Price Gouging
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I pose this question to all those who think there is "price gouging."
Assuming price gouging exists, what would your solution for the problem be?
I hope your answer isn't government regulation, because if it is, I challenge you to answer my next question.
Other than welfare (income redistribution), what does government do more efficently than the private sector?
Oh by the way, the cigarette example is a very poor one. Since the government has gotten involved, cigarettes have almost tripled in price. So you want the government to regulate gas prices . . . great, you fill up on Tuesdays and Thursdays, and I'll get to fill up on Wednesdays and Fridays, . . . If you need gas any other day I guess your up the brown river without a paddle.
Assuming price gouging exists, what would your solution for the problem be?
I hope your answer isn't government regulation, because if it is, I challenge you to answer my next question.
Other than welfare (income redistribution), what does government do more efficently than the private sector?
Oh by the way, the cigarette example is a very poor one. Since the government has gotten involved, cigarettes have almost tripled in price. So you want the government to regulate gas prices . . . great, you fill up on Tuesdays and Thursdays, and I'll get to fill up on Wednesdays and Fridays, . . . If you need gas any other day I guess your up the brown river without a paddle.
Camp David,
Why not answer my previous question? If gouging exists, why aren't gas stations charging $25/gal. for gas?
What would you advocate? That we compell the ambulance company to sell at a price you deem acceptable?
The only person who can price a good or service is the owner of that good, or providor of the service. To compell a doctor to perform a medical service at a price less than what the doctor decides is involuntary servitude. That has been illegal in this country for a long time.
Scott
Why not answer my previous question? If gouging exists, why aren't gas stations charging $25/gal. for gas?
What would you advocate? That we compell the ambulance company to sell at a price you deem acceptable?
The only person who can price a good or service is the owner of that good, or providor of the service. To compell a doctor to perform a medical service at a price less than what the doctor decides is involuntary servitude. That has been illegal in this country for a long time.
Scott
CZ-100
Member
I see Gas companys in the same category as the power companys, they are a utility, a monopoly if you wish, and should be regulated.
Our whole ecomany is based on moving goods and such, prices of fuel, as they are now are going to make the price of EVERYTHING of UP.
Our whole ecomany is based on moving goods and such, prices of fuel, as they are now are going to make the price of EVERYTHING of UP.
Fairlane63
Member
Walter Williams is one of my favorite columnists-- he has the ability to take complex problems and explain them in a way that even I can understand. Here's what he recently had to say about price gouging. Makes sense to me...
http://www.gmu.edu/departments/economics/wew/articles/05/lessons.html
HURRICANE EVACUATION LESSONS
Evacuations are not a benign process. Twenty-four people were killed when a bus carrying 38 Houston nursing home residents and six employees caught fire in a traffic jam. It's thought that oxygen tanks used by elderly evacuees had a role in the fire. Given the hurricane predictions for Houston and Galveston, one can't blame officials for ordering evacuations, but the lesson to be learned is evacuations can be costly. In addition to injuries and loss of life, when evacuations are ordered, there are costs associated with opportunistic criminal behavior such as looting, which there were reports of in Houston.
Hurricane Rita provided us with another evacuation lesson as millions sought to leave Houston and Galveston. Gasoline stations ran out of gas leaving hundreds of motorists stranded. Many abandoned their cars. Police officers were deployed to carry gas to motorists whose tanks were empty. Texas authorities also asked the Pentagon for help in getting gas to stranded motorists. Much of the blame for the shortage rests at the feet of Texas Attorney General Greg Abbott, who recently ordered that penalties of up to $20,000 be imposed per incident of price-gouging. You say, "How come you blame Greg Abbott?" Let's look at it.
When the hurricane evacuation order came, there was an immediate change in the demand conditions for gasoline; namely, demand became much greater than the available supply. Retailers, in fear of prosecution by the attorney general, didn't do what would have brought demand more in line with the available supplies of gasoline -- raise prices.
Suppose a family evacuating Houston chose to make a 146-mile drive to stay with relatives in Austin. Their car has a half a tank of gasoline -- plenty to get to Austin -- but just to be safe, they decide to fill up. What do you think they might do if they expected to pay $2.75 a gallon but when they got to the gas station they found the gas selling for $3.75? I bet they'd say, "The heck with that; we'll fill up in Austin." That's wonderful; they've voluntarily made gas available for someone running out of gas. In my book, for a motorist who's running on empty, gas available at $3.75 a gallon is preferable to gas being unavailable at $2.75 a gallon.
