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Random price spikes are not desirable in American capitalism. If you don't like it, that's too bad. You are way outnumbered.
Price spikes, random or otherwise, are relatively common in American capitalism. It is, however, only in limited instances when the "price gouging" label is thrown at them.
Being outnumbered in this situation has little to do with right and wrong.
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Correct. There is a moral component to being against price gouging.
When one understands that allowing prices to rise in accordance with changing market conditions actually ASSURES supply, while setting an artificially low price ceiling virtually assures shortages, it is hard to try to claim some moral high ground for being against "price gouging." Having a source of supply, even at elevated prices is ALWAYS preferable (and in fact morally superior) to having no supply available at any price.
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Can I ask what course you are taking right now, and what your professor says about price gouging?
I am long past taking courses (my user name is a clue). However, I have discussed this issue at length with many of my colleagues in Economics, and while it may surprise you, none of them are in the "price gouging exists" camp (as it is commonly being described in this thread). Although to be fair, answering this question is highly dependent on how the issue is defined. And for most (all?) in the "price gouging exists" camp, the definition is based on emotions and feelings. "You're charging too much and it's not fair!" You are taking a naturally occurring phenomenon (prices rising as a result of changing market conditions), and declaring that this phenomenon is now illegal. I really am surprised that more people are unable to see the absurdity of that.
And for most (all?) in the "price gouging exists" camp, the definition is based on emotions and feelings. "You're charging too much and it's not fair!" You are taking a naturally occurring phenomenon (prices rising as a result of changing market conditions), and declaring that this phenomenon is now illegal. I really am surprised that more people are unable to see the absurdity of that.
You are committing the naturalistic fallacy, and in the context of something as bounded and artificial as the (actual) economy. The fact that something naturally occurs, in certain situations, is not evidence that what occurs is good or optimal, nor that it assures supply nor that it instantly reaches continuously adjusting equilibria. This is especially true of emergencies.
But again, I must rephrase my point (reiterated twice) from earlier in this thread. Even if the market somehow works like you believe it does, unencumbered by market power or the strains of human irrationality in a crises, how does it lead to optimal utility? If the prices spike in a way that prices out all but the richest, how is the result optimal? If we were dealing in luxuries, fine. But the purpose of anti-price gouging statutes is to ensure that all can afford the necessities during temporary market imbalances like hurricanes and floods and ice storms.
Now, I agree that price gouging statutes alone may not be enough since the wealthy could still "overpurchase" and run down the supplies. Rationing would be required on the other side to ensure that all parties get enough to "get by" until the crises has passed. But that's an even greater constraint on the "natural" function of the market.
Price spikes, random or otherwise, are relatively common in American capitalism. It is, however, only in limited instances when the "price gouging" label is thrown at them.
That is because most people don't complain with continual price increases like rising gas prices that go up say $0.05 a week for a month. We are really complaining about price spikes when there disasters for the most part.
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Originally Posted by TaxPhd
Being outnumbered in this situation has little to do with right and wrong.
True but that is like saying the Nazies were wrong in Nazi Germany during the 30's and 40's. They aren't going listen and believe you are wrong even when you are right. It is typical mob logic where you conform to a group's decision to prevent being an outcast even when it is wrong. See mob mentality on wikipedia.
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Originally Posted by TaxPhd
When one understands that allowing prices to rise in accordance with changing market conditions actually ASSURES supply, while setting an artificially low price ceiling virtually assures shortages, it is hard to try to claim some moral high ground for being against "price gouging." Having a source of supply, even at elevated prices is ALWAYS preferable (and in fact morally superior) to having no supply available at any price.
How is it preferable to raise prices beyond people's pocketbooks allow? Look at how for the next week or two after a crisis when gas prices and even produce prices haven't recovered to normal equilibrium.
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Originally Posted by TaxPhd
I am long past taking courses (my user name is a clue). However, I have discussed this issue at length with many of my colleagues in Economics, and while it may surprise you, none of them are in the "price gouging exists" camp (as it is commonly being described in this thread). Although to be fair, answering this question is highly dependent on how the issue is defined. And for most (all?) in the "price gouging exists" camp, the definition is based on emotions and feelings. "You're charging too much and it's not fair!" You are taking a naturally occurring phenomenon (prices rising as a result of changing market conditions), and declaring that this phenomenon is now illegal. I really am surprised that more people are unable to see the absurdity of that.
I am not surprised that they may not believe in price gouging and likely blame price gouging laws for limiting supply during crises because gas stations have little incentive to stay open because of the gas prices they need to pay vs. the crisis price control maximum increase. Not saying, I agree but I can see it. The issue is there have been crises that have caused this even Katrina and as recent as Sandy. I wonder if some REALLY thought they did exist but the mob mentality I mentioned earlier prevented that.
