Yes, the poor are better off under finitely high prices, they can at least try to acquire some of the necessary product in short supply… Follow your own logic, the poor are least likely to be able to go somewhere else where the shortage doesn’t exist or find any other alternative. There is no reason to believe your basic premise that high prices will prevent hoarding. It doesn’t, it just means the people with the most money do all the hoarding and the poor still get nothing. These are necessities, if you prevent people from obtaining them they will take them any way they can.
Also, your response is an odd way of not responding
Right again. Look, no matter what scenario we propose, if the government isn’t actively taking steps to protect the poor by rationing a price-controlled supply, then they get screwed. My preference would be to avoid that situation entirely, but those aren’t the cards dealt. We’re talking about the least-bad scenarios now.
Hoarded gas is a marginal good, purchasing decisions are made at the margins, ergo people buy less of it when the price goes up. If we don’t believe that works, then we don’t believe in mainstream economics, and an extraordinary suggestion like that requires an extraordinary explanation.
Look a little more closely at that statement.
First, we’ve already established that “the rich” have many alternatives to driving when there’s a gas panic, and so aren’t as desperate for gas. That motivation for hoarding is thus diminished.
Secondly, we’ve established that another cause of hoarding is profiteering. If we can accept without mathematical proof that rich people have more money, then it follows that they have less motivation for dangerous, low-return ventures like hoarding trash bags full of dangerous flammable liquid fuel to hawk on the corner. That’s the domain of the less-wealthy people, who we’ve established are more sensitive to pricing pressure, which means their hoarding behaviors also should be.
A gas station allowed to raise prices to $10/gal in a limited supply/high demand scenario makes more money per gas shipment. This allows them to offer more money as an incentive to get more shipments diverted to their location, which increases supply, which lowers prices.
A gas station not allowed to raise prices has to either wait for their regular shipment, or offer more money out-of-pocket to get shipments diverted from elsewhere. The latter may not be profitable given existing margins, so the only solution may be to just to shut down and wait.
Of course, the government could step in and mandate X shipments to be diverted to Y locations, but this is much more inefficient. The government has to figure out who needs what, how much is fair, where is the location with the most supply that can be efficiently transported to the locations with the most need, and appropriately motivate everyone (either by force or by throwing buckets of money in compensation, both of which are inefficient) to do this quickly, all while expending additional resources to enforce rationing & price control measures, and policing black market resellers.
There’s a difference between burdens falling ‘heaviest’ on the poor and 'only ’ on the poor.
For the financially secure, the ‘burden’ of temporarily high gas prices is to take away a small portion of their most abundant and replenish-able resource. They may lose the ability to pay for a few luxuries, but they are otherwise unmolested by temporary high prices for individual products. The poor bear this burden alone, despite the fact that others pay just as much per gallon.
When gas is literally unavailable, everybody, rich and poor alike, have to deal with the burden. The wealthy will weather it better, but they can’t just go on as though nothing has happened. This is a lousy solution, but has the feature of not focusing all the burden on the poor.
The third option, the right option, the option that is actually fair and reasonable and obtainable, is to temporarily ration. You don’t need the National Guard stationed at every gas pump, anymore than you needed them stationed at every street corner to enforce social distancing. The Governor sets a rule that you can buy 5 gallons per visit, no exceptions, or some similar type of rule.
This is probably the best response I’ve seen in the thread. A total outage is effectively like a lottery system, and a properly-administered, randomized lottery would be a fair method of allocation (if more wasteful). But it’s not exactly a random lottery, is it? Nobody’s administering, is it? It’s just whoever happens to have to flexibility to beat everyone else to the pump, wait in line for an hour, and go home with what you need.
This has the (purported) advantage of leveling the burden across class strata, but I’d suggest that once again the rich are going to be the ones who have the information and scheduling advantage in that kind of lottery. So that doesn’t really seem fair to the poor either.
What seems fairest to me is putting more of the decisions in the customer’s hands as to how much they really need to consume in a crisis situation. Some are acting as if less-wealthy people have zero options, and in cases that’s probably true, but I don’t think it’s as straightforward as all that.
Again, it’s just breathtaking to watch the furious assaults on the hypothetical (as well as the documented reality of what happened).
How does this help at all? People just make more visits causing longer lines and more fist fights. I can see this already. I’ve got the wife and two kids in the car, so I get 20 gallons according to my interpretation. The person in line behind me obviously disagrees and has a different interpretation.
And as mentioned above, it doesn’t effectively allocate the resources. The guy who needs 10 gallons to get to work is out of luck, but if my wife and I work from home, we can each get 5 gallons and I can send the kid to another station and he can fill up the 5 gallon can. We need zero gas to brave the temporary storm, but we are still legally hoarding 15 gallons per trip.
I also don’t understand why you think rich people would hoard gas at $8/gal. Apart from the fact that people don’t get rich making stupid financial decisions, there would be no shortage at that price (or whatever price it settled at) so there would be no reason to hoard. If you believe that there would be hoarding at that price, then why isn’t there hoarding at all prices for anything? Why is anything price sensitive? Why can’t farmers charge $100/bushel for corn knowing that rich people will be out hoarding it at any price?
