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What you describe is the definition of price gouging. A global disaster occurred which caused supply shocks, demand shocks, or both in various industries which

by slg 4y ago

What you describe is the definition of price gouging. A global disaster occurred which caused supply shocks, demand shocks, or both in various industries which led to companies increasing their prices as a response. Society only has so much tolerance for selling to the highest bidder, especially when a product is more of a necessity than a luxury. People still have a fair price in their mind and it is viewed as unethical to charge more than that even if some people are still willing to pay that price.

sokoloff 4y ago
People who have a notion of the price last month as being the "fair price" are welcome to not buy the limited supply of sawmill output until the price recovers to something that they find fair. If there is only capacity to produce Y 2x4x8s, while there's demand for 1.3xY, how do you propose to allocate them? Pricing serves to tend to allocate them to the place where they will create the most value. This is not water in a several-week-long shortage after a hurricane. These are building supplies for several-quarters-long chronic shortages. Delaying having drinkable water is not feasible. Delaying building is.
- slg 4y ago
  > Pricing serves to tend to allocate them to the place where they will create the most value. No, price just puts a floor on the value creation required. It doesn’t actually enforce the efficient use of scarce resources. Beyond that floor, higher prices tends to allocate goods to the people with the most money.
- throw_a_grenade 4y ago
  > Pricing serves to tend to allocate them to the place where they will create the most value. Yeah, because my house is more valuable than yours, as exemplified by the fact that it costs more money to buy lumber for it, so it can create more value. Clearly I'm a more valuable human than you (because I've got more money), and I deserve better and more valuable house.
hcurtiss 4y ago
There was no supply shock. In the last three years, there was more lumber produced than ever. It was a demand shock driven by federal stimulus. And, again, what were we supposed to do? Tell the highest bidder we wouldn't sell to them? And then what? Lottery our lumber to lower bidders? That's ridiculous.
- slg 4y ago
  I was being general. Lumber might not have had supply shocks, but the pandemic did cause many supply shocks across industries. I wasn’t offering a solution. I was remarking on the idea of we’re just selling to the highest bidder as a universal defense for this behavior. We can recognize it when a grocery store raises the price of water after an earthquake. We should be able to recognize it elsewhere.
  - sokoloff 4y ago
    At the very least, you could have been a whole lot more clear than responding to a comment of "But for the first ~3 weeks of the pandemic, our sawmills ran flat out -- more production than ever. Notwithstanding that fact, we saw unprecedented pricing -- because demand was radically outpacing supply." with "What you describe is the definition of price gouging."
    - slg 4y ago
      I'm not clear on what you think wasn't clear in my original comment. Are you suggesting that increased production can't happen in situations of price gauging? My intent was to link the logic OP described with the logic behind price gouging. I didn't think it was expecting too much of the reader to have a negative view of price gouging and therefore view my comment as a criticism of OP's explanation.
      - sokoloff 4y ago
        If you were intending all along to be speaking generally, replying to the description of what they experienced with lumber prices and mills operating at maximum capacity with "What you describe is the definition of price gouging" could lead many readers (including this one) to conclude that you were speaking specifically about their situation rather than generally about the topic. Even now I can't be sure whether you think the multi-quarter increase in price of building supplies in 2020 and 2021 was price gouging or not.
emeraldd 4y ago
https://en.wikipedia.org/wiki/Price_gouging https://en.wikipedia.org/wiki/Price_gouging "Laws often include exceptions for price increases that can be justified in terms of the increased cost of supply, transportation, demand, or storage." IANL Based on the above definition, it sounds like OP is not describing price gouging. Their business is not setting the price of the goods directly. The buyers are competing for a limited supply and pushing each other to bid higher amounts. That sounds like a justifiable increase. Now, if the mill saw the emergency and said "we won't take less than cost + 45% ..." or something like that, it would likely fall into price gouging territory.

by slg 4y ago

sokoloff 4y ago

People who have a notion of the price last month as being the "fair price" are welcome to not buy the limited supply of sawmill output until the price recovers to something that they find fair. If there is only capacity to produce Y 2x4x8s, while there's demand for 1.3xY, how do you propose to allocate them? Pricing serves to tend to allocate them to the place where they will create the most value. This is not water in a several-week-long shortage after a hurricane. These are building supplies for several-quarters-long chronic shortages. Delaying having drinkable water is not feasible. Delaying building is.

slg 4y ago
> Pricing serves to tend to allocate them to the place where they will create the most value. No, price just puts a floor on the value creation required. It doesn’t actually enforce the efficient use of scarce resources. Beyond that floor, higher prices tends to allocate goods to the people with the most money.
throw_a_grenade 4y ago
> Pricing serves to tend to allocate them to the place where they will create the most value. Yeah, because my house is more valuable than yours, as exemplified by the fact that it costs more money to buy lumber for it, so it can create more value. Clearly I'm a more valuable human than you (because I've got more money), and I deserve better and more valuable house.

hcurtiss 4y ago

There was no supply shock. In the last three years, there was more lumber produced than ever. It was a demand shock driven by federal stimulus. And, again, what were we supposed to do? Tell the highest bidder we wouldn't sell to them? And then what? Lottery our lumber to lower bidders? That's ridiculous.

slg 4y ago
I was being general. Lumber might not have had supply shocks, but the pandemic did cause many supply shocks across industries. I wasn’t offering a solution. I was remarking on the idea of we’re just selling to the highest bidder as a universal defense for this behavior. We can recognize it when a grocery store raises the price of water after an earthquake. We should be able to recognize it elsewhere.
- sokoloff 4y ago
  At the very least, you could have been a whole lot more clear than responding to a comment of "But for the first ~3 weeks of the pandemic, our sawmills ran flat out -- more production than ever. Notwithstanding that fact, we saw unprecedented pricing -- because demand was radically outpacing supply." with "What you describe is the definition of price gouging."
  - slg 4y ago
    I'm not clear on what you think wasn't clear in my original comment. Are you suggesting that increased production can't happen in situations of price gauging? My intent was to link the logic OP described with the logic behind price gouging. I didn't think it was expecting too much of the reader to have a negative view of price gouging and therefore view my comment as a criticism of OP's explanation.
    - sokoloff 4y ago
      If you were intending all along to be speaking generally, replying to the description of what they experienced with lumber prices and mills operating at maximum capacity with "What you describe is the definition of price gouging" could lead many readers (including this one) to conclude that you were speaking specifically about their situation rather than generally about the topic. Even now I can't be sure whether you think the multi-quarter increase in price of building supplies in 2020 and 2021 was price gouging or not.

emeraldd 4y ago

https://en.wikipedia.org/wiki/Price_gouging https://en.wikipedia.org/wiki/Price_gouging "Laws often include exceptions for price increases that can be justified in terms of the increased cost of supply, transportation, demand, or storage." IANL Based on the above definition, it sounds like OP is not describing price gouging. Their business is not setting the price of the goods directly. The buyers are competing for a limited supply and pushing each other to bid higher amounts. That sounds like a justifiable increase. Now, if the mill saw the emergency and said "we won't take less than cost + 45% ..." or something like that, it would likely fall into price gouging territory.