This doesn’t contradict what I said, or support the claims which I have refuted.
I understand perfectly well. Again, your baseless insults do not support your point.
This doesn’t contradict what I said, or support the claims which I have refuted.
All things are not equal. So this statement irrelevant. Even so, I suspect you’re incorrect, but it’s hard to be sure with irrelevant nonsense like this. Even if all things were equal, and this statement were true, it still wouldn’t refute the text you’ve quoted.
More rational than who? Seriously. What is this a response to? Where have I suggested that irrational actions were the problem?
Sure there is. If he wants it, and can’t get it for a lower price, then he has reason to pay that price. It’s just a matter of how much he wants it vs how much he wants to keep the money to spend on something else.
Nope. This is an appeal to consequences, and a poor one at that.
Another false dichotomy.
…aaaand one more ad hominem to finish it off. Seriously. If I’ve made any statements about the free market which were untrue, all you have to do is point them out. You’re not fooling anyone by posting random quotes of me and responding with a combination of ad hominem, Ignoratio elenchi, false dichotomy, and outright nonsense.
I’m sorry, as you are quite correct that punishment is probably not the best word choice. I should have used the phrase “Should we expect him to bend over and touch his toes…” instead.
My problem is with blaming anyone for the predicament of someone who cannot afford a crisis-priced generator. What makes him special? What about the guy who is so poor he can’t even afford a generator at the pre-crisis price? Is he somehow being punished/victimized by the greedy consumers and vendors who have established the pre-crisis market price for a generator?
What if the really needy one has moderate resources? His situation is far worse without gouging than with.
Without gouging we have a severe shortage of the asset, everyone with any moderate level of need for it will make a purchase, and everyone with significant need for it will have a small chance of actually finding an asset to buy.
With gouging, the people with moderate need don’t bother purchasing it, because the price is too high, and folks with significant need will have a good chance to find units in the store, as long as they have the finances to afford it.
The “normal price” method, while it allows retailers to look at themselves in the mirror when they get home, does not often put the asset in the possession of someone who really needs it. The “gouging” method, while it is greedy and cruel, actually does tend to put the asset in the hands of someone who really needs it. Yes, some folks who really need it won’t get it, but that’s going to happen no matter what method you choose.
I’m not even sure if DMC is right… but re-posting an already refuted argument which addresses neither the propositions, nor the logic of his argument… Wow… just… wow.
Why would you have a problem with that? I think it’s pretty easy to assign the blame to the person who raised the price out of greed, as they are the reason that the price was actually raised. Those price stickers didn’t get coated with pixie dust that magically added zeros to the end.
For this person it sucks, but he’s not being kept out of the loop simply due to some greedy bastard that takes advantage of a near-monopoly situation, brought on by a disaster.
So, in your scenario, those with overly-abundant resources win, while everyone else is fucked. In my scenario, those with overly-abundant resources win, those with the ability to put aside some emergency funds win, while those who can’t afford a generator at standard retail are fucked. Seems a lot more people are fucked in your scenario, but hey, at least someone gets rich off those excess fuckees.
I guess I’m just not quite on board with giving up just because we can’t help every single individual under all circumstances. I’m certainly on board with trying to increase the number that we can help, but that’s probably because I don’t consider selfishness to be a personal goal.
I quoted you perfectly, and if you think I misread or misinterpreted something you said, then by all means, point that out. Anyway, let’s refresh the points so that you can see how you do not understand how markets work:
Translation:
Price caps and lotteries are not effective for need based allocation. Neither is the free market.
The first sentence is debatable, but I happen to agree. The second one is false. As I said before, the free market contains a price mechanism. People act rationally, or have the ability to act rationally, if they have information, such as price. For purposes of discussion, price really is all that matters, otherwise you get into mindless variances. That’s why when people speak of economics, particularly economists, it must be understood that “all things being equal.”
If there is a pricing mechanism, it automatically sends signals to actors within the market of how to act with regards to a good or service. The price tells them if it is worth it, i.e. do they really have the need to enter into a transaction for that good or service. If you cannot see this, then you truly do not understand how markets work. That’s not an insult. That’s fact. Therefore, a market with a price mechanism will have more ability to deal with, be more effective with, need based allocation. Hence, your second quoted statement is false.
