Right on schedule: Time to go after those awful “price gougers”

posted at 4:01 pm on November 10, 2012 by Erika Johnsen

When allowed to function properly, the free market works very smoothly in bringing people the goods and services they want, in the amount that they want them, and for the price at which they value them. As much as people don’t like hearing it, the laws of supply and demand are no less vital in the event of an emergency — but politicians sure do love to rag on those greedy, profiteering businesses that jack up their prices in the event of a sudden supply shock or demand spike (a.k.a., “price gouging”). Anti-price gouging laws are a huge mistake that hurt the public at large, because all they accomplish is preventing the free market from doing what it does best: Quickly and efficiently adapting to conditions in a way that benefits everyone, and in an emergency especially, price gouging can save lives.

Predictably, of course, in the wake of Hurricane Sandy, so begins the outrageous outrage against those who had the audacity to raise prices on things like gasoline and lodging, via NBC:

New Jersey has filed lawsuits against eight businesses for allegedly gouging customers with exorbitant prices in the days after Superstorm Sandy roared ashore, the state’s attorney general said Friday.

The defendants, seven gas stations and a hotel, are accused of hiking their prices from 11 to 59 percent in the days after the storm. One gas station was charging as much as $5.50 a gallon, Attorney General Jeffrey S. Chiesa said. The hotel, a Howard Johnson Express in Parsippany, N.J., allegedly raised its room rates to $119 after the storm, up 32 percent from the top rate of $90 just prior to the storm.

“We have received no indication that these defendants faced costs that would have made these excessive price increases necessary or justifiable. One gas station even paid less per gallon for a shipment of fuel after the storm than it had paid before the storm,” Chiesa said in a statement.

“Justifiable”? “Excessive”? “Exorbitant”? Excuse me, but how is it that any government possesses the all-encompassing knowledge to determine what is and is not an “exorbitant” price? Competition is a much more accurate and efficient regulator than any government can ever be, and perhaps if lawmakers and bureaucrats were wise enough to let the market do its thing, their citizens would be better off.

Lee Doren illustrates a great example with bottled water in the video I’ve posted below, so I’ll flesh this out using the example of hotel lodging. Let’s say you live in an apartment with a few friends in a seaside-town, and you know a big hurricane is coming. You also know that your street is prone to serious flooding and your power will probably go out, so you decide to go check into a hotel in a more inland location for a few days. You batten down the hatches and get the hell out of dodge, but when you arrive at the hotel you planned on, you find that the price of rooms is more expensive than you’d banked on. So, you reevaluate: Maybe you and your friends decide to squeeze into one room instead of paying for two, or maybe you think, well, I do have a friend we could crash with who lives even farther inland if we just drive a bit more. So now, you’re taking up zero or one hotel room whereas you might’ve taken two without the hotel’s “price gouging” — meaning there are more rooms available for the people who come along who might really have no other option.

In a nutshell, price gouging incentivizes people to take only what they really need to survive, meaning that a greater amount of people will be able to get the necessary supplies instead of arriving at the store to find rows of empty shelves. What’s more, high prices can incentivize suppliers to bring more of the sought-after goods into the affected areas.

Ever eager to assume that political intervention is superior to market solutions in allocating resources, New Jersey is currently rationing gasoline in certain areas, which isn’t having much effect on mitigating the shortages and the waiting lines. But, as Holman Jenkins writes in the WSJ, maybe we should all hug a price gouger:

Gas stations post the most visible price in the economy, and are target No. 1 for politicians looking for innocent entrepreneurs to scapegoat. One Florida station owner during Katrina told investigators the universal truth of all gas station owners: He raised prices because he had “too many customers” and was running out of fuel. For his honesty and good sense, he was slapped with the state of Florida’s first gouging subpoena.

… In the aftermath of this week’s storm, how long before the Northeast’s refiners and fuel distributors are back in action? Gasoline may well be in short supply for days or weeks. Nothing would be as therapeutic to the public interest as letting retail prices rise to $5 or $6 or whatever might help motorists make better decisions about whether to fill up or not.

Crackdowns on gouging are plausible only because the advantages of not prosecuting price gougers belong to the category of the unseen—the public can’t see the supplies that would be available but for price-gouging laws. A good statewide New Jersey gasoline panic might correct that myopia, at least for a while.


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apatheia

ap·a·thy
   [ap-uh-thee] Show IPA
noun, plural ap·a·thies.
1.
absence or suppression of passion, emotion, or excitement.
2.
lack of interest in or concern for things that others find moving or exciting.
3.
Also, ap·a·thei·a, ap·a·thi·a  [ap-uh-thee-uh] Show IPA. Stoicism . freedom from emotion of any kind.
Relevant Questions
What Is Apatheia?
Origin:
1595–1605; (< F) < Latin apathīa < Greek apátheia insensibility to suffering, equivalent to apathe- (stem of apathḗs ) unfeeling ( a- a-6 + pathe-, variant stem of páthos pathos) + -ia -ia

http://dictionary.reference.com/browse/apatheia

“insensibility to suffering”

I don’t know. Just seems inconsistent.

davidk on November 10, 2012 at 6:04 PM

Taking property is theft, even if the government gives itself the power to do so. In a free market, the market value is determined by the property owner and the buyer. The value is only what the two parties agree to for the voluntary exchange. There is nothing voluntary about property seizure and theft. The Constitution gets quite a bit wrong; this is one of those things.

