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To lots of people, so-called "price gouging" feels wrong, so it must be wrong. Disaster pricing can't just be morally wrong: it has to be economically wrong too

To lots of people, so-called "price gouging" feels wrong, so it must be wrong. Disaster pricing can't just be morally wrong: it has to be economically wrong too. We must make the science fit our intuition, the braying crowd says, and not the other way around. Reality doesn't work that way. The trouble is that when we want something to be true, we find all sorts of specious ways of demonstrating this truth, and in the process, fall afoul of confirmation bias, sampling bias, various statistical errors, and good old-fashioned wishful thinking. Consequently, whenever I see a paper that goes with the grain of internet outrage activism, I apply a very high standard of evidence. It's too easy to believe something that tells people what they want to hear.

mywittyname 7y ago
Price gouging is wrong because not helpful at all. 1) it doesn't increase the supply of goods. Everyone is very aware that there's a shortage and they are working hard to produce more. Jacking up the price does not achieve this goal. 2) it encourages hording of critical supplies. People don't want to sell now in hopes of getting a better price tomorrow. They continue to do so until the next batch of supplies come onto the market and finally drive the prices back down 3) it makes people angry. When a group of people see someone with a bunch of something they need to live, and they can't afford it, they might decide to take it by force. This has the potential to cause needless bloodshed. There's literally no benefit to price gouging, but a huge cost to life and social stability. This is why so many people think it feels wrong: when something causes only harm with no benefit, most people would call that wrong. In fact, one of the definitions of wrong is an action or conduct inflicting harm without due provocation or just cause.
- quotemstr 7y ago
  Re #1: yes it does. For example, during Katrina, high prices encouraged people to drive long distances to bring supplies from other states. Re #2: low prices, not high prices, encourage hoarding. Why not buy 20 multi-packs of toilet paper if it's cheap? If toilet paper is expensive, you buy what you need. The alternative to price gouging isn't everyone getting what he needs: that's a fantasy. The actual alternative is empty shelves and black markets. Re #3: emotion is no basis for public policy. The state has a responsibility to maintain law and order during an emergency. In some situations, intuition serves us well, but economics is not prone to these situations. It really is a good thing for prices to rise in times of scarcity. Thousands and thousands and thousands of years of history tell us that price controls only ever make things worse.
  - mywittyname 7y ago
    1) people were also shipping water and other supplies to Katrina for free. I literally spent hours during the aftermath of Katrina filling aid packages for people affected by the storm. These aid packages were not sold, they were given away to people who had lost everything. These supplies are already being produced as fast as possible. Even people with 3d printers are making these masks to give away #2) bubbles form with a group of people purchase goods at already inflated prices, with the explicit attempt to drive up prices further and sell them for a profit. "If people are willing to pay $50 for a roll of toilet paper, maybe if I buy up all the toilet paper, I can sell it for $500!" -People causing bubbles. 3) If the state has a responsibility to maintain order, then they have a responsibility to combat price gouging, because failing to do so is a failure to maintain order. It's not an emotion issue, it's a rational one. I feel like you're the one whose intuition is off. What I'm talking about are real, proven issues with price gouging and these are literally the reason that it is outlawed in nearly all of the USA. It's a slam-dunk case for prosecutors too. There's a reason why people caught price gouging are in the news the next week for "donating" their stash.
    - qeternity 7y ago
      Nice red herring at the end there. Nobody is arguing whether or not price gouging is illegal in many or most jurisdictions. That’s a matter of fact. There are no proven economic issues with price gouging, just moral ones.
    - dehrmann 7y ago
      > If the state has a responsibility to maintain order, then they have a responsibility to combat price gouging, because failing to do so is a failure to maintain order. Expensive goods or shortages: pick one, but neither "maintains order."
  - MisterBastahrd 7y ago
    Scarcity forced people to drive to other states. Gouging is illegal in Louisiana and it's always outsiders who are completely shocked when everyone from the bleeding heart to the die-hard GOP supporter will call the cops when they see it. Anyone who gouges in the state can fully expect to receive a lawsuit from the state AG.

mywittyname 7y ago

Price gouging is wrong because not helpful at all. 1) it doesn't increase the supply of goods. Everyone is very aware that there's a shortage and they are working hard to produce more. Jacking up the price does not achieve this goal. 2) it encourages hording of critical supplies. People don't want to sell now in hopes of getting a better price tomorrow. They continue to do so until the next batch of supplies come onto the market and finally drive the prices back down 3) it makes people angry. When a group of people see someone with a bunch of something they need to live, and they can't afford it, they might decide to take it by force. This has the potential to cause needless bloodshed. There's literally no benefit to price gouging, but a huge cost to life and social stability. This is why so many people think it feels wrong: when something causes only harm with no benefit, most people would call that wrong. In fact, one of the definitions of wrong is an action or conduct inflicting harm without due provocation or just cause.

quotemstr 7y ago
Re #1: yes it does. For example, during Katrina, high prices encouraged people to drive long distances to bring supplies from other states. Re #2: low prices, not high prices, encourage hoarding. Why not buy 20 multi-packs of toilet paper if it's cheap? If toilet paper is expensive, you buy what you need. The alternative to price gouging isn't everyone getting what he needs: that's a fantasy. The actual alternative is empty shelves and black markets. Re #3: emotion is no basis for public policy. The state has a responsibility to maintain law and order during an emergency. In some situations, intuition serves us well, but economics is not prone to these situations. It really is a good thing for prices to rise in times of scarcity. Thousands and thousands and thousands of years of history tell us that price controls only ever make things worse.
- mywittyname 7y ago
  1) people were also shipping water and other supplies to Katrina for free. I literally spent hours during the aftermath of Katrina filling aid packages for people affected by the storm. These aid packages were not sold, they were given away to people who had lost everything. These supplies are already being produced as fast as possible. Even people with 3d printers are making these masks to give away #2) bubbles form with a group of people purchase goods at already inflated prices, with the explicit attempt to drive up prices further and sell them for a profit. "If people are willing to pay $50 for a roll of toilet paper, maybe if I buy up all the toilet paper, I can sell it for $500!" -People causing bubbles. 3) If the state has a responsibility to maintain order, then they have a responsibility to combat price gouging, because failing to do so is a failure to maintain order. It's not an emotion issue, it's a rational one. I feel like you're the one whose intuition is off. What I'm talking about are real, proven issues with price gouging and these are literally the reason that it is outlawed in nearly all of the USA. It's a slam-dunk case for prosecutors too. There's a reason why people caught price gouging are in the news the next week for "donating" their stash.
  - qeternity 7y ago
    Nice red herring at the end there. Nobody is arguing whether or not price gouging is illegal in many or most jurisdictions. That’s a matter of fact. There are no proven economic issues with price gouging, just moral ones.
  - dehrmann 7y ago
    > If the state has a responsibility to maintain order, then they have a responsibility to combat price gouging, because failing to do so is a failure to maintain order. Expensive goods or shortages: pick one, but neither "maintains order."
- MisterBastahrd 7y ago
  Scarcity forced people to drive to other states. Gouging is illegal in Louisiana and it's always outsiders who are completely shocked when everyone from the bleeding heart to the die-hard GOP supporter will call the cops when they see it. Anyone who gouges in the state can fully expect to receive a lawsuit from the state AG.