Is it perfect? Will the market guarantee the needs of all its actors? No. No one ever said it would. Even the most die-hard anarcho-capitalist, anti-government, anti-all regulation, etc. will not guarantee it will. Why? Because there is always a scarcity of resources.
People’s wants, and sadly, their needs, will always exceed their wealth and resources. That is just a fact of life. So, not only is there a dearth of resources, there is also a limit to what people could pay, even if those existed. That’s why msmith537 made his FantasyLand comment. That’s why I also commented on having to rely on someone’s charity.
This is in relation to the scenario proffered of three guys living in a disaster area where there is a severe limited of generators: TV Guy, Insulin Guy, and ME (medical equipment) Guy. They are listed in order of need (lowest to highest) for a generator, and each guy’s name purports the use for the generator. You claimed that the free market will not allocate generators to these people based on need, because TV Guy could have way more money than ME Guy.
That’s true in the sense that the market only acts when its actors act. If ME Guy is broke, he’s not going to enter into any transaction. However, it terms of supply shock, people are going to act more rationally with regards to goods and services that they need. What people want is suddenly going to be on a very low priority. Supply shock causes prices to rise dramatically. If TV Guy is only going to watch tv, he’s not going to spend $5k on a generator when he could use the money to buy food or protection. If ME Guy needs that money to live, he will spend every last resource he can to buy it. If viable alternatives exist, which they often do in any market, then TV Guy can spend his money on the lesser prices battery powered tv, or whatever, books…
Some people, wrongly, claim that they will buy something based on whatever whimsy they have. That is not rational thought. Yes, markets have irrational actors, but as a whole, especially when confronted with limited resources, doesn’t it make more sense that people act rationally? If you can’t come to terms with this, then any discussion of economics will be completely lost to you. (That’s not an insult. It’s just like I have no appreciation for 18th century etiquette.) TV Guy has no reason to spend as much on a generator as ME Guy. It’s not rational. If prices are not raised, TV Guy might think it’s ok to buy a generator now. He doesn’t know of any shortage – how can he? – prices are the same. He does know that he’s without electricity now, and, since prices are the same, why not buy one now just in case this happens again? To think otherwise is irrational, and we can start adding variances all day until the cows come home and the scenario would be one of a constant anarchy, even in non-disaster times. Last time I looked, I didn’t see any looters in my streets.
[note: I truncated my responses as did yours.]
Nonsense? You’re the one who brought up charity? Seriously, you should check your memory and/or reading comprehension. To refresh your memory, you stated:
If you don’t see how free market principles are better now, I honestly don’t know what to say… None of the solutions presented offers anything even remotely as effective as the pricing mechanism. The last sentence is evidence of you, NoJustice, offering charity as a solution. The only way it would be better is if the philanthropist knew exactly who needed what, and could afford anything to give it the needy. And, really, how would a charity know when to act if there was not news or info of prices going through the roof?
In fact, as Cheesesteak posits, you want people to be greedy. You want prices to rise. Without this, people will not take risks to bring those goods to the affected area. If word gets out that there is a market for $500 generators going for $5k, people will go there. Added supply will bring the prices down, or at least let suppliers compete against themselves to keep prices relatively stable.
People keep saying this, starting with Plan B’s claim, but I haven’t seen the cite I requested. Sure, prices will come back down once electricity is restored, but at that point it really doesn’t matter. Would you like to provide the cite that they come down while the need is still high, simply because a bunch of greedy bastards with trucks roll into town?
I’m not even saying I don’t believe it, just that I’d like some actual data to back it up.
In either case, if there are only 10 generators for sale in a town of 10,000, then 9,990 people are fucked, regardless of income level.
My goal (and yours too, I hope) is to get more generators to this town as rapidly as possible to quickly reduce the size of the “fucked” pool. The free-market method lets high prices motivate extraordinary efforts (overtime, graveyard shifts, expensive-but-fast transport methods, etc.) on the part of the supply chain, which will soon lower prices back to pre-crisis levels.
If generator prices are held artificially low, how do you propose to increase the supply of generators more rapidly than the free-market method?
