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I don’t know how I feel about this. In the general case, I feel like price gouging during emergencies is unethical. But, when there is a non-artificial supply
by dfee 7y ago
I don’t know how I feel about this. In the general case, I feel like price gouging during emergencies is unethical.
But, when there is a non-artificial supply and demand issue, I struggle with the derivative effects of these policies.
My concern is that rather than simply evaluating on the consumers ability to pay (and backwards-looking at prior statements instead of increased go-forward costs), these policies add only one additional criteria: ability to threaten legal issues. Thus, it’s only effect is to prioritize government agencies alongside wealthy clients. And that’s just governments using force to get better treatment. Which also feels unethical.
But maybe there’s a happier and healthier read of the situation.
- freeone3000 7y agoGovernments will also exert this force on behalf of their citizens, is the happier read. In a disaster, everything becomes finite, but profiteering is still deeply disruptive to the shared societal fabric.
- p1necone 7y agoYep - if there's N capacity to provide a necessary necessary good/service, but M > N need, raising the price doesn't seem like a great solution to manage it in a crisis situation. To some extent non necessary uses would decrease, but you also end up with more wealthy people who want it more getting it, and more generally there won't be any distinction between want and need.
- icebraining 7y agoJust like outside a crisis situation.
- ineedasername 7y agoPossibly, but in a crisis situation it is quite a bit more important to deliver adequate service to the "need" group. Outside of a crisis, the "need" group can pursue less expensive alternatives at their leisure. Right now, "fast" is critical.
- p1necone 7y agoAnd outside of a crisis situation demand patterns change much more gradually - long enough for manufacturers to ramp up production, more competitors to emerge etc. The normal feedback loops that make core goods available to the masses don't have time to happen right now.
- ineedasername 7y agoPrecisely. It seems like most manufacturing & supply chains have some elasticity for increased demand, e.g., toilet paper manufacturers were able to increase production either 10% or 20% very quickly (I forget which), but after going all out with 24 hour shifts, you can't do much more in the short term. Also, the more companies that have to do this, the more likely there will be correlated supply chains that feed those companies their raw materials, meaning the issue contaminates the supply & logistics process one more link up the chain.
- JumpCrisscross 7y ago> if there's N capacity to provide a necessary necessary good/service, but M > N need, raising the price doesn't seem like a great solution to manage it in a crisis situation Within a crisis, yes. But this also did-incentivises overprovisioning, i.e. building slack into the system.
- klodolph 7y agoNot speaking in general terms, but just for cloud services—it’s just bananas expensive to overprovision at a cloud provider. The more profitable (and ecological) way to run a cloud provider is to provision only for the capacity that you need, and then pack your machines with low-priority tasks with lower guarantees where you can simply start load-shedding in a crisis. There are thousands of businesses that will look at EC2 spot pricing and simply not schedule their jobs above a certain price point, and I’m sure all the cloud providers have internal workloads running at lower priority (e.g. transcoding YouTube meme compilations) that will run at reduced capacity. Personally I think the whole thing is kind of elegant, even if there are a lot of rough edges in practice.
- burkaman 7y agoWhy do you think governments would only sue on behalf of themselves? The point of these laws is to allow attorneys general to sue on behalf of their constituents. Random example: https://www.standardspeaker.com/coronavirus/state-attorney-general-investigating-price-gouging-including-several-local-cases-1.2612131 https://www.standardspeaker.com/coronavirus/state-attorney-g...
- AmericanChopper 7y agoAbility to pay is only one aspect of demand. There’s also how much you actually want it, and the amount of opportunity cost you’re willing to pay. Keeping prices artificially low keeps demand artificially high, while supply doesn’t increase, or cannot increase if it’s inelastic.
- burkaman 7y ago> There’s also how much you actually want it, and the amount of opportunity cost you’re willing to pay. Money doesn't have much relation to opportunity cost in the presence of enormous wealth inequality. An unemployed person willing to pay their entire bank account of $100 for some good clearly wants it more than a work-from-home tech worker willing to pay the $600 they made yesterday. The same applies to businesses using cloud services. A struggling local business has a ludicrously low cap on what they can pay for Teams compared to Walmart or something.
