Stupid, or justified? Seems to me that this is an open and shut case that is all about moral outrage rather than anything rational. Consumers as a group generally don’t like it when supply and demand doesn’t work in their favor. And yet, 99% of the time, supply and demand IS working in their favor. You may not like staring at a $20 case of water, but the only reason you’re staring at it is because if it had been $5 you’d be looking at an empty shelf.
It’s economics 101 that prices that are too low result in shortages. Yes, yes, we know that not all markets are perfect, but during disasters markets actually work pretty darn well for normal consumer items, assuming they are permitted to do so. If retailers are forced to keep their prices the same, the shelves empty. If they can charge what the market will bear, consumers will nearly always find what they need, and if they don’t it’s because as high as the prices went up, they still didn’t keep up with demand.
Anti-gouging laws are 100% about politics. People don’t get outraged when they can’t buy things, they get sad. There’s no one person to lash out at for that state of affairs. But when they see something priced way too high in their judgment, then there’s a villain: the store owner. And once you have a villain, elected officials waste little time in punishing the villain, especially since individual store owners are not politically connected, like say, an oil company.
Yet that’s what happens becuase of gouging laws. Empty shelves.
Just because we need something does not imply a certain price point. Nor does a product normally considered a need actually represent a need for every person. For example, if you stocked up on dry foods but a restaurant is open, you don’t need what the restaurant is selling at all. But others who could not obtain as much as you did may need what the restaurant is selling. Price signals are a good way to make sure that only those who need the food will get the food, whereas outlawing price signals just advantages the strong and fast over the weak and slow.
If there are no other means of buying necessities then yes, laws should come into effect.
We don’t always live in a perfect free market so I can’t get outraged about such laws in exceptional circumstances.
And so again, empty shelves, most people go without. While some others have abundance because they go there first.
This is not actually a more just state of affairs. Low prices mean people overstock. So the fastest have more than they need and the slow have nothing. Some say, “ration!”, impose limits. But that’s not very efficient either. One can get around rationing by just going to another store, and rationing doesn’t take into account household size. You’ll still have the single guy buying four cases of water and the guy with 5 kids buying four cases of water.
Price signals force people to make hard choices about what they need and what they can live without. All other methods just cause a brute force rush on retailers.
Because we’re not talking about $1000 baubles here, we’re talking $20 instead of $5, or $5 instead of $1. Obviously if you had to pay those prices for a month you’d be broke, but in the immediate aftermath of a disaster even the poorest people tend to have more cash(or food stamps) than goods to buy.
More proof that gouging laws are all about politics: they almost never apply to labor. Yet especially in the case of rebuilding, laborers are allowed to charge employers whatever the market will bear. Which increases the costs of jobs, which hits consumers. That is of course a good thing though, because it draws people into a disaster area to work. Lots of domiciles need fixing and an area’s own labor force is going to be insufficient. Thus the need to draw people from outside the area with double or triple wages. Suddenly we get rational when it’s something WE sell.
I also notice that no one feels bad about taking advantage of stores whose freezers are not working and thus have to unload their stock at 90% off. That’s about as clearcut a case of taking advantage of a poor store owner as you get. But people feel no guilt. And why should they? If he charged the same price as before, he’d have to throw most of his stock away. Markets work, especially during disasters.
Gouging laws have a place, but only when the situation is so bad as to require actual rationing. This would be extremely rare in a country like the USA.
Need forces me to make hard choices about what I need – for example, “Will I Just Take This If I Need It And Can’t Afford It?”
If I’m going to die without drinkable water, then I’m going to take the drinkable water. And if, to borrow a page from Ethics 101, we’re shipwrecked – well, then, I’m going to grab something that floats, because I’m going to cling to it for dear life. No, society can’t endure if everyone does that for every item at all times; that’s why it’s easy to build a workable long-term arrangement out of “enlightened self-interest” by enduring various short-term inconveniences. But as soon as it becomes a life-or-death question in an emergency, I lean less on “enlightened” and more on “self-interest”.
I doesn’t have to be either/or – for disasters, perhaps allow markups up to a certain level (maybe no more than 5% or 10% increase per day, or alternately have prices capped at 200% of the pre-disaster price), but not beyond.
Or get rid of them, but fully fund groups that can hand out necessities (diapers, basic food and water, dry clothes, etc.) for free such that everyone can get these necessities.
That’s actually the worst of both worlds, because you still end up with shortages AND people pay higher prices.
