Do Hurricanes Cause Shortages?
No, but price controls do. Price gouging is very poorly defined as "unconscionable pricing." There is basically no way for a businessperson to know whether they are breaking the law or not; while there are benchmarks that states use to denote prima facie gouging, these are not exclusive. The added uncertainty associated with the postdisaster business environment means less investment, lower supplies over the long run, and slower, more painful recoveries. FULL ARTICLE
Comments (42)
michael
"Hurricanes don't cause shortages, however. Price controls do."
This is a ridiculous and unsupportable thesis.
Locally, as the track of Ike became established, everyone went to the pumps to fill up on gas. Those stations that didn't raise their prices quickly ran out. While we also had stations immediately hike their prices to as much as $5.49. And those stations still have unsold gas.
They also, parenthetically, have summonses coming in the mail from our state Attorney General.
The proximal cause of gas shortages is a disruption of the supply lines-- that is, an absolute shortage of the substance itself, relative to demand. Anticipation of that disruption is the secondary cause of shortages-- people topping off their tanks and disrupting the normal, just-in-time sequence of retail purchase and resupply by delivery.
The author's premise presupposes an infinite supply of gasoline, ready to deliver instantly wherever the price is highest. But there's no such thing. Those stations that did NOT respond to Ike by adding two bucks to the pump price will get gas within the next couple of days. And, I anticipate, at the usual price or only slightly higher.
Those station that DID hike their prices still have their supply of unsold gasoline.
In extremis, one can imagine a scenario where no gas was available at any price. Bill Gates could be standing at the dry pump with his pockets full of thousand dollar bills, and he would not get any gas for his tank.
Published: September 15, 2008 9:48 AM
Curt Howland
Michael, you're blathering again.
Since there is still unsold gas, there is still gas. That's not called a "shortage". Thus, not having price controls prevented a shortage.
Someone who needs gas can still get it.
You may imagine all you want about everyone raising prices and thus no one selling anything, but just like your $500/ride boatman, the fact that none is sold is proof that they raised the price too high. The cannot profit unless they sell product.
Your state attorney general is going to prosecute people who didn't sell product? Talk about monumentally stupid.
Published: September 15, 2008 10:13 AM
Ron
Based on your comments, Michael, I'm wondering if you actually read the article.
"Those stations that did NOT respond to Ike by adding two bucks to the pump price will get gas within the next couple of days."
Possibly, but a lot can happen in two days. The point is that the stations with higher prices have gas now, which could make the difference between getting out of town and having to ride out the hurricane, risking one's life in the process.
The author touched on economizing, but he didn't go into detail about what the effects of doing so (or not doing so) might me. You mentioned that people filled up on gas once Ike's path was established, and that this left many stations empty. Had the price been allowed to rise, those first few people may have chosen to only buy enough gas to get out of town, rather than simply filling their tanks at pre-hurricane prices. This would ensure that there was gas available for those who came later.
Regardless of what you, along with most politicians, believe, the law of supply and demand can't simply be repealed or manipulated to meet what you feel are the appropriate ends. This is especially true in an emergency, when the price system is the only effective mechanism for ensuring the availability of critical supplies.
Published: September 15, 2008 10:52 AM
Keith
Quote from michael: "They also, parenthetically, have summonses coming in the mail from our state Attorney General."
In other words, the Attorney Generals says: "Give me your gasoline, or I'll kill you."
Isn't American socialism fun?
Published: September 15, 2008 12:51 PM
Deacon
#######
#######
FYI, Folks:
September 15, 2008
It was reported moments ago,
on Richmond, VA, radio:
Filling stations in Virginia are
running out of gas, because
those hurricane damaged areas
hold 26, or so, refineries
responsible for 90% of Virginia's
gasoline supplies...
...and the reporter said:
"It's going to get worse before it gets better!"
#######
#######
Published: September 15, 2008 1:13 PM
Walt D.
Price caps create shortages - even Keynesian's know this.
Regardless of what commodity we are taking about, who is going to ship stuff in from out of state, if they can not recoup their transportation costs?
A fundamental principle of economics maintains that rising prices send a message to the consumer to consume less, and a message to the producer to supply more. Passing legislation to interfere with this process guarantees that this message does not get sent!
Published: September 15, 2008 1:46 PM
mmervic
As an aside, if these asinine price gouging laws didn't exist, people could take out their ire on the "gougers" by refusing to do business with them after the emergency is over. Free markets triumph once again.
Published: September 15, 2008 2:45 PM
Jacob Steelman
Politicians always pander to the ignorance in society when they implement a state of emergency and intervene in the private marketplace by implementing laws restricting price rises during times of natural disaster. Their actions immediately curtail the flow of goods and services to areas affected by the disaster. Prices rise because of the significant increase in demand for certain goods and services demanded by consumers during a natural disaster, this is the markets way of allocating available supply - the most democratic & non-violent of all means for allocation. Shortages result when government intervenes (at the point of a gun) and in such situations allocations through non-pricing mechanisms by providers of goods and services is the only means of distributing goods and services among all those consumers demanding such (mothers with babies, the infirm, etc. become means of allocation). If consumers truly dislike price gouging they will punish the gougers by walking with their feet when the natural disaster is over.
