond to it. In other words -- does a given society only have markets, or does it also have values? And of course, the higher the prices, the larger the number of people to whom whichever commodity we're speaking of is simply inaccessible. At some point practical effect isn't distinguishable from hoarding/shortage and it's not obvious that discriminating by price is ethically superior.

s73v3r_ 8y ago

By encouraging price gouging, you're saying only the rich deserve these life critical supplies. I find that far more unethical than price capping.

eadmund 8y ago
By capping prices, you're saying only those who live near water stockpiles deserve it (because that's what price caps lead to: first-come, first-served), which means more wasted water & fewer people surviving.
- jakelazaroff 8y ago
  You can solve the waste issue by rationing. But more to the point, prioritizing rich people is every bit as arbitrary as prioritizing those who live near water stockpiles.
  - loeg 8y ago
    Do you like, not believe in monetary systems in general? This is how money works. With more of it, you can outbid people with less of it.
    - deleted 8y ago
      [deleted]
    - s73v3r_ 8y ago
      And in an emergency situation, that is a morally wrong system to have.
      - loeg 8y ago
        Like democracy, it's the worst system to have except for literally any other system we've tried.
  - spacehome 8y ago
    You're 100% correct. Rationing by wealth leads to equal misery as rationing by who happened by the grocery store sooner. However rationing by wealth is the surest way to increase supply quickly.

Spooky23 8y ago

In the economics 101 fantasy land, sure. In reality profiteers attract a criminal element, both in terms of street criminals hawking $100 bottles of water and corruption of government and commercial officials. IMO controlling the demand side via rationing is the most ethical approach.