You have a point here, and a good reason why, in a disaster like this, it would be appropriate to charge 10-15, maybe 25% more than normal price. If they are charging double, then they are definitely profiting off it much more than their costs of stockpiling, but that’s still not really gouging, though I do feel it’s getting into that realm.
We are talking about 1000% or more increases on items, that is gouging, is that what you are defending here, or are you just defending the less than 100% markups that most would not consider to be gouging?
Isn’t price gouging during natural disasters or other emergencies illegal? A few weeks ago, in reference to the imminent eclipse, a news feature made this point quite clear. There was no limit to the amounts that could be legally charged for food and lodging along the eclipse path, as evidenced by a number of ridiculous hotel and Air BNB rates they reported. But charging people $99 for a bottle of water? Not so much.
Of course, the U.S. is a big country with fifty state and thousands of local jurisdictions, so exceptions are possible I admit.
It almost never makes sense to keep anything approaching disaster levels of inventory for things like bottled water unless you are anticipating a disaster (e.g. you know a hurricane is coming next week). Competition forces you to have the most efficient levels of inventory you can achieve.
Its not just the cost of the actual inventory and spoilage, its the space as well. Those extra inventory costs that you think would justify price gouging during emergencies would make the retailer uncompetitive and drive them out of business. Its the free market in action.
The average supermarket keeps enough water/soda/juice, and other life sustaining supplies to supply its local area for three days as long as they don’t let someone come in and buy all the fucking water/soda/juice. With your approach, a wealthy family can just pay $10/gallon for all the gas and all the water because they don’t exercise any price discrimination until stuff hits the thousands and during an emergency, they probably pull out the stops because they are simply not price sensitive at all.
Gouging is almost always with respect to inventory that is normally kept on hand or purchased specifically in anticipation of an imminent disaster.
Please list the grocery stores and gas stations that keep inventory at disaster levels on a regular basis. Noone does it. The price of stocking all that water and blankets is that you don’t have room for cereal and avacados. Typical inventory management doesn’t really allow for your style of overstocking on stuff like bottled water. Gas stations are even less likely to do so because they would have to install a much larger gas storage tank than they need in the off chance that there is a disaster in the area at some point. The margin on gasoline is thin enough that storing significantly more gas than they need during normal times would drive them out of business in a fucking hurry.
And it is also possible that the supply curve is not elastic enough during the short term (say the three day aftermath of a hurricane) to justify the distribution of life sustaining supplies based on ability to pay.
Or it might reflect opportunistic price gouging on life sustaining supplies.
you seem to say that allowing price gouging is a necessary inducement to get retailers to keep large inventory that would only be necessary during an emergency. I don’t think the most laissez faire attitudes towards price gouging would ever induce any business to keep inventories significantly higher than the optimal level during normal times unless there is an anticipated disaster event in which case there really isn’t a whole lot of extra inventory cost and you probably would have stocked more anyway (in anticipation of higher demand). The reason is because you are right, keeping high inventories are costly and it would put a retailer out of business to keep those large inventories “just in case” The over-inventories gas station and supermarkets would not be able to compete with other gas stations with more efficient inventory in the long run.
you seem to say that the additional costs of keeping large inventories might justify current price gouging but you can’t name any businesses that keep this sort of inventory. Noone does this and no one will ever do this. The notion of keeping disaster inventory levels of disaster supplies at retail locations is absurd. It would be like having a solar eclipse store if you didn’t know when solar eclipses would occur until a week ahead of time, except its a lot easier to stock up on bottled water in a week than it is to stock up on solar eclipse glasses in a week.
I point out that you can meet most of the immediate disaster needs of an area with rationing instead of relying on the “free market” to distribute life sustaining supplies based on ability to pay.
You point out that supply elasticity might be enough to justify price gouging that might get more supplies into a disaster area. I point out that it might not make much of a supply difference at all and all you might be doing is letting the rich feast while the poor starve. Sure supply typically goes up with price but it takes time for the market to react to price signals. The opportunity to price gouge is pretty much over before the week is out and everyone knows it, you need a particularly nimble supplier to be able to make a profit and a difference beyond what can be done by emergency relief organizations and agencies.
