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Price gouging is accepted normally. It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. Most emergenc

Price gouging is accepted normally. It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. E.g. an hour before a hurricane strikes, the price of water bottles and gas won't motivate new producers to enter a market, but there's a social interest to keep these prices stable. The main problem here is a prolonged "emergency with default rules" that's happening now, because the default rules are targeted at short emergenices. It's reasonable to announce an emergency now and figure out the details later; but now it's been many months and the "later" should have already arrived with specific "pandemic laws" replacing the generic emergency laws, but that's been problematic in many areas.

codys 6y ago
Yes, it could make a lot of sense to enact price control boards like those of the WW2 era to allow some level of price changes without allowing price changes to the extent that it is harmful to the national interest.
- WalterBright 6y ago
  WW2 gas rationing produced drive-by shootings. (There was quite a black market of gas that sprung up due to rationing.)
  - erik_seaberg 6y ago
    WW2 wage controls prompted employer-provided health insurance, a terrible idea we're stuck with 75 years later.
Jeremy1026 6y ago
> It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. How is a Nintendo Switch related to the COVID-19 emergency? If it counts because "people are bored" then what wouldn't fall under related to COVID-19?
- apacheCamel 6y ago
  I am not really sure how I feel about this. Yes, charging $1000 for a Nintendo Switch is insane, but who will buy it? I guess the same process goes for ticket scalpers too who resell tickets on insane markups trying to snag people desperate enough to get it. I think as long as it doesn't affect cleaning supplies and similar items then I am okay with it, despite it being extremely slimy.
  - izzydata 6y ago
    What about real-estate? Theoretically someone could buy up every property in an area and then price gouge anyone who wants to live there. They "could" just live somewhere else that is cheaper.
    - apacheCamel 6y ago
      I guess that just adds more to the "I don't know how I feel." part. If the demand is there, then they will sell. Otherwise, this person would own a bunch of empty property. But is there something already stopping that? Is there anything stopping Jeff Bezos from just buying up a small community and disallowing anybody to live there without paying a ton extra? I am very unfamiliar with real estate so this is a genuine question.
      - WalterBright 6y ago
        If I got wind that Bezos was determined to buy up every property in my neighborhood, I'd quadruple my price. Heck, 10x! Bezos would pay plenty. I'd buy my neighbor's house for 2x and jack that up 10x for the sale to desperate Bezos. This is why such attempts to corner the market fail. See Hunt Brothers.
        kd5bjo 6y ago
        Similarly, Disney bought the land in Florida for WDW quietly, using a bunch of shell companies, to avoid exactly this situation.
BurningFrog 6y ago
> Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. But it does reduce incentives to keep supplies of goods to be ready to sell them at a profit during the emergency.
- londons_explore 6y ago
  This. Keeping a warehouse full of water bottles and generators doesn't cost much more than the interest on the capital costs. Ie. A few percent per annum. If an emergency occurs more often than once every ~40 years, and you can sell for double the price, you walk away with a profit, and you seriously help a lot of people.
  - vageli 6y ago
    > Keeping a warehouse full of water bottles and generators doesn't cost much more than the interest on the capital costs. Ie. A few percent per annum. Can water in water bottles sit untreated for prolonged periods? If not, some inventory management would be required, possibly environment control costs, taxes on the property. I'm not seeing how this "doesn't cost much". Maybe if you're already in the storage business.
    - londons_explore 6y ago
      First in, first out stock rotation. And combine it with an existing warehouse that handles water bottles so the handling costs are already paid for by whichever other company is using the warehouse.
skybrian 6y ago
Higher prices during emergencies would make it more profitable to anticipate them and keep inventory around in case of emergency. It costs money to store extra stuff and that cost needs to be paid for somehow or preparedness probably won't happen. There may be other ways though. In cities where people have limited storage space, maybe consumers who want to be prepared would pay a subscription fee for the option to buy a disaster kit on short notice?
- TeMPOraL 6y ago
  Yeah, I was thinking this may be a good business post-COVID. Let people compose their "survival kits" and subscribe to them; kind of like insurance, but instead of a payout, you'd get guaranteed delivery of the items you listed (or equivalents). Subscription fees would pay for storage, and some of the costs could be recouped by selling off items nearing expiry.
WalterBright 6y ago
What gouging does in an emergency is allocate the needed supplies to where they are needed the most. If people in the zone have extra supplies, they'll sell them rather than hoard. > the price of water bottles and gas won't motivate new producers to enter a market It absolutely does. Before the anti-gouging laws, when there was a hurricane, people outside the zone would fill up all their gas cans, get supplies, etc., then drive into the zone and sell them for high prices. After the laws were enacted, that put a stop to that - no gas until FEMA got around to showing up a few days later. Anti-gouging laws produce shortages, hoarding, mis-allocation, and crime (black markets, theft, etc.).
- squarefoot 6y ago
