Don’t Outlaw Price Gouging After Harvey. Let the Market Work

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[–]voter[S] 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (0 children)

What country is this?

No one is going to take personal responsibility and prepare if the government is going to set the prices. Businesses will not provide products if they aren't compensated.

https://redguardsaustin.com/t/whatever/new/

[–]magnora7 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (8 children)

I have to disagree, I was here in Houston during harvey and people were trying to charge $20 for a bottle of water. An emergency crisis is not the time to try and exploit others, or make room for others to exploit others. I think making price gouging illegal during a natural disaster is perfectly reasonable.

[–]danuker 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (7 children)

The money people are willing to part with is an indicator of their true need of the product.

If you enforce "first come, first serve" and ban price gouging, then all you'll get is empty shelves.

Edit: I'll add an example that'll hopefully tug at heartstrings:

Suppose you didn't buy the $20 bottle of water, not needing it too much, and being able to live for a day without water, while you think some more.

After that, suppose a father came and bought the last 5 bottles for his sick daughter that might die if she didn't get some.

If the store had sold the water cheaply, there would have been none left for the father.

As for you, you think about the high price, and figure you can drive somewhere less affected, where it's cheaper, and bring some back - reducing the shortage, and lowering the price, AND making a profit.

Banning price gouging ensures the disappearance of the resources. People will be forced to go somewhere else for water, and will have no financial motive to bring any back - it is not worth transporting heavy, cheap, and voluminous water for long distances. People are forced to rely on government aid, which is what the government wants - more control over everyone.

That is how price signalling (also known by the dirty word "gouging") works. It directs resources from where they're plentiful to where they're needed, while rewarding people prudent enough to stockpile what might be needed direly (also known by the dirty word "speculation").

[–]magnora7 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (6 children)

I see what you mean, but in a crisis people shouldn't be stockpiling water and then making it unavailable to others just because they are greedy. We also have usury laws. Not everything is a total free for all, nor should it be

[–]danuker 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (5 children)

making it unavailable to others just because they are greedy

Well, I don't expect anything for less than a fair price. In case of a disrupted supply chain, you don't know when there are going to be more products, and pricing them as if nothing's wrong will give them to the fastest person, instead of the person willing to pay the most (and needing it enough to pay that much).

Without this incentive, businesses have less or no financial reason to prepare for disaster. Like the wiki article says about buying a power generator, without price gouging "the costs cannot be recovered during the relatively short amount of time when there is no power. As a result, a business that proactively prepared could not compete with others that did not".

Edit: Perhaps some stores overreact and set products so expensive that few people buy. In that case, they will not make enough sales to take advantage of the disaster (before the supply chain is restored), and it's their loss also.

[–]magnora7 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (4 children)

I see what you mean, but there is a limit to this. If someone's heart stops, and I am holding a defibrillator, and I refuse to let anyone use it unless I'm paid $10k, doesn't that seem like extortion and also working against quality of life for everyone? Taking advantage of people when they're at their most vulnerable is despicable, in my opinion. Selling marked-up water during a natural disaster is just a lesser version of my defibrillator example.

Also the consideration should arise that when crises become too profitable, you actually are creating incentives for business to create crises... in my defribullator example, if that works once, maybe then the financially smart thing is to start causing heart attacks in others. This is obviously a horrible incentive.

I think allowing gouging during disasters is equivalent to creating these terrible incentives. The more gouging you allow, the more common and planned-for it will become, and the more screwed everyone would be in case of disaster. At some point, this begins causing actual deaths because people couldn't get access to clean water during emergencies. When greed is causing deaths, that's a problem.

[–]danuker 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (3 children)

I see, the defibrillator strikes me and makes me think a lot. I thank you for the example!

I guess it depends on where you are on a spectrum between "helping a fellow out" and "keeping one's hard-earned cash".

I wouldn't take care of a sick retired stranger, but would pool some money for someone to do it - as private, voluntary health insurance.

I might be going off-topic, feel free to ignore me if it's not interesting anymore :)

The particular incentives you mention in healthcare makes me wonder why the US has among the worst healthcare bang-for-buck.

I guess the US is more towards "keeping", but I suspect there's something more. I believe lower rates of health insurance means people pay for "treat it now!" instead of insurance companies focusing on prevention and cures.

Making health insurance mandatory invites mediocrity and corruption: if the insurance does not do its job, you have no option of not paying. But private and voluntary insurance lets you choose among various providers (private), and even whether to insure (voluntary). I think this is a better solution.

I have to go to sleep now, it's past 2AM in Romania

[–]magnora7 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (2 children)

I agree with your points, they make a lot of sense.

I guess it depends on where you are on a spectrum between "helping a fellow out" and "keeping one's hard-earned cash".

I think that's really the core of it. It's just a matter of if the person buying actually has the ability to shop around for the best price, or if it's a genuinely predatory situation that they are trapped in. Similar to the overpriced water during a storm, you cannot shop around for the best hospital when you have a heart attack, you simply go to the nearest hospital as fast as you can. The lack of an actual free market in that situation is what makes it predatory, imo.

[–]danuker 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (1 child)

I was writing an article during our discussion.

I integrated your point in my analysis (the "People that are poor AND sick/disabled" heading), and I believe price gouging should stay illegal for people who are disabled and/or can not shop around nor work during a disaster, but should be legalized otherwise.

[–]magnora7 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (0 children)

Cool! Glad I could help you do research for your article. Looks pretty good :)