Published: September 15, 2008 3:53 PM
N. Joseph Potts
Except for fuel for evacuations and television news helicopters, hurricanes actually depress demand for fuel in the short to mid term once they have hit. If electricity in the area is generated from fuel and half the grid is disconnected one way or another, demand for electricity (and the fuel to generate it) will be WAY down. Ditto for places evacuated.
If roads are flooded or blocked with debris, people aren't able to DRIVE their vehicles with their full gas tanks. And if their workplaces are destroyed or isolated, they won't be commuting, either. Those generating with auxiliary generators are relatively few, and most of us generate far less power than we normally consume.
News media and governments produce short SPIKES in fuel demand, but in general, hurricane depress demand for fuel. Both governments and the media thrive on scaring people.
Published: September 15, 2008 5:31 PM
Howard Lucas
That's a lot of fancy baloney... natural disasters do potentially reduce supply. Prices do not create shortages one bit... they simply reduce access to some people. The supply and demand theory is fine, but that's not exactly going to work when there is a monopoly... or when there is a concentrated source for any specific resource. If gas is not available, the remaining supplies go up in value because of supply and demand. If prices go up before the storm it is because the managers in charge of supply are exercising their greed for more profit without regard for the public welfare. Price gouging is not simply an energy issue.
Shortages happen when the prices are to low? What kind of drugs is this writer on, or in what ivory tower is he living? The term "market mechanism" is smoke and mirrors verbiage... for when the managers are deciding how much they can get for what they have to sell. The 'supply curve' sounds more like a baseball term... than the basis for price gouging. Supply increases and decreases at the whim of the manufacturer, and can often be (but not absolutely necessary) in response to demand. I recall the ENRON executives laughing on a taped telephone conversation as they created shortages to squeeze profit out of an unsuspecting public.
Higher prices tell people nothing... other than it costs more. People arrange their priorities in accordance with their needs and their ability to pay. There are times I suspect the energy industry is like a hungry tick that sees society at large as a fat dog. As Ross Perot used to say... You may as well get ready for the big SUCKING sound, because it's coming! What makes the writer believe any industry feels any benevolence towards it's customers?
Price gouging laws stop unscrupulous dealers from charging huge sums that only serve to increase the misery index. Rationing is a logical way to get a product to the greatest number of people. It is more fair than allowing a few greedy individuals buy up gas and horde it... because they can (to hell with their neighbors). It potentially helps the spread of a modicum of civil calm in a time of high stress. Telling me the market should charge anything it wishes lends me to wonder if you believe there should be no laws or rules? I consider price gouging a parasitic criminal act against society. Don't you?
When an area is completely destroyed... recovery will be slow. You can not replace years of physical infrastructure with the wave of a hand. It's actually a logical question... should rebuilding be attempted in a high storm / flood zone? Is it ethically responsible to allow people return with false hopes of recovery... when the destroyed systems may take tens of years to rebuild? Recovery many have little connection to prices and be more a factor of the stress and labor intensive efforts required for rebuilding.
More HOG WASH... businessmen and women (THUGS) know when they're price gouging. They know the 'common' market price and they arbitrarily set pricing remarkably higher! Identifying price gouging is NOT rocket science. You know darn well that we are not talking about a small increase in prices.
Enforcing traffic speed laws requires resources. Should we stop enforcing or setting speed limits on the roads? If the enforcement fines are set high enough... they often offset considerably (or even surpass) the resource costs.. Regulatory enforcement can be a societal win-win situation! The use of resources need not be directed immediately to price gouging. They should obviously be directed to society's recovery. But after the storm and recovery... egregious scoundrels need to be punished. until after other more urgent
Hurricanes reduce the supply and increase the demand of all sorts of products... all which are susceptible to price gouging. This is not simply an energy issue. Physical availability and greed, not price controls, are the cause of increase prices. How are gas lines avoidable when a huge mass of the population needs gas to travel, gas for generators, etc. This is an observation that is blind to the reality... the before and after period of a natural disaster are often chaotic. Long gas lines have nothing to do with regulations, but everything to do with human nature and the physical reality. Storms destroy structures and people. Lives are often lost because of the resultant forces of a storm. High winds, floods and moving debris often cause damage to life, limb and dwelling. Businesses, schools, churches and homes are damaged or completely lost. Price gouging laws are NOT "excellent fodder for political crusaders". They simply set an enforceable standard of decency that is lacking in the few parasitic beings that think taking advantage of others in time of disaster is a good idea. Believe me it is NOT the time to be known as a social parasite. Such individuals need to be identified and punished to the full extent of the law.