  > What gouging does in an emergency is allocate the needed supplies to where they are needed the most. If people in the zone have extra supplies, they'll sell them rather than hoard. So why during the last 2.5 months I couldn't buy a plain bottle of ethyl alcohol at less than 5-10 times its retail price before the pandemic? Of course I didn't bow to the gougers; kept my only bottle (still have 1/2 of it so far) and plan to make it last until the emergency is over. I'd rather disinfect my guts with a bottle of whisky that would cost me less. Screw those bastards, sodium hypochlorite works damn well and is cheap and easy to dilute.
  - ggreer 6y ago
    It sounds like the price mechanism had the intended effect. It encouraged more efficient use of the scarce resource and a search for substitutes.
    - 8note 6y ago
      Is it more efficient to limit the usage to richer people? Or to the people that need it the most? It sounds like you think these two groups are the same? What goes into that thinking?
      - ggreer 6y ago
Pyxl101 6y ago
> E.g. an hour before a hurricane strikes, the price of water bottles and gas won't motivate new producers to enter a market, Yes, it will. It will motivate suppliers to find existing supplies of water and transport them to the affected area. If prices remain the same, then there's no incentive for additional sellers to do this. If prices float upwards, then a ton of sellers will enter the market and attempt to sell the products.
zo1 6y ago
> "Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt." I disagree here. If price-gauging was allowed, then there would definitely be an incentive to "prepare" for the inevitable emergency that would warrant the increased prices. At that point, the "increase" in price represents the effort of stockpiling, taking increased risk of product going spoiled in case emergency doesn't happen, storage costs, research into what is needed for which emergency, prepping for different emergencies, etc. The higher you allow the price to go, the more availability you can guarantee when the emergency does happen. The problem is that we see price-gauging as a fairness issue rather than an insurance problem. Yes, people would make a profit out of the exercise, but they do that as well from normal business functioning. I don't see price-gauging on a morally different level than "why don't we provide affordable (or free) food to everyone". I'd vote for that policy right now in a heartbeat even as a libertarian. One free-food distribution center for every square kilometer in every city sounds good. What, you want people to die of starvation? Even the term is loaded: "gauging" as if we're poking a suffering person's eyes out. Are we really that easily manipulated into falling for emotional language? On a side note, if we were to allow "dynamic-pricing" during emergencies then one could conceivably come up with insurance products/packages that would allow individuals to very affordably manage the unlucky probability of the emergency.
GuB-42 6y ago
> Price gouging is accepted normally. It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. The article talks about fancy dumbbells, inflatable spa, and bread maker. None of them essential items in my book. You can exercise without fancy dumbbells, you can live without a spa, and you can make bread in a regular oven. If it was about masks, hand sanitizers and other essential items, I would understand. But comfort items? Just pay or find comfort elsewhere. Despite the pandemic, there is no shortage of interesting and healthy things to do.
anm89 6y ago
How are dumbbells a specific part of this emergency?
- anfilt 6y ago
  I guess people don't realize calisthenics is a thing... However, I think it's mainly that pretty much most gyms are closed in affected areas.
  - anm89 6y ago
    I mean, by that logic, everything that exists outside of houses (everything) is specific to this event.
opo 6y ago
>...Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. That is simply wrong. Before all these price gouging laws, in natural disasters there used to be marginal producers (people with a pickup truck etc.) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is a bargain if that way you can keep your insulin chilled: https://www.econlib.org/library/Columns/y2007/Mungergouging.html https://www.econlib.org/library/Columns/y2007/Mungergouging.... In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). (Or will incentivize spending money to be more flexible in production in case demand increases for a short time.) If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than spending money on more immediate things that are more likely to get votes. (We've now seen that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.) For these reasons, a majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/ http://www.igmchicago.org/surveys/price-gouging/
- 8note 6y ago
  It's a bargain for someone who can normally afford to be paying more to store their insulin, sure, but for someone who's barely affording it normally, there's no difference between having it and not. It's a pretty racist approach really, since those people who aren't going to be able to afford the bump are likely to be black. The same forces that push the government to not work on its stock pile affects companies just as much. You could be selling those things NOW for the current price rather than spending money to store them to maybe sell them at a higher price and maybe have to throw them out. When the emergency happens very infrequently like this one, private companies' stockpiles wont do any better than the government's did. The government has better means to think long term though since they don't need to continuously make larger short term profits
9nGQluzmnq3M 6y ago
But why is Amazon even attempting to impose price controls on "essentials" like barbells, hot tubs and game consoles?

codys 6y ago

Yes, it could make a lot of sense to enact price control boards like those of the WW2 era to allow some level of price changes without allowing price changes to the extent that it is harmful to the national interest.