I think Lord Feldon made a good point, in the US we just don’t need anti-gouging laws or rationing. If a certain area has a shortage, if prices are allowed to rise, labor and goods will rush into that area to take advantage of higher prices, because while one area is stricken the rest of the country is still benefitting from abundance. Obviously if we had a nationwide famine, we’d have to ration. We rationed during major wars too. But if a small AREA has shortages, the best way to solve those shortages is for areas with abundance to reallocate goods and services to the area that needs them. And the most efficient way to do that is with price signals. “Hey, I can fix roofs here in Little Rock for $10/hr, but if I drive down to Houston I can get maybe $40/hr for the next few months.” much of the excess laborers who are nearby will head over(and many who aren’t nearby). Whereas if laborers were forced to take the same wage they got back home, why leave their families? Altruism only gets you so far.
I don’t buy that there can’t be a happy medium somewhere, even if it’s hard to figure out exactly how to get there. Your preferred solution sounds like it will leave lots of families unable to afford things that, while perhaps not needed to avoid short-term death, are needed to have any semblance of health, safety, and shelter, even in a disaster (i.e. maybe they can afford basic food and water, but no shelter, dry clothes, medicine, or fuel).
That doesn’t answer my question, what stops the rich from stockpiling? Especially if the price increase is relatively inconsequential to them.
How long will the poor people in that disaster-hit area have to put up with increased costs? Note that they will be be dis-proportionally affected by these price increases and may not be able to afford those prices in the meantime.
I doesn’t have to be either/or – for disasters, perhaps allow markups up to a certain level (maybe no more than 5% or 10% increase per day, or alternately have prices capped at 200% of the pre-disaster price), but not beyond.
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Then the shortages are lesser, but still present if your arbitrary limit is below the market price.
Even if it were practical to hand out necessities to everyone in the wake of a disaster, a guarantee such as this would discourage stockpiling in disaster areas, deepening the problem. Vast amounts of resources are funneled to disaster areas in the lead-up to disasters and it goes into personal stockpiles, mostly modest, that carry many families and communities through the disaster. It would be in nobody’s interest to discourage such an efficient decentralized system.
If no one is starving or thirsty or shelter-less or lacking urgent care or other necessities, then fine. But I don’t think that’s the case, and I don’t think that would be the case, without some level of assistance.
Is this a real problem or a hypothetical one? Are rich people stuck in the disaster area, and are they willing to pay 200% markups for necessities that they’re not even going to use? Maybe that happens to a small extent, but the much bigger problem is, as adaher states, empty shelves.
The invisible hand isn’t perfect but this is one of those scenarios where it’s probably the best we can do. The answer to price gouging is to send money directly to those who need it. They can decide what things they really need and how much they’re willing to pay for them given the scarcity. If diapers are in short supply and people are willing to pay lots and lots of their donated dollars to buy diapers, then diapers are going to find a way into the area. If enough diapers find their way in, the price will drop. That’s much better than someone trying to figure out which goods to send, how much, what price they should sell for… they’ll never get it right and inevitably there won’t be enough diapers, or they’ll be too many and not enough of something else.
I’m not even sure you’d need to send money. Even when I made minimum wage, the day after a storm was the one time I had more money than I could spend. Spending even $20 in a place hit by a storm can be challenging.
I live in Florida, so I’ve seen my share. Nothing as bad as what’s happening in Houston now, I don’t know that free markets or price controls matter when everything’s under water. But when the floodwaters recede, I would like to see people get what they need fast, rather than police wasting resources going after people selling generators out of their pickups at triple prices.
Before going any further in this debate, wouldn’t it be good practice for folks to give cites for their assertions? What do the experts (economists) say about this? What about dealing with the demand end of the equation by limiting purchases any one consumer can make rather than limiting the price a retailer can charge?
Does a lower price contribute to or exacerbate the problem of stockpiling?
How long does it take for the market to react to an increase in demand for a given necessity (as compared to other necessities)?
Should/do such laws apply to all consumer goods or just necessities?
Seems like the debate is focusing too much on ideology and not enough on what the goals are and what the experts say are the best way to accomplish those goals. We wouldn’t have such debate about climate change, would we? People would be rushing in with cites from the get go.
By rationing you still slow down the stockpiling. Sure, the guy with five kids might have to go to five stores but the guy without five kids is less inclined to put the time and effort into that when he’s probably got a bunch of other stuff to do, too.
If you let prices rise it means that at some point the poor are priced out of the market. The water on the shelf is useless if you can’t get at it. If enough people can not pay for a necessity you can wind up with a riot and looting.
The answer is none of these extremes - it’s evaluating things in context. It’s allowing some rationing and some price raising but putting limits on them. It’s having some authority types making sure the old folks in the nursing home get some food and water, too.
As for all parties buying 4 cases of water - well, later on maybe the single guy can engage in a private transaction with the guy with 5 kids.
In any case, you’re not going to get a perfect solution short of the army issuing ration cards and controlling distribution, which I don’t think anyone really wants.
