There were stories of mean price gougers after the flooding last week.
The following video, published at LearnLiberty provides some insight.
Summary:
"If the power goes out during a hurricane, who should be able to get an emergency generator? If sellers knew the motives of each buyer, they could sell a generator to the customer who needs it to keep life-saving medication from spoiling instead of the customer who wants to watch TV. But sellers aren't mind readers. One way generators can be allocated efficiently is by allowing the sellers to increase prices in an emergency situation. If the generators that are available cost more than they normally would, the people who would be willing to pay a premium to get one may do so because their need is greater. Many people would say increasing prices on certain goods during such an emergency is "price gouging." Philosophy professor Matt Zwolinski argues that far from being immoral, price gouging may be the best way to allocate scarce resources in an emergency."
Check out Matt Zwolinski's blog: http://bleedingheartlibertarians.com/
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This is nonsense and we all know it!
The people who would get a generator is not ‘because their need is greater’ but because they have more money at their disposal.
Matt Zwolinksi’s inference and advice are seriously misguided. In fact, in a community such as ours, that is prone to natural disasters from time to time, any firm found ‘price gouging’ should be fined for doing so, as gas stations and other establishments were in New York City, after Hurricane Sandy:
http://www.cnbc.com/id/49622944
http://cityroom.blogs.nytimes.com/2013/05/03/25-gas-stations-fined-for-price-gouging-after-hurricane/
So what hotels and airlines etc do during high season(s) is not price gouging?
I don’t read you complaining about that?
I think they get what they can to sustain them during lean periods. What’s the difference?
Charging gas stations for increasing prices after a storm makes even less sense. If the price ins increased people are more selective and might not buy as much, leaving supplies for others.
Using the generator as an example is a trifle extreme. In the Bahamas situation, each individual has the opportunity to by one prior to a storm arriving as a part of his hurricane preparedness. He may well, by buying early be able to take advantage of a discount.
However, when it comes to staples. such as water, food and gas, prices should remain constant, it behooves the supplier to maintain adequate supplies in anticipation.
The lumber companies in the US bring in massages of plywood etc prior to the hurricane season… The fact that Home Depot is a big sponsor of the Weather Channel has become a standing joke.
Must suppliers make a killing selling at their regular rates.
As they say…. It’s an ill wind that does nobody any good.
The issue from my perspective is knowing what to stock and lead times to get supplies.
Once they’re sold out, they’re gone and it takes time to replenish. Therefore other people still don’t get what they need.
And if you don’t have inventory you make no sales to continue to pay staff and expenses etc.
Gas stations for example have one size storage tank. They can’t keep additional supplies on hand etc.
It is not a simple process. I know as we have order cycles of up to 6 months. i.e. a vehicle arrives 6 months after we order it. What happens if we sell out? We have none to sell and on and on.
To assume there is a crystal ball to get supplies correct in normal times it’s difficult enough. To determine what to order in the event of an emergency is almost impossible.
Maybe consumers should stock up for when the storm hits?
What about the Insurance companies S3S? We are asked to pay very high hurricane insurance premiums for the whole year when in fact hurricane season is only six months.
Lots of good points scored here.. Yet, let us not forget that the laws of supply and demand applies here as well..
In our country we have a limited supply of necessary goods where as we all know everything has to be imported and duty and landing costs have to be paid before such goods are released to the merchant suppliers for retail sale.. In times of emergency, consumer demand skyrockets as the public as a whole is usually unprepared for such emergencies.. This excess demand caused a kind of economic rationing of goods through price increases due potential and actual shortages in supply.. What is perhaps somewhat unfair is that the poorer segment of society might be excluded because of higher prices for purchasing these necessity goods..
For the Bahamas emergencies come as no surprise and anyone with half a brain should be adequately prepared.. Last minute panic buying is not the answer but seems to be the way we choose to do things.. Yes, price gouging is wrong but lack of adequate emergency preparation is even more inexcusable.. Least we not forget the Boy Scout motto, “Be Prepared” still is the best way to avoid higher emergency prices and possibility doing without..
The case for ‘price gouging’ works only in the realm of theoretical economics where, as supplies reduce, prices rise along the demand curve:
http://economics.about.com/od/changes-in-equilibrium/ss/The-Economics-Of-Price-Gouging.htm
But any right-thinking person or Government would institute rationing instead, to restrict demand if it is anticipated that supplies will reduce/run out:
http://www.economicsonline.co.uk/Competitive_markets/Rationing_and_incentives.html
P.S. Rick, by introducing hotels to the debate, you are talking about discretionary purchases; how can you compare such purchases with physical necessities, especially in times of severe hardship for many?