Attorney General Abbott also threatened legal action against what he called "unconscionable pricing" by hotels. Take that same family. The husband might have said, "Honey, I don't feel like driving all the way to Austin to stay with your mother and father; let's rent a room." When they get to the hotel, the rooms are no longer $75 a night but $150. The husband says, "Okay, I'll put up with the in-laws." That's wonderful, too. They've made a room available for a family who has no other alternative.
Market allocation isn't the only way to make sure people economize on resources that have suddenly become scarce. Texas officials resorted to pleading with motorists not to top off their tanks. Their pleas were ignored. What Texas officials could have done was to place anti-top off officers at every gas station to make sure people weren't buying more gas than they needed to get to their evacuation destination. Texas officials also could have stationed hotel officers at every hotel. The job of the hotel officer would be to query potential guests as to whether they had nearby relatives or friends with whom they could spend a night or two. If they had relatives or friends within a reasonable distance, such as my example of the husband and wife with relatives in Austin, the hotel officer would tell them to hit the road. Would measures such as these have been preferable to rising prices or the unavailability of gas and lodging?
Don't get me wrong. There's nothing pleasant about rising prices in the wake of a disaster. My argument is that not allowing the market mechanism to allocate suddenly scarce resources produces the inferior outcome.
http://www.gmu.edu/departments/economics/wew/articles/05/lessons.html
HURRICANE EVACUATION LESSONS
Evacuations are not a benign process. Twenty-four people were killed when a bus carrying 38 Houston nursing home residents and six employees caught fire in a traffic jam. It's thought that oxygen tanks used by elderly evacuees had a role in the fire. Given the hurricane predictions for Houston and Galveston, one can't blame officials for ordering evacuations, but the lesson to be learned is evacuations can be costly. In addition to injuries and loss of life, when evacuations are ordered, there are costs associated with opportunistic criminal behavior such as looting, which there were reports of in Houston.
Hurricane Rita provided us with another evacuation lesson as millions sought to leave Houston and Galveston. Gasoline stations ran out of gas leaving hundreds of motorists stranded. Many abandoned their cars. Police officers were deployed to carry gas to motorists whose tanks were empty. Texas authorities also asked the Pentagon for help in getting gas to stranded motorists. Much of the blame for the shortage rests at the feet of Texas Attorney General Greg Abbott, who recently ordered that penalties of up to $20,000 be imposed per incident of price-gouging. You say, "How come you blame Greg Abbott?" Let's look at it.
When the hurricane evacuation order came, there was an immediate change in the demand conditions for gasoline; namely, demand became much greater than the available supply. Retailers, in fear of prosecution by the attorney general, didn't do what would have brought demand more in line with the available supplies of gasoline -- raise prices.
Suppose a family evacuating Houston chose to make a 146-mile drive to stay with relatives in Austin. Their car has a half a tank of gasoline -- plenty to get to Austin -- but just to be safe, they decide to fill up. What do you think they might do if they expected to pay $2.75 a gallon but when they got to the gas station they found the gas selling for $3.75? I bet they'd say, "The heck with that; we'll fill up in Austin." That's wonderful; they've voluntarily made gas available for someone running out of gas. In my book, for a motorist who's running on empty, gas available at $3.75 a gallon is preferable to gas being unavailable at $2.75 a gallon.
Attorney General Abbott also threatened legal action against what he called "unconscionable pricing" by hotels. Take that same family. The husband might have said, "Honey, I don't feel like driving all the way to Austin to stay with your mother and father; let's rent a room." When they get to the hotel, the rooms are no longer $75 a night but $150. The husband says, "Okay, I'll put up with the in-laws." That's wonderful, too. They've made a room available for a family who has no other alternative.