The term price gouging is an accurate term, emotions and all. You excuse the price gouging with a lot of hypothetical costs without examining if any of those costs are really what leads to the price gouging. When you opportunistically raise prices on life sustaining supplies during a disaster, you are price gouging and I think we can (and probably should) attach a moral element to your behavior.
In what way were my posts not responsive to yours?
first because it’s easy. The govt bringing in more water (let’s say it’s water)…provides more water. The govt just controlling the price of water doesn’t bring in any more water, and in fact results in less water being brought in (other than by the govt) than if you let the price of water rise.
This isn’t quite as obvious, since for one thing the govt bringing in more water and regulating the price of all water are not mutually exclusive. But the most water would be available if the govt a) brought in as much as it could itself and b) didn’t concern itself directly with what price private water sellers were charging.
By not directly I mean besides the important fact that govt bringing in (and presumably giving away or selling at low price anyway) additional water would tend to lower the price private sellers could charge, indirectly. Same goes for charitable orgs. The debate often seems to go on tangent of, ‘scum bags are charging a lot more but charitable people/orgs are giving it away’. OK, but giving it away in significant quantities could have a big effect on how much ‘scum bags’ could charge.
But still not obvious because you have to know how much it costs the govt (taxpayers) to bring in water, how much the price would actually rise to balance supply and demand without price limits (either with or without free govt, or charitable org, provided water), etc. There is a practical/empirical aspect to this. I would say it’s sometimes ignored on either side, though in my observation more on the side morally outraged by the idea of letting prices rise.
Let me just say as someone in the path of Irma, that if we’re not going to allow price gouging, that the implicit bargain we are making is that we won’t hoard, thus denying many people any access to needed supplies at all. I’m seeing assholes preparing for the nuclear apocalypse, and actually looking at the faces of people who got no water while they walked out with ten cases.
The choices are gouging or rationing, and the retailers have zero incentive to pick that fight with customers. They get the same money regardless and don’t risk creating an incident. If we’re going to ration, the options are either that citizens self-police, or that the actual police enforce anti-hoarding laws.
Your next sentence is quite a sufficient demonstration of that.
I wrote the following in bold in a previous post so that people wouldn’t miss it. But you still missed it. This is a direct quote from that previous post.
It is ultimately an empirical question of whether higher prices bring more goods to afflicted regions.
“Empirical” means looking at reality in order to figure out how reality works. This is in contrast with “theoretical”, which is based more on deductive thinking (or really just pure storytelling in this kind of case). I also wrote the following in a previous post, not originally in bold, but which I’m going to emphasize here since you also missed it the first time.
I’m far from an expert on emergency economics, so I’m not going to state ex cathedra how reality works here – I simply don’t know
“I don’t know” is not a justification for anything. Apart from the indisputable statements like “more water is better than less”, none of my post was an absolute. It was pondering possibilities. If I had wanted to “justify” a position, I would have provided empirical evidence for that position. I didn’t. I didn’t do that, because I don’t know. What you don’t seem to understand is that you don’t know either. You’re telling a story that you find compelling. Your story might even be right. But writing a clever argument does not automatically make that story correct, nor does it justify your moral condescension. The entire problem is that we should actually be looking at the empirical evidence before deciding who is evil.
It’s a kangaroo court that issues its sentence before looking at the evidence, or even considering what that evidence might look like.
I remember a previous discussion on “double taxation” where everyone’s ideological knee jerked so sharply in that thread that no one would actual read what you wrote. You complained about this. You found it frustrating that people couldn’t characterize your post accurately because their ideology got in the way.
Well.
I’m not going to go through each part of your post because there is no point. You’re just offering a story. Of course, your story might be right. Your explanations might be correct. Totally possible. But you offer no more empirical support than anyone else, and that is, again, the big issue here. Disasters don’t happen very often, and their circumstances aren’t particularly amenable to careful data collection. Data in the social sciences is generally bad, and here it’s even worse than normal.
