5 ms·

The attitude people have towards price gouging in general is very strange. I never understood it until I read this: http://www.overcomingbias.com/2009/09/the-da

The attitude people have towards price gouging in general is very strange. I never understood it until I read this: http://www.overcomingbias.com/2009/09/the-dark-side-of-cooperation.html http://www.overcomingbias.com/2009/09/the-dark-side-of-coope... >For example, in big disasters like hurricanes, certain goods like gas, wood, water, or food become especially valuable. While natural selfish reactions lead to higher prices for these key items, humans clearly evolved to see this behavior as uncooperative; we resist such price rises, and want to punish those who allow them. >Perhaps this made sense for our distant ancestors, but today it is counter-productive. If these goods are not allocated by price, they will instead be allocated by standing in lines, personal connections, etc., processes that are consistently worse at giving goods to those who value them the most, and do worse at creating incentives to prepare for such scenarios. EDIT: I'm getting a lot of replies with about the same argument so I'll just make a response here. Uber and gas are not essential for survival. You can make the argument for water, but even that isn't necessarily better distributed with fixed prices. E.g. the recent water crisis in Toledo where people cleared out the shelves in minutes buying bottles of water they didn't need. The biggest reason to allow price gouging is that it incentivizes increasing the supply. People come into the city bringing bottles of water to sell, people sell their personal supply. If price gouging was legal, people could make money storing supplies of resources to sell off during criseses. Supply and demand would eventually lower the price to what it costs to store resources for rare events. This kind of economic emergency preparedness should be encouraged as much as possible.

lukasb 12y ago
Robin's logic only works if you think the existing distribution of wealth is equitable. If you think unjust systems and behavior led to the current distribution, you would want to limit the extent to which wealth imbalance impacts the consumption of goods you consider essential.
- nhaehnle 12y ago
  Precisely. To put a finer point on it: Imagine a disaster that seriously impacts food delivery for several days, e.g. while access roads are cleared of debris/snow/whatever. You want some reasonable mechanism that distributes food to people until normal operations can continue. Given wealth distributions as they exist today - i.e., unequitable ones - using flexible prices may lead to a situation where sufficiently rich people maintain their eating habits to an extent where not enough food can be provided to the poor, who are then likely to suffer entirely unnecessary deaths. An alternate system of explicit rationing, such as has been used during major wars, works better in such situations.
- penrod 12y ago
  The horror - horror! - of rich people having more stuff than poor people is not alleviated by preventing prices from rising in times of scarcity - rich people can just pay others to stand in line for them. Equity of distribution doesn't strike me a particularly good metric for dealing with emergencies anyway since it's easily maximized by not letting anyone have anything, which is essentially what 'gouging' bans achieve.
cperciva 12y ago
CBC radio did an excellent program about price gouging a couple years ago; I highly recommend it (and also the rest of the Invisible Hand series): http://www.cbc.ca/theinvisiblehand/episodes/2012/06/27/the-great-gouge/ http://www.cbc.ca/theinvisiblehand/episodes/2012/06/27/the-g...
superuser2 12y ago
Every single human being ever in the history of time and space places infinite value on water (up to the quantity necessary to remain hydrated.) You're not allocating based on how much they're willing to spend, because anyone would be willing to spend anything to stay alive. You're allocating based on wealth. It may seem natural to the HN anarchist-libertarian crowd that someone's wealth is a prefect proxy for the extent to which he deserves to be alive and "very strange" to think otherwise. Personally, people with that attitude are about as close to "evil" as it's possible to get outside of a movie villain.
- dnautics 12y ago
  Your first sentence is inherently contradictory and betrays a fundamental misunderstanding of the concept of value (or possibly, a misunderstanding of the concept of infinite).
  - pessimizer 12y ago
    Or you're not getting that he's saying that there's a discontinuity in the utility function.
    - dnautics 12y ago
      there's no such thing as continuous utility, all value judgements are a weighted discrete graphs of relative preferences.
      - pessimizer 12y ago
        And this one goes to infinity at zero. When comparing the utility of a can of tuna to a castle made out of diamonds and staffed by trained unicorns, for a starving person the utility of the can of tuna is higher.
        dnautics 12y ago
        Clearly you are afflicted by not understanding the concept of 'infinity'.
ricardobeat 12y ago
> processes that are consistently worse at giving goods to those who value them the most I believe the willingness to stand in line for an extended period of time is a much better indicator of value then having large amounts of money.
lazylizard 12y ago
i think. there's also a difference in the supply/capacity part. transport services are usually scaled to meet average load or perhaps somewhere a little more than that..i think they're usually not scaled to meet peak load. on the other hand, disasters are like a sudden decrease in supply. perhaps news of the decrease in supply will drive people's expectations..perhaps to imagine it will become worse..but demand could be largely the same.. the expectations part is fairly interesting..it seems to say that people dont trust the government to be of help when there is a disaster. or something like that.

