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>I still don't understand why price gouging is not accepted. Only high prices are an incentive for new producers to enter a market. Or rather: high prices promi

>I still don't understand why price gouging is not accepted. Only high prices are an incentive for new producers to enter a market. Or rather: high prices promise huge return on investments so that investors allocate money for producers to open new production facilities. Price gouging only applies in circumstances where supply is fixed for all intents and purposes, so it's purely an act of taking advantage of people in a crisis because you can. Anyone who can ramp up production is already ramping up as much as they can. In circumstances where it is accepted, it actually leads to bigger shortages since people benefit from hoarding.

gowld 6y ago
This is true in theory. In practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production. This paradox is severe for products with low marginal cost but high fixed cost, which is most things nowadays thanks to modern economy of scale. Price laws are per unit, but peoduction costs are amortized across a whole production lifetime, and the difference between "X units per month for 10 years" is quite different from "10X units per month for 1 month" is substantial.
- naravara 6y ago
  >n practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production. If it was actually socially important you could just. . . pay for it out of the public funds as a form of emergency assistance or social insurance. Why enable retailers to gouge and exploit the most vulnerable people when you could just have everyone pitch in to fill the gap?
- pgwhalen 6y ago
  Any source on that happening with Covid PPE? I’d love to read about it.
mamon 6y ago
When supply is fixed the price gouging serves as an important mechanism promoting efficient use of it. If a 30 oz bottle of hand sanitizer costs $50 then everyone would ask themselves: "Do I REALLY need 5 bottles of it?"
- TeMPOraL 6y ago
  That kind of reasoning only works when all the things you need add up to roughly all the money you have. Otherwise, the rich person will say, "fuck it, I'll take 5", while countless of poor people won't be able to afford any.
  - zo1 6y ago
    If we're that concerned about the poor people, then maybe our laws should rather ignore price gauging and instead focus on implementing government-run distribution and storage centers for the inevitable emergency so that everyone can get their basic supplies. I can buy the argument that we don't like the way that a free market would solve this problem. But then we have to actually put down something reasonably-likely to work in its stead. Right now we have neither (whilst the poor suffer), and we're blaming the side that's saying "leave it alone, the market can kinda fix it".
    - TeMPOraL 6y ago
      So with anti-price-gouging laws, we're making a bet that rich people are more constrained by the ability to use certain items than they are constrained by money. That is, if they can't buy up the supply and resell it at absurd prices, they have no reason to buy more than they truly need, so the goods remain available to more people in need, at lower price. I do like the idea of government-run emergency stockpiles, and rationed distribution of those. But then, I have a feeling that people who want price gouging to be allowed are also the people who, in times of calm, complain about government being fat, and demand the emergency stockpiles to be cut down.
- IanCal 6y ago
  Efficient if people broadly have the same wealth. It's not efficient for me to buy hand sanitizer I barely need at the expense of care workers who do.
erik_seaberg 6y ago
> only applies in circumstances where supply is fixed After SARS, something like COVID-19 was foreseeable to the professionals. But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency. We've optimized out spare capacity we actually needed.
- naravara 6y ago
  >But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency. None of the preparations for an emergency involve allowing front-line retailers to hoard resources and fleece people on them. Inventory space isn't the main issue here, and that's the only investment front-line retail has to make. This take is completely divorced from reality.
- zo1 6y ago
  Exactly this. It's a self-fulfilling law, and unfortunately, the plebs suffer. Only for the government "saviors" to swoop in to save the day whilst at the same time blaming "capitalism" because it failed to stockpile enough demand without any way to recoup the costs.
- colejohnson66 6y ago
  Companies could’ve stopped doing stock buybacks and instead invested. But that doesn’t raise the stock value. Look at the airline industry: They spent billions on stock buybacks and are now complaining of having no money.

gowld 6y ago

This is true in theory. In practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production. This paradox is severe for products with low marginal cost but high fixed cost, which is most things nowadays thanks to modern economy of scale. Price laws are per unit, but peoduction costs are amortized across a whole production lifetime, and the difference between "X units per month for 10 years" is quite different from "10X units per month for 1 month" is substantial.

naravara 6y ago
>n practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production. If it was actually socially important you could just. . . pay for it out of the public funds as a form of emergency assistance or social insurance. Why enable retailers to gouge and exploit the most vulnerable people when you could just have everyone pitch in to fill the gap?
pgwhalen 6y ago
Any source on that happening with Covid PPE? I’d love to read about it.

mamon 6y ago

When supply is fixed the price gouging serves as an important mechanism promoting efficient use of it. If a 30 oz bottle of hand sanitizer costs $50 then everyone would ask themselves: "Do I REALLY need 5 bottles of it?"

TeMPOraL 6y ago
That kind of reasoning only works when all the things you need add up to roughly all the money you have. Otherwise, the rich person will say, "fuck it, I'll take 5", while countless of poor people won't be able to afford any.
- zo1 6y ago
  If we're that concerned about the poor people, then maybe our laws should rather ignore price gauging and instead focus on implementing government-run distribution and storage centers for the inevitable emergency so that everyone can get their basic supplies. I can buy the argument that we don't like the way that a free market would solve this problem. But then we have to actually put down something reasonably-likely to work in its stead. Right now we have neither (whilst the poor suffer), and we're blaming the side that's saying "leave it alone, the market can kinda fix it".
  - TeMPOraL 6y ago
    So with anti-price-gouging laws, we're making a bet that rich people are more constrained by the ability to use certain items than they are constrained by money. That is, if they can't buy up the supply and resell it at absurd prices, they have no reason to buy more than they truly need, so the goods remain available to more people in need, at lower price. I do like the idea of government-run emergency stockpiles, and rationed distribution of those. But then, I have a feeling that people who want price gouging to be allowed are also the people who, in times of calm, complain about government being fat, and demand the emergency stockpiles to be cut down.
IanCal 6y ago
Efficient if people broadly have the same wealth. It's not efficient for me to buy hand sanitizer I barely need at the expense of care workers who do.

erik_seaberg 6y ago

> only applies in circumstances where supply is fixed After SARS, something like COVID-19 was foreseeable to the professionals. But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency. We've optimized out spare capacity we actually needed.

naravara 6y ago
>But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency. None of the preparations for an emergency involve allowing front-line retailers to hoard resources and fleece people on them. Inventory space isn't the main issue here, and that's the only investment front-line retail has to make. This take is completely divorced from reality.
zo1 6y ago
Exactly this. It's a self-fulfilling law, and unfortunately, the plebs suffer. Only for the government "saviors" to swoop in to save the day whilst at the same time blaming "capitalism" because it failed to stockpile enough demand without any way to recoup the costs.
colejohnson66 6y ago
Companies could’ve stopped doing stock buybacks and instead invested. But that doesn’t raise the stock value. Look at the airline industry: They spent billions on stock buybacks and are now complaining of having no money.