6 ms·

> Price fixing, rent control, anti-gouging laws, etc, all fail for the same reason, but that never discourages the next cohort that imagines they can defy econo

> Price fixing, rent control, anti-gouging laws, etc, all fail for the same reason, but that never discourages the next cohort that imagines they can defy economics. According to Google ~39 US States have anti price gouging laws, how have those failed?

WalterBright 5y ago
They fail because they result in shortages, hoarding, and a black market.
- monocasa 5y ago
  Anti gouging laws only kick in when there's a shortage to begin with, and they normally coincide with rationing, so I'm not sure shortages and hoardng are fair to ascribe to the policy. WRT the black market, when your other option is to just keep the regular market unregulated, the inevitable trades happening in the formal economy versus the informal one doesn't make much of a difference, except for doing your best to make sure everyone at least gets access to some of the critical resource in the anti-gouging case.
  - WalterBright 5y ago
    There is not a shortage in a free market. Prices rise until supply meets demand.
    - monocasa 5y ago
      Only in perfectly spherical, frictionless free markets that aren't applicable to reality. Practically changes happen quicker than a supply chain can adjust, and that can leave people without critical supplies.
      - WalterBright 5y ago
        Some businesses do not raise prices, preferring empty shelves to the bad goodwill and accusations of profiteering. Nevertheless, goods and services are always available if the price is allowed to float. Anti-gouging laws always leave people without critical supplies. Remember the Great Toilet Paper Shortage a couple years ago?
        monocasa 5y ago
        Once again, that's ignoring rationing happening at the same time. Yes APG laws without rationing encourage hoarding, but that's not the scheme generally being discussed. Additionally, jurisdictions without APG laws also empirically faced widespread shortages during the pandemic, that's not a unique feature of APG laws.
    - lpapez 5y ago
      This is a really weird and frankly naive take IMO, especially after what we witnessed during the pandemic. The demand for some goods is not affected by their price, and such goods have a name that you can hear in any Economics 101 class - "inelastic goods".
      - WalterBright 5y ago
        I hear all the time that prices for certain goods are inelastic - particularly for gas and housing and medical care. But events always show it most definitely is elastic.
    - BitwiseFool 5y ago
      But has a free market actually existed? I sense "the free market" is a platonic ideal that has not, and cannot, be realized in the real world.
      - WalterBright 5y ago
        A free market doesn't have to be perfect to work well. Just like friction doesn't have to be zero in order for a lubricant to work. Socialism, however, works worse and worse the closer things get to ideal socialism.
    - beerandt 5y ago
      Yea, like for hurricanes, there used to be local independent gas stations that "price-gouged", but you could at least go get 5 gallons for 5x the normal price if you really needed it. With price-gouging laws, it means they run out just like everyone else, and then there's no supply available for anyone, regardless of how bad the need.[0] But it also makes the problem much worse, because when price is fixed, the sole determining factor of who gets it becomes who can get there first. [0]Or they hoard it themselves and only sell it to friends and family, or as a favor, or in a quasi black market in exchange for other price controlled items. Eg, negotiating how much they'll sell you at the capped price. "I'll sell you $500 of price-capped gas if you sell me a $500 price-capped generator."
      - monocasa 5y ago
        > But it also makes the problem much worse, because when price is fixed, the sole determining factor of who gets it becomes who can get there first. Unless a rationing scheme was simultaneously instituted.
        WalterBright 5y ago
        The trouble with rationing is it assumes everyone has an equal need for rationed goods. Of course, this is absurd, and the result is gross mis-allocation. WW2 gas rationing is an illustrative example, as people either had more gas than they could use, and so wasted it, or were desperately short of what they needed. Inevitably, criminal gangs arose to redistribute the rationed gas, complete with drive-by shootings.
        monocasa 5y ago
        You don't think criminal gangs would arise to resell non rationed or APG items, or that violence based arbitration of access doesn't occur? Criminal gangs operate orthogonally to the law chasing profit margin. They have no qualms working in ostensibly legal markets and imposing a near monopoly through violence on it. For one example of many, see the cartels' involvement in the avocado trade.
        5y ago
    - throw0101a 5y ago