Published: September 15, 2008 6:03 PM
billwald
And drought doesn't cause food shortages in Africa, price controls do.
Published: September 15, 2008 8:23 PM
Mike
I'm confused. My governor (in NC) says price gouging is real and I should call him if I suspect someone is gouging. He says he doesn't know what is "too much" but he knows it when he sees it. I called and let him know that I think myself and my fellow citizens may have been charging way too much gasoline for our dollars in the 1980s. I feel really guilty; I hope he gets back to me.
Published: September 15, 2008 8:31 PM
magnus
Enforcing traffic speed laws requires resources. Should we stop enforcing or setting speed limits on the roads?
If by "we" you mean "the State," then I'll do you one better -- the State should not be in the business of even building the roads in the first place, much less policing them.
Like everything else government does, it has no ability to make economic calculations. None. This is not a matter of opinion. It is a natural law of the universe.
As a result, government cannot allocate resources according to economic criteria. So it makes decisions based on other criteria, which can only be one or more of the following: (a) arbitrary fiat, which is guaranteed to be grotesquely wasteful, but is actually the best case scenario, (b) to buy political favor and/or to avoid political embarrassment, or (c) for its own corrupt gain.
These facts are unavoidable, and are true whether you are talking about the State making decisions about gasoline or speeding enforcement.
Published: September 15, 2008 8:45 PM
Ball
Howard Lucas, I hardly know where to begin.
>I consider price gouging a parasitic criminal act against society. Don't you?
Price gouging is a chimera. It's basically whining that a price is 'too high'. Any price could be considered gouging. Everything is sold by people who have more of it and sold to those who have less. The law of supply and demand is in effect regardless of how many suppliers there are. Austrians do not make the error of trying to quantify competition or other such Neoclassical hogwash.
>businessmen and women (THUGS) know when they're price gouging. They know the 'common' market price and they arbitrarily set pricing remarkably higher!
So-called 'price gouging' IS the market price: it is what people are willing to pay. Setting the price to a different ratio would be the exact opposite of the market price and will result in shortages however you try to hide these effects with rationing.
Your basic complaint boils down to this: Some people have, some people have not. If this were not the case, there would be no prices at all! Prices are a manifestation of inequality. Price gouging is merely a sharp change in price which reflects scarcity (i.e. you can't always get what you want, regardless what politician you elect).
Take every argument against so-called 'price gouging', remove the 'gouging' term, and you have the exact same argument.
Published: September 15, 2008 8:47 PM
flix
billwald: "And drought doesn't cause food shortages in Africa, price controls do."
True. Price controls, War, confiscation of seed corn and prohibition of imports.
Published: September 16, 2008 12:21 AM
Paul Marks
This is the same Governor Riley who wanted to greatly increase taxes because "Jesus would do it".
Although he is a Republican he reminds me of the Democrat Congressman who said that Barack Obama was a "Community Organizer - like Jesus, and Jesus was killed by a Governor".
And the media say that the only people who bring twist religion to fit a political agenda are on the right.
No doubt Governor Riley will say that "Jesus favours price controls" next.
Published: September 16, 2008 6:29 AM
michael
Curt, your comments do not adequately describe what happened here.
"Since there is still unsold gas, there is still gas. That's not called a "shortage". Thus, not having price controls prevented a shortage. Someone who needs gas can still get it."
What happened was the threat of a disruption, and a suspension of supplies for only a matter of several days. As a result, maybe half the stations serviced by the Southern Pipeline ran out of regular. As of this morning, I expect deliveries are again being made.
If instead there had been major damage to the distribution system, and resupplies suspended indefinitely, no amount of price hikes would have created fresh supplies of gas. There would have been... NO GAS. This contradicts the premise of the article, which is that price ceilings create shortages.
Did we have price controls? No. Station operators were free to charge whatever they liked but were subject to a vaguely worded stricture about price gouging. And as a result subpoenas have now been issued to a handful of them.
I happen to like this middle of the road approach-- loosely defined controls. It acts as a deterrent without being an obstruction to commerce. But I will ask you this: can you see that this approach has affected the supply of gasoline in any way? I can't.
I have a followup question: in many states there are laws in place prohibiting selling gas below a price floor. These laws are intended to discourage price wars... but in effect they penalize stations that want to court business by having 1999 Days, where they roll the prices back to $1.21 or some such level.
Good? Or bad?
And Ron, you offer this:
"The author touched on economizing, but he didn't go into detail about what the effects of doing so (or not doing so) might me. You mentioned that people filled up on gas once Ike's path was established, and that this left many stations empty. Had the price been allowed to rise, those first few people may have chosen to only buy enough gas to get out of town, rather than simply filling their tanks at pre-hurricane prices. This would ensure that there was gas available for those who came later."