Dante on November 10, 2012 at 6:01 PM

Oh crap, Dante. There you go again. Talking sense.

davidk on November 10, 2012 at 6:06 PM

Stoic Patriot on November 10, 2012 at 6:00 PM

Sorry about your cat. Oops, sorry. Drat. I guess I wouldn’t make a good Stoic. Sorry.

davidk on November 10, 2012 at 6:08 PM

“insensibility to suffering”

I don’t know. Just seems inconsistent.

davidk on November 10, 2012 at 6:04 PM

Wikipedia has a good summary:

Whereas Aristotle had claimed that virtue was to be found in the golden mean between excess and deficiency of emotion (metriopatheia), the Stoics sought freedom from all passions (apatheia). It meant eradicating the tendency to react emotionally or egotistically to external events – the things we cannot control. For the Stoics, it was the optimum rational response to the world, for we cannot control things that are caused by the will of others or by Nature, we can only control our own will. This did not mean a loss of feeling, or total disengagement from the world. The Stoic who performs correct (virtuous) judgments and actions as part of the world-order experiences contentment (eudaimonia) and good feelings (eupatheia).

Stoic Patriot on November 10, 2012 at 6:08 PM

http://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

In the modern world Aesop’s fable has been turned upside down; the grasshopper and his government cronies bankrupt the ant and take all the supplies he stowed away for the winter.

FloatingRock on November 10, 2012 at 6:11 PM

Stoic Patriot on November 10, 2012 at 6:08 PM

Stoicism as a philosophy then seems to me to be somewhat inconsistent.

But what do I know. I’m just a a school-bus driver. Not that I’m complaining sorry about that.

davidk on November 10, 2012 at 6:13 PM

http://en.wikipedia.org/wiki/The_Ant_and_the_Grasshopper

In the modern world Aesop’s fable has been turned upside down; the grasshopper and his government cronies bankrupt the ant and take all the supplies he stowed away for the winter.

FloatingRock on November 10, 2012 at 6:11 PM

Good.

davidk on November 10, 2012 at 6:14 PM

I think charities like Franklin Graham’s and Glenn Beck’s should preserve their supplies and volunteers for when something happens in a red state from now on. We all know that Obama will neglect anyone who went against him in the election, like he did the Texas fires and the flooding in Missouri.

Night Owl on November 10, 2012 at 6:20 PM

I wonder if Stoic Patriot voted?

Abstain From Beans

by Robert LeFevre

In ancient Athens, those who admired the Stoic philosophy of individualism took as their motto: “Abstain from Beans.” The phrase had a precise reference. It meant: don’t vote. Balloting in Athens occurred by dropping various colored beans into a receptacle.

To vote is to express a preference. There is nothing implicitly evil in choosing. All of us in the ordinary course of our daily lives vote for or against dozens of products and services. When we vote for (buy) any good or service, it follows that by salutary neglect we vote against the goods or services we do not choose to buy. The great merit of market place choosing is that no one is bound by any other person’s selection. I may choose Brand X. But this cannot prevent you from choosing Brand Y.

When we place voting into the framework of politics, however, a major change occurs. When we express a preference politically, we do so precisely because we intend to bind others to our will. Political voting is the legal method we have adopted and extolled for obtaining monopolies of power. Political voting is nothing more than the assumption that might makes right. There is a presumption that any decision wanted by the majority of those expressing a preference must be desirable, and the inference even goes so far as to presume that anyone who differs from a majority view is wrong or possibly immoral.

But history shows repeatedly the madness of crowds and the irrationality of majorities. The only conceivable merit relating to majority rule lies in the fact that if we obtain monopoly decisions by this process, we will coerce fewer persons than if we permit the minority to coerce the majority. But implicit in all political voting is the necessity to coerce some so that all are controlled. The direction taken by the control is academic. Control as a monopoly in the hands of the state is basic.

In times such as these, it is incumbent upon free men to reexamine their most cherished, long-established beliefs. There is only one truly moral position for an honest person to take. He must refrain from coercing his fellows. This means that he should refuse to participate in the process by means of which some men obtain power over others. If you value your right to life, liberty, and property, then clearly there is every reason to refrain from participating in a process that is calculated to remove the life, liberty, or property from any other person. Voting is the method for obtaining legal power to coerce others.

Dante on November 10, 2012 at 6:22 PM

wonder if Stoic Patriot voted?

Dante on November 10, 2012 at 6:22 PM

I did. I voted for Virgil Goode even though I was well aware that he would not win. You’ll also find that many stoics were involved heavily in the political process. Marcus Aurelius, for one, was both an emperor and a stoic.

Stoic Patriot on November 10, 2012 at 6:29 PM

. The Constitution gets quite a bit wrong; this is one of those things.

Dante on November 10, 2012 at 6:01 PM

You’re an idiot.

Solaratov on November 10, 2012 at 6:41 PM

Do you have a beef with antitrust law? It is as clear an example of the government’s interference with economic processes as it gets, and yet most conservatives are fine with it. I wonder why.

Archivarix on November 10, 2012 at 5:42 PM

Because price collusion and trust-type behavior remove the “market” from free market — it’s socialism for the trust/monopoly holders. In a sense, the monopoly is forming its own sub-government which is intervening in the market.

Count to 10 on November 10, 2012 at 6:45 PM

Because price collusion and trust-type behavior remove the “market” from free market — it’s socialism for the trust/monopoly holders. In a sense, the monopoly is forming its own sub-government which is intervening in the market.

Count to 10 on November 10, 2012 at 6:45 PM

They do not.

Monopoly only exists by gvmt intervention.

Dante on November 10, 2012 at 6:50 PM

They do not.

