3 ms·

And yet, food prices, despite not being set by law, are not infinitely high. Nor indeed are they terribly high. Perhaps there's something you're missing here.

pessimizer 12y ago
Or knowing that you haven't introduced any information that you could have possibly expected this person not to know, maybe you're missing something here. When starving people participate in auctions with people who are not starving, even when both sides have equal wealth, the results may accord better with superuser2's prediction than yours.
- aetherson 12y ago
  Really? So, let's say there's a sandwich. You aren't particularly hungry. I'm starving. We both have net assets of say, $125,000. What exactly are you predicting? That you, not starving, will bid the price of the sandwich up to infinite levels because it's worth $125,000 to you to make me starve?
makomk 12y ago
For most people in Western countries, most of the time, the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government). If there's not enough food being grown or retailers are charging too much, new farmers and new retailers eventually drive the price down through competition. This works because demand for food is predictable, fungible, and relatively constant. Now imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food. Retailers can basically inflate prices to whatever they like and people will pay, because they desperately need that water and food and it's not like a new retailer is going to set up shop and dramatically undercut them before the disaster hits. There are certain business practices that cannot be solved by the market, and price gouging during disasters is one of them.
- viscanti 12y ago
  You need food and water to survive. Transportation is probably not in that same category.
- pdonis 12y ago
  > the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government) The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall. > imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food How long will the natural disaster last? How much can people economize on food and water during that time by simply eating less? How much can people economize by eating cheaper foods that provide nutrition but might not taste as good as what they normally eat? And so on. Retailers can't inflate prices as much as they want because sane people will be asking themselves all the above questions, and will simply refuse to buy food and water at a price point that isn't worth it to them, all things considered. People need food, but the need is not infinite.
  - cpwright 12y ago
    > The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall. This is so true. In the aftermath of Hurricane Sandy there were plenty of gasoline shortages around NY; but the price did not significantly go up. If the stations were able to charge $9 or $10 a gallon, and the government didn't interfere, you can bet that companies/drivers would have been more than willing to import gasoline from other states. Why sell it in Ohio for $4, when you can sell it in NY for $10. Within a day or two, rather than the close to a week it took for normalcy to be restored; there would have been plentiful gasoline if you wanted it enough to pay. Instead we had stupidity like even and odd days in some counties, and long lines when a station happened to have gas.
superuser2 12y ago
Competition. We have government roads that are not flooded down which anyone can drive a truck full of produce/whatever to compete with the incumbents. Competition is less likely to exist when the infrastructure is decimated. Until transportation gets rebuilt, the local stores that have water are the only games in town. Price gouging is by definition when merchants set prices for basic survival goods higher than they would be in a normally functioning competitive market.
- pdonis 12y ago
  A normally functioning competitive market responds to changes in external conditions that cause changes in the relative scarcity of goods and services. Such changes should cause changes in prices, because the prices are signals that tell consumers about the relative scarcity of goods. If the price of bottled water goes up during a natural disaster, that's telling you, the consumer, that water is scarce and you should economize.

pessimizer 12y ago

Or knowing that you haven't introduced any information that you could have possibly expected this person not to know, maybe you're missing something here. When starving people participate in auctions with people who are not starving, even when both sides have equal wealth, the results may accord better with superuser2's prediction than yours.

aetherson 12y ago
Really? So, let's say there's a sandwich. You aren't particularly hungry. I'm starving. We both have net assets of say, $125,000. What exactly are you predicting? That you, not starving, will bid the price of the sandwich up to infinite levels because it's worth $125,000 to you to make me starve?

makomk 12y ago

For most people in Western countries, most of the time, the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government). If there's not enough food being grown or retailers are charging too much, new farmers and new retailers eventually drive the price down through competition. This works because demand for food is predictable, fungible, and relatively constant. Now imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food. Retailers can basically inflate prices to whatever they like and people will pay, because they desperately need that water and food and it's not like a new retailer is going to set up shop and dramatically undercut them before the disaster hits. There are certain business practices that cannot be solved by the market, and price gouging during disasters is one of them.

viscanti 12y ago
You need food and water to survive. Transportation is probably not in that same category.
pdonis 12y ago
> the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government) The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall. > imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food How long will the natural disaster last? How much can people economize on food and water during that time by simply eating less? How much can people economize by eating cheaper foods that provide nutrition but might not taste as good as what they normally eat? And so on. Retailers can't inflate prices as much as they want because sane people will be asking themselves all the above questions, and will simply refuse to buy food and water at a price point that isn't worth it to them, all things considered. People need food, but the need is not infinite.
- cpwright 12y ago
  > The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall. This is so true. In the aftermath of Hurricane Sandy there were plenty of gasoline shortages around NY; but the price did not significantly go up. If the stations were able to charge $9 or $10 a gallon, and the government didn't interfere, you can bet that companies/drivers would have been more than willing to import gasoline from other states. Why sell it in Ohio for $4, when you can sell it in NY for $10. Within a day or two, rather than the close to a week it took for normalcy to be restored; there would have been plentiful gasoline if you wanted it enough to pay. Instead we had stupidity like even and odd days in some counties, and long lines when a station happened to have gas.

superuser2 12y ago

Competition. We have government roads that are not flooded down which anyone can drive a truck full of produce/whatever to compete with the incumbents. Competition is less likely to exist when the infrastructure is decimated. Until transportation gets rebuilt, the local stores that have water are the only games in town. Price gouging is by definition when merchants set prices for basic survival goods higher than they would be in a normally functioning competitive market.

pdonis 12y ago
A normally functioning competitive market responds to changes in external conditions that cause changes in the relative scarcity of goods and services. Such changes should cause changes in prices, because the prices are signals that tell consumers about the relative scarcity of goods. If the price of bottled water goes up during a natural disaster, that's telling you, the consumer, that water is scarce and you should economize.