Market allocation isn't the only way to make sure people economize on resources that have suddenly become scarce. Texas officials resorted to pleading with motorists not to top off their tanks. Their pleas were ignored. What Texas officials could have done was to place anti-top off officers at every gas station to make sure people weren't buying more gas than they needed to get to their evacuation destination. Texas officials also could have stationed hotel officers at every hotel. The job of the hotel officer would be to query potential guests as to whether they had nearby relatives or friends with whom they could spend a night or two. If they had relatives or friends within a reasonable distance, such as my example of the husband and wife with relatives in Austin, the hotel officer would tell them to hit the road. Would measures such as these have been preferable to rising prices or the unavailability of gas and lodging?
Don't get me wrong. There's nothing pleasant about rising prices in the wake of a disaster. My argument is that not allowing the market mechanism to allocate suddenly scarce resources produces the inferior outcome.
Amusetec
Member
If there was any gouging going on with the bell that is becuse of the PUC and if they where gouging going on then what would you call it now. I pay more on my phone bill than when they where a monopoly.
have you priced soda? one store on the corner charges .75 the other .89 same truck brings them but charge diff. price. same for chips same for cigaretts same for everything in the store so why should one product be treated diff.
When that 'owner' is being subsidized by public funds (either directly or through tax credits), he should not have exclusive control over pricing.
Simplistic, ideological answer that completely ignores reality. Many (most?) hospitals are 'non-profit' entities. Not only are they exempt from income taxes, but local property taxes as well. The public who provided those exemptions did so with an expectation of some return.
You should know better.
It appears that many of you think storeowners should be free to charge whatever they wish for their product or service at any given time. I personally don’t think so. I think price gouging should be illegal and should carry harsh penalties.
Our current economic structure does not allow for anything even close to perfect competition. “Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. Perfect competition means there are few, if any, barriers to entry for new companies, and prices are determined by supply and demand. Thus, producers in a perfectly competitive market are subject to the prices determined by the market and do not have any leverage. For example, in a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price, causing any firm that increases its prices to lose market share and profits.” *http://www.investopedia.com/university/economics/economics6.asp
Now I think a free market economy is a great thing, except when there are substantial barriers to enter the market place. The current barriers that exist to enter the market place allow companies to gouge customers without the possibility of serious repercussions. For instance, if you have 10 gas stations in your locality and 1 of them gouged their prices, to be substantially higher than the other 9, then that company would almost immediately price itself out of the market. In this situation everything works outs. The price gouging company goes under. Now what happens in this town when the demand for an item spikes. Supply and demand dictates that the prices will rise, due to the increased demand and lack of supply (and suppliers). All the current suppliers are able to raise their prices drastically (price gouging) without fear of any repercussions. Now the market will rebalance itself, as new entrepreneurs take advantage of the increased demand and open up new gas stations and refiners. Right??? The answer is no. The substantial barriers that exist to enter the market drastically prolong the amount of time needed for these new companies to enter the market place. All price-gouging companies know that they cannot continue to charge high prices (higher than what the market will normally dictate) indefinitely. They know that by doing this they will eventually lose market share and profits caused by the increased competition. But they also know that they can temporary take advantage of the prolonged amount of time required for new competition to emerge. They can charge extremely high prices for a period of time, then lower them back to acceptable rates before new competition has time to emerge. Thus removing the entrepreneurial incentive for the new competition, and without any new competition the companies are virtually immune to any serious repercussions caused by their temporary price gouging.
Now if our economic structure allowed for new competition to quickly enter the market, prices would rebalance themselves quickly. And companies would be reluctant to price gouge because they would damage their customer relations with their current market share. And even if prices returned to normal quickly, the displeased customers would probably patronize the new companies.
Now because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.
