Price Gouging. Does it Exist? (capitalism, free market, debt, borrow)
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You may understand price gouging per se doesn't exist. When prices go up sharply due to an event, price is a means of rationing resources and assuring additional resources will pour in to an area with need. Unfortunately, people do not by and large understand that laws which limit so called price gouging, also limit access to relief after a major event.
You may understand price gouging per se doesn't exist. When prices go up sharply due to an event, price is a means of rationing resources and assuring additional resources will pour in to an area with need. Unfortunately, people do not by and large understand that laws which limit so called price gouging, also limit access to relief after a major event.
This sort of thinking really grinds my gears. Try explaining this clap-trap to those poor folks who were faced with having to pay $10 for a gallon of milk after Superstorm Sandy. Try telling that to the folks who were gouged $20 for a bag of ice after Hurricane Andrew, except those folks got a grain of sense and just took the dammed ice by way of mob action - goodie for them...those cretins had to go home with their tails tucked between their legs, boo-hoo.
In this great state of Georgia, when we were afflicted with the great Gas Shortage of 2008, the Guvn'r declared a State of Emergency and told everyone that there will be more gas in 5 days, meanwhile, all prices were frozen, and gas stations that still had gas had to sell at frozen prices - as was proper and fair and yes, this system WORKED.
I strongly disparage anyone that says it's okay to price gouge - it's no different than highway robbery, and all price-gouging needs to be exterminated like roaches in the basement.
Stuff like this is why I consider myself an Economic Atheist.
This sort of thinking really grinds my gears. Try explaining this clap-trap to those poor folks who were faced with having to pay $10 for a gallon of milk after Superstorm Sandy. Try telling that to the folks who were gouged $20 for a bag of ice after Hurricane Andrew, except those folks got a grain of sense and just took the dammed ice by way of mob action - goodie for them...those cretins had to go home with their tails tucked between their legs, boo-hoo.
I understand your ire, it's natural. Economics often teaches us things which are counter intuitive. The gouging for gas, creates a windfall for anyone who can supply it, same for all other commodities. This will cause an instant, and I mean instant, diversion of commodities to the communities in need before the government can even begin to react.
As resources satisfy demand, prices quickly decline. It's the great initial profit that serves to help alleviate pain and suffering in communities quickly. Without it, help will come, but not as quickly as with very high prices.
This is unfortunate, but it's human nature. The person posting indicates he has a doctorate, and likely understands the economic theory regarding gouging.
In order to price gouge you need to get anyone selling the product in an area to conspire to keep prices high. So if gasoline prices in Atlanta jump from $4 to $10 then every gas station owner in Atlanta has to make a secret pact to keep prices that high. If I own a gas station in Atlanta I will agree to the $10 price then just turn around and drop it $8. I just took all business away from my competitors and still made a fortune. Until the guy across the street drops it to $7...and the next guy to $6. This proves price gouging does not exist.
People that believe in 'price gouging' 'slave wages' 'predatory lending' and other made-up scenarios argue economics on frothy emotional appeal. None of which holds up to reality. Their scenarios have no depth and weight. They are delusional.
If price gouging existed then why wouldn't we always have $10 gas prices. Why are gas station owners only charging me $3.69 today when they could be gouging me for a lot more money? Because they can't do it. The free market does not allow it.
This sort of thinking really grinds my gears. Try explaining this clap-trap to those poor folks who were faced with having to pay $10 for a gallon of milk after Superstorm Sandy. Try telling that to the folks who were gouged $20 for a bag of ice after Hurricane Andrew, except those folks got a grain of sense and just took the dammed ice by way of mob action - goodie for them...those cretins had to go home with their tails tucked between their legs, boo-hoo.
In this great state of Georgia, when we were afflicted with the great Gas Shortage of 2008, the Guvn'r declared a State of Emergency and told everyone that there will be more gas in 5 days, meanwhile, all prices were frozen, and gas stations that still had gas had to sell at frozen prices - as was proper and fair and yes, this system WORKED.
I strongly disparage anyone that says it's okay to price gouge - it's no different than highway robbery, and all price-gouging needs to be exterminated like roaches in the basement.
Stuff like this is why I consider myself an Economic Atheist.
Can you define price gouging for us so that we can better understand your position on this?
If price gouging existed then why wouldn't we always have $10 gas prices. Why are gas station owners only charging me $3.69 today when they could be gouging me for a lot more money? Because they can't do it. The free market does not allow it.
At my price gouging gas station, I charge $20/gallon. Being a price gouger is awesome!
People that believe in 'price gouging' 'slave wages' 'predatory lending' and other made-up scenarios argue economics on frothy emotional appeal. None of which holds up to reality. Their scenarios have no depth and weight. They are delusional.