Most station owners raised prices a moderate amount, maybe 40-50 cents, and posted signs requesting that customers limit purchases to ten gallons. This approach allocated the gas satisfactorily.
People do tend to hoard in a panic. That's why when a hurricane is on the radar bottled water, batteries, plywood and other basics disappear instantly. But if a store were to just triple prices on these items "in order to rationally allocate scarce resources" their customers would desert them for good after the storm had passed.
In my state we do in fact have routine disasters. And we do not tolerate price gougers in the marketplace. Surprisingly, the market serves consumers better than if there were no rules at all.
Published: September 16, 2008 9:24 AM
Peter
If instead there had been major damage to the distribution system, and resupplies suspended indefinitely, no amount of price hikes would have created fresh supplies of gas. There would have been... NO GAS.
Nonsense. If the price had been able to rise high enough (both from lack of political interference and because customers were willing to pay), it would have been worth it for gas stations to buy gas in unaffected areas and fly it in by helicopter, if that was the only way to get it! (Of course that would never happen, because if the only way to get it there was by helicopter it'd be because the roads were inaccessible and then there'd be no cars needing gas either, but that's beside the point)
Published: September 16, 2008 9:37 AM
michael
Mike from NC, you should find out how the law actually reads. Here's a synopsis:
"Price gouging—or charging unreasonably excessive prices in times of crisis—violates North Carolina General Statute 75-38, when a disaster, an emergency or an abnormal market disruption for critical goods and services is declared or proclaimed by the Governor. The price gouging law, which Cooper helped strengthen in 2006, also applies to all levels of the supply chain from the manufacturer to the distributor to the retailer."
Considerable latitude is left to the discretion of the Attorney General-- which is a good thing. If prosecution were to become too punitive, public pressure would force him to cut back on enforcement.
The main thing about North Carolina is that we are a state of many poor people, just scraping by, and a few rich people who can buy all the gas they want and store it in containers in their garage if they like. Any legal condition that allowed unlimited price gouging would result in popular unrest, as the scarce goods would be allocated to the rich, while the poor in the path of a storm would have to ride out on bicycles. Those politicans unresponsive to the need for price limitation in emergencies would be removed from office.
We are oddly conservative yet populist. We tend to vote Republican nationally and Democratic locally.
This exchange is also of interest:
billwald: "And drought doesn't cause food shortages in Africa, price controls do."
Flix: "True. Price controls, War, confiscation of seed corn and prohibition of imports."
In fact consumers in the world's poverty belt get whipsawed between two extremes. Subsidised American farms are able to outcompete globally, offering for instance rice, wheat and cotton below the cost African farmers must charge. Thus they drive local Africans out of business.
Then US food gets dumped in those countries as "foreign aid". Local farmers can compete even less with free food, so the local food-to-market chains collapse. Now they are forced to buy from global producers. And when world commodity prices increase, as they have this past year, the public in those countries can no longer afford to eat.
To ascribe any of this to "price controls" (although bill wald's comment is obviously humorously intended) is to not comprehend the complexity of the situation. The US and EU connive to manipulate global food prices through deft use of "free market" mechanisms. And have been very successful at it.
Published: September 16, 2008 10:08 AM
Keith
Quote from michael: "I happen to like this middle of the road approach-- loosely defined controls. It acts as a deterrent without being an obstruction to commerce."
Let's not define our laws so people know what's "illegal" and what's "legal". Let's just leave up to what ever politician happens to be in power at the time to define it. That way everybody will always be threatened with the possibility of being jailed for anything they might do. Is this seriously what you're supporting?
Quote from michael: "I have a followup question: in many states there are laws in place prohibiting selling gas below a price floor. These laws are intended to discourage price wars... but in effect they penalize stations that want to court business by having 1999 Days, where they roll the prices back to $1.21 or some such level.
Good? Or bad?"
Of course it's bad.
What business is it of any government as to what price somebody might want to sell their property, ever? You can try to rationalise it anyway you want, but it's still coercive theft at the point of a gun. It doesn't matter if it's an "emergency", or if there's a "monopoly", or if the theft was decided by some democratic process. It's robbery.
Published: September 16, 2008 11:59 AM
magnus
I happen to like this middle of the road approach-- loosely defined controls.
Your support for crime and tyranny knows no bounds. First, you applaud acts of murder, battery and arson committed against people who dare to sell their own goods and services in ways that you disapprove of. (It's clear to everyone but you that these crimes you long for are just a fantasy, a back-woods country myth, but the fact that you long for the days when such crimes were committed reveals your true character.)
Now, you openly approve of the exercise of power by the State that you WANT and PREFER to be arbitrary, and its "rules" to be vague.
Clearly-defined laws that prohibit specific acts are a basic premise of due process, and thus a critical element of a free society.
You, however, know nothing about this, and like a rabid animal, get all giddy when you see somebody you dislike on the receiving end of aggressive violence.
You're disgusting.