There is a major hurricane approaching the southeast United States right now. I’m actually in South Florida right now, potentially in the path of the storm, so I’m not going to get into a useless back-and-forth with you if you read this post just as carelessly as you did the previous. Or even if you manage a reasoned response. I have more important things to be doing.
But I will say that many of the shelves at retailers are already bare. Gas stations are already running out of fuel.
It’s Tuesday. The storm doesn’t hit until Saturday, the eye not until Sunday (if it hits at all), and there were no bottles of water, no bread, no D batteries at the two places we visited. Thankfully, we already have lots of water. We have food. We thought we had a backup supply of batteries, but as it turns out, we didn’t. Maybe we misplaced them. We’ll check again, check different places, maybe they’ll get another shipment in. But this gets down, again, to the elasticities of supply and demand. That’s the kind of discussion that cuts to the heart of the matter, but it also seems to be the kind of discussion that’s very hard to have.
Unfortunate. But if that’s the way it is, then that’s the way it is.
Actually, if the market broke down, there wouldn’t be the feedback mechanism between perceived scarcity and higher prices in play. Price gouging is actually a classic example of a well functioning market.
Basically the whole argument against price “gouging” is the notion that goods with inelastic demand (i.e. things like water, for example) or items without substitutes shouldn’t follow the normal mechanisms of supply and demand, usually out of humanitarian considerations, rather than purely economic ones.
It’s also that inelastic demand and lack of substitutes during crises that make the prices go so high; people need water to live, gas to get around, etc… so in conditions where they can’t take the bus, or drink from the faucet, prices go up… because they can.
At some point though, substitutes DO come into play, either through hasty introduction by competitors, or because previously unattractive substitutes become attractive due to high prices.
Sometimes the price fluctuations are due to sheer stupidity; recently here in Dallas, we’ve been enduring a sort of gas panic, that’s entirely based in the perception that gas supplies MUST be tight, and prices about to rise dramatically. So the dipshits around here have been filling up repeatedly and CAUSING the panic, when all industry sources are pointing out that there’s not much of a supply crunch, and not much of a projected price increase. Yet we have $3+ a gallon gas and about half the stations are gas-less because of morons who have drunk the kool-aid and are filling up whenever they can, putting unusual strain on the resupply system… for no real reason other than dumbassery.
First of all stay safe, I consider you one of the more relevant posters on this board.
What you are calling storytelling and clever argument might also be called analysis and reasoning. Noone is going to inventory disaster levels of supplies during normal times. NOONE. The closest I think you will get is retailers stocking up on disaster supplies in the days ahead of a predictable disaster like a hurricane. Like I said, show me one retailer that stocks disaster levels of supplies in areas where price gouging is permitted? If price gouging could actually induce people to stock disaster levels of inventory, you would think someone somewhere would be doing it, but they’re not. Isn’t the lack of any evidence actually a form of empirical evidence?
You say that high prices (and we are talking about price gouging levels of pricing) might reflect high costs and you once again refer to inventory costs and so I ask you to point to the retailer that is actually incurring these high costs.
I impose a moral component to people who price gouge life sustaining supplies. I never once criticized people who price gouged the solar eclipse glasses in the wake of the irrational hysteria surrounding blindness during the solar eclipse. But life sustaining supplies are different.
Why don’t you just get out of there? Is it safe where you are?
But if there were a way for the retailers to resupply normally, then presumably the price wouldn’t rise much, because of competition. The problem price gouging laws are attempting to address is that retailers are selling existing inventory at much higher prices to people who are in a captive market.
People and goods were moving in and out of Houston before, during, and after the hurricane. Not on every road. Not to and from every single neighborhood. But hardly captive. We have posters using words like “helicarriers” when trucks were doing the job. No, retailers were not “resupplying normally”. So we can’t expect normal supply chain efficiencies.
I’m not so against people making money that I would prefer for people in need to go without.