Price gouging, or capitalism?

[taliv]

Because, quite frankly, like AR vs. AK, or 9mm vs. .45 or any number of the debates that crop on this forum repeatedly, it's a dead horse that has been beaten to pulp. To say nothing of the continual rehashing of the topic on the news as spun by inflated talking heads who know about as much about basic economics as I know about calculating the relative postions of entangling electrons.

One can only put up with the same nonesensensical arguments for so long before calling them for what they are; and Chris did that more succinctly than I certainly could have.

i've only been on THR about a year, but this is the first time i've encountered this topic. sorry to bore you.

i don't mind people debating the merits of AR vs AK or 9mm vs .45. Reality is, that it's very hard to test and reach indisputable conclusions when there are so many variables (see the stopping power thread). So there are legitimate theories on both sides, and they'll remain theories. But it would be foolish to say an AR or .45acp is nonsensical.

It's the same with this topic. My argument is not only rational and supported, it's a far more widely held view. Doesn't make it "right", but it does make calling it "nonsensical" a little close minded. And I'll grant you that telling me to "grow up" is succinct, but I frankly expected better from a moderator on "the high road".

So there are flawed market externalities that are legally required, but since they're legally required, they're ok?

is that so hard to understand? take any of the examples i've offered. unless it's your contention that we should do away with patents and copyrights (plenty of people think we should, but it's not without consequences. e.g. it would lead immediately to the federal gov being the sole source for drug research), and antitrust, etc, then YES there are external influences that are required to keep our "free" market functioning.

if you think gun regulations are bad, you should try being a stock broker for a while. all the laws and regulations i have to abide by changed all sorts of things. I might think the best investment is x but be unable to offer it due to any of a hundred different reasons (some good, some stupid).

the point is the market is NOT free. and as long as it is constrained by artificial influences to the point that it breaks down, then the simplified supply/demand theories we learned in high school won't work in the real world quite like they do in the text books.

 

[taliv]

1) Seems to me there's a big difference between charging even $10/gallon for fuel and forcing someone to give up a (let's say) $100,000 home for a few gallons of water.

2) No one short of an outright psychopath would do such a thing.

1. an extreme example that is obviously "price gouging" to make a point doesn't change the fact that the far more realistic example is still gouging. we're just talking about the degree or severity now.

2. thank you. if only an outright psychopath would do such a thing, it's not that far fetched to make that thing a crime, eh?

 

[Art Eatman]

"How much are your pork chops?"

"Six dollars a pound."

"That's outrageous! That's gouging! Besides, Mr. Smith across the street is selling them for $1.79 a pound!'

"So buy from Mr. Smith."

"He doesn't have any."

"Okay. When I don't have any, they'll be $1.79 a pound."

Butcher shop conversation, 1942.

Art

 

[Justin]

1. an extreme example that is obviously "price gouging" to make a point doesn't change the fact that the far more realistic example is still gouging. we're just talking about the degree or severity now.

Which still, ultimately boils down to nothing more than your opinion that So-and-so is "charging too much." Sorry, but I've never, ever seen anyone come out with any sort rational explanation to describe when it goes from charging a "fair" price to "gouging."

2. thank you. if only an outright psychopath would do such a thing, it's not that far fetched to make that thing a crime, eh?

I highly doubt such a situation would hold up in court as the agreement is obviously being made under duress. (Give me your house or die of thirst.) Besides, in such a dire situation, it would seem prudent to share what you have in order to have another person who will therefore be willing to help out with getting through the situation. Again, only a complete psychopath would be so craven, and most likely to his own immediate detriment.

Nice try.

 

[Justin]

Incidentally, is it still gouging if the reverse is true?

If someone is willing to pay more than a "fair" price for a given commodity, let's say $10/gallon for fuel, should the gas station owner still be prosecuted for gouging because he's likely to give preference to the person offering more for his product?

 

[taliv]

art, heh.