Sorry, what? Informational asymmetries, asymmetries of power, and cognitive biases all make those things not only possible but well-proven. "Wage slavery" means that one does not have the economic power to quit a job or find a job that provides better compensation or working conditions. If one has no assets saved and does not make enough money to save, then one cannot voluntarily quit a job to search for new work. Indeed, even risking the possibility that an employer will find out one is searching for a new job creates a risk cost that makes the endeavor unprofitable for the employee. Not only that, but people are irrationally risk-averse, even beyond the rationality of asymmetric utility, and as a result are more easily exploited in low-wage scenarios.
Employment contracts of adhesion, contracts that all employers include, which employees are almost uniformly incapable of fully understanding (as they are neither lawyers nor economists), and which must be agreed to in order to be hired, are another way that wage slavery can exist. See the mandatory individual arbitration clauses that are included; individual arbitration is heavily slanted towards the employer and means that widespread wage-theft can go on with very little risk to the company.
Company stores were the most egregious form of wage slavery (one was deeper in debt by virtue of always making less than the company rent/food/goods would be supplied for), but anybody who makes less than a "living wage" is subject to wage slavery.
Predatory lending comes from the same font. If you have an individual borrower, especially an undereducated borrower, their knowledge will make them easy prey. First, borrowers have little understanding of the total NPV costs of their mortgage, even when shopping around, so the fact that multiple banks are in play doesn't actually make this different (functionally) from a monopoly scenario. Even if it did, when presented with numerous complex choices, consumers overwhelmingly choose to discard some choices randomly, and also end up making poor or limited choices. We are not capable of infinite information processing.
Lenders also know that consumers (in general) engage in hyperbolic discounting, which makes them more likely to engage in activity that is low-risk in the short term but high-risk in the long term, even though the long-term costs outweight the short-term benefits. This is human nature, and was likely evolutionary advantage, but without being countervailed by education it can be destructive. It's a fact that one party has models exploiting these realities and the other party is the one being exploited. All actors are not rational, information symmetric, and on equal economic footing. Not only that, but all information has a cost, meaning that the poorer an individual is, the more economic profit they will cede from incomplete information.
As to price gouging? Yes, it absolutely is real. If a company will make SOME individual profit from supplying goods and services, they will supply it. The idea that a company would only supply milk beyond its current supply when it reaches $10 per gallon (as opposed to an already-profitable $4) simply isn't true unless the goods are seasonal goods in limited supply or require long-distance transport of very high cost. If the government limited costs to, say, 20% above X (X being some equilibrium price), there would be no risk of shortages during a crisis. It's only the desperation of the consumers which allows companies to take advantage.
I get that people believe this means collusion would have to be part of the explanation, and over the long run that would be true. But in the short run, I very much doubt it would need to be explicitly coordinated because information in a panic would not be trading efficiently among consumers in such a way that merchants would have to fear being undercut completely. To wit, if 40% (out of 100) consumers find out that one merchant is charging $5 per gallon and desert the $10 per gallon payer, the $10 per gallon merchant is still getting $600 for 60 gallons as opposed to $500 for 100 gallons at the equilibrium. Not only that, but depending upon the good, individual businesses could have de facto monopoly power, which would price consumers out of the market and create deadweight loss in the way all non-price-discriminatory monopolies do.
If it follows from a hurricane that blows out the roads, then only stores in walking distance count. If that's the case, then one has to assume that the wealthy who can afford to drive up the price are getting more utility out of the situation. And even so, the business, by virtue of its size, has more ability to exploit economies of scale in getting heavy-duty trucks or airplanes to deliver more goods at a lower price (including the cost of the goods themselves) than the frenzy of demand would.
The only way to say price gouging is "good" is to prevent hoarding by wealthier parties. So the flipside would be rationing orders. Price limits and rationing orders would be more utilitarian as a combination than would allowing the invisible hand to do its work. Again, all of this is viewed through the lens of maximizing utility rather than economic profit. Because poorer individuals would be priced out during an emergency, the utility would be inefficiently allocated.
Of course, that's true of capitalism in general....
I could be in error, but the term for this conduct may be price fixing.
Whatever you want to call it. Doesn't happen.
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Try explaining this clap-trap to those poor folks who were faced with having to pay $10 for a gallon of milk after Superstorm Sandy. 
Try telling that to the folks who were gouged $20 for a bag of ice after Hurricane Andrew, except those folks got a grain of sense and just took the dammed ice by way of mob action - goodie for them...those cretins had to go home with their tails tucked between their legs, boo-hoo.
You can't always get what you want
