The Right to Set Your Own Price
Price caps violate the property rights of owners of scarce resources, such as gasoline, writes Chris Westley. The gas station owners, not public authorities, are the ones who risk their capital in order to satisfy customers. They are the ones who hire labor, set contracts with suppliers, and organize resources so as to provide goods to customers via voluntary exchange. They should be able to charge whatever prices they want. FULL ARTICLE
Comments (23)
Great article. This is similar to that game played by New York AG, Spitzer where he decides how a company should do its business (e.g., insurance such as Marsh) and if he disagrees, he tries them in the paper and forces them to settle out of court.
Property rights are increasingly encroached upon. Another great article was in the WSJ regarding the environmentalist’s efforts to save the spotted owl. They wiped out 80% of the logging on 24 million acres, 130,000 jobs were lost, 900 mills closed and guess what; it looks like the real culprit was the barred owls who moved in and took over their territory.
When will this assault on property rights abate? The Austrians are right there is no third way. Either we have a free market or we inexorably move toward Socialism or public ownership of property. Interventionism is just a slightly slower way of getting us to that endpoint.
Published: October 21, 2005 8:02 AM
Excellent. More needs to be done to drive home the point of private property rights and theie relevance to liberty for us all.
Published: October 21, 2005 8:29 AM
Socialist doctrines have been taught in America for a long time now and one thing they have been especially adept at is denigrating the institution of private property. This has produced in the minds of many people the idea that property produces selfishness, greed and exploitation. It is a petty, evil institution. Thus rights to property have become somewhat conditional. Individuals can only own things if the "collective" doesn't want to own them instead. If you use your property in ways "society" sees as beneficial then you are usually allowed to keep it. If not, then it can be taken away from you. If you don't like it then too bad. Stop being such a selfish bourgeois exploiter. Or in the words of Hillary Clinton, "We're going to take it away from you for the common good."
Published: October 21, 2005 8:38 AM
So is anybody going to file a friend of the court brief for Jason McBride? Just wondering.
Published: October 21, 2005 9:41 AM
This article is pure common sense; the kind that isn't so common any more. When you think of how far down the socialist/fascist path the thinking of this nation has gone, it makes you shake your head. Would even one person in a hundred on the street see the issue as put in this article? I wonder, and that’s sad.
I'm with Aaron. In fact, it's articles like this that remind me of the need to abolish the public school system forever. The founders really dropped the ball in not making at least a diligent attempt to keep the federal government completely out of education. What a disaster.
Published: October 21, 2005 9:56 AM
"I'm with Aaron. In fact, it's articles like this that remind me of the need to abolish the public school system forever. The founders really dropped the ball in not making at least a diligent attempt to keep the federal government completely out of education."
Agreed -- and why not start getting them out of education by demanding an immediate retroactive end to government guaranteed loans for college thus generating market determination of the price of a college education?
“It is often asserted that the poor man’s failure in the competition of the market is caused by his lack of education. Equality of opportunity, it is said, could be provided only by making education at every level accessible to all. There prevails today the tendency to reduce all differences among various peoples to their education and to deny the existence of inborn inequalities in intellect, will power, and character. It is not generally realized that education can never be more than indoctrination with theories and ideas already developed. Education, whatever benefits it may confer, is transmission of traditional doctrines and valuations; it is by necessity conservative. It produces imitation and routine, not improvement and progress. Innovators and creative geniuses cannot be reared in schools. They are precisely the men who defy what the school has taught them.� -- Mises, page 338 Human Action (pdf)
“In countries which are not harassed by struggles between various linguistic groups public education can work if it is limited to reading, writing, and arithmetic. With bright children it is even possible to add elementary notions of geometry, the natural sciences, and the valid laws of the country. But as soon as one wants to go farther, serious difficulties appear. Teaching at the elementary level necessarily turns into indoctrination. It is not feasible to represent to adolescents all the aspects of a problem and to let them choose between dissenting views. It is no less impossible to find teachers who could hand down opinions of which they themselves disapprove in such a way as to satisfy those who hold these opinions. The party that operates the schools is in a position to propagandize its tenets and to disparage those of other parties.� Mises, page 900 Human Action (pdf)
Published: October 21, 2005 11:12 AM
Yup. You'll get no argument from me, J.D. And I did not know or else had completely forgotten, that Mises had said those things. He keeps getting smarter and smarter each time i come across something he said. Thanks!
Published: October 21, 2005 11:25 AM
Paul, Check this link for some words from a noted opponent of the public school system:
http://www.johntaylorgatto.com/chapters/1d.htm
Published: October 21, 2005 11:52 AM
As the owner of a business, I am tired of being gouged by customers who are taking advantage of the fact that my prices have to compete with those of similar businesses in the area. I know for certain they could pay more.The government should do something!
Published: October 21, 2005 11:55 AM
Laura,
I'm not a lawyer, but if anyone knows of one who would be willing to file an amicus brief, perhaps they can contact Mr. McBride. His business is on the Web.
Published: October 21, 2005 12:26 PM
Mikey: I know your joking, but the funny thing is, you never know when the government might really just do something like that. It did it before in spades in the thirties for the farmers. It involved getting the farmers to plow under portions of their fields, reduce production and ruin goods produced. It included the government buying produce at inflated prices and dumping that produce on foreign markets, or just storing it period. They did all this while at the same time, people went hungry and without employment.
There is no joke that is too ridiculous, nasty or absurd to avoid being seriously considered and even implemented by the state. When they're not trying to force you to price lower than you want to, they'll try to force you to reduce production so you can sell higher than you otherwise could. Clowns and jokers remain at the wheel at all times, ready at any moment to steer us into the ditch, or off a cliff.