It’s distressing how often people want to help the downtrodden by appropriating other people’s resources. Want to help the downtrodden? OK, you buy a generator at present market value, then invite the downtrodden diabetic over to store his insulin in your gen-powered fridge. Presto: the downtrodden diabetic wins, cuz he’s got cold insulin; you win, cuz you’ve got a generator to power your home theatre system; and the merchant wins, cuz he got to charge what he wanted for his merchandise. Voluntary transactions all around, as it ought to be.
It seems to me that the fundamental thing being missed here is that the guy with the generators is under no obligation to provide them to anyone at any price, regardless how much you think you need one.
The guy with the generators has all the say in the matter. He can auction them off, hold a lottery, hand pick who receives them (which could be anyone from the most needy to his best friends) or simply smash them out of spite.
More specifically, there are two things being missed:
Without some way to tell who needs the generator most, people in the area who have them will give it to the first person who can pay their price - regardless of how much the guy behind him in line might need it.
Without some increased reason to, people who are outside the area who have generators will not bring them into the area and sell them to anybody.
Gouging solves both these problems, if imperfectly (due to people posessing various amounts of starting capital which skews their valuation of dollars). Price fixing doesn’t solve these problems at all. So instead of having more generators getting trucked in, and being doled out in rough order of willingness to pay, it becomes first come first serve, and the first ten people empty the shelves because their demand rose while prices did not.
But who says there are only 10 generators? What if there are 100 generators, and only 90 people need them really badly. Seems peachy. But what if I happen to think that around half of those people have oodles of cash laying around? I could sell 45 of them at 10 times face value, let everyone else suffer and still make a killing. Hell, I could throw the other half in the nearest creek to artificially reduce supply, raise the price another grand, and still make a killing. Wouldn’t the “greed is good” folks advocate that the vendor do exactly that?
My goal (and yours too, I hope) is to get more generators to this town as rapidly as possible to quickly reduce the size of the “fucked” pool. The free-market method lets high prices motivate extraordinary efforts (overtime, graveyard shifts, expensive-but-fast transport methods, etc.) on the part of the supply chain, which will soon lower prices back to pre-crisis levels.
Simple supply and demand. If I make $200 profit on a generator, and I suddenly can sell 500 of them overnight, I’m going to damned sure do everything in my power to get 500 of them in quickly.
Because if I am able to buy them at pre-distressed prices, I can buy ten times as many and help ten times as many people.
Again, what is it with this “free-market” crap being tossed around. Whether it even works in general is a different debate (and should a thread open up, I’ll happily chime in as to why the “freer” our markets have gotten, the less well they seem to work), but in certain disasters, there is no such thing as a free market, at least not immediately. Vendors have a near monopoly status for a short period of time, so the free market is out the window. By the time the market can react and let competition do its thing, the shit has been cleaned from the fan blades.
I keep asking for a cite as to examples of how this all worked out so peachily, but so far no one has put up. I’m not even certain at this point that I’m completely against the concept of jacked up prices, nor do I know if I have a better solution until I find out how effective your’s actually is, but would certainly like a bit more data that “my professor told me” or “if you were an economics whiz, you’d understand” type shit that is being shoveled around here. Last time I was in a thread being talked down to about economics, it was with “gurus” talking about how awesome the economy was doing. It wasn’t.
Nothing is being missed. If he wants to sit on the generators, go to town. If he wants to sell him, I’m simply asking to be convinced that it should be legal for him to take advantage of a short-term monopoly by price gouging.
Nope - there’s no need to artificially reduce supply; you’re already sitting in a spectacularly low supply and riding high. I mean, if you weren’t, there’d be no gouging!
The true greedy person would sell all the generators he could at the high price, and then auction off the rest to the highest bidder once he has a crowd of sufficiently desperate people standing around begging him for generators. Of course, this does risk that some previous customer who paid a high price will get pissed that they’re going for cheaper now and come after the seller with the gun, which encourages him to set his original gouging price at precisely the level he can sell them all. After all, if he sits on a stock of generators, or worse destroys them, and people find out, somebody he wouldn’t sell too will probably shoot him for doing that.
If it was that easy, you’d already be there and there wouldn’t be a shortage - which is to say, you’re basically positing that the “gouging” price level is the current price level, and people will come swarming in and selling at the current price and saturate the market there.