--Poe
Our current economic structure does not allow for anything even close to perfect competition. “Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. Perfect competition means there are few, if any, barriers to entry for new companies, and prices are determined by supply and demand. Thus, producers in a perfectly competitive market are subject to the prices determined by the market and do not have any leverage. For example, in a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price, causing any firm that increases its prices to lose market share and profits.” *http://www.investopedia.com/university/economics/economics6.asp
Now I think a free market economy is a great thing, except when there are substantial barriers to enter the market place. The current barriers that exist to enter the market place allow companies to gouge customers without the possibility of serious repercussions. For instance, if you have 10 gas stations in your locality and 1 of them gouged their prices, to be substantially higher than the other 9, then that company would almost immediately price itself out of the market. In this situation everything works outs. The price gouging company goes under. Now what happens in this town when the demand for an item spikes. Supply and demand dictates that the prices will rise, due to the increased demand and lack of supply (and suppliers). All the current suppliers are able to raise their prices drastically (price gouging) without fear of any repercussions. Now the market will rebalance itself, as new entrepreneurs take advantage of the increased demand and open up new gas stations and refiners. Right??? The answer is no. The substantial barriers that exist to enter the market drastically prolong the amount of time needed for these new companies to enter the market place. All price-gouging companies know that they cannot continue to charge high prices (higher than what the market will normally dictate) indefinitely. They know that by doing this they will eventually lose market share and profits caused by the increased competition. But they also know that they can temporary take advantage of the prolonged amount of time required for new competition to emerge. They can charge extremely high prices for a period of time, then lower them back to acceptable rates before new competition has time to emerge. Thus removing the entrepreneurial incentive for the new competition, and without any new competition the companies are virtually immune to any serious repercussions caused by their temporary price gouging.
Now if our economic structure allowed for new competition to quickly enter the market, prices would rebalance themselves quickly. And companies would be reluctant to price gouge because they would damage their customer relations with their current market share. And even if prices returned to normal quickly, the displeased customers would probably patronize the new companies.
Now because the government is responsible for several of the barriers that exist for companies to enter the marketplace they should also be responsible for limiting short term price gouging.
--Poe
Oh hey yeah, good point. Why dont we just suspend the right to Life and Liberty while we are at it. There is simply no such thing as a mitigating circumstance when it comes to restriction inalianable rights, and the right to PROPERTY and the purchase and sale thereof is one of the most fundamental of those rights.
If you dont want to pay for gas then DON'T. The fact that you have built your life around a dependance on a steady supply of regular unleaded is *not* the fault of the guy who owns the gas station, its yours.
jeff-10
Member
I am one of those people who are tired of people complaining about gas prices. Why do people think they have a right to cheap gas? Do they believe the supply is infinite and demand from the rest of the world has no effect on our gas prices? The problem isn't high gas prices its people buying vehicles with ridiculously low mpg. I don't see how how $3 a gallon for gas is particularly high.
So what? Perfect competition is NOT a precondition for the efficient functioning of free markets.
Laws against "price gouging" are stupid and counter-productive. They are a form of price controls. Price controls always and everywhere create shortages.
Increased demand causes prices to rise, that in turn sends a signal to the supply chain to reroute greater supply to customers. The best thing that government can do is get out of the way and allow markets to operate. The worst thing that governments can do is interfere with markets as they seek equilibrium. Prices convey information. Government price controls are essentially a form of censorship.
Read How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present by Thomas DiLorenzo. Even if you hated econ in school, you could easily like this book. It's not loaded down with jargon, inscrutable graphs, math, or academic gobbledegook.
(I'm another econ major.)
Molon Labe
Member
+1 javafiend
Wiley
Member
If you don't like the price you pay at the pump, you have a number of choices:
1. Go somewhere else.
2. Walk.
3. Buy your own gas on the spot market just like all the independents. It's only $1.8370/gal according to CNBC as I write this.
4. etc.
But please stop whining about it.
1. Go somewhere else.
2. Walk.
3. Buy your own gas on the spot market just like all the independents. It's only $1.8370/gal according to CNBC as I write this.
4. etc.
But please stop whining about it.
No such thing as price gouging.
Unless you want to be a commie.
Go be a commie and see how well price controls work.
Hey look at how cheap gas is!! But they don't have any.
Yeah, but it sure is cheap!!
You can't wipe your ass with fluffy charmin if there are price controls.
Unless you want to be a commie.
Go be a commie and see how well price controls work.
Hey look at how cheap gas is!! But they don't have any.
Yeah, but it sure is cheap!!
You can't wipe your ass with fluffy charmin if there are price controls.
Molon Labe
Member
Please tell me how the government should do this.
+2. Yup. Poe, I think you seriously misunderstand the problem. All price control laws do (call them anti-gouging laws if you wish) in the case of a natural disaster, for example, is cause people to DIE. Because if the entrepeneurs are not allowed legally to come and sell their $4 a gallon water (the market price *in that market*), then they simply won't, and the people that need it won't have water, and they will die. Don't tell me the red cross and fema will be there, cuz if they were there giving away free water, then there wouldn't be a market for $4 per gallon water.