Published: October 21, 2005 12:51 PM
Thanks for the link J.D. I've enjoyed Gatto before and i've bookmarked your link. I know most of my statist friends base their fear of anarchy in their severe mistrust in the nature of their non-heads-of-state fellow humans. I think i'll point them to this link if the topic comes up again.
Published: October 21, 2005 2:44 PM
Most of the time there is no such thing as gouging, or it's a good thing, because it creates incentive to increase production (or bring existing product to where it's needed). It also, generally, has the desirable effect of getting product into the hands of those who need it most.
In some cases though, isn't there such a thing as gouging? If the benefits above are absent? How about if I happen upon a drowning man and charge him his full net worth to throw him a life preserver? In such a case, I am simply taking advantage of another person's misfortune. I can't think of any social benefit, unless you think that it would create an incentive for people to drive their boats around aimlessly in search of drowning victims to take advantage of (with the arguable social benefit of fewer total drownings).
The general rule might be that it's gouging if you in no way planned on a sudden huge upward price swing. People who stockpile in order to take advantage of high emergency prices are not gouging. People who just happen to have stock on hand might be. Not to say gouging laws are a good thing, because I don't think they are. But charging the maximum market rate is not always morally neutral.
Published: October 21, 2005 4:01 PM
Funny you should bring up the "drowning man agrees to pay fortune for his life" scenario. I was reading some Benjamin Tucker the other day and he suggested that in anarchy, the man might later refuse to pay the agreed price, and similarly, no court would be bound to uphold the agreement either.
I'll have to go back sometime and absorb that argument more fully to see how that sits with me. But that might work for me.
But in the general case of gouging, i think a man should always feel free to not be gouged by abstaining from buying. And the gouger should always feel free to abstain from selling to the would-be gouged. On the other hand, if the buyer agrees to buy, and the seller agrees to sell, and the transaction takes place, all is well. Action always trumps grumbling in my books.
Published: October 21, 2005 6:20 PM
Very good article. Hmm so what happens down there when in another line of work, say electrical work. And a company charges $75 for two men and another electrical company charges $60 an hour. Where is the idiot AG then. Running off to run the one company out of business then? So the jerk AG runs off a company an so there is one fewer companys and company number two says> Hmm less competion to deal with lets raise our prices to $65 and hour now. Just asking, as i am an electrican and only now looking forward to being able in a few years to say to heck with it all an move out of the country and take our money with us and kick back on the beach in Malaysia. Ha since my wife is from there. I had it with idiots in the Government.
Published: October 22, 2005 10:06 AM
Did someone forget the 5th amendment of the US constitution. Any price control for the public good that reduces any compensation for any property be it rents, goods, services or labor from market rates would seem to be taking of private property by the government without just compensation.Whats going on here???
Published: October 22, 2005 9:47 PM
TJM,
What is going on is that the Constitution is worth the paper it is written on when the people allow the state to interpret it any way they wish.
Published: October 24, 2005 9:24 AM
What about the whopping money being made by the American Oil companies? Their cost of production has not gone up, Why cannot they supply gasoline at far lower prices?
And in the case of Mcbride, the consumers had a choice- They did not have to buy it. They could have gone elsewhere as any prudent human would have if they felt they were being overcharged
Published: October 25, 2005 1:31 AM
Nathan, they sure CAN supply gasoline at far lower prices, but why SHOULD they? They, and only they are the proper moral agent to decide at what price they are willing to exchange their scarce goods for other goods. There is no other moral agent that may make that decision for them. Governments that try to be that moral agent are interfering with that decision that is the oil company's alone, thus, they are taking their property away from them, which is better known as stealing.
I know there are others here who will carp about the federal involvement of the military in the production of petroleum, but this evil has NO bearing on the wholesale sales of petroleum products, and in any event two wrongs don't make a right. Let's not trample a fundamental principle in the name of "fairness".
Published: October 25, 2005 8:30 AM
I agree with Vince, and also, if the price were lowered for any other reason than as a result of market clearing considerations, i.e. an increased supply or decrease in demand, there would be an immediate shortage. What is preferable, a higher market clearing price, or a lower price but with no product available for sale? There's no question we'd rather pay a higher price than to wait in long lines for gasoline.
Finally, without the higher profits, there is no signal to the investors to apply resources towards increasing production, which will in turn, lower prices and incidentally reduce profitability.
Published: October 25, 2005 11:06 AM
Nathan
What basis do we have to conclude that oil companies are making an unreasonable profit compared to other companies? If we look at Net Income as a Percentage of Cost of Revenue for a few large companies, we see the following:
Exxon Mobil 15%
Microsoft 200%
General Electric 25%
McDonalds 25%
It seems that the oil companies are being scapegoated. Centralized price controls in the old Soviet Union led to shotages of bread and vodka. One of the reasons Chuck Schumer can get away with crying price gouging and advocating price caps is that there were no gas lines in the Soviet Union. However, this was because there were very few cars! Anyone under 40 (who were under 15 in 1980) will not remember gas lines under Jimmy Carter. Therefore a large part of the current voters will not remember this object lesson in Economics.
Published: October 25, 2005 1:30 PM
One more thing- if you sell something below market price, the buyer will be in a position to resell at market price for a profit, thus the ultimate consumer is no better off.This was in a previous post or article on this site, sorry I forget by whom.
Published: October 25, 2005 2:02 PM
Excellent point Mikey: Without government style coercion with price controls, you can't even have shortages and lineups and below market prices. That's because even if you want to sell below market price and do so, the market will overwhelm your act and keep prices where the market clears.
Published: October 25, 2005 3:03 PM