Monopoly only exists by gvmt intervention.

Dante on November 10, 2012 at 6:50 PM

Monopoly frequently exists as a result of government intervention, but that is by no means the only way they come into existence. In a society with week to non-existent governance, monopolies evolve naturally out of economic choke-points, and often use violent means to eliminate or absorb any competition that tries to develop.

Count to 10 on November 10, 2012 at 6:58 PM

“Gouging” at $5.50 a gallon? I’m paying over $4 in California. Honestly, how do they measure “gouging”? If a disaster occurs at a refinery, that reduces supply and increases prices, allowing the market to operate. A local disaster has the same result, why is it legislatively treated differently?

As Milton Friedman explained, the surest way to create a shortage is price controls. People in NY and NJ have waited in gas lines for ten hours plus. How much do people value their time? Furthermore, with the price control, when someone does get the front of the line surely fill up their tank full because they have no incentive not to.

Socialism at it’s best. Enjoy it, because there’s a helluva lot more coming.

netster007x on November 10, 2012 at 7:19 PM

You also fail to acknowledge that there might be people who really need the hotel room but simply can’t afford the higher rates.

red_herring

There might be people who really need the hotel room but simply can’t afford the regular rates either….what’s your point?

xblade on November 10, 2012 at 7:28 PM

There might be people who really need the hotel room but simply can’t afford the regular rates either….what’s your point?

I already asked that question and people here assumed I was a communist or something.

myiq2xu on November 10, 2012 at 7:45 PM

I already asked that question and people here assumed I was a communist or something.

myiq2xu on November 10, 2012 at 7:45 PM

Um…. No something involved. And just because a fellow traveler asks the question makes it any less true.

Happy Nomad on November 10, 2012 at 7:52 PM

I voted for Virgil Goode even though I was well aware that he would not win.

Stoic Patriot on November 10, 2012 at 6:29 PM

Goode should be grateful that there were so few of you that he wasn’t the spoiler in VA. I swear, he would have had to leave the state if he had been the difference between red or blue.

So why’d you waste your vote? Because you did. What statement did you make with so few fellow Goode groupies? We are a two party nation. If some other party is to rise it will be with the demise of the GOP or Dems. Neither party is paying serious attention to any fringe party.

Happy Nomad on November 10, 2012 at 7:57 PM

Um…. No something involved. And just because a fellow traveler asks the question makes it any less true.

Happy Noma

Ummm, I’m not a fellow traveler, if that’s what you’re implying. My question points out the absurdity of red_herring’s concern about people not being able to afford the higher price. There will always be someone who can’t afford the rates, no matter what the hotel charges, making his argument silly and moot.

xblade on November 10, 2012 at 7:59 PM

Monopoly frequently exists as a result of government intervention, but that is by no means the only way they come into existence. In a society with week to non-existent governance, monopolies evolve naturally out of economic choke-points, and often use violent means to eliminate or absorb any competition that tries to develop.

Count to 10 on November 10, 2012 at 6:58 PM

The only way monopolies come into existence is through government. Monopolies are not a product of the free market, just as booms and busts are not natural to the market and only occur due to intervention.

Dante on November 10, 2012 at 8:00 PM

You also fail to acknowledge that there might be people who really need the hotel room but simply can’t afford the higher rates.

red_herring

You’re confusing want and need.

Dante on November 10, 2012 at 8:01 PM

We are a two party nation. If some other party is to rise it will be with the demise of the GOP or Dems. Neither party is paying serious attention to any fringe party.

Happy Nomad on November 10, 2012 at 7:57 PM

The best candidate your precious GOP could come up with to take on the worst POTUS in history was a poorly-disguised liberal. And THEN only after going through a list of fools and dunces that belonged more in a circus sideshow than in politics.

MelonCollie on November 10, 2012 at 8:02 PM

Ummm, I’m not a fellow traveler, if that’s what you’re implying. My question points out the absurdity of red_herring’s concern about people not being able to afford the higher price. There will always be someone who can’t afford the rates, no matter what the hotel charges, making his argument silly and moot.

xblade on November 10, 2012 at 7:59 PM

Isn’t it funny how quickly “conservatives” argue liberal policies and positions?

Dante on November 10, 2012 at 8:02 PM

Um…. No something involved.

Did you eat paint chips as a kid?

xblade on November 10, 2012 at 7:59 PM

What he said.

myiq2xu on November 10, 2012 at 8:02 PM

Dante

Mr. Alighieri wants his name back. You’re ruining the brand.

myiq2xu on November 10, 2012 at 8:05 PM

Posts like this are a big reason why people think the gop doesn’t care about the poor. While there’s no doubt that price gouging creates “economic efficiency” in the real world the rich are not affected whereas the poor must sacrifice. People don’t care if there’s efficiency if these are the results.

red_herring on November 10, 2012 at 4:49 PM

Apparently, “care about” is now synonymous with “want to create more of”.

fitzfong on November 10, 2012 at 8:11 PM

The only way monopolies come into existence is through government. Monopolies are not a product of the free market, just as booms and busts are not natural to the market and only occur due to intervention.

Dante on November 10, 2012 at 8:00 PM

History demonstrates otherwise, though, as I have noted, monopolies effect their own form of government, and in the process destroy the free market that they arise out of.

Count to 10 on November 10, 2012 at 8:12 PM

In a society with week to non-existent governance, monopolies evolve naturally out of economic choke-points, and often use violent means to eliminate or absorb any competition that tries to develop.

