Economics: The Value of "Price Gouging"

[Speaker to Animals]

I think a lot of "water" is being muddied by equating "price gouging" with monopoly "price fixing". These are different things. StA's example is not price gouging, it's Fife and I trying to price fix with only 2/3rds of the water supply. Our attempt fails until StA depletes his 1/3rd of the supply, at which time Fife and I have 100% of the remaining water. That's monopoly price fixing - a different animal.

Price gouging is actually a normal market reaction to an enormous spike in demand. Natural disasters create incredible demand, which drives the price of goods higher, which attracts sellers who want to capitalize on these higher prices. That's it. Normal market activity demonized by the derogatory term "price gouging".

You already admitted that: (1) in order for price gouging to work, the sellers must all at least implicitly agree to engage in price gouging, else buyers will go to sellers who are not engaging in price gouging.

It follows from that premise, which you agreed to, that the fundamental mechanism that makes price gouging possible has nothing to do with scarcity but, rather, the sellers having locked down the supply of something no differently than is the case for a cartel, or a single seller cornering the entire market of that good (monopoly). There are no other alternatives. Any other arrangement of supply and sellers means competition exists and price gouging becomes impossible.

But your toy anecdotal defense of price gouging just implies all price gouging stems from scarcity and the price gougers are just upstanding folks trying to make a living bringing scarce resources to an otherwise starving market. But that's simply not true. That's not the basis for price gouging. The basis for price gouging is the exact same basis for something like OPEC or cocaine cartels: sellers control a large supply but only sell small portions of it at the highest possible price.

There's nothing inherently good about price gouging. It doesn't bring needed goods to the market (actually, quite the opposite). If you allow for price gouging in the aftermath of a disaster, you actually create an incentive for sellers to horde resources and sell only a fraction of their horde at exorbitant prices.

[Speaker to Animals]

(1) The condition necessary to engage in price gouging behavior is the collective or sole control of supply for a limited period of time in the small area.

(2) It follows from (1) that scarcity is not a prerequisite for price gouging and probably would not even exist for most of the goods price gougers would sell in the aftermath of a disaster if we allow for this behavior.

(3) It follows from (2) that price gouging, contrary to the exuberant exposition of DB, does not necessarily result in an efficient allocation of resources, quite the opposite, and probably would result in otherwise plentiful resources being horded in order to take advantage of the decriminalization of price gouging.


Your toy definition does not in any way match reality, DB. Thomas Sowell is a good huckster. I will give him that, but you've done been huckstered, son.

Allowing for price gouging almost certainly will result in resources NOT being allocated. To wit: in PR people were hiding relief supplies in warehouses. Why? Probably because they were price gouging.

[DBTrek]

You've misread my agreeing that your description of factors necessary for monopoly price fixing as an agreement with your statements on price gouging.

(1) The condition necessary to engage in price gouging behavior is the collective or sole control of supply for a limited period of time in the small area.

Not true. Fifty individuals driving trucks and vans full of critical supplies to a disaster area for sale at above-normal prices is also referred to as price gouging. These sellers are neither collectivized, nor do they have sole control of a supply. What they do have are supplies that are in high demand in an area where no one can meet all of the demand.

As your first point does not stand, the following points collapse as well.

[Fife]

[Martin Hash]

"The Second Amendment is the solution to price gouging." - me

[Speaker to Animals]

I barely survived the price gouging laws here in North Carolina during Hurricane Florence. Not sure how I survived, really.

The bodies of dehydrated people stacked up at least seven feet in places.

[doc_loliday]

I like the bit about how buying expensive water during a crisis is an irrational buying decision. It's clearly the least rational decision one could make.

I also think we forbid companies from rushing to move limited supplies by paying for OT, more employees, and shipping in the name of fairness.

[DBTrek]

Where demand spikes, the government should take over meeting supply and forbid all competition - so shit is fair, yo.

[Fife]

Baby, it's cold outside.

Here's something for the midwits to get their panties all warm and toasty with outrage:

'Price Gouging' Is Supply and Demand at Work, Even in a Polar Vortex
Price signals ultimately mean more supplies for disaster-struck areas.

The so-called polar vortex has many parts of the nation in its icy grip this week, with some areas experiencing temperatures well below zero degrees Fahrenheit. Unsurprisingly, one state government is sending out a misguided warning against "price gouging."

"Michigan energy providers should heed this warning: Those who take advantage of consumers will be held accountable," Michigan Attorney General Dana Nessel says in a statement. "A state of emergency does not make it open season on Michigan's most vulnerable residents." She particularly singles out propane providers, noting that 320,000 households in the state "use propane as their primary heating fuel."

Better save your LP, yankees. Your state houses might not be able to tolerate the thought of anyone sending in trucks with the stuff until the spring thaw.

[DBTrek]

Aka - No one rush any goods to Michigan, because whether you get them jackets in time to save lives, or some time in mid-July, profits will be the same.

“We would rather see our most vulnerable freeze to death than see a dirty capitalist make an inflated profit margin.”