Published: September 16, 2008 12:20 PM
Ron
Speaking of vaguely defined laws, this reminds me of an old economics joke. I think Joe Salerno or Peter Klein might have told this in one of their lectures. It goes something like this:
Three business owners are in prison, having lunch in the cafeteria, and the conversation turns to what they each did to end up there.
Entrepreneur number 1 says, "I charged lower prices for my products than my competitors, and I was convicted of predatory pricing."
Entrepreneur number 2 says, "Well, I charged higher prices than my competitors, so I'm in here for price gouging."
Finally, entrepreneur number 3 says, "I charged the same prices as my competitors, and I was found guilty of collusion."
So, as Keith said, everyone is in imminent danger of committing a "crime" at any time, based purely on the whim of some bureaucrat.
Published: September 16, 2008 12:54 PM
Curt Howland
Michael, "your comments do not adequately describe what happened here."
Your own statement is the perfect example why government regulations always do harm. Whether price ceilings, price floors, production quotas or production limits, distribution restrictions or requirements, it makes no difference.
Any regulation prevents a reaction to conditions as those conditions change. They are all destructive, always.
Any temporary benefit to one group or another you might want to cite is both only temporary, and comes only at the expense of someone else, because it is coercive.
Published: September 16, 2008 1:03 PM
michael
Quote from michael: "I happen to like this middle of the road approach-- loosely defined controls. It acts as a deterrent without being an obstruction to commerce."
Quote from Keith: "Let's not define our laws so people know what's "illegal" and what's "legal". Let's just leave up to what ever politician happens to be in power at the time to define it. That way everybody will always be threatened with the possibility of being jailed for anything they might do. Is this seriously what you're supporting?"
Yes it is. This is more in line with the British system of legislation, where the written law gives us guidelines for conduct. Whether or not a given instance of conduct is prosecutable is up to the eloquence of the prosecutor and the presentations of the accused. And the law is finally adjudicated by twelve good citizens.
In North Carolina, Roy Cooper just wants to hear the justifications offered by station operators who offered gas one day at $3.68 and the next day at $5.38. If they can give a good accounting of themselves, they're home free.
In contrast, Americans believe in the letter of the law. Thus if a law is passed saying no one can double the price of gas at a single stroke, then they will all announce 98 percent price increases... because it's safe and permitted to do so. Two days later, of course, they're free to legally raise the price another 98%. When the letter is preserved under law, the spirit is generally lost.
Magnus-- It's your call who or what you may think is disgusting. But it doesn't add to the debate. We live in a republic-- a representative form of government where our representatives order public life according to the will of the majority. And in NC the majority is just fine with elastic, interpretable controls on price gouging.
If you don't like it, it's a free country. You can move to some other jurisdiction.
However in your castigation of "crime, tyranny, murder, battery and arson" you offer a comment that seems self contradictory: "It's clear to everyone but you that these crimes you long for are just a fantasy, a back-woods country myth, but the fact that you long for the days when such crimes were committed reveals your true character."
Now as I understand it, the scenario I related is, one the one hand, a fantasy and a myth. While on the other hand, it's something that actually happened. Are we to perceive no discordant note in your summary?
At any rate, we don't do things like that any more, and in fact never did. That's just an ugly rumor. :) If we don't like the way someone does business, we don't give them our business. Fire bombs went out of fashion with the Klan.
Ron: Excellent joke. It's a takeoff on the old Stalin Era joke, with the three guys in Siberia asking each other "What are you in for?"
The first says "I opposed the policies of Kirov." The second says "That's funny. I'm here because I backed the policies of Kirov." The third one says "I'm Kirov."
Published: September 16, 2008 1:25 PM
magnus
If you don't like it, it's a free country.
Not with people like you living in it, it's not.
Published: September 16, 2008 2:17 PM
Francisco Torres
Locally, as the track of Ike became established, everyone went to the pumps to fill up on gas. Those stations that didn't raise their prices quickly ran out. While we also had stations immediately hike their prices to as much as $5.49. And those stations still have unsold gas.
Which means there was gas. Raising the price insured a supply of gas from those suppliers. They could reap the benefits of their farsightedness.
The proximal cause of gas shortages is a disruption of the supply lines--
Actually, that would lead not to a shortage (meaning unfulfilled needs, or zero stock), just to a reduced supply. As long as the gas stations had gasoline in stock, there should not have been a shortage. What caused the shortage was not the disruption of supply per se, but the artificial cap imposed by anti-gouging laws. Many of the suppliers were afraid to raise their prices and so were not able to have enough stock for the increased demand. Other suppliers were better able to meet demand, but at the risk of being unfairly prosecuted by economics-illiterate prosecutors.
The author's premise presupposes an infinite supply of gasoline, ready to deliver instantly wherever the price is highest.
This is incorrect. He assumes market-driven prices, not infinite supply.
Those stations that did NOT respond to Ike by adding two bucks to the pump price will get gas within the next couple of days.