Count to 10

When did we become a society with weak to non-existent governance? Getting rid of anti-trust laws doesn’t mean we have to abandon laws against violent crime.

xblade on November 10, 2012 at 8:23 PM

Isn’t it funny how quickly “conservatives” argue liberal policies and positions?

Dante

Well, to be fair, I think Happy Nomad is agreeing with us, but for some reason, the point myiq2xu and I made went right over his head. But your point is valid. We just have to embrace socialism to save the free market you know.

As an aside, all these economic reasons folks give for supporting gouging are fine, but my reason for being ok with it is much simpler…it’s called liberty. If a business owner wants to give away tons of water, let him. It’s his water, not mine. And if another business owner wants to charge $10 a bottle, let him. It’s his water, not mine. I mean, what if he doesn’t want to sell it at all and wants to keep it for himself? That’s the highest price of all, so should we be able to steal it from him, or prosecute him for not making it available to others?

xblade on November 10, 2012 at 8:27 PM

When did we become a society with weak to non-existent governance? Getting rid of anti-trust laws doesn’t mean we have to abandon laws against violent crime.

xblade on November 10, 2012 at 8:23 PM

Different argument — I was responding to the assertion that monopolies never develop in the absence of government intervention.
The labor trusts we call “unions” are bad enough — we don’t need to expand the nobility of legally protected monopolies.

Count to 10 on November 10, 2012 at 8:55 PM

As an aside, all these economic reasons folks give for supporting gouging are fine, but my reason for being ok with it is much simpler…it’s called liberty. If a business owner wants to give away tons of water, let him. It’s his water, not mine. And if another business owner wants to charge $10 a bottle, let him. It’s his water, not mine. I mean, what if he doesn’t want to sell it at all and wants to keep it for himself? That’s the highest price of all, so should we be able to steal it from him, or prosecute him for not making it available to others?

xblade on November 10, 2012 at 8:27 PM

Agreed. But, clearly that isn’t enough for a lot of people, who need to be shown that what they demand is counterproductive to the goals they are trying to achieve.

Count to 10 on November 10, 2012 at 9:02 PM

Another great example was in Hurricane Hugo in 1989. An upstate South Carolina trucker figured the Lowcountry might get hit, so he bought several hundred chainsaws and put them on his rig and headed to Charleston after the storm. He was selling $100 retail saws for $300, sold out pretty fast, but a couple people wouldn’t pay and complained, so SC enacted a gouging law.

But the reason people were paying the price is all the local stores had sold out of chainsaws. The guy wasn’t forcing anyone to pay $300. But now with our brilliant “anti-price-gouging” law, the next storm THERE JUST WON’T BE ANY CHAINSAWS AT ANY PRICE.

Ronald Reagan once said the scariest words in the English language are “I’m from the government and I’m here to help.”

Adjoran on November 10, 2012 at 9:16 PM

Remember, that guy also took the risk the storm would turn to sea and he’d be stuck with a truckload of chainsaws.

Adjoran on November 10, 2012 at 9:17 PM

And what is wrong with that? Make an argument.
tom daschle concerned on November 10, 2012 at 4:49 PM

Easy, Jesus’ teachings.

Boomer_Sooner on November 10, 2012 at 9:21 PM

Also, want a clue as to the types of reasons the average American might not be jumping on board the USS GOP?

Look no further than this article. Well known conservative blog, right there, arguing IN FAVOR of price gouging even in a natural disaster.

Call everyone who isn’t full bore right wing RINO’s, idiots, moochers, socialists, bums, all seeking a hand out, obamaphones, dead to you, not worthy to lick the scum off your righteous boots, and oh by the way, price gouging is great! And there should be no mechanisms in place to keep it in check. It’ll be awesome utopia and everything will actually end up working out perfect in the end! We promise! The poll samples about it and historical examples were ALL overweighted towards the democrats!

Boomer_Sooner on November 10, 2012 at 9:49 PM

History demonstrates otherwise, though, as I have noted, monopolies effect their own form of government, and in the process destroy the free market that they arise out of.

Count to 10 on November 10, 2012 at 8:12 PM

History does not demonstrate otherwise. You are confused about what a monopoly is. Monopolies do not rise out of the free market; they are not produced by the free market.

Dante on November 10, 2012 at 9:52 PM

History does not demonstrate otherwise. You are confused about what a monopoly is. Monopolies do not rise out of the free market; they are not produced by the free market.

Dante on November 10, 2012 at 9:52 PM

The railroad trusts, the DeBeers diamond monopoly, Standard Oil, etc — all of these were government interventions? How about the labor unions before the Wagner Act?

Count to 10 on November 10, 2012 at 10:15 PM

Also, want a clue as to the types of reasons the average American might not be jumping on board the USS GOP?

Look no further than this article. Well known conservative blog, right there, arguing IN FAVOR of price gouging even in a natural disaster.

Boomer_Sooner on November 10, 2012 at 9:49 PM

Let say you’re in a disaster situation… you have two scenarios you can pick from.

1) No food, fuel, or water for 2 weeks while the government gets things sorted; and you die.

2) “gougers” bring in necessary supplies and are rewarded, resulting in more gougers and a slightly inflated price.

So you’re saying not forcing everyone into situation #1 is evil?

Ok, explain to me the “good” in letting people die needlessly because we’re preventing those seeking profits from bringing supplies. Why is letting people suffer and die good?

Oh, you want people to do this out of goodwill… so we just need a different type of people to cover all the necessities here.

Once you figure out how to reconfigure the entire human race into a kinder and more compassionate sort of person we can try your way.

