John Stossel: too wrong to refute! We were able to discuss What's wrong with slavery? We had a lot of agreement, though I still await a definition of coercion from b_b. So, what's wrong with gouging? Are there any negative consequences of prohibiting gouging?
Natural disasters are pretty much the genesis of community. Humans band together to overcome challenges that would crush individuals. This is basic social contract shit: we pay taxes and abide by rules so that when we are at a disadvantage, the greater community will protect us as we protect the unfortunate when we are not harmed. Gouging is a fundamental attack on the social contract. Yeah - maybe you need a generator so badly you'll pay double... but in a disaster you need everything badly. Gouging upends the typical distribution of resources to the advantage of the few and powerful; Stossel's generator hero is getting there on highways kept safe by DOT, using gas certified and regulated by the Department of Commerce and selling in an environment kept safe by the police department. It's not like he showed up like the Great Humungus with an army of gay bikers at his back. Stossel's basic argument is something along the lines of a free market allows the revelation of scarcity through price discovery. Fucking duh. A place without power needs power generation. A place without running water needs water. You don't need "price discovery" to determine this. You need the logical extension of the social contract to speed relief to affected areas so that everyone in unaffected areas can prosper under the sense that their society will protect them from the greater hardship of Hobbes' nastybrutishandshort. It's not that this shit can't be refuted. It's that it can be solved by inspection. This here is some real Golden Rule shit and it takes a libertarian to argue that they're 100% A-OK as the starving, in-the-dark instruments of "price discovery."
I agree that the best way to meet urgent needs following a natural disaster is for humanity to band together as one, loving and supporting one another with generosity and sacrifice. Many people do this. If enough of us followed the Golden Rule, the gouger will have nothing to do, for people who can get generators through compassion will not pay a premium for generators. Prices do convey information, which we can also get from the Weather Channel. They also provide an incentive for people to respond to urgent demand, when the Golden Rule is not sufficient.
That right there is the crux of the issue, and where the rubber hits the road on libertarian/not libertarian thinking. No, that is. To the libertarian mindset, a market incentive is every bit as good as a social incentive. To everyone else, it's clearly, obviously, and self-demonstrably not.If enough of us followed the Golden Rule
Prices...also provide an incentive for people to respond to urgent demand,
I am inclined to agree. In my view, the non-libertarian philosophy is a grand scientific experiment, testing out systems of all kinds, discarding those which definitely end in mountains of skulls, tweaking and recombining ideas, trying to get the checks and balances just so, creating agencies to monitor agencies, sometimes ending with Sweden and sometimes with Venezuela, confident that if we can get the system right, and get people to love more and hate less, to work together and be fair and good to each other, we can lick all of society's problems. I won't speak for others, but I advocate that we see reality as it is, and take human nature as it is, a complex mixture of self-interest, kin preference, and occasional random acts of kindness, assume that many people will do evil if they can get away with it, but most just want to get along and prosper, that market incentives are reliable because most people seek opportunities to improve their situation, that social incentives are essential because we are social creatures with herd instincts, that we look for arrangements that result in the best overall outcomes, focusing especially on reducing poverty, seeing that the increase in wealth following trade specialization and market exchange did more to improve worldwide health, peace and happiness than any grand plan, and stop worrying about inequality so much.
The free market pundits love to slag on Piketty without acknowledging that his recommendation, after 500-odd pages of facts and statistics, was a free market economy regulated by socialists. The question is not whether market incentives are reliable; the question is whether market incentives are more important than humans. The field of behavioral economics has demonstrated again and again and again that the more distance you put between an actor and the people he's acting on, the less humane he will be. Communism and libertarianism both work great so long as your society's population fits within Dunbar's number. As soon as there are strangers about, crime no longer has a victim. And nearly everyone can abide by the golden rule and the whole thing crumbles the minute someone steps out of line; call it prisoner's dilemma, call it tragedy of the commons, call it what you will libertarianism and communism presume a stable solution to an unstable problem.
I could go today to Home Depot and buy a generator. Doing no comparisons between different suppliers, I can be fairly sure I'm paying a fair price. With no emergencies going on, generators are essentially a commodity. But during an emergency, supply becomes scarce in very specific areas. In such cases, I might go to Home Depot and pay triple what I'd pay at Lowe's, but without shopping around I don't know that. It's an emergency, and I don't have the time to shop around. Additionally, in that time maybe everyone runs out of generators. Gouging takes advantage of this. It sends the wrong price signals. A generator shortage in the Gulf Coast doesn't equate to a national shortage. But it might cost more to send a delivery truck off the normal schedule, and with the damaged infrastructure along the way there may be additional costs. Unable to raise the price, they don't ship them and people continue to go without.So, what's wrong with gouging?
Are there any negative consequences of prohibiting gouging?
This (along with a mistrust and distaste for meddling paternalism that often does more harm than good) is my main concern. If the generator supply is adequate, gougers have nothing to do. When demand spikes, gougers respond by increasing supply. I suggest that gougers discourage running out. If there's a hurricane coming and generators are priced as usual (the word "fair" is hard to pin down) I'll buy one for sure, and maybe two or three as backups. If batteries and milk are priced as usual, the shelves will be empty. If hotel rooms are at the regular rate, a large, affluent family will happily spread out into two rooms. If prices reflect the spike in demand, I'll reconsider, and maybe buy the smallest generator that I can get by with rather than one large enough to supply two houses. Higher prices provide incentive to use emergency goods more efficiently (while making black markets irrelevant).they don't ship them and people continue to go without
Additionally, in that time maybe everyone runs out of generators. Gouging takes advantage of this.