      > There is not a shortage in a free market. Prices rise until supply meets demand. So if people want to buy a Mona Lisa all they have to do is wait until the price is high enough and Leonardo da Vinci will paint another?
  - mixedCase 5y ago
    > doing your best to make sure everyone at least gets access No, you don't. You're usually just limiting the supply even further by discouraging sales, and at the absolute best, shuffling around the people who get to buy the item. You can't help scarcity at all by fixing prices.
    - monocasa 5y ago
      The supplies that just flew off the shelves and were sold at a fair price are more than incentivized for being restocked or even served by pop up wholesale resellers. It's not like the anti-gouging laws lock in a price under profitablity; the stores wouldn't have the items even before the anti-gouging kicks in if that were the case.
      - nickpp 5y ago
        You are ignoring the motivational power of 10x increase in profit, for a vendor. Also the de-motivational power of a 10x increase in price, for a hoarder. In fact, a high enough price may even turn a hoarder into a vendor.
    - jollybean 5y ago
      "You can't help scarcity at all by fixing prices." Yes, you definitely can. The price which incurs maximum profits for producers has little to do with consumer surplus or the maximization thereof. Price fixing alters the distribution of surpluses one way or the other, because we don't measure consumer surplus directly, we often think of 'reduced profits' to the producer, but fail to regard the increased surpluses to consumers. The term 'scarcity' is a bit of canard, because very, very few things are actually truly 'scarce' like Gold, most things depend on labour inputs, materials, and especially opportunity cost. Vaccines are an example. Phizer could probably make a lot more profit by charging $150-500/vaccine in the USA, which might leave 65% of Americans in the lurch. But the surpluses to citizens arrived at through a 'not really market price' negotiated between the US Gov, and Phizer, are much more vast. Especially the moment you consider longer term effects (i.e. limited deployment of vaccine hurts the economy badly and thus other lines of revenue) you see the systematic effects.
  - opo 5y ago
    >...so I'm not sure shortages and hoardng are fair to ascribe to the policy. 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 an incredible 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 goods 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 the potential for high profits 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 - when the pandemic started we saw that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated. While politicians like 'price gouging' laws since everyone can see a higher price (but can't see the missing products that won't be available), 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/
    - monocasa 5y ago
      First off, it's not clear that pop up, cross market arbitrage resellers are statistically relevant to these markets, or that they're something that should be optimized for. Secondly, it's not clear that these resellers given up as examples are truly performing arbitrage, like is generally assumed in thought experiments by opponents of APG laws. These thought experiments also generally assume that the subsequent lack of additional incentive is enough to reduce supply. Let's take the example you gave of the ice sellers (and was given in your econlib citation). This example cites owners of a refrigeration truck with either direct access to the equipment that produces ice (a remarkably time and capital intensive venture), or business connections capable of obtaining large quantities of ice during a shortage. Either those hold true and for some reason these people who have invested heavily in ice distribution are for some reason deciding to stay home on a day of the highest demand because they can't increase the going rate more than 5%, or (more likely in my mind) they aren't actually increasing supply to the market in question, but instead bought locally before the the normal sellers thought to increase their prices (or the normal sellers had ethical issues with greatly increasing their prices in a a time of need). Additionally, these examples all leave out the key to the idea, simultaneous rationing, which means that the supply isn't reduced by hoarding (at any price to the hoarder) by directly reducing the amount they can get. So in your example, there isn't an issue getting ice for your insulin because of rationing _and_ you didn't have to pay a premium for it. Finally, as an aside, your first citation is from a far right think tank dedicated to the removal of government influence on all aspects of life, and the second is a polling of economists connected to a specifc branch of economics known to be rife with groupthink. It's unsurprising the conclusion they come to.
- wnevets 5y ago
  > They fail because they result in shortages, hoarding, and a black market. When has that happened? Can you provide an example?
deleted 5y ago
[deleted]