Until then, why don’t we go with the option that results in less suffering and death? I’m even ok being called heartless for wanting to reduce suffering and death, that’s fine by me.

gekkobear on November 10, 2012 at 10:27 PM

Boomer_Sooner on November 10, 2012 at 9:49 PM

Say, were your parents siblings, by any chance?

We realize that STUPID people can’t understand the counterproductive nature of anti-gouging laws, and that simpletons have a knee-jerk reaction against gouging because they lack the ability to think very deeply.

I blame the public schools.

Adjoran on November 10, 2012 at 10:34 PM

The railroad trusts, the DeBeers diamond monopoly, Standard Oil, etc — all of these were government interventions? How about the labor unions before the Wagner Act?

Count to 10 on November 10, 2012 at 10:15 PM

As I suspected, you don’t know what a monopoly is.

Dante on November 10, 2012 at 10:36 PM

Pay close attention, Count to 10

The Truth About the “Robber Barons”

Dante on November 10, 2012 at 10:40 PM

Also, want a clue as to the types of reasons the average American might not be jumping on board the USS GOP?

Look no further than this article. Well known conservative blog, right there, arguing IN FAVOR of price gouging even in a natural disaster.

Boomer_Sooner on November 10, 2012 at 9:49 PM

Yeah. When Akin and Mourdock put their feet in their mouths, everyone, including this site, were all over them, and rightfully so. But then stuff like this, which alienates just as many people, is okay.

Sometimes, silence is golden. Just because you might be right doesn’t mean you need to always speak up.

And we wonder why we’re shrinking in popularity.

avgjo on November 10, 2012 at 10:41 PM

Thomas Sowell’s book Basic Economics contains the best explanation I’ve ever read of how the pricing system works to society’s best advantage.

LagunaDave on November 10, 2012 at 11:02 PM

Pay close attention, Count to 10

The Truth About the “Robber Barons”

Dante on November 10, 2012 at 10:40 PM

That doesn’t address the point.

As I suspected, you don’t know what a monopoly is.

Dante on November 10, 2012 at 10:36 PM

You are demonstrating that you don’t.

Count to 10 on November 10, 2012 at 11:13 PM

Easy, Jesus’ teachings.

Boomer_Sooner on November 10, 2012 at 9:21 PM

Please elaborate on his economic theory.

This should be awesome!

*pops some mfking corn

tom daschle concerned on November 10, 2012 at 11:29 PM

Also, want a clue as to the types of reasons the average American might not be jumping on board the USS GOP?

Look no further than this article. Well known conservative blog, right there, arguing IN FAVOR of price gouging even in a natural disaster.

Boomer_Sooner on November 10, 2012 at 9:49 PM

Let say you’re in a disaster situation… you have two scenarios you can pick from.

1) No food, fuel, or water for 2 weeks while the government gets things sorted; and you die.

2) “gougers” bring in necessary supplies and are rewarded, resulting in more gougers and a slightly inflated price.

So you’re saying not forcing everyone into situation #1 is evil?

Ok, explain to me the “good” in letting people die needlessly because we’re preventing those seeking profits from bringing supplies. Why is letting people suffer and die good?

Oh, you want people to do this out of goodwill… so we just need a different type of people to cover all the necessities here.

Once you figure out how to reconfigure the entire human race into a kinder and more compassionate sort of person we can try your way.

Until then, why don’t we go with the option that results in less suffering and death? I’m even ok being called heartless for wanting to reduce suffering and death, that’s fine by me.

gekkobear on November 10, 2012 at 10:27 PM

The funny thing is, the quickest way to drive prices down after a disaster is to allow lots of so-called “price gougers” to make a fortune. Next thing you know, more price gougers will arrive to make their own fortune at slightly better prices than the previous price gougers, who will have to cut their own prices to compete. And in a short time, the price of goods is driven down to normal levels.

I won’t say that there’s no such thing as price gouging, but all attempts to prevent it are worse than the problem they try to solve. The real thing to be concerned with is people who are able to apply force to keep out the competition and keep prices artificially high. And that would almost require help from a local governmnet.

tom on November 11, 2012 at 12:05 AM

The funny thing is, the quickest way to drive prices down after a disaster is to allow lots of so-called “price gougers” to make a fortune. Next thing you know, more price gougers will arrive to make their own fortune at slightly better prices than the previous price gougers, who will have to cut their own prices to compete. And in a short time, the price of goods is driven down to normal levels.

I won’t say that there’s no such thing as price gouging, but all attempts to prevent it are worse than the problem they try to solve. The real thing to be concerned with is people who are able to apply force to keep out the competition and keep prices artificially high. And that would almost require help from a local governmnet.

tom on November 11, 2012 at 12:05 AM

Yes. A million times. Yes.

fitzfong on November 11, 2012 at 12:24 AM

You’ve said a ton of insane stuff here lately Erika, but I think

price gouging can save lives.

Just might take the cake.

mythicknight on November 10, 2012 at 4:51 PM

Or it’s perfectly reasonable. There were several days of warning before the storm hit, which would have given potential wannabe price gougers more time to move goods into the area. At least that’s how it should work, but it doesn’t so much because of the needless retribution pols throw at rational players.

theperfecteconomist on November 11, 2012 at 1:23 AM

The only way monopolies come into existence is through government. Monopolies are not a product of the free market, just as booms and busts are not natural to the market and only occur due to intervention.