lukasb 12y ago

Robin's logic only works if you think the existing distribution of wealth is equitable. If you think unjust systems and behavior led to the current distribution, you would want to limit the extent to which wealth imbalance impacts the consumption of goods you consider essential.

nhaehnle 12y ago
Precisely. To put a finer point on it: Imagine a disaster that seriously impacts food delivery for several days, e.g. while access roads are cleared of debris/snow/whatever. You want some reasonable mechanism that distributes food to people until normal operations can continue. Given wealth distributions as they exist today - i.e., unequitable ones - using flexible prices may lead to a situation where sufficiently rich people maintain their eating habits to an extent where not enough food can be provided to the poor, who are then likely to suffer entirely unnecessary deaths. An alternate system of explicit rationing, such as has been used during major wars, works better in such situations.
penrod 12y ago
The horror - horror! - of rich people having more stuff than poor people is not alleviated by preventing prices from rising in times of scarcity - rich people can just pay others to stand in line for them. Equity of distribution doesn't strike me a particularly good metric for dealing with emergencies anyway since it's easily maximized by not letting anyone have anything, which is essentially what 'gouging' bans achieve.

cperciva 12y ago

CBC radio did an excellent program about price gouging a couple years ago; I highly recommend it (and also the rest of the Invisible Hand series): http://www.cbc.ca/theinvisiblehand/episodes/2012/06/27/the-great-gouge/ http://www.cbc.ca/theinvisiblehand/episodes/2012/06/27/the-g...

superuser2 12y ago

Every single human being ever in the history of time and space places infinite value on water (up to the quantity necessary to remain hydrated.) You're not allocating based on how much they're willing to spend, because anyone would be willing to spend anything to stay alive. You're allocating based on wealth. It may seem natural to the HN anarchist-libertarian crowd that someone's wealth is a prefect proxy for the extent to which he deserves to be alive and "very strange" to think otherwise. Personally, people with that attitude are about as close to "evil" as it's possible to get outside of a movie villain.

dnautics 12y ago
Your first sentence is inherently contradictory and betrays a fundamental misunderstanding of the concept of value (or possibly, a misunderstanding of the concept of infinite).
- pessimizer 12y ago
  Or you're not getting that he's saying that there's a discontinuity in the utility function.
  - dnautics 12y ago
    there's no such thing as continuous utility, all value judgements are a weighted discrete graphs of relative preferences.
    - pessimizer 12y ago
      And this one goes to infinity at zero. When comparing the utility of a can of tuna to a castle made out of diamonds and staffed by trained unicorns, for a starving person the utility of the can of tuna is higher.
      - dnautics 12y ago
        Clearly you are afflicted by not understanding the concept of 'infinity'.

ricardobeat 12y ago

> processes that are consistently worse at giving goods to those who value them the most I believe the willingness to stand in line for an extended period of time is a much better indicator of value then having large amounts of money.

lazylizard 12y ago

i think. there's also a difference in the supply/capacity part. transport services are usually scaled to meet average load or perhaps somewhere a little more than that..i think they're usually not scaled to meet peak load. on the other hand, disasters are like a sudden decrease in supply. perhaps news of the decrease in supply will drive people's expectations..perhaps to imagine it will become worse..but demand could be largely the same.. the expectations part is fairly interesting..it seems to say that people dont trust the government to be of help when there is a disaster. or something like that.