- AmericanChopper 7y agoI’d consider providing essential services to low income people disadvantaged during a crisis to be a seperate issue all together. I’d also suggest that such an issue would only apply to a narrow band of essential products and services. An unemployed person with $100 in their account isn’t going to care about how much access they have to high quality video conferencing. However, if I have the option of using a 12 person video conference for my morning standup, why wouldn’t I use it? If there was an additional cost for every video conference I wanted to have, I’d think more judiciously about when to use it. Which sounds better than the current situation of knowing that video conferencing is simply going to be unreliable and slow, regardless of how much I may need it for any particular meeting.
- loeg 7y agoYou've just described how a monetary system works and have not refuted the link between prices and opportunity cost.
- chipotle_coyote 7y ago
- edmundsauto 7y agoThe additional dimension is time-smoothing. Emergency declarations that solely serve to smooth over a few weeks spike can be effective. There does not appear to be a predictive estimator whether emergency declarations will be appropriately time limited.
- 2J0 7y agomy father , a Depression Era banker, observed : "who asks How Much is fine but the man who asks When you are paying him is finished." Government has to smooth time.
- azernik 7y agoAlmost all emergency-related profiteering is about non-artificial supply and demand issues. Grocery chains charging 10x as much for water or toilet paper is exactly the kind of thing these laws are meant to prevent. (If the shortage is long-term, you'll usually want to implement a rationing system to address the shortages, but in the short term this kind of fiat can work.)
- Karishma1234fff 7y agoI find price gouging to be perfectly normal and perhaps even desirable during times like these. If the toilet paper prices go up drastically people will not be able to hoard it the way they are doing today.
- mgkimsal 7y agovariable pricing for volume - reverse discounts, in effect - might have worked well. buying 1 pack of TP? $2. 2 packs? $5. 3 packs? $12. etc. The people that truly need 1 or 2 can afford those. The people that want to buy 10 or 20 at a time will pay a huge premium, enough such that it won't really even be easy for them to turn a profit trying to resell to the people who got there 10 minutes after them.
- hannasanarion 7y agoPeople will still be able to hoard things. The difference is that only the rich will hoard, because everybody else never got the chance. The normal market logic that high prices encourage extra production doesn't apply during an emergency, when the demand is panic-induced and momentary, and supply changes won't take effect until after the emergency is over. The actual solution that makes sure everyone gets what they need and theres no hoarding is rationing: limit the number that one person can buy. And that's exactly what most grocery stores are doing.
- prussian 7y agoHow is rationing working? supply is still not enough and rationing on that basis still doesn't prevent the "rich" from effectively paying straw purchasers to buy the goods they want to hoard. Hell, it doesn't even prevent people from repeatedly making visits to collect whatever is on the shelves. I'm not convinced the US government, let alone any western government, has the plan, manpower or infrastructure in place to actually take over distribution of essentials in fair quantities.
- hannasanarion 7y agoWhat do you mean? Rationing is working fine in the stores that are implementing it, the problem is that so many stores aren't. My local grocery is rationing paper products, milk, chicken, and eggs, and they're always available if you visit before noon. There is no supply problem for consumer products. The shortages you see at grocery stores are exclusively because of panic-buying and hoarding, the shelves are stocked right back up to full overnight.
- psandersen 7y agoIgnoring the implementation issues, my issue is when the vendor profits of limited supply in a crisis. If the supplier is only passing on their own increased costs then that's at least fair in principle. Similarly, marginal increases in price for marginal increases in use also seems fair when there are demand surges.
- onetimemanytime 7y ago>>I don’t know how I feel about this. Your feelings aside it is probably illegal as this is an emergency, and MSFT's PR would take a major, major beating. So MS is probably hiring by the thousands trying to meet demand. You raise prices when a hurricane or a pandemic hits, if you don't want to be around for a long time.