You are committing the naturalistic fallacy, and in the context of something as bounded and artificial as the (actual) economy. The fact that something naturally occurs, in certain situations, is not evidence that what occurs is good or optimal, nor that it assures supply nor that it instantly reaches continuously adjusting equilibria. This is especially true of emergencies.
But again, I must rephrase my point (reiterated twice) from earlier in this thread. Even if the market somehow works like you believe it does, unencumbered by market power or the strains of human irrationality in a crises, how does it lead to optimal utility? If the prices spike in a way that prices out all but the richest, how is the result optimal? If we were dealing in luxuries, fine. But the purpose of anti-price gouging statutes is to ensure that all can afford the necessities during temporary market imbalances like hurricanes and floods and ice storms.
Now, I agree that price gouging statutes alone may not be enough since the wealthy could still "overpurchase" and run down the supplies. Rationing would be required on the other side to ensure that all parties get enough to "get by" until the crises has passed. But that's an even greater constraint on the "natural" function of the market.
Price ceilings ALWAYS result in shortages. Don't you get that? Doesn't matter whether it is a rent controlled apartment in NYC, or bottled water after a hurricane. A price ceiling ALWAYS results in shortages. Holding prices artificially low doesn't assure that all can afford the necessities. It only assures that there is nothing to buy. When the politician smugly announces that his anti gouging legislation prevented the price of bottled water from going to $5/each, he conveniently neglects to mention that there was NO bottled water available at ANY price. Doesn't matter that the price is $1, when there is none available to buy.
Price ceilings ALWAYS result in shortages. Don't you get that? Doesn't matter whether it is a rent controlled apartment in NYC, or bottled water after a hurricane. A price ceiling ALWAYS results in shortages. Holding prices artificially low doesn't assure that all can afford the necessities. It only assures that there is nothing to buy. When the politician smugly announces that his anti gouging legislation prevented the price of bottled water from going to $5/each, he conveniently neglects to mention that there was NO bottled water available at ANY price. Doesn't matter that the price is $1, when there is none available to buy.
So because of that we should let gas prices jump into $10.00 a gallon and water jump to $15 a bottle just because that is where the market wants it to be? That type of logic will kill people the weeks after any type of crisis.
So because of that we should let gas prices jump into $10.00 a gallon and water jump to $15 a bottle just because that is where the market wants it to be? That type of logic will kill people the weeks after any type of crisis.
No it won't kill people (certainly not more than will die when those items are unavailable). What is means is that John Does buys the 10 gallons of gas he needs to get out of the hurricane zone, rather than the 35 gallons that his tank will hold, plus another 25 gallons in cans in the bed of his truck. His self-limiting purchase assures that there is fuel AVAILABLE for others. Same thing with the water.
Do you really believe that the price ceiling imposed by anti gouging laws WON'T result in shortages?
So it would seem, since we are talking consumable products, maybe it would be better to make sure you have a month, 3 month, one year supply of food just for when the wind blows. It would also be important to keep the gas tank full, fill up after half a tank and maybe keep 5 or 10 gallons stored at home in the garage. (Yes you can rotate the gas). I don't think you have the room to store a year supply of gas, but if you had food stored could you stay put when an emergency happens?
Another way to look at this is from a public safety standpoint. When they had that ice truck mob after Hurricane Andrew, those people selling (erm, gouging, I mean..lol) were in physical danger when angry people started throwing rocks at them and started taking the ice for themselves.
Same thing with the lone gas station in the area selling gas for some exorbitant price. I can very easily see glass being broken and employees being threatened with physical harm because they're trying to charge $20 a gallon. So, to prevent mobs from getting out of control, lock those prices down and just let people line up to buy it. As per my vid link earlier in the thread, it was a sane and SAFE process, and the people that really wanted, or needed gas were able to get it, if they were willing to put up with that long wait.
As for the fallacy that higher prices will induce more supply, that's just not possible sometimes in the short term, as it takes time for supply to reach the affected area, regardless of what the price is. So the shortage is there, regardless of what the profit incentive is. So, the logical thing to do is to have the State of Emergency in effect and lock those prices down, let the supplies run out on a time-cost basis and just tell everyone to wait until new supplies arrive.
This is a system that works, the majority of people think it's the fair and proper thing to do, and this is why we do it this way. There is no such thing as applying academic principles in the real world, as the real world has all sorts of variables that can't be described on some dusty chalkboard. People say economics is not based on fairness and emotions - well, people by their very nature have feelings and ideas of what's fair and what's not. That's reality, and there's nothing remotely wrong or unethical about it. There really isn't. The game has been played, and the trophy goes to the anti-gougers. Time to accept that and move on.
So, my advice to the OP - time to quit "tilting at windmills" and get back into the coffee shop with like-minded individuals. You might get a bit more enjoyment out of life that way.
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