Which still, ultimately boils down to nothing more than your opinion that So-and-so is "charging too much." Sorry, but I've never, ever seen anyone come out with any sort rational explanation to describe when it goes from charging a "fair" price to "gouging."

ok, maybe some examples will help.

let's say i own an exxon gas station. i'm getting gas for $1/gal, selling it for $2, same as all the other stations. i get a wild hair and raise my price to $6/gal. it's my gas, i can do what i want. no problem.

scenario 2: due to shortages, or just because they feel like it, exxon charges me $5/gal so i raise my price to $6. no problem.

scenario 3: i get a hot tip from an internet chat forum that mexico is about to invade texas, so i decide to keep most of my gas and sell just a little for $12/gal. woohoo! still no problem. (other than no customers)

scenario 4: SHTF and a 100 mile radius is declared a disaster area and we're cut off from the rest of the world. over the next two weeks, as a result of local hyper-inflation (the butcher across the street is charging $6/lb for pork chops) i raise my prices to $6/gal. no problem.

scenario 5: SHTF six states away. as soon as the carnage hits CNN, i bump my price to $6. exxon's still selling me gas for $1, and there's no shortage. all the other stations in town are at $2.20. Odds are good, i'm guilty as charged, but i might get off on a technicality.

scenario 6: Humvee convention comes to town. They've about emptied my tanks and i'm not expecting another truck for 2 more days. I raise my price to $6 and suggest they carpool. no problem.

scenario 7: Hurricane came through two days ago, another is on its way. Everybody's supposed to evacuate. exxon raised my cost to $3/gal, plus I've got to pay a lot extra to convince a guy to drive the tanker truck down here. I raise my prices to $6. no problem.

scenario 8: Hurricane came through two days ago, another is on its way. Everybody's supposed to evacuate. cars are lined up from the pumps to halfway down the block, but I've got plenty of gas that i bought yesterday for $1. I decide to raise my prices to $6 because I know people will pay it because they don't have much choice. the nearest station is 1 mile away and people aren't going to drive over there just to see if their gas is cheaper. i'm basically taking advantage of people in an emergency, and if the AG charges me, i'm going to lose.

scenario 9: i'm charging $6/gal before the SHTF. supply problems cause my costs to go up to $5/gal, so I raise my price to $11/gal while all the other stations go to $6/gal. no problem.

scenario 10: i'm charging $1.10/gal and drive the the other gas station in town out of business. then I raise my prices to $6/gal because I'm the only game in town. no problem.

again, it's only gouging if
a) it's a necessity
b) there's an emergency
c) the change in price can't be reasonably explained by increased cost or supply/demand

btw, "fair" has nothing to do with it, imho. i'm not trying to define 'fair'.

 

[taliv]

ncidentally, is it still gouging if the reverse is true?

If someone is willing to pay more than a "fair" price for a given commodity, let's say $10/gallon for fuel, should the gas station owner still be prosecuted for gouging because he's likely to give preference to the person offering more for his product?

interesting question, but i'm not sure i'm following it. if i've got to get out of town because a hurricane is coming, i'll be willing to pay whatever it takes. if i see the hoardes of zombies in the distance, i'll whip out the plastic and take your last 10 gallons @ $1000/gal to get my wife and daughter to safety. i've got no choice. "willing" doesn't really play a part when you're desperate in a life or death situation.

if i'm just out for a sunday drive and decide to pay $10/gal at your gas station because your cashiers are scantilly clad, even though I could buy it for $2 across the street, that's not gouging. again, "fair"s got nothing to do with it.

 

[Marko Kloos]

The question remains which one you prefer in that kind of scenario: a tankful of gas available to you at $1000/gallon, or no gas at all available to you at $2/gallon.

 

[oh blanky]

Anyone who believes there is such a thing as price gouging is a commie.

You may move to a nice workers paradise like China or Cuba to enjoy some price controls.

Enjoy!

 

[1 old 0311]

$100 Hamburgers? Yes you can sell them fot that, IF you have ALWAYS sold them for that. If a disaster has been declared and you raise prices over 25% YOU ARE GUILTY OF PRICE GOUGING. It is the law.

Kevin

 

[oh blanky]

$100 Hamburgers? Yes you can sell them fot that, IF you have ALWAYS sold them for that. If a disaster has been declared and you raise prices over 25% YOU ARE GUILTY OF PRICE GOUGING. It is the law.

Kevin

If that's the way the statute is written, you are correct.

It's not right though.

 

[Marko Kloos]

Next time folks around here accuse the Liberals of favoring law based on emotion rather than logic, I'll refer to this thread with a chuckle.

Are "price gouging" laws in place? Yes. Are they the law? Yes. Do they have any grounding in logic and knowledge of economics? Hell, no.

The people who write them, and the people who support and defend them have little to no knowledge of economics, little to no respect for the basic principle of private property, and little to no regard for the fact that price gouging laws make things worse during a crisis, not better.

 

[another okie]

When someone says "product X" is priced too high or they're "gouging" us, I always say, "If you think they're making easy money, why don't you go into that line of business?" You'll find out soon enough why prices are so high.