WalterBright 6y ago
WW2 gas rationing produced drive-by shootings. (There was quite a black market of gas that sprung up due to rationing.)
- erik_seaberg 6y ago
  WW2 wage controls prompted employer-provided health insurance, a terrible idea we're stuck with 75 years later.

Jeremy1026 6y ago

> It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. How is a Nintendo Switch related to the COVID-19 emergency? If it counts because "people are bored" then what wouldn't fall under related to COVID-19?

apacheCamel 6y ago
I am not really sure how I feel about this. Yes, charging $1000 for a Nintendo Switch is insane, but who will buy it? I guess the same process goes for ticket scalpers too who resell tickets on insane markups trying to snag people desperate enough to get it. I think as long as it doesn't affect cleaning supplies and similar items then I am okay with it, despite it being extremely slimy.
- izzydata 6y ago
  What about real-estate? Theoretically someone could buy up every property in an area and then price gouge anyone who wants to live there. They "could" just live somewhere else that is cheaper.
  - apacheCamel 6y ago
    I guess that just adds more to the "I don't know how I feel." part. If the demand is there, then they will sell. Otherwise, this person would own a bunch of empty property. But is there something already stopping that? Is there anything stopping Jeff Bezos from just buying up a small community and disallowing anybody to live there without paying a ton extra? I am very unfamiliar with real estate so this is a genuine question.
    - WalterBright 6y ago
      If I got wind that Bezos was determined to buy up every property in my neighborhood, I'd quadruple my price. Heck, 10x! Bezos would pay plenty. I'd buy my neighbor's house for 2x and jack that up 10x for the sale to desperate Bezos. This is why such attempts to corner the market fail. See Hunt Brothers.
      - kd5bjo 6y ago
        Similarly, Disney bought the land in Florida for WDW quietly, using a bunch of shell companies, to avoid exactly this situation.

BurningFrog 6y ago

> Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. But it does reduce incentives to keep supplies of goods to be ready to sell them at a profit during the emergency.

londons_explore 6y ago
This. Keeping a warehouse full of water bottles and generators doesn't cost much more than the interest on the capital costs. Ie. A few percent per annum. If an emergency occurs more often than once every ~40 years, and you can sell for double the price, you walk away with a profit, and you seriously help a lot of people.
- vageli 6y ago
  > Keeping a warehouse full of water bottles and generators doesn't cost much more than the interest on the capital costs. Ie. A few percent per annum. Can water in water bottles sit untreated for prolonged periods? If not, some inventory management would be required, possibly environment control costs, taxes on the property. I'm not seeing how this "doesn't cost much". Maybe if you're already in the storage business.
  - londons_explore 6y ago
    First in, first out stock rotation. And combine it with an existing warehouse that handles water bottles so the handling costs are already paid for by whichever other company is using the warehouse.

skybrian 6y ago

Higher prices during emergencies would make it more profitable to anticipate them and keep inventory around in case of emergency. It costs money to store extra stuff and that cost needs to be paid for somehow or preparedness probably won't happen. There may be other ways though. In cities where people have limited storage space, maybe consumers who want to be prepared would pay a subscription fee for the option to buy a disaster kit on short notice?

TeMPOraL 6y ago
Yeah, I was thinking this may be a good business post-COVID. Let people compose their "survival kits" and subscribe to them; kind of like insurance, but instead of a payout, you'd get guaranteed delivery of the items you listed (or equivalents). Subscription fees would pay for storage, and some of the costs could be recouped by selling off items nearing expiry.