My suggestion is that gouging takes advantage of the entire scenario, that it takes advantage of people's fear of not getting it. I like to think existing profit margins should incentivize sellers to have enough. If they can't supply demand at the usual prices, who will fill the gap by gouging? If the battery and milk shelves are empty, they should be getting supply to fill them. If they're able to gouge, they're incentivized to create scarcity. While there can be arguments that other retailers will undercut attempts like that, I don't trust that they will. It doesn't take coordinated price fixing to see the dollars in making people afraid and in the store to buy generators, batteries, and milk. Have a healthy supply of them but only put a few out on display, triple the price, and keep restocking every fifteen minutes and they'd probably make out pretty good regardless of what other stores are doing.
This is purely a resource allocation problem, do you allocate resources randomly or do you allocate them based on need/demand. A person that needs to run a sump pump to prevent flooding is going to be way more likely to pay 3-4x for a generator than some who wants to watch football and have cold beer. If you put a price ceiling than it’s going to be random luck on who gets the generator and it won’t be assigned to where it does the most good. Some bleeding heart liberal will of course say that poor people live in lower areas, poor people are less likely to evacuate so poor people are being price gouged so it’s not fair. And yeah life’s not really fair but we don’t currently have a better way to distribute resources based on need. What will likely happen is that all the generators will either get bought by people that don’t need them or scalpers for the secondary market and the person that really needs one will either have to pay even more on the secondary market or not be able to get a generator at all and sustain huge avoidable losses. So instead of a shitty situation to the tune of $1000 for a overpriced generator someone might be out 50-100k in flood damage
Setting aside the audacity required to establish a namesake charity designed to teach children exclusively one brand of economic thought (ad hominem fallacy, as you say)... At a fundamental level, we're talking about leveraging someone's severe misfortune for profit. Even Texas has anti-gouging laws that were fairly well enforced in the wake of Harvey. So it seems like a relatively extremist argument to say "Hey, free market, amirite?" as an attempt to justify unbridled human greed. The only negative consequences that I can think of are the cost of enforcing anti-gouging laws and the cost of government assistance programs designed to boost the influx of resources into areas of suffering people. But the majority of Americans, including me, have decided that we'll foot that bill. Now, FEMA flood insurance on the other hand, ehhhhhh, I'm not so sure that we should keep on writing those contracts so willy nilly, but that's effectively another can of worms.
Agree, the creepy charity is irrelevant. Trauma surgeons profit from severe misfortune. Relief workers take home a day's pay. I'm not sure what you mean by "leveraging" -- do you object that someone is making more profit than you approve of, or that they are benefiting from a misfortune, or the combination? This seems irrelevant: the question is whether gouging is right or wrong. Laws do not make it so. Extreme, and ridiculous. We don't need to refute a silly, four-word argument. If you designate the purpose of the argument as "to justify a vice" it is much easier to dismiss than if the purpose is "to increase the supply of urgently needed supplies during a disaster." But we should not argue about intentions, we should argue about results. Perhaps confiscating the goods would defray these expenses. But the law should also provide a deterring, punitive effect. Do you agree that both buyer and seller are necessary to complete a gouging transaction? If so, both are participating in an illegal act. Would you support prosecuting the purchaser in a gouging sale? If not, what will you tell the guy who was about to pay double for a generator so he can keep the freezer running? The negative consequence I first thought of was that 19 generators, trucked 600 miles into the disaster zone, didn't help the storm victims. Anti-gouging laws clearly limit the incentive to bring new supply where there is a shortage. This is not a cost of prohibiting gouging. It's a cost of meeting the emergency demand with a public program. If, indeed, the majority of Americans support this program, and they successfully elect politicians who promise to provide this program, and the politicians try to keep their promises, and the bad party does not interfere, and the budget is allocated, and the agencies are created, and competent, honest leaders are appointed, and the funds come through, and any unintended consequences of government competing with honest businesspeople are avoided, and clever beneficiaries do not connive ways to capture and hoard and resell the handouts, and a gaggle of contracting companies do not squeeze the program for every nickel, so at last everyone who wants a generator gets one, then, at last, the gouger will have nothing to do.we're talking about leveraging someone's severe misfortune for profit
Even Texas has anti-gouging laws
So it seems like a relatively extremist argument to say "Hey, free market, amirite?" as an attempt to justify unbridled human greed.
The only negative consequences that I can think of are the cost of enforcing anti-gouging laws
and the cost of government assistance programs designed to boost the influx of resources into areas of suffering people. But the majority of Americans, including me, have decided that we'll foot that bill.
Limited, not removed. Selling a generator for cost&transportation&reasonable profit isn't gouging.Anti-gouging laws clearly limit the incentive to bring new supply where there is a shortage.
It would never make sense to bring generators into the worst disaster areas. The optimal delivery point is just far enough to sell the generators on the outskirts of the storm damage. Instead of moving goods to the area of highest demand you would move them to an area of lowest barriers.
If cost & transportation & reasonable profit provide sufficient incentive for sellers to meet the demand, gougers will not be able to sell and get "unreasonable" profit, whatever that might mean. They might even dump their goods at a lower-than-intended price, if they are permitted to risk their own resources in bringing goods to the site of an emergency, hoping to sell for high prices. Who gets to decide what price is unreasonable for every product in every context? If nobody buys, nobody gets gouged. If someone buys, will you tell them they are not allowed to get the generator at that price because in someone else's opinion it is too expensive?