Dante on November 10, 2012 at 8:00 PM

Monoplies are quite common and are a natural part of the market. They exist anywhere where the market is not large enough to accomodate competition for one. Booms and busts also happen without goverment interference as well. It happens anytime the market over-vaules the potential profit of something. Many gold mining towns in the old west are a good example of this.

NeverLiberal on November 11, 2012 at 2:46 AM

You’ve said a ton of insane stuff here lately Erika, but I think

price gouging can save lives.

Just might take the cake.

mythicknight on November 10, 2012 at 4:51 PM

Or it’s perfectly reasonable. There were several days of warning before the storm hit, which would have given potential wannabe price gougers more time to move goods into the area. At least that’s how it should work, but it doesn’t so much because of the needless retribution pols throw at rational players.

theperfecteconomist on November 11, 2012 at 1:23 AM

No it’s not reasonable. Price gouging is completely unethical and takes advantage of a disaster to distort pricing. The incentive to stock up ahead of a upcoming event is the same for regular retailers as it is for gougers. Laws against price gouging are there for public safety, good order, and aren’t redistributive or progressive in any way.

In some states (ok at least one) there are laws against stocking which I agree don’t have any positive impact and other laws are unduly vague but most of them are sensible, limited, and don’t distort the market.

lexhamfox on November 11, 2012 at 3:32 AM

Most asinine write-up on Sandy that I’ve seen yet.

rayra on November 11, 2012 at 3:33 AM

Why is gold priced higher than coal? Are jewelers gouging people wanting to buy gold rings to for their marriage? Simple. There ain’t enough gold and it gets precious by its scarcity. Therefore when there is disaster, normal supplies are disrupted and food etc gets more precious. Been this way as long as man has walked the earth. Even Obama and his liberal minions can’t change this. You can ask the people who were paid to vote for him.

Herb on November 11, 2012 at 8:51 AM

.. waiting to bleat PRICE GOUGING!! when my electric bill goes into “necessarily skyrocket” mode .. yup.
/.

CaveatEmpty on November 11, 2012 at 9:01 AM

So when January rolls around and our taxes go up will that be gouging ? Paying more for the same useless government, and so civil servants can get raises?

arand on November 11, 2012 at 9:13 AM

Herb on November 11, 2012 at 8:51 AM

Where you have gone wrong is that price gouging is the invention of banksters and fat-cats, and has only been around since the Republican Party came on the scene. You will require reeducation or at least a tuneup at the Ministry of Truth.

claudius on November 11, 2012 at 9:52 AM

So when January rolls around and our taxes go up will that be gouging ? Paying more for the same useless government, and so civil servants can get raises?

arand on November 11, 2012 at 9:13 AM

No … that will be patriotic. Giving the fruits of your labor to Mother United States is a citizens duty. The more you let them take the more patriotic you are. Of course the most patriotic are the dependent. The motherland exists for them.

darwin on November 11, 2012 at 9:59 AM

That doesn’t address the point.

It did.

You are demonstrating that you don’t.

Count to 10 on November 10, 2012 at 11:13 PM

Let’s say that there are five companies who make widgets. The first company has a 5% market share, the second has a 15% market share, the third has a 20% market share, the fourth has 20% market share, and the fifth company has a 40% market share.

Now let’s say that the fifth company acquires the first three companies, and now has a 80% market share. Let’s say that over time, the fifth company continues its efficiency in producing widgets and is able to sell them at a lower price than its competitor so that it’s market share grows to 90%.

Do you think that’s a monopoly, yes or no?

Dante on November 11, 2012 at 10:20 AM

Price gouging is completely unethical…

lexhamfox on November 11, 2012 at 3:32 AM

You’ve said a ton of insane stuff here lately Erika, but I think

price gouging can save lives.

Just might take the cake.

mythicknight on November 10, 2012 at 4:51 PM

Economic ignorance. You guys might as well be liberals.

Dante on November 11, 2012 at 10:21 AM

Let’s say that there are five companies who make widgets. The first company has a 5% market share, the second has a 15% market share, the third has a 20% market share, the fourth has 20% market share, and the fifth company has a 40% market share.

Now let’s say that the fifth company acquires the first three companies, and now has a 80% market share. Let’s say that over time, the fifth company continues its efficiency in producing widgets and is able to sell them at a lower price than its competitor so that it’s market share grows to 90%.

Do you think that’s a monopoly, yes or no?

Dante on November 11, 2012 at 10:20 AM

It becomes a monopoly when people loose access to competition. If their is a market that the second company in your example cannot reach, the first has achieved monopoly, and can set it’s price to maximize profit — something that lowers total productivity in order to benefit the owners of that company. They will also temporarily take a loss to undercut the prices of any local competitor as they attempt to start up, forcing that competitor out of business, after which they raise their prices to the profit maximizing level again.
You seem to be under the mistaken impression that the monopoly will sell it’s product at (or near) cost. That never happens, and the amount above cost that a company sells it’s product is determined by the level of competition in the market. In order to maintain a free market, you must deal with the monopoly and price collusion instability, just as you need to deal with fraud.

Count to 10 on November 11, 2012 at 10:32 AM

But you need to explain how the government caused that monopoly. What you just described implies that it developed without government at all.

blink on November 11, 2012 at 10:33 AM

I think he was actually trying to claim that his scenario wasn’t a monopoly.

Count to 10 on November 11, 2012 at 10:46 AM

“Price gouging ” is the fastest way to stop shortages.

Our company convenience store never had a day where we netted over 10 cents a gallon. If we had a time where we could have cleared a dollar, we would have found a way to sneak truckloads in very quickly.

seven on November 11, 2012 at 10:58 AM

Economic ignorance. You guys might as well be liberals.