Dave P
Member
In praise of price gouging
Merchants should be allowed to set a price of their choosing. Besides Williams, Stossel also provides us with insight:
In praise of price gouging
Sep 7, 2005
by John Stossel ( bio | archive )
Politicians and the media are furious about price increases in the wake of Hurricane Katrina. They want gas stations and water sellers punished.
If you want to score points cracking down on mean, greedy profiteers, pushing anti-"gouging" rules is a very good thing.
But if you're one of the people the law "protects" from "price gouging," you won't fare as well.
Consider this scenario: You are thirsty -- worried that your baby is going to become dehydrated. You find a store that's open, and the storeowner thinks it's immoral to take advantage of your distress, so he won't charge you a dime more than he charged last week. But you can't buy water from him. It's sold out.
You continue on your quest, and finally find that dreaded monster, the price gouger. He offers a bottle of water that cost $1 last week at an "outrageous" price -- say $20. You pay it to survive the disaster.
You resent the price gouger. But if he hadn't demanded $20, he'd have been out of water. It was the price gouger's "exploitation" that saved your child.
It saved her because people look out for their own interests. Before you got to the water seller, other people did. At $1 a bottle, they stocked up. At $20 a bottle, they bought more cautiously. By charging $20, the price gouger makes sure his water goes to those who really need it.
The people the softheaded politicians think are cruelest are doing the most to help. Assuming the demand for bottled water was going to go up, they bought a lot of it, planning to resell it at a steep profit. If they hadn't done that, that water would not have been available for the people who need it the most.
Might the water have been provided by volunteers? Certainly some people help others out of benevolence. But we can't count on benevolence. As Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker, that we can expect our dinner, but from their regard to their own interest."
Consider the storeowner's perspective: If he's not going to make a big profit, why open up the store at all? Staying in a disaster area is dangerous and means giving up the opportunity to be with family in order to take care of the needs of strangers. Why take the risk?
Any number of services -- roofing, for example, carpentry, or tree removal -- are in overwhelming demand after a disaster. When the time comes to rebuild New Orleans, it's safe to predict a shortage of local carpenters: The city's own population of carpenters won't be enough.
If this were a totalitarian country, the government might just order a bunch of tradesmen to go to New Orleans. But in a free society, those tradesmen must be persuaded to leave their homes and families, leave their employers and customers, and drive from say, Wisconsin, to take work in New Orleans. If they can't make more money in Louisiana than Wisconsin, why would they make the trip?
Some may be motivated by a desire to be heroic, but we can't expect enough heroes to fill the need, week after week; most will travel there for the same reason most Americans go to work: to make money. Any tradesman who treks to a disaster area must get higher pay than he would get in his hometown, or he won't do the trek. Limit him to what his New Orleans colleagues charged before the storm, and even a would-be hero may say, "the heck with it."
If he charges enough to justify his venture, he's likely to be condemned morally or legally by the very people he's trying to help. But they just don't understand basic economics. Force prices down, and you keep suppliers out. Let the market work, suppliers come -- and competition brings prices as low as the challenges of the disaster allow. Goods that were in short supply become available, even to the poor.
It's the price "gougers" who bring the water, ship the gasoline, fix the roof, and rebuild the cities. The price "gougers" save lives.
Merchants should be allowed to set a price of their choosing. Besides Williams, Stossel also provides us with insight:
In praise of price gouging
Sep 7, 2005
by John Stossel ( bio | archive )
Politicians and the media are furious about price increases in the wake of Hurricane Katrina. They want gas stations and water sellers punished.
If you want to score points cracking down on mean, greedy profiteers, pushing anti-"gouging" rules is a very good thing.
But if you're one of the people the law "protects" from "price gouging," you won't fare as well.
Consider this scenario: You are thirsty -- worried that your baby is going to become dehydrated. You find a store that's open, and the storeowner thinks it's immoral to take advantage of your distress, so he won't charge you a dime more than he charged last week. But you can't buy water from him. It's sold out.
You continue on your quest, and finally find that dreaded monster, the price gouger. He offers a bottle of water that cost $1 last week at an "outrageous" price -- say $20. You pay it to survive the disaster.