First, they cannot know that for sure - there is something called "risk". Second, there is an opportunity cost incurred if staying put, i.e. they potentially lose profits for not anticipating the demand promptly.
Those station that DID hike their prices still have their supply of unsold gasoline.
Indeed, but they still had gasoline available. Once the regional price of gasoline comes down, those stations would have to price it accordingly, but they would have been able to reap the profits from the increase in demand from which to resupply, and still have gasoline left over to offer. Those stations that could not raise their prices would have reaped much less profits, plus would not be able to purchase any new gas until the price comes down, leaving them with no revenue.
In North Carolina, Roy Cooper just wants to hear the justifications offered by station operators who offered gas one day at $3.68 and the next day at $5.38. If they can give a good accounting of themselves, they're home free.
I do not know why you would accept or even justify having to explain to a politician what amounts to a voluntary, free exchange of goods. If politicians do not get involved setting the "fair" price for baseball cards, or popcorn, or make up, then there is no justification for them to extract explanations from gas station owners.
Considerable latitude is left to the discretion of the Attorney General-- which is a good thing. If prosecution were to become too punitive, public pressure would force him to cut back on enforcement.
First time I have seen the sentence "Considerable latitude is left to the discretion..." and "is a good thing", together in the same paragraph.
Published: September 16, 2008 2:49 PM
Michael A. Clem
Michael, I'm having a hard time understanding why people should be punished for raising the prices of their products. They ARE their products, justly acquired, aren't they? Then they have the right to set the price at whatever they want. Of course, if they set the price too high, they will find few or no buyers, and since I assume they want to sell their products, they will try to find the best price.
But if the price is too low, then they sell out of their product, and people who didn't get in early to get it are SOL. Why would government agents want to punish consumers in this way?
Raising prices helps ensure that more people have access to the supplies they need during a disaster, and discourages people from wasting those supplies on frivolous or unnecessary uses. You don't see that as a good thing?
Published: September 16, 2008 3:17 PM
magnus
We live in a republic-- a representative form of government where our representatives order public life according to the will of the majority.
No, we live in anarchy, like all people do, all the time. This is the natural, inevitable state of human existence, no matter what kind of pretense of authority you or anyone else tries to graft onto a territory and the people living in it. Anarchy exists because humans are autonomous but social -- each person capable of evaluating his circumstances, and able to act independently and in cooperation with others.
There is a parasitic, mafia-style organization that calls itself the "state" operating in my neighborhood. This criminal organization occasionally calls itself a republic, particularly during those times when it tries to appear reasonable and convince its victims that they aren't really victims.
But no one -- not you, not them, not anyone -- has anything remotely approaching actual authority or legitimacy. I did not give it to them, so therefore they do not have it.
Perhaps these people, and its sycophants like yourself, occasionally try to rationalize their crimes by dressing up their criminal behavior in fancy clothes, like a little girl dressing up a doll. But a doll in fancy clothes is not a person, and a State dressed up with terms like "republic" do not make it a legitimate authority.
Published: September 16, 2008 3:31 PM
Mike
Michael,
You make just as much sense as Easley and Cooper. That is to say, none at all. Yes, I already know the law, but thanks for posting your synopsis, which further makes the point that price gouging, or excessively high prices, is an undefinable anti-concept. Maybe require Roy Cooper to sign off on every economic transaction in the state? What say you? After all two people willing to make a trade at a given price isn't indicative of the trades fairness. Only Roy Cooper has the ability to decide that.
Published: September 16, 2008 4:00 PM
Peter
Speaking of vaguely defined laws, this reminds me of an old economics joke. I think Joe Salerno or Peter Klein might have told this in one of their lectures. It goes something like this:
Haha. Yes. Do you know The Incredible Bread Machine?
Published: September 16, 2008 8:45 PM
Keith
Quote from michael: "I happen to like this middle of the road approach-- loosely defined controls. It acts as a deterrent without being an obstruction to commerce."
Quote from Keith: "Let's not define our laws so people know what's "illegal" and what's "legal". Let's just leave up to what ever politician happens to be in power at the time to define it. That way everybody will always be threatened with the possibility of being jailed for anything they might do. Is this seriously what you're supporting?"
Quote from michael: "Yes it is."
Ah, the confession of a fascist. The law is whatever he says it is.
Published: September 17, 2008 7:28 AM
michael
"If you don't like it, it's a free country."
Magnus: "Not with people like you living in it, it's not."
No need to get acrimonious. You are perfectly free to wait until your fellow man is drowning, then charge him for the use of your rope. And I'm free to respond to such an occasion in the manner I see fit. It is, in fact, a free country.
And FT, I've been sitting here trying to figure out exactly what makes you tick. And I think it's this: what you really want is to have inelastic, very specific rules surrounding commercial behavior-- so you can then figure out how to get around those rules.