Supplies do run out anyway in an emergency.
What can any “right thinking person or government” do about that?
Reality is right thinking. You seem to be thinking from your theoretical ivory tower this morning S3S.
The same applies to gasoline as to hotel rooms and air fares and as old sock says insurance premiums.
What if I need a hotel room for an emergency and the room rates have doubled because it’s high season?
We are a reactionary people & even then in a lot of cases do nothing about the problem like crime for instance.We don’t seem to prepare very well for anything & as a result you have to pay the price no mater what it is when the time comes & we have not prepared for it.
S$S, your new blog ID.. This is not theoretical economics but the realities of the fundamentals of supply and demand.. Just as government policies can distort the price mechanism for goods and services so does emergency situations as well.. Yet prices will eventually return to the equilibrium once supply and demand return to normal balance..
As a kid, I can remember when a cruse ship would visit Montego Bay, the price of a “Red Stripe” would go up by a quarter.. Was this gouging or only a normal response to increased demand?? That evening as the cruse ship set out to sea, prices for beer dropped by a quarter reflecting a falloff in demand.. Bottoms up lads prices are back to normal..
‘Reductio ad absurdum’, Rick
If prices inflate because there is an artifical increase in demand due to a natural disaster, what happens to prices in years when no disasters occur (think of none occurring for a very long time)?
Do merchants (a) hold their prices steady during these lean years or (b) reduce their prices, continue to reduce them as the time between sales lengthens (and continue to do so until the price approaches 0? Well, that’s what the demand/supply curve suggests)?
http://www.investopedia.com/university/economics/economics3.asp
They usually do the first but never the second …. so, neither should they be free to do the opposite, either.
Besides, as I said, the obvious answer to the depletion of supplies is rationing, which does not advantage those of higher economic means or vice-versa.
I agree to a degree with Norman,
it centers around Personal foresight or planning, or lack thereof.
SO many of us do not period.
Hence the “Government to the rescue” hue and cry.
Oxymoronic at best.
Read Adam Smith, the Wealth of Nations then start this thread over.
The cry of gouging come up every time, with very few cases being actual.
In most cases, Fuel or Plywood, Groceries, the cheap most familiar brands do sell out, leaving only premium brands, more costly.
Irrational minds (90%) decide someone has jacked the price, and so go running to Price Control,
(a misnomer, markup control would be accurate, even profit control is incorrect,the establishment could be losing money no matter the markup!)
5/8 ply for hurricane shutters runs out, leaving 3/4 or finish ply,
obviously more expensive.
High test being left when the regular is sold out…..
Ethics? Ok, another angle which needs consideration,
but if you possessed the last loaf of bread on the Island, would you seel for $4, or consider maybe $10, so you could at least buy a cheaper or more bulky alternate item to feed your own family? Rice? Grits?
Nassau has not seen the Supply and Demand issue arise to any great extent yet,
God help most if extreme shortages do occur.
Far from it S3S. Don’t forget I am in business that works off of time lines as outlined.
Merchants keep their prices (except those of us on price control) at levels that are most profitable for their overall business.
Selling some product at a loss and making what you might consider excessive mark ups on another.
We often reduce prices when they are in inventory for long periods. Not sure how you conclude merchants don’t, unless I’m misunderstanding you?
Rationing does not apply unless I’m misunderstanding you on this point too?
The way S3S is thinking is exactly how the government thinks & that is one of the main reasons business get hit so hard with high taxes,they think the worst of capitalism in general.
Old Shoe, thank you, but I’ve never been so denigrated as to be equated with ‘the Government’.
On the other hand, I am not nor ever will be an idealistic capitalist. Instead I am a pragmatic capitalist, who “doesn’t care for the bull side or the bear side – only the right side”.
We’re all idealistic in one way or another S3S, including you who considers your pragamtic capitalism – whatever that is – is the “right” form.
I can never be convinced a bureaucrat knows best in these situations.
They are no less a scoundrel than some business people, but I trust the market more.
Seems the market is held much more accountable,
even if only due to the Quick to jump to conclusions principal.
Now if we could just kill the impression that sale price = pure 100% profit to the retailer……
Its like they say in the book “Free Market Revolution”,we seem to trust some faceless bureaucrat with our food quality but not say McDonalds who are selling it. Is it not in their own interest NOT to poison you ? I say yes it most certainly is. The only thing the bureaucrats are doing is driving the prices & taxes out of this world.