You resent the price gouger. But if he hadn't demanded $20, he'd have been out of water. It was the price gouger's "exploitation" that saved your child.
It saved her because people look out for their own interests. Before you got to the water seller, other people did. At $1 a bottle, they stocked up. At $20 a bottle, they bought more cautiously. By charging $20, the price gouger makes sure his water goes to those who really need it.
The people the softheaded politicians think are cruelest are doing the most to help. Assuming the demand for bottled water was going to go up, they bought a lot of it, planning to resell it at a steep profit. If they hadn't done that, that water would not have been available for the people who need it the most.
Might the water have been provided by volunteers? Certainly some people help others out of benevolence. But we can't count on benevolence. As Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker, that we can expect our dinner, but from their regard to their own interest."
Consider the storeowner's perspective: If he's not going to make a big profit, why open up the store at all? Staying in a disaster area is dangerous and means giving up the opportunity to be with family in order to take care of the needs of strangers. Why take the risk?
Any number of services -- roofing, for example, carpentry, or tree removal -- are in overwhelming demand after a disaster. When the time comes to rebuild New Orleans, it's safe to predict a shortage of local carpenters: The city's own population of carpenters won't be enough.
If this were a totalitarian country, the government might just order a bunch of tradesmen to go to New Orleans. But in a free society, those tradesmen must be persuaded to leave their homes and families, leave their employers and customers, and drive from say, Wisconsin, to take work in New Orleans. If they can't make more money in Louisiana than Wisconsin, why would they make the trip?
Some may be motivated by a desire to be heroic, but we can't expect enough heroes to fill the need, week after week; most will travel there for the same reason most Americans go to work: to make money. Any tradesman who treks to a disaster area must get higher pay than he would get in his hometown, or he won't do the trek. Limit him to what his New Orleans colleagues charged before the storm, and even a would-be hero may say, "the heck with it."
If he charges enough to justify his venture, he's likely to be condemned morally or legally by the very people he's trying to help. But they just don't understand basic economics. Force prices down, and you keep suppliers out. Let the market work, suppliers come -- and competition brings prices as low as the challenges of the disaster allow. Goods that were in short supply become available, even to the poor.
It's the price "gougers" who bring the water, ship the gasoline, fix the roof, and rebuild the cities. The price "gougers" save lives.
Waitone
Member
Hurricane comes throug town and destroys everything.
Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.
Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.
Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.
Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.
If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging.
Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.
Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.
Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.
Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.
If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging.
I’m not advocating for or against “price gouging”, but please lets be realistic about it. Capitalism has nothing at all to do with looking out for the welfare of the less fortunate. It’s all about the bottom line and taking advantage of every possible opportunity to promote ones financial wellbeing.
Molon Labe
Member
Well... yes and no.
Capitalism in-and-of-itself has no concept of "providing for the less fortunate." It is simply an economic system. But here's what's interesting: capitalism is the best at "providing for the less fortunate" when compared to all other types of economic systems.
solareclipse
Member
Free market is a relative term. In reality, heavy government intervention (vs control) is needed for the markets to run.
same with democracy.. in the pure sense, there shouldn't be all the laws telling you what to do and what not.
I find it hilarious when people find an issue they do not agree with and start to proclaim "free" left and right as the opposing view.
same with democracy.. in the pure sense, there shouldn't be all the laws telling you what to do and what not.
I find it hilarious when people find an issue they do not agree with and start to proclaim "free" left and right as the opposing view.
ID_shooting
Member
"Hurricane comes throug town and destroys everything.
Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.
Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.
Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.
Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.
If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging."
Let me add to this. but family two realizes that they do not have $1000.00 dollars because the banks are closed, the ATMS are under 3 feet of water and he can not get to his money. They plead with the Lowes manager but he will not not budge. In fact, the franchise owner just happens to be there, sees that two people are seriously interested in his generator so he decides he can raise the price to what ever he wants. He runs down and bumps the price to $3000.00. Well, Family four sees this, and since they are wealthy, and have the funds on hand, they decide to buy it on the spot before it goes higher to run thier AC unit and thier hot tub.
All of this sounds fine in a free market, and is the basis for straight capitolism; however, what we didn't realize is that the butcher is not selling his meat on the open market and is instead rationing out his meat to the nearby families. With the meat supply gone, 14 children die of malnutrition.