 

[taliv]

and the people who support and defend them have little to no knowledge of economics, little to no respect for the basic principle of private property,

come on guys. you're moderators. i'll refrain from returning The Low Road ad hominem attacks like this one and refer you to Art's thread on bashing and the christmas spirit.


when you are attacking the mainstream belief that is held by most economists and most of The People, the burden of proof is on you to show that the laws don't work. you don't get to just sit back and make vague references to some "economics".

If you have some examples, post them. If you have some logic or an idea of your own, let's hear it. If you know something about econ yourself, whip it out.

Heck, even if you just want to toss your support in on one side or another without exposing your own knowledge of economics, that's fine. You could just say "I agree with Justin" without insulting my education and my morals.

 

[Marko Kloos]

You asked for my thoughts on the subject, so here they are. You may find some overlap with other stuff I've posted in this thread, but it's a summary for folks who haven't read this thread. I typed up my thoughts on the subject in my blog this morning, so forgive me for recycling my own material.

Here we have a group of people, namely gun owners, who are constantly on the receiving end of legislation made by people who have good intentions but little knowledge about a subject, and gun owners are fully aware how such legislation frequently does not only fail to fix the problem it seeks to address, but makes it worse.

Now this group of gun owners comes out largely in favor of just such a piece of legislation, namely the aforementioned "price gouging" laws. They are using the gas price increases in the wake of hurricane Katrina as a perfect example of such price gouging, displaying an astonishing lack of knowledge on the subject, yet they are so sure of the righteousness of their position that they have no problem making their feelings on the issue written law for everyone. (Sound familiar?)

When a gas station raises prices during or after a disaster, people yell that "the gas in their tanks was bought for $1.80 a gallon, and how can they now sell it for $3 a gallon? That's gouging!"

The merchant sells you a gallon of gas not based on what he paid for that gallon, but rather based on what it's going to cost him to replace that gallon of gas. If he knows that due to the disaster his supply is either going to dry up, or cost him $3 per gallon next week, he has no choice but to charge more for his current inventory, so he'll have money in the till next week to pay the higher supplier bill. If he doesn't do so, or he's not able to do so because of "anti gouging" laws in place, two things are going to happen.

First, his supply is going to diminish much faster, since the price of the commodity does not reflect its current demand. Everybody stopping by at the gas station will fill up all the family vehicles, and bring spare gas canisters, regardless of their actual need for the gas. (Basic law of economics: if you price something below its market value, soon you will have nothing left of that something.)

Second, he won't be able to meet the higher price tag for the gas next week, when it costs significantly more to truck the fuel into a disaster zone, and he won't be able to refill his tanks. Thus, once his tanks are emptied of the "price controlled" gas, there won't be any more for anyone. (If you were in a disaster zone, which would you prefer: gas that's available at $10 per gallon, or gas that's unavailable at $2 per gallon?)

If, on the other hand. the merchant does not have his hands tied by such silly laws, two things are going to happen:

First, the gas in his tanks will be rationed more effectively, since at $10 a gallon folks won't hog the fuel, but rather only buy what they need.

Second, the fuel suppliers will see that they can still make money on gas even if they truck it into the disaster zone, because it can be sold there for a price that reflects its local value and the costs for shipping it there. If the gas supplier has to pay three times as much to truck fuel into the disaster zone, but he knows it can only be sold there for what he can sell it for in disaster-free Poughkeepsie or Peoria, where do you think that supplier is going to direct his gas? If the market is allowed to adjust the fuel based on supply and demand, the trucks will keep rolling into the disaster zone, and the continuous supply of gas in that area will be secure.

That's just the basic supply-and-demand dynamic behind that scenario. Then there's the philosophical and moral aspect of "price gouging" laws. They are nothing but the threat or use of force against a private citizen in order to make him sell his own property at a price others deem to be "fair".

Folks, in a free country, a person can dispose of their own property any damn way they see fit, at any price they wish to charge. If people think it's too much, they'll shop at the competition. If none exists, some folks will realize there's money to be made and establish one. "Price gouging" is a socialist concept, and it negates the concept of private property ownership purely on emotional grounds.

For those who mumble "monopoly" and argue that we need cars and are therefore over a barrel, I have to point to the reason for that "monopoly", which is the same government everybody beseeches for assistance against gougers and evil monopolies. The barriers against market entry in the oil industry are regulatory, not financial or technical. Government therefore created the very problem it pretends to fix with silly "gouging" laws.