Dante on November 11, 2012 at 10:21 AM

It’s not economic ignorance. Quite the opposite actually since it makes sense to encourage markets under such stress to remain functioning and stable for a period until the crisis passes. Markets aren’t rational in an area immediately after a natural disaster.

Profits aren’t unethical. Making excessive profits in the short time after a disaster is unethical and exacerbates the suffering of those affected.

lexhamfox on November 11, 2012 at 11:21 AM

price gouging can save lives

See how that works in an election Erika.

lexhamfox on November 11, 2012 at 11:29 AM

Easy, Jesus’ teachings.

Boomer_Sooner on November 10, 2012 at 9:21 PM

Where are you to defend this reprobate? You on your knees fellating beezlebub?

tom daschle concerned on November 11, 2012 at 11:30 AM

It’s not economic ignorance. Quite the opposite actually since it makes sense to encourage markets under such stress to remain functioning and stable for a period until the crisis passes. Markets aren’t rational in an area immediately after a natural disaster.

Profits aren’t unethical. Making excessive profits in the short time after a disaster is unethical and exacerbates the suffering of those affected.

lexhamfox on November 11, 2012 at 11:21 AM

It is economic ignorance. The free market is always rational. And there is no such thing as excessive profits. You’re embracing your anti-market inner liberal.

Dante on November 11, 2012 at 11:57 AM

Again, why did you mention hoarding in comparison to price gouging?

blink on November 11, 2012 at 10:00 AM

Because at least one state law on price gouging has a component that prevents retailers from stockpiling. I’m not ignoring you I just have other things to do today. It’s an important day for some of us.

lexhamfox on November 11, 2012 at 11:57 AM

It becomes a monopoly when people loose access to competition. If their is a market that the second company in your example cannot reach, the first has achieved monopoly, and can set it’s price to maximize profit — something that lowers total productivity in order to benefit the owners of that company. They will also temporarily take a loss to undercut the prices of any local competitor as they attempt to start up, forcing that competitor out of business, after which they raise their prices to the profit maximizing level again.
You seem to be under the mistaken impression that the monopoly will sell it’s product at (or near) cost. That never happens, and the amount above cost that a company sells it’s product is determined by the level of competition in the market. In order to maintain a free market, you must deal with the monopoly and price collusion instability, just as you need to deal with fraud.

Count to 10 on November 11, 2012 at 10:32 AM

Thank you. You have just proven that you don’t know what a monopoly is.

But you need to explain how the government caused that monopoly. What you just described implies that it developed without government at all.

blink on November 11, 2012 at 10:33 AM

But I didn’t describe a monopoly at all. That’s the point.

Dante on November 11, 2012 at 12:00 PM

blink on November 11, 2012 at 10:33 AM

I forgot for a moment to whom I was speaking: an admitted Keynesian. As such, you are anti-free market, being in favor of currency manipulation and market intervention.

Dante on November 11, 2012 at 12:35 PM

Look no further than this article. Well known conservative blog, right there, arguing IN FAVOR of price gouging even in a natural disaster.

Call everyone who isn’t full bore right wing RINO’s, idiots, moochers, socialists, bums, all seeking a hand out, obamaphones, dead to you, not worthy to lick the scum off your righteous boots, and oh by the way, price gouging is great! And there should be no mechanisms in place to keep it in check. It’ll be awesome utopia and everything will actually end up working out perfect in the end! We promise! The poll samples about it and historical examples were ALL overweighted towards the democrats!

Boomer_Sooner on November 10, 2012 at 9:49 PM

There is no such thing as price gouging. Why do you, a supposed conservative, embrace leftist market policies and argue against the free market?

Dante on November 11, 2012 at 12:43 PM

There is no such thing as price gouging. Why do you, a supposed conservative, embrace leftist market policies and argue against the free market.

Dante on November 11, 2012 at 12:43 PM

Please come back to the real world

Genuine on November 11, 2012 at 1:57 PM

Dante on November 11, 2012 at 12:00 PM

Okay, why don’t you clue the rest of us in on the special definition of “monopoly” that you seem to be using all on your lonesome, because you clearly aren’t using the functional definition the rest of us know.

Count to 10 on November 11, 2012 at 2:07 PM

Erika, you know how crazy “full” libertarians sound when they go to allowing their very valid and useful ideas in many areas to be taken way beyond the realm of sanity and reason in others?

Advocating for price gouging is your equivalent.

Genuine on November 11, 2012 at 2:57 PM

Advocating for price gouging is your equivalent.

Genuine on November 11, 2012 at 2:57 PM

Would one of you genuine genius please give me an OBJECTIVE definition of what constitutes price gouging?

davidk on November 11, 2012 at 4:02 PM

Didn’t think so.

davidk on November 11, 2012 at 4:46 PM

Would one of you genuine genius please give me an OBJECTIVE definition of what constitutes price gouging?

davidk on November 11, 2012 at 4:02 PM

Look it up yourself or check out the laws in the twenty some states that have such laws.

lexhamfox on November 11, 2012 at 5:04 PM

Price gouging is a pejorative term referring to a situation in which a seller prices goods or commodities much higher than is considered reasonable or fair. This rapid increase in prices occurs after a demand or supply shock: examples include price increases after hurricanes or other natural disasters. In precise, legal usage, it is the name of a crime that applies in some of the United States during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market, or to windfall profits. In the Soviet Union, it was simply included under the single definition of speculation.

http://en.wikipedia.org/wiki/Price_gouging

davidk on November 11, 2012 at 5:16 PM

As of 2008, thirty-four states in the United States have enacted laws against price-gouging. Price-gouging is often defined in terms of three criteria listed below:

1. Period of Emergency: The majority of laws apply only to price shifts during a time of disaster.
2. Necessary items: Most laws apply exclusively to items which are essential to survival.
3. Price ceilings: Laws limit the maximum price that can be charged for given goods.

ibid

price gouging

Definition
The act of retailers increasing prices when no alternative is available.

http://www.businessdictionary.com/definition/price-gouging.html

davidk on November 11, 2012 at 5:20 PM

The government is the biggest freaking price gouger there is!