The world isn’t fair to the poor, the fact that the world continues to be unfair to the poor does not make any particular crisis management strategy a bad choice. When you make the decision price based, you are putting the decision point squarely on the core of what it means to be poor, on the single biggest problem plaguing the poor.
For others, that decision point is at a place of interest, but not at a critical place for them and their family. If it’s a temporary spike, they don’t really have to change their behavior at all. That extra $50 to fill the tank this week is no big deal to people who have sufficient money. It’s a crisis to people who don’t.
It’s a shortage, so there will absolutely be people who get the proverbial “FU” as a result. They’ll be unhappy, their day is screwed up, their plans ruined, whatever. Should every single one of those FUs be sent to poor people? To make sure that rich people don’t get shut out of buying gas if they want some?
I dispute the assertion that higher prices are automatically going to, as you put it, “send every single FU to the poor”. The reason we had outages rather than shortages is because people were unnecessarily overconsuming. Had they not overconsumed, there would have been some gas for everybody. Maybe even adequate supply for everyone. Yet you (and others) are arguing as if the price would certainly have been like $1000 a gallon, instead of like $6 or $12 or something that could be managed for a week or so.
I believe it would have been low double digits at most, evidenced by the (anecdotal) evidence that some people couldn’t scalp their hoarded gas at $85 or $40. So the real market price must have been south of that, and it’s a shame we didn’t get to find out that it may have been much lower.
And we’re also arguing as if the price spikes and hoarding were caused by rich people sucking up all the supply. Is that really true? I assert it is not, that it wasn’t rich people who changed their behavior at all. Why would I think something like that? Maybe this:
The rich wouldn’t have sucked up all the gas because, as you said, there was no need for them to change their behavior at all. As I’ve been trying to argue.
Why didn’t we get to find out? Before the supply was interrupted and there was no fuel to be had, how come some gas station entrepreneur did not sell at $10 or $15?
Because of anti price gouging laws. And that is one of the criticisms of them as they do not allow true market prices to be set and therefore everyone is getting a “steal” at the now below market mandatory government set price and causing everyone to rush out and buy as much as possible exacerbating the shortage and creating an outage.
As stated above I’m in favor of letting the prices float but I wonder how this would work in practice. If a long line started to form would the station start increasing the price while people where in line? That would raise some tensions. Setting the prices at the beginning of the day might not be granular enough.
I don’t disagree. Frankly, it’s pathetic how one year after the Great Toilet Paper “Shortage”, a blip in supply has people hoarding gas like they’re Mad Max.
A person who uses 10 gallons of gas a week would see their bill spike from $30 to $120? For people with money that’s manageable, for people making $10 an hour… the increase alone is 10 hours of take home pay, 25% of their weekly income. We expect the working poor to lose 25% of what little they make so that the market for gasoline doesn’t get temporarily messed up?
That’s just not cool.
The question isn’t whether it will work, because of course it would work, the free market is a wonder of efficiency. The issue is that the free market is incapable of caring whether or not Mr. $10/hr can afford to eat dinner tonight. There is no mechanism for the laws of supply and demand to account for it. We have to do that.
Is losing 10 hours of take home pay better or worse than spending 3 hours camped out in line at the gas station hearing of a potential shipment, only to find out the shipment isn’t expected until tomorrow, and then driving 2 more hours around (wasting more fuel, exacerbating the issue) attempting to find another gas station with no luck, then navigating craigslist for another hour in order to eventually locate a seller ~30 minutes away with a few extra plastic tubs of contaminated gasoline at $15/gal?
I’m not terribly happy about it, but I feel like it’s cooler than “surprise, you’re one of the lucky winners who gets none of the price-controlled gas, so you don’t get to work at all. At least you don’t have to buy gas.” It’s a crisis, by definition large parts of it are going to be uncool, and government’s job is to mitigate that instead of making it worse. Georgia failed.
If it’s a money problem, at least people have the option of cutting whatever’s less important than putting food on the table, just for a week. (I know, I know, for the working poor, every last thing is core, nothing is marginal, absolutely nobody has any leeway or alternatives whatsoever. We’ve been through it). But if the gas is reasonably priced and you can’t get any of it, how do you solve that problem?
I’m pretty sure that a lack of funds is a significantly more tractable problem than having no fuel whatsoever, especially if we’re just talking a week or so. That’s the choice I’d want in that position.
And to be clear, that’s what’s going on. They’re now reporting only 38% of gas stations are fully out of gas. I don’t know last week’s exact number but my eyeball count was over 60% in my area, with a 30 minute wait where there was availability. I can’t imagine anybody preferred that over paying triple for just enough to get by, but maybe that’s my failure of imagination.
That, at least superficially, actually seems perfectly sensible. You can charge $10 or $15, without being nailed for gouging, if that accurately reflects your cost.
(Of course, if you cannot get any more, then you will soon run out of product to sell, gouging or no gouging. Anti-gouging in that case just prevents you from ripping people off.)