Here in NC we don't feel comfortable with that kind of setup-- it just leads to a regime where the crooks and rule-benders reign. We like a set of loose ethical guidelines, where if someone transgresses, he can be judged in the eyes of his peers.
You wouldn't be comfortable here. We can get pretty judgmental.
MAC then says much the same: "Michael, I'm having a hard time understanding why people should be punished for raising the prices of their products. They ARE their products, justly acquired, aren't they? Then they have the right to set the price at whatever they want."
It's a complicated, squishy world out here among the carbon-based life forms. We don't always behave in ways you find rational. When you try ripping your customers off in some way that might technically be legal, you do so at your own risk. A shopkeeper is a member of the community. And if his behavior is aberrant, he becomes a member of concern to the group.
Normally in this day and age what you risk is a loss of business. Or in the extreme, a boycott. But if it seems reasonable to you to profit at the distress of others, by all means give that a try. Maybe in your community people will love you for it, accepting extortionate prices as the cost of your presence.
Then follows this priceless passage, from magnus:
"No, we live in anarchy, like all people do, all the time. This is the natural, inevitable state of human existence, no matter what kind of pretense of authority you or anyone else tries to graft onto a territory and the people living in it. Anarchy exists because humans are autonomous but social -- each person capable of evaluating his circumstances, and able to act independently and in cooperation with others. There is a parasitic, mafia-style organization that calls itself the "state" operating in my neighborhood. This criminal organization occasionally calls itself a republic, particularly during those times when it tries to appear reasonable and convince its victims that they aren't really victims. But no one -- not you, not them, not anyone -- has anything remotely approaching actual authority or legitimacy. I did not give it to them, so therefore they do not have it."
Boy, that felt really good to write, didn't it? But you're actually very wrong. Here in the USA we do live in a republic, contrived by our fellows to give us a more comfortable existence than does anarchy. And it is a nation not ruled by men, but by laws.
However, the anarchy option is still available to you. I would suggest you give Somalia or Yemen a try. In those places there are truly no legal limits on behavior. Perhaps there you will have found your proper venue. Bring guns.
Barring that, if you want to live here you have to play by our rules.
Published: September 17, 2008 9:42 AM
magnus
And I'm free to respond to such an occasion in the manner I see fit.
No, you are not. You are free to run your mouth, complain, whine and kvetch, and even free to refuse to do business with whomever you want. Even criminals like you have rights.
What you are NOT free to do is murder, beat, shoot or commit arson against people you dislike.
Boy, that felt really good to write, didn't it?
I don't feel one way or another about it. It is the product of reason. I have no more feeling about it than if I were to acknowledge the definition of force as the product of mass and acceleration, or describe the self-organizational and non-hierarchical behavior of complex adaptive systems that are comprised of multiple interacting intelligent agents. It's just a part of nature.
Here in the USA we do live in a republic, contrived by our fellows to give us a more comfortable existence than does anarchy.
The fact that you tolerate or even participate in the criminal organization doesn't make its pretense of authority any more legitimate. It just makes you a co-conspirator.
And it is a nation not ruled by men, but by laws.
Dictates and commands that are "loosely defined" and therefore give broad discretion to power-wielding State agents are not laws at all. The Rule of Law requires that the laws be definite. Otherwise, you are merely ruled by men.
In those places there are truly no legal limits on behavior.
Yawn. I do not object to legal limits on behavior. I object to the State (particularly the socialist democratic State) as a pretended means of enforcing legal limits on behavior, seeing as how the State is the biggest, most egregious violator of rights.
Barring that, if you want to live here you have to play by our rules.
I'd like to see you try and make me. Better men than you have tried and failed.
Published: September 17, 2008 10:14 AM
Michael A. Clem
But if it seems reasonable to you to profit at the distress of others, by all means give that a try
"Profit at the distress of others"? Everyone needs to eat, every day. Is the grocery store or the restaurant profiting at the distress of others by charging for their food? I'm distressed that sirloin steaks cost more than I want to pay for them. Does that mean my grocer is gouging me?
All that a disaster is doing is bringing every day commerce into high scrutiny. Again and again, we show you that raising prices when supplies are low is a basic economic function that helps allocate scarce resources where they are most needed, not an aberrant action, and all you can say is "prosecute the price-gougers". Now I think that you have little or no heart for people in disasters, since you want to hurt them when they desperately need supplies the most. Allowing our feelings to cause us to engage in irrational behavior may seem instinctively right, but if the results compound the problems caused by the disaster, then it is clearly wrong, however counter-intuitive that may seem to you.
Published: September 17, 2008 11:35 AM
magnus
"Profit at the distress of others"? Everyone needs to eat, every day. Is the grocery store or the restaurant profiting at the distress of others by charging for their food? I'm distressed that sirloin steaks cost more than I want to pay for them. Does that mean my grocer is gouging me?