WalterBright 5y ago

They fail because they result in shortages, hoarding, and a black market.

monocasa 5y ago
Anti gouging laws only kick in when there's a shortage to begin with, and they normally coincide with rationing, so I'm not sure shortages and hoardng are fair to ascribe to the policy. WRT the black market, when your other option is to just keep the regular market unregulated, the inevitable trades happening in the formal economy versus the informal one doesn't make much of a difference, except for doing your best to make sure everyone at least gets access to some of the critical resource in the anti-gouging case.
- WalterBright 5y ago
  There is not a shortage in a free market. Prices rise until supply meets demand.
  - monocasa 5y ago
    Only in perfectly spherical, frictionless free markets that aren't applicable to reality. Practically changes happen quicker than a supply chain can adjust, and that can leave people without critical supplies.
    - WalterBright 5y ago
      Some businesses do not raise prices, preferring empty shelves to the bad goodwill and accusations of profiteering. Nevertheless, goods and services are always available if the price is allowed to float. Anti-gouging laws always leave people without critical supplies. Remember the Great Toilet Paper Shortage a couple years ago?
      - monocasa 5y ago
        Once again, that's ignoring rationing happening at the same time. Yes APG laws without rationing encourage hoarding, but that's not the scheme generally being discussed. Additionally, jurisdictions without APG laws also empirically faced widespread shortages during the pandemic, that's not a unique feature of APG laws.
  - lpapez 5y ago
    This is a really weird and frankly naive take IMO, especially after what we witnessed during the pandemic. The demand for some goods is not affected by their price, and such goods have a name that you can hear in any Economics 101 class - "inelastic goods".
    - WalterBright 5y ago
      I hear all the time that prices for certain goods are inelastic - particularly for gas and housing and medical care. But events always show it most definitely is elastic.
  - BitwiseFool 5y ago
    But has a free market actually existed? I sense "the free market" is a platonic ideal that has not, and cannot, be realized in the real world.
    - WalterBright 5y ago
      A free market doesn't have to be perfect to work well. Just like friction doesn't have to be zero in order for a lubricant to work. Socialism, however, works worse and worse the closer things get to ideal socialism.
  - beerandt 5y ago
    Yea, like for hurricanes, there used to be local independent gas stations that "price-gouged", but you could at least go get 5 gallons for 5x the normal price if you really needed it. With price-gouging laws, it means they run out just like everyone else, and then there's no supply available for anyone, regardless of how bad the need.[0] But it also makes the problem much worse, because when price is fixed, the sole determining factor of who gets it becomes who can get there first. [0]Or they hoard it themselves and only sell it to friends and family, or as a favor, or in a quasi black market in exchange for other price controlled items. Eg, negotiating how much they'll sell you at the capped price. "I'll sell you $500 of price-capped gas if you sell me a $500 price-capped generator."
    - monocasa 5y ago
      > But it also makes the problem much worse, because when price is fixed, the sole determining factor of who gets it becomes who can get there first. Unless a rationing scheme was simultaneously instituted.
      - WalterBright 5y ago
        The trouble with rationing is it assumes everyone has an equal need for rationed goods. Of course, this is absurd, and the result is gross mis-allocation. WW2 gas rationing is an illustrative example, as people either had more gas than they could use, and so wasted it, or were desperately short of what they needed. Inevitably, criminal gangs arose to redistribute the rationed gas, complete with drive-by shootings.
        monocasa 5y ago
        You don't think criminal gangs would arise to resell non rationed or APG items, or that violence based arbitration of access doesn't occur? Criminal gangs operate orthogonally to the law chasing profit margin. They have no qualms working in ostensibly legal markets and imposing a near monopoly through violence on it. For one example of many, see the cartels' involvement in the avocado trade.
        5y ago
  - throw0101a 5y ago
    > There is not a shortage in a free market. Prices rise until supply meets demand. So if people want to buy a Mona Lisa all they have to do is wait until the price is high enough and Leonardo da Vinci will paint another?
- mixedCase 5y ago