WalterBright 6y ago

What gouging does in an emergency is allocate the needed supplies to where they are needed the most. If people in the zone have extra supplies, they'll sell them rather than hoard. > the price of water bottles and gas won't motivate new producers to enter a market It absolutely does. Before the anti-gouging laws, when there was a hurricane, people outside the zone would fill up all their gas cans, get supplies, etc., then drive into the zone and sell them for high prices. After the laws were enacted, that put a stop to that - no gas until FEMA got around to showing up a few days later. Anti-gouging laws produce shortages, hoarding, mis-allocation, and crime (black markets, theft, etc.).

squarefoot 6y ago
> What gouging does in an emergency is allocate the needed supplies to where they are needed the most. If people in the zone have extra supplies, they'll sell them rather than hoard. So why during the last 2.5 months I couldn't buy a plain bottle of ethyl alcohol at less than 5-10 times its retail price before the pandemic? Of course I didn't bow to the gougers; kept my only bottle (still have 1/2 of it so far) and plan to make it last until the emergency is over. I'd rather disinfect my guts with a bottle of whisky that would cost me less. Screw those bastards, sodium hypochlorite works damn well and is cheap and easy to dilute.
- ggreer 6y ago
  It sounds like the price mechanism had the intended effect. It encouraged more efficient use of the scarce resource and a search for substitutes.
  - 8note 6y ago
    Is it more efficient to limit the usage to richer people? Or to the people that need it the most? It sounds like you think these two groups are the same? What goes into that thinking?
    - ggreer 6y ago

Pyxl101 6y ago

> E.g. an hour before a hurricane strikes, the price of water bottles and gas won't motivate new producers to enter a market, Yes, it will. It will motivate suppliers to find existing supplies of water and transport them to the affected area. If prices remain the same, then there's no incentive for additional sellers to do this. If prices float upwards, then a ton of sellers will enter the market and attempt to sell the products.

zo1 6y ago

> "Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt." I disagree here. If price-gauging was allowed, then there would definitely be an incentive to "prepare" for the inevitable emergency that would warrant the increased prices. At that point, the "increase" in price represents the effort of stockpiling, taking increased risk of product going spoiled in case emergency doesn't happen, storage costs, research into what is needed for which emergency, prepping for different emergencies, etc. The higher you allow the price to go, the more availability you can guarantee when the emergency does happen. The problem is that we see price-gauging as a fairness issue rather than an insurance problem. Yes, people would make a profit out of the exercise, but they do that as well from normal business functioning. I don't see price-gauging on a morally different level than "why don't we provide affordable (or free) food to everyone". I'd vote for that policy right now in a heartbeat even as a libertarian. One free-food distribution center for every square kilometer in every city sounds good. What, you want people to die of starvation? Even the term is loaded: "gauging" as if we're poking a suffering person's eyes out. Are we really that easily manipulated into falling for emotional language? On a side note, if we were to allow "dynamic-pricing" during emergencies then one could conceivably come up with insurance products/packages that would allow individuals to very affordably manage the unlucky probability of the emergency.

GuB-42 6y ago

> Price gouging is accepted normally. It's just temporarily prohibited for the duration of an emergency for the products related to that emergency. The article talks about fancy dumbbells, inflatable spa, and bread maker. None of them essential items in my book. You can exercise without fancy dumbbells, you can live without a spa, and you can make bread in a regular oven. If it was about masks, hand sanitizers and other essential items, I would understand. But comfort items? Just pay or find comfort elsewhere. Despite the pandemic, there is no shortage of interesting and healthy things to do.

anm89 6y ago

How are dumbbells a specific part of this emergency?

anfilt 6y ago
I guess people don't realize calisthenics is a thing... However, I think it's mainly that pretty much most gyms are closed in affected areas.
- anm89 6y ago
  I mean, by that logic, everything that exists outside of houses (everything) is specific to this event.

opo 6y ago

>...Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. That is simply wrong. Before all these price gouging laws, in natural disasters there used to be marginal producers (people with a pickup truck etc.) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is a bargain if that way you can keep your insulin chilled: https://www.econlib.org/library/Columns/y2007/Mungergouging.html https://www.econlib.org/library/Columns/y2007/Mungergouging.... In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). (Or will incentivize spending money to be more flexible in production in case demand increases for a short time.) If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than spending money on more immediate things that are more likely to get votes. (We've now seen that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.) For these reasons, a majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/ http://www.igmchicago.org/surveys/price-gouging/

8note 6y ago
It's a bargain for someone who can normally afford to be paying more to store their insulin, sure, but for someone who's barely affording it normally, there's no difference between having it and not. It's a pretty racist approach really, since those people who aren't going to be able to afford the bump are likely to be black. The same forces that push the government to not work on its stock pile affects companies just as much. You could be selling those things NOW for the current price rather than spending money to store them to maybe sell them at a higher price and maybe have to throw them out. When the emergency happens very infrequently like this one, private companies' stockpiles wont do any better than the government's did. The government has better means to think long term though since they don't need to continuously make larger short term profits

9nGQluzmnq3M 6y ago

But why is Amazon even attempting to impose price controls on "essentials" like barbells, hot tubs and game consoles?