So what is the perfect answer? There really isn't one. We can agrue semantics till we are blue in the face and still not come to a conclusion.
All I know is that anytime you are dealing with a comodity (you can't say you have a choice not to buy fuel. Some of us, like me, have a job the requires it. Not becuase I live too far from work but rather that driving is my work) you have to controll it, if rationing and selective distrobution are required, then so be it.
Working logistics in the Army tought me that in a crisis situation, such as limited fuel supply, you may have to make tough decisions. If we had 20,000 galons of JP8 and the armor unit needed it, but the infantry got there first and decided they were going to hord it, how long would be before the armor unit became stationary artillery with 65 ton radios.
Remember, we aren't talking about cans of Pepsi here, we are talking about a needed unit of supply that consumers are reliant upon. Yes, there are limited supplies, but not becuase distrobution companies choose it, but rather the top level suppliers controll it to maximize profits and prey on the needy.
Does this sound socialists, you bet it does. That is why niether true capitolism nor true socialism do not work. You must have a mix of both to provide for your society.
The natural response will be for somone to tell me to study basic econimics, well, while you were studying the past, I was living and working in the field of logistics. Sorry, no book can teach you about what really happens in the real world.
Two families have needs. Both needs are important. Both sets of needs are satisfied by a gas generator. The generator in question sold at Lowe's before the 'cane for $400. After the 'cane the generator is now the object of desire of two families.
Family #1 wants the generator so it can run fans, a few lights, the microwave all in an attempt to bring a semblence of sanity and normalcy to their lives.
Family #2 wants the generator so it can power the refridgerator unit of its meat locker since the family owns a butcher shop. It does not care about lights and microwaves. It cares only about saving $30,000 in inventory.
Both families go to Lowe's only to find the price is now $1,000. Family #1 is upset. Who wants to spend $1,000 to run a fan and microwave. Family #2 is tickled pink to pay the asking price because it will net the family $29,000.
If government bigfoots the pricing through anti-gouging laws, the chance of the generator satisfying the greatest economic utility is greatly reduced. The issue becomes who get to the generator first, not where the generator does the most good for society in general.
"Gouging" is a market means of allocating scarce resources for the greatest economic utility. Count me in favor of gouging."
Let me add to this. but family two realizes that they do not have $1000.00 dollars because the banks are closed, the ATMS are under 3 feet of water and he can not get to his money. They plead with the Lowes manager but he will not not budge. In fact, the franchise owner just happens to be there, sees that two people are seriously interested in his generator so he decides he can raise the price to what ever he wants. He runs down and bumps the price to $3000.00. Well, Family four sees this, and since they are wealthy, and have the funds on hand, they decide to buy it on the spot before it goes higher to run thier AC unit and thier hot tub.
All of this sounds fine in a free market, and is the basis for straight capitolism; however, what we didn't realize is that the butcher is not selling his meat on the open market and is instead rationing out his meat to the nearby families. With the meat supply gone, 14 children die of malnutrition.
So what is the perfect answer? There really isn't one. We can agrue semantics till we are blue in the face and still not come to a conclusion.
All I know is that anytime you are dealing with a comodity (you can't say you have a choice not to buy fuel. Some of us, like me, have a job the requires it. Not becuase I live too far from work but rather that driving is my work) you have to controll it, if rationing and selective distrobution are required, then so be it.
Working logistics in the Army tought me that in a crisis situation, such as limited fuel supply, you may have to make tough decisions. If we had 20,000 galons of JP8 and the armor unit needed it, but the infantry got there first and decided they were going to hord it, how long would be before the armor unit became stationary artillery with 65 ton radios.
Remember, we aren't talking about cans of Pepsi here, we are talking about a needed unit of supply that consumers are reliant upon. Yes, there are limited supplies, but not becuase distrobution companies choose it, but rather the top level suppliers controll it to maximize profits and prey on the needy.
Does this sound socialists, you bet it does. That is why niether true capitolism nor true socialism do not work. You must have a mix of both to provide for your society.
The natural response will be for somone to tell me to study basic econimics, well, while you were studying the past, I was living and working in the field of logistics. Sorry, no book can teach you about what really happens in the real world.
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