In reality, of course, the sort of adverse conditions that encourage gouging also deter incoming shipments, without extreme motivation.
Whoa whoa whoa - is there a shortage, or isn’t there? If there’s a shortage, when you buy ten times as many you are taking nine generators away from people who will die without them. If not…no gouging will occur.
I agree with msmith537, that you simply do not comprehend the concept of property. If the generators are his, he should be free to not sell them for any amount, give them away for free, or anything in between.
What if someone is currently using their generator? Why shouldn’t they be allowed to offer it for sale at a price that reflects the utility they are getting out of it?
…
No, I wouldn’t, because your suggestion is so abysmally wrong as to almost be laughable. Destroying your own stock to “artificially reduce supply” cannot increase your profits unless your clients are so stupid that they hardly can be considered to be sapient.
If you have 100 generators and you are selling them for $5,000 apiece, you receive $500,000. If you have 100 generators and you sell half of them for $6,000 apiece and destroy the other half, you receive $300,000.
Let’s get back to the issue of what happens before the disaster hits.
If you pass ‘anti-gouging’ laws, then there is absolutely no incentive to stock emergency supplies. In fact, some businesses may actually intentionally choose to avoid stocking goods for use in an emergency, since they will subject to the additional hassle and risk of selling them during a crisis or even having them expropriated by the government.
But what if you explictly passed a law that said, “If we have an emergency in the future, you can sell whatever you’ve got for any price the market will bear.” What would happen? What would YOU do if you were a businessman?
I’d do something like the following: I’d try to assess the risk of hurricane or other natural disaster occurring in the next year, or next season, or whatever. I’d then think about how much profit I could make in the event of a disaster. I would balance the risk of over-supplying my inventory against the profits to be made should disaster fall. Then I’d stock additional inventory accordingly.
The next thing I’d do is advertise to make sure people knew where to come in the event of that emergency. If a hurricane was about to hit, I’d immediately increase my prices somewhat, then advertise “Sam’s Disaster supplies”. I’d get some sales right up front in anticipation of the hurricane, as a modest increase in profit. If the hurricane did hit and caused a major disaster, I could raise my prices even more.
But my competitors will do the same thing, and I know it. So I’d have to factor that in. Eventually, the prices we would settle on would closely represent the additional value of having those supplies, balanced off by the cost and risk of stocking them.
Everyone benefits. Supplies are greater when the storm hits. The public has more information about how to get those supplies.
‘Anti-gouging’ laws are price caps. Price caps ALWAYS result in supply shortages. This is not what you want in a disaster area.
Balanced against this logic, we have… generally an emotional distate for ‘profiting from hardship’ and the same old tired class warfare rhetoric about gougers and the poor. But not much else.
Because of course, that is the default situation already. And you expounded on the supply side of the equation in your well-reasoned post.
What about the demand side of the equation? Before the hurricane, potential buyers of generators are also weighing the cost of generator vs. the risk of not having one, and acting accordingly.
For argument’s sake, let’s say someone weighs the decision to spend $500 vs. the 1% chance that power will be out for 1 week at some point in the future. They pass by the generator rack at Home Depot month after month, for years, without buying. They invest the $500 at some rate of return, or spend it on consumption.
Then the hurricane hits. Now that 1% risk becomes realized. That doesn’t mean their previous assessment was wrong. Or that their estimates of risk were wrong. It just means that the 1% assumption was realized.
Now, of course, they want it both ways. The $500 in present terms, before the hurricane hit, was weighed against 1%(value of discomfort) and was found to be superior value. $500 > 1%(value of discomfort)
But now they want the $500 generator after the hurricane.
What the ‘price fixers’ are arguing is that the price of risk should be zero. That there should be no weighing of the future value of the generator compared with $500 in present terms.
That’s a recipe for disaster. It’s also the same logic behind the gubmint subsidizing loan rates for Fannie and Freddie. They basically tried to will default rates (the risk) lower to match the price they want set in the marketplace (the interest rate). Or tried to will prices lower for a given default risk. And look what happened.
I suppose the answer to that question is whether you think it’s better for no one to get the generators at all or for our profiteer to earn a large short-term premium.
Are we trying to enforce what is “fair” or are we trying to provide the maximum benefit to society (IOW generators distributed)?