"Capitalism" is not so much a description of a philosophy, like political -isms (communism, socialism, etcetera), but rather a description of reality, like the law of gravity. No amount of price control in any market has ever managed to circumvent or negate the basic laws of supply and demand, no matter how one feels about the issues involved.

 

[Marko Kloos]

Heck, even if you just want to toss your support in on one side or another without exposing your own knowledge of economics, that's fine. You could just say "I agree with Justin" without insulting my education and my morals.

I pointed out that your education seems to be insufficient to adequately participate in an economical debate. That's not "insulting" your education, it's merely pointing out a perceived deficiency. If I were to participate in a discussion on vehicle engines, a field of expertise where my own education is less than complete, I would not take it as an insult if someone pointed out that my arguments were not based on educated opinion. It has no bearing on the quality of your education, just on its applicability to the debate at hand.

If Tom Diaz from the VPC signed up for THR and started posting his criticism of current gun laws, he'd get a whole lot of commentary on his own lack of knowledge regarding the matter at hand. Would those be "ad hominem" attacks?

As far as your morals go, I find more to criticize about your moral stance than your education on economics. Your position is one that sees no wrong with telling a man at gunpoint to sell you his own property at a price which you deem "fair". I fail to see anything defensible in that position, and I am pointing out that this point of view does not meet my standards for moral action. To me, such a viewpoint is evidence for a lack of respect for property rights. That's not an attack on your person, but rather an attack on your position.

 

[taliv]

markos, your blog post has entirely missed the definition of gouging. if you'll refer to my list of examples above, you'll see that's clear.

granted, there may be some idiots screaming "price gouging" any time gas goes over $2, but that isn't what we're talking about.

what we're talking about is the sort of gouging that's illegal, and i've made it clear, at least 3 times, that none of the stuff in your post below is illegal. it's not gouging.

nobody is going to come and force them at gunpoint to sell their gas at a different price if their costs have gone up. read the friggin law.

i'm not advocating forcing them at gunpoint to sell their gas at a price below their cost. if you'd read any of the posts, you'd see that.

 

[taliv]

so let me get this straight... because i'm explaining economic concepts and providing examples to support a view held by the vast majority of people, you perceive my education is insufficient?? heh

so you know, i've got a degree in business, complete with As in all my money and banking and econ classes, plus about half the coursework for an MBA. i was a stock broker until '98 or so, which means i've passed the series 7 and 63 exams and done all the continuing education. i don't feel you have to be qualified to have a discussion, but since you brought it up, i'd like to hear about your econ studies.

As far as your morals go, I find more to criticize about your moral stance than your education on economics. Your position is one that sees no wrong with telling a man at gunpoint to sell you his own property at a price which you deem "fair". I fail to see anything defensible in that position, and I am pointing out that this point of view does not meet my standards for moral action. To me, such a viewpoint is evidence for a lack of respect for property rights. That's not an attack on your person, but rather an attack on your position.

well, yes, that WOULD be an indefensible and immoral position if anyone here held it. humorously, they don't. you've moved from ad hominems to straw mans. can we make it a trifecta?

if you'd read any of the posts, you'd see that i've repeatedly said "fair" has nothing to do with it, and nobody is trying to prescribe a "fair" price. and again, nobody is forcing people in your example, whose costs have gone up, from recouping those by raising prices.

you seem intent on ignoring the definition of price gouging, and equating some random whining with the concept behind the law. they are not the same thing. please reread.

 

[twency]

I've only been on THR about a year, but this is the first time i've encountered this topic. sorry to bore you.

The first time, you say?

A year, you say?

Well, here's another big thread on this subject started in October. http://thehighroad.org/showthread.php?t=160328

It's a topic which does seem to get rehashed very, very often. For threads mentioning gouging, a search reveals 194 results as of this writing. http://thehighroad.org/search.php?searchid=943874

For the record, I'm with the crowd which thinks that price controls guarantee shortages and involuntary rationing. Allowing owners of a product to sell that product for whatever the market will bear is good for everyone, even those who decide they can't afford it in the short-term. In the long run, everyone is better off when owners of property are not forced, using the government's power of the sword, to sell their property at a price which is out of line with what the market will bear.

I occasionally play devil's advocate and argue for points with which I don't necessarily agree, but this is something where I feel pretty strongly - prosecuting "gouging" almost always results in more mischief than it solves.

_____________
-twency

 

[gunfan]

No there isn't. Here's the clue of the week - it's their gas.