  > doing your best to make sure everyone at least gets access No, you don't. You're usually just limiting the supply even further by discouraging sales, and at the absolute best, shuffling around the people who get to buy the item. You can't help scarcity at all by fixing prices.
  - monocasa 5y ago
    The supplies that just flew off the shelves and were sold at a fair price are more than incentivized for being restocked or even served by pop up wholesale resellers. It's not like the anti-gouging laws lock in a price under profitablity; the stores wouldn't have the items even before the anti-gouging kicks in if that were the case.
    - nickpp 5y ago
      You are ignoring the motivational power of 10x increase in profit, for a vendor. Also the de-motivational power of a 10x increase in price, for a hoarder. In fact, a high enough price may even turn a hoarder into a vendor.
  - jollybean 5y ago
    "You can't help scarcity at all by fixing prices." Yes, you definitely can. The price which incurs maximum profits for producers has little to do with consumer surplus or the maximization thereof. Price fixing alters the distribution of surpluses one way or the other, because we don't measure consumer surplus directly, we often think of 'reduced profits' to the producer, but fail to regard the increased surpluses to consumers. The term 'scarcity' is a bit of canard, because very, very few things are actually truly 'scarce' like Gold, most things depend on labour inputs, materials, and especially opportunity cost. Vaccines are an example. Phizer could probably make a lot more profit by charging $150-500/vaccine in the USA, which might leave 65% of Americans in the lurch. But the surpluses to citizens arrived at through a 'not really market price' negotiated between the US Gov, and Phizer, are much more vast. Especially the moment you consider longer term effects (i.e. limited deployment of vaccine hurts the economy badly and thus other lines of revenue) you see the systematic effects.
- opo 5y ago
  >...so I'm not sure shortages and hoardng are fair to ascribe to the policy. 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 an incredible 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 goods 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 the potential for high profits 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 - when the pandemic started we saw that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated. While politicians like 'price gouging' laws since everyone can see a higher price (but can't see the missing products that won't be available), 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/
  - monocasa 5y ago
    First off, it's not clear that pop up, cross market arbitrage resellers are statistically relevant to these markets, or that they're something that should be optimized for. Secondly, it's not clear that these resellers given up as examples are truly performing arbitrage, like is generally assumed in thought experiments by opponents of APG laws. These thought experiments also generally assume that the subsequent lack of additional incentive is enough to reduce supply. Let's take the example you gave of the ice sellers (and was given in your econlib citation). This example cites owners of a refrigeration truck with either direct access to the equipment that produces ice (a remarkably time and capital intensive venture), or business connections capable of obtaining large quantities of ice during a shortage. Either those hold true and for some reason these people who have invested heavily in ice distribution are for some reason deciding to stay home on a day of the highest demand because they can't increase the going rate more than 5%, or (more likely in my mind) they aren't actually increasing supply to the market in question, but instead bought locally before the the normal sellers thought to increase their prices (or the normal sellers had ethical issues with greatly increasing their prices in a a time of need). Additionally, these examples all leave out the key to the idea, simultaneous rationing, which means that the supply isn't reduced by hoarding (at any price to the hoarder) by directly reducing the amount they can get. So in your example, there isn't an issue getting ice for your insulin because of rationing _and_ you didn't have to pay a premium for it. Finally, as an aside, your first citation is from a far right think tank dedicated to the removal of government influence on all aspects of life, and the second is a polling of economists connected to a specifc branch of economics known to be rife with groupthink. It's unsurprising the conclusion they come to.
wnevets 5y ago
> They fail because they result in shortages, hoarding, and a black market. When has that happened? Can you provide an example?

deleted 5y ago

[deleted]