Government-employed distress-responders get paid quite well for their services. (And that's not even considering the fact that they make time-and-a-half at the drop of a hat, receive above-market benefits, as well as retirement packages so fat they could choke a horse.)
According to michael, it's fine and dandy for these government-employed disaster-responders to be well-paid. But anyone else? Well, they get a lynching, with michael's blessing.
Published: September 17, 2008 12:57 PM
Peter
You are perfectly free to wait until your fellow man is drowning, then charge him for the use of your rope. And I'm free to respond to such an occasion in the manner I see fit.
The "manner you see fit" is by murdering him. If that's your definition of "free country", why can't I "respond in the manner I see fit" (e.g., by murdering you) to some action of yours that I don't like? I hope you don't run across anyone else who thinks like you...
Published: September 17, 2008 8:40 PM
Alex
Michael is the reason why I no longer post on the Mises.org economic blog.
He is basically corrupted, and not intelligent.
Why are you people arguing with him? He is a child; ignore him and he will leave.
He has no concept of economics, and still less of ethics.
For God's sake, someone needs to ban him from this blog.
Published: September 18, 2008 8:26 AM
michael
On the benefits of living in a civil society, I've commented "...if you want to live here you have to play by our rules."
To which magnus responds "I'd like to see you try and make me. Better men than you have tried and failed."
Empty bombast and bravado. I doubt highly that you ever actually flout the law. When detained at some routine traffic stop, I suspect you submit meekly rather than try shooting your way out.
Mr Clem's offering is much more substantive, as he addresses directly the need for some among us to always profit at the expense of others:
""Profit at the distress of others"? Everyone needs to eat, every day. Is the grocery store or the restaurant profiting at the distress of others by charging for their food? I'm distressed that sirloin steaks cost more than I want to pay for them. Does that mean my grocer is gouging me?"
No, he's just passing along his costs while mantaining a reasonable margin for himself. You evade the distinction to be made between ordinary profit and extortionate profit.
Maybe you haven't read my comments that I've been a businesman myself, and always attenpted to operate at a profit. Such a motive is obvious-- it even motivates the wage earner toiling in the fields of others. That's obviously nothing like what I've been describing at great length.
I'll try it again. When you're struck while crossing the street and an ambulance comes to take you to the hospital, the operator sends you a bill for his service. He's running a business, and has to. In this country you expect the bill, even though in most other modern nations you wouldn't be charged.
But that's okay. Now let's say you've been struck and are lying on the sidewalk. And this time one of your fellow citizens stops and says "Need a lift to the ER? How much cash have you got in your pocket?"
THAT, in my opinion, is private, profit-oriented enterprise gone wrong. Yet that is the kind of latitude you seem to be demanding.
Tell me I'm wrong. Say there are some pursuits to which you would not stoop.
And Peter? I think you're becoming over-wrought. Chill out, bro. All I did was to describe some clearly abhorrent human behavior... and you've stepped right in to assume I'm talking about you.
Alex, of course, has the perfect rejoinder: "For God's sake, someone needs to ban him [meaning myself] from this blog."
Aye, that's the answer. If we don't agree with someone and can't overcome his objections by discourse, let's shout him down, and bar him from the forum. That way we can all pretend no opposition exists to our dribbles of wisdom.
Fortunately the operators of this website have more good sense. They and I would both welcome your well reasoned defense of excessive profit taking while someone is in extremis. What we're in is simple debate. And your side has yet to come up with a good apologia for bad behavior.
Published: September 18, 2008 9:19 AM
magnus
If you want to live here you have to play by our rules.
Empty bombast and bravado.
Published: September 18, 2008 9:48 AM
scott t
who is this 'our' anyway??
in nc, Recently, only 3 percent of registered voters in North Carolina voted in a runoff election that cost the state $3.5 million.1 The turnout is usually better for general elections, but it is still low only 46 percent of registered voters went to the polls in the 1998 general election.2 Voter turnout in the United States is the lowest in the world among democracies."
(im not sure if recent voter turnouts are significantly http://www.common-sense.org/?fnoc=/common_sense_says/00_june)
with such low registered voter turnouts and the thousands that aren't even registered -- it doesnt seem to me that you can accurately claim that nc 'oddly populist and conservative'.
Published: September 18, 2008 11:56 AM
Alex
What is so bad about socialists is that they want to use force against people who are merely asking for economic freedom, and then demand that these people be kind in comments to them.
Rubbish. Michael deserves all of the bad comments and then some - do not be polite to barbarians.
Michael is an empty vessel - and he enjoys the attention given to him by making people who have more economic sense than him angry. He is a barbarian.
I would ignore his comments if were you.
Published: September 18, 2008 4:39 PM
klagee1970
Was the shortage of water at the Superdome after Hurricane Katrina created because they weren't charging enough?
There are always exceptions to the laws of supply and demand. Markets act imperfectly, just like individuals and governments.
Published: October 8, 2008 4:50 PM