JellyToast on November 11, 2012 at 5:26 PM

Look it up yourself or check out the laws in the twenty some states that have such laws.

lexhamfox on November 11, 2012 at 5:04 PM

Well, why didn’t I think of that? Did you not know or did you just think I needed the exercise?

I’m still waiting for an OBJECTIVE definition.

What formula(s) would one use to determine if a person or business is engaging in price gouging?

davidk on November 11, 2012 at 5:26 PM

Profits aren’t unethical. Making excessive profits in the short time after a disaster is unethical and exacerbates the suffering of those affected.

lexhamfox on November 11, 2012 at 11:21 AM

What OBJECTIVE criterion determines “excessive profits?”

davidk on November 11, 2012 at 5:29 PM

What OBJECTIVE criterion determines “excessive profits?”

davidk on November 11, 2012 at 5:29 PM

“At some point, you’ve made enough money”

~BHO, circa 2010

What more do you need?

BobMbx on November 11, 2012 at 5:35 PM

“At some point, you’ve made enough money”

~BHO, circa 2010

What more do you need?

BobMbx on November 11, 2012 at 5:35 PM

And that is the correct answer.

davidk on November 11, 2012 at 5:49 PM

As an aside, all these economic reasons folks give for supporting gouging are fine, but my reason for being ok with it is much simpler…it’s called liberty. If a business owner wants to give away tons of water, let him. It’s his water, not mine. And if another business owner wants to charge $10 a bottle, let him. It’s his water, not mine. I mean, what if he doesn’t want to sell it at all and wants to keep it for himself? That’s the highest price of all, so should we be able to steal it from him, or prosecute him for not making it available to others?

xblade on November 10, 2012 at 8:27 PM

At least someone on this thread gets it.

nazo311 on November 11, 2012 at 5:53 PM

A free market benefits everyone. A controlled market ends up benefiting almost no one. Although government has good intentions, they don’t think about what the consequences of meddling in the market are. That is, no one gets the resources they actually need.

nazo311 on November 11, 2012 at 5:57 PM

And who is going to compensate the gas stations that all lost income during the many days when they had no electricity to pump the gas or had no shipments coming in because of hurricane problems at the refineries or shipping places or suppliers.

Anyone?

I paid a little more for gas that first week and I was happy to do it. Seriously? What is a few dollars more with everything we already pay high inflation for every day?

So the price goes up for a couple weeks. Big deal.

I was cold and in the dark without internet and calling a roofer to fix my roof, when my cell phone wasn’t cutting out.

I considered myself lucky that my family and I were safe and I had a house and found a gas station with gas.

Elisa on November 11, 2012 at 8:35 PM

Elisa on November 11, 2012 at 8:35 PM

That is what BIC insurance lines are for. Also, NJ has set up a loan program to put cash immediately in the hands of businesses until their insurance claims are settled.

lexhamfox on November 11, 2012 at 9:51 PM

Profits aren’t unethical. Making excessive profits in the short time after a disaster is unethical and exacerbates the suffering of those affected.

lexhamfox on November 11, 2012 at 11:21 AM

Unethical is one thing. Illegal is quite another.

Or to put it differently, it’s the difference between being frowned on for using your liberty to make a quick buck after a disaster, and being hauled off in handcuffs for “charging too much”.

MelonCollie on November 11, 2012 at 10:11 PM

The airlines “gouge” thousands of people every day selling some seats for a hundred dollars while selling one right next to them for over a thousand yet you don’t see them being dragged before congress.

Robert Jensen on November 11, 2012 at 10:53 PM

The airlines “gouge” thousands of people every day selling some seats for a hundred dollars while selling one right next to them for over a thousand yet you don’t see them being dragged before congress.

Robert Jensen on November 11, 2012 at 10:53 PM

The airlines need to be dragged before congress, taxed at least at 95%, regulated to the nth degree, and demanded to pay cash money to elected democrats.

Its 2012 America Mittches!

tom daschle concerned on November 11, 2012 at 11:05 PM

MelonCollie on November 11, 2012 at 10:11 PM

There is a public order component to these laws. Looters are the lowest life forms but gougers aren’t far behind.

These are civil offenses so it involves fines rather than handcuffs in most states and certainly most of the cases resulting from Sandy.

Here is a quick guide to the laws and penalties by state.

Given the rather lean margins for things like fuel, water, and food, 10% additional profit makes a big difference to retailers and provides plenty of incentive to them to restock and stay open. Also, if they have to pay extra to suppliers prior to or during the emergency, it is perfectly legal to pass those additional expenses on to consumers so the argument that these laws inhibit resupply and efforts to restock doesn’t hold up.

There is a difference between liberty and taking a liberty during a declared emergency. But anyway go ahead and make getting these laws off the books part of the GOP platform for 2014 because having free markets no matter what the circumstances is more important than anything else.

lexhamfox on November 11, 2012 at 11:48 PM

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