There is no such thing as "price gouging." There is, of course, such a thing as, "Self-righteous whimpering because those evil nasty business owners decide to set the prices of their own property higher than I think is fair."

Grow up.

- Chris

Amen! Welcome to the free-market economy, not a Socialist State.

Scott

 

[taliv]

sorry twency, i don't get to read every single thread. sometimes they hit page 2 before i see them. btw, most of the 194 hits you got do not refer to price gouging. and the article from the first link was about collusion, not price gouging. collusion and price fixing is also illegal... go figure

not sure what your point is.

 

[Marko Kloos]

f you'd read any of the posts, you'd see that i've repeatedly said "fair" has nothing to do with it, and nobody is trying to prescribe a "fair" price. and again, nobody is forcing people in your example, whose costs have gone up, from recouping those by raising prices.

you seem intent on ignoring the definition of price gouging, and equating some random whining with the concept behind the law. they are not the same thing. please reread.

Clear this one up for me...do "price gouging" laws not tell business owners how much they can charge for their product based on someone else's idea of what they ought to be charging? That is the basic concept behind the law, is it not?

 

[twency]

sorry twency, i don't get to read every single thread. sometimes they hit page 2 before i see them. btw, most of the 194 hits you got do not refer to price gouging.

My point was not that you have an obligation to read every thread, or even read the subject of every thread. My point was simply that this is a common topic of conversation here, and you were suggesting otherwise. I was trying to demonstrate this isn't exactly the first time it's been discussed, whether in passing or at length.

You are correct that not all of the 194 hits for gouging refer to price gouging. I did a quick survey of the first ten threads (after this one) in the list, and it looks like three mention types of gouging unrelated to money, and one refers to gouging in the context of taxes. Sixty percent of the most recent hits refer to price gouging in one way or another, as far as I can tell. It's not always the core topic of conversation, but it's an accusation flung far and wide about gun makers, gun dealers, gas stations, and many other targets.

__________
-twency

 

[taliv]

ok, one more time

again, it's only gouging if
a) it's a necessity
AND
b) there's an emergency
AND
c) the change in price can't be reasonably explained by increased cost or supply/demand

c) is where you guys are getting hung up. It's not about "fair" and the gov isn't dictating what the price is or saying its' fair or not. they do not tell business owners how much they can charge.

they ONLY say that you can't take advantage of people in an emergency. if your costs go up and you have to pass those on, that's OK.


nobody is being prosecuted because gas prices were over $3 over the past few months. it's NOT ILLEGAL. it's NOT GOUGING (as defined by law). they're free to do whatever they want.

granted, because the socialists you guys are railing against are upset about it and because there is no law against it, our congress held hearings on the matter and brought in oil execs to make a big public show like they're "doing somethign about the evil corporations".

i completely agree with you this behavior by our legislature is irresponsible pandering to socialists, but it was only done because all the liberal whacko AGs obviously couldn't accuse "big oil" of profiteering and price gouging based on the law.

so if you want to complain about that, i'm right there with you.

but what started this, was spitzer bringing a charge against some specific gas companies and stations for raising prices far BEYOND what could be explained by supply/demand and rising costs:

"When disaster strikes, state law requires that price increases be linked directly and proportionately to increased costs,'' Spitzer said in a prepared statement. "This investigation has found numerous instances of unwarranted price increases. In fact, many retailers appear to have used the disaster as an excuse to gouge consumers.''

and yes, spitzer invoked the "fairness" crap in his press release, because he's a wanker and that's what his constituents want to hear. but the fact is, if he can prove that they raised the price 25% more than their costs went up, then he's doing his job.

i suppose you could argue that the 25% figure is someone's arbitrary idea of "fair". i'll buy that. but that's a new york specific rule. it's not the same in florida, for example, whose FAQ i posted.

 

[Glock Glockler]

the change in price can't be reasonably explained by increased cost or supply/demand

If people are willing to pay $3/gallon for gas as opposed to $2/gallon then by default demand for that product increased. Usually in "emergencies" people begin to "panic buy" and they will voluntarily pay more for that product, and the merchant will increase his price in order to maintain his stock. What is complicated about this? Would you prefer to go to a store and find out that they are cleaned out because everyone horded up on stuff?

they ONLY say that you can't take advantage of people in an emergency
If people feel they are being taken advantage of then don't do business with that particular merchant, do you think you have a right to my particular services or goods? They are mine to do with as I please, you have no claim on them.