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As Hurricane Milton makes landfall, a reminder about price-gouging Price gouging during disasters is good. It saves lives.
Think of it this way. When the hurricane is on its way do you want people to panic-buy double what they need “just in case”, causing the shops to run out? Why wouldn’t they do that if prices are artificially stopped from rising? Wouldn’t it be better if people limited the amount they bought because “it’s so expensive right now”, leaving more available for others?
When the disaster strikes, would you like businesses and individuals from hundreds of miles away to drop whatever they were doing previously and start transporting emergency supplies into the area affected – and keep doing it until there are no more shortages? Would you like factories hundreds of miles away to shift production to whatever the people in the afflicted area need most? You would? Then let them sell their stuff at a higher price than usual.
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In a crises it is more, not less – more, vital that the the laws of economics, of voluntary interaction and supply and demand, are followed.
However, the entire world view of the establishment is opposed to this objective reality – and NOT just the Marxist aspect of their thought. For example, the economic “social teaching” which is the only aspect of church teaching that people like Mr Biden or former Speaker Pelosi believe in – they dismiss everything else the christian churches teach, but they devoutly believe such things as the first paragraph of the once famous Papal Encyclical of 1891 (yes as far back as that) – that capitalism has led to a rise in poverty and immorality and that state intervention is the cure.
There are two problems with this position – firstly the claims that are made in the first paragraph of the 1891 Encyclical are false, capitalism did NOT cause a rise in poverty and immorality (compare 1891 to 1791 or 1691 or 1591 – or any previous time), and, even if its claims were true (and they were not true – the claims were false) the proposed solution, state interventionism, would make things worse – not better, worse.
The situation is similar with “mainline” (Episcopalian and other) Protestant thinking on “the Social Question” – inspired by German thinkers Richard Ely was the main influence on both the establishment Protestant churches in America in the early 1900s and on academia (he led the take over of academia by the interventionists), and political thought – as he was a major influence on both “Teddy” Roosevelt and Woodrow Wilson – and all the economic ideas of Richard Ely were wrong.
All this did NOT apply to the “Bible thumping” evangelicals (the so called “fundamentalists” – NOT at first defined by opposing biological evolution, but rather by standing by essays on “the fundamentals of Christianity” which were written to oppose the “Social Gospel” in the early 1900s, several of those essays were written by SUPPORTERS of biological evolution, the essays are NOT about Darwin). But these evangelicals (so called “fundamentalists”) had little influence on the American establishment – to whom religion became more of a mixture of just common practices (such as going to church) and active intervention to (supposedly) “help the poor”, rather than a system of real theological belief.
So it is not a Catholic thing or a Protestant thing – or even a Christian versus atheist thing, as the main atheist position in American establishment (establishment) thought, is Marxism.
Again basic economics applies in a crises, such as a massive and terrible hurricane, even more (not less – more) than it does normally. And basic economics is precisely what everything the American establishment are taught (and have been taught for more than a century) goes against.
Richard Ely was the most important economist in the early years of 20th century America – and he did not accept the most basic principles of economics.
And the establishment still do not accept these principles – indeed they hate and despise them.
This is how basic the problem is.
It should be pointed out that conservative Catholics correctly explain that Papal infallibility has never been claimed for any of the Encyclicals on economic policy from 1891 through the 1930s and beyond – indeed it could not be as these encyclicals are not on basic matters of Christian doctrine.
So if a Catholic says, for example, “I think that the first paragraph of the encyclical of 1891 contains basic errors of fact” they are NOT guilty of heresy.
It is also ironic (to say the least) that this economic teaching is the only aspect of Catholic teaching that “Catholic” politicians in the Democrat party retain – they reject all other aspects of church teaching.
To bring things up to date – it is no way “anti Christian” to oppose the bureaucratic power (and corruption) of FEMA.
It costs more and it is more dangerous and difficult to get stuff to people in disaster areas, therefore things cost more both to the supplier and consumer.
It is so obvious it hardly seems worth pointing out. But it needs to be pointed out because the level of economic competence in people is so dulled by stupid political reckoning that the simplest things are hard to understand. It is hard to believe that people believe the excuse that the reason food prices are up 25-40% is because of greedy grocery stores — who generally operate at a 1-3% margin. But they do, because people believe things that align with their beliefs rather than the other way around. So people are going to swallow whole the utterly ridiculous talking points from the left so they don’t have to give up on the belief that government profligacy doesn’t have devastating consequences.
Certainly it is understandable that it places an extra burden on the victims of disaster, but the higher price is not an exploitation of the disaster rather it is a consequence of the disaster. And paying more for your generator or bottles of water seems inconsequential compared to the cost of rebuilding your house.
I also wanted to say that Ron Desantis is such an embodiment of competence in this difficult situation. Who’d want anyone else in charge? Can you imagine Kamala or Biden (or for that matter Trump) being in charge of something like this? The contrast between the clowns who populate our politician space could not be starker. I very much wish the Republicans were running him for President.
And Don’t Forget – government always makes these things worse, not better.
My neighbours have taken in their elderly parents, whose ocean-front home in Destin, FL, was rendered uninhabitable by the waters of Hurricane Helene.
The husband is heading back down there as soon as Hurricane Milton has passed, to organize the rebuilding of the home.
For the third time.
Federally-subsidized flood insurance, don’t-you-know. The basic incentive – don’t build a home where it often floods, in a place where no commercial insurance company would offer you cover at any premium, due to the 100%-certainty of a more-or-less total loss – has been completely up-ended by politicians buying votes with taxpayer money. There’s a reason that most of Florida was an alligator-infested wilderness as little as 50 years ago.
Watch for the intensive lobbying to retain and even to expand the Federal flood insurance programme in the wake of the latest devastating storms. I confidently predict that Vice-President Harris will promise these things if she is elected, and, once again, coal miners in Butte, MT, will be taxed to rebuild the beachfront homes of retirees on the coasts of Florida.
llater,
llamas
“If Global Warming is true, why are people still building beach-front properties in Florida?”
Ah, because of government meddling. So, clearly, governments are Climate Change deniers.
Not quite sure how relevant it is but during recent shortages here in the UK of eggs and cooking oil, the supermarkets I know of have not taken the opportunity to put up the prices but they have restricted the number of items that people can buy at a time. Assuming they are trying to maximise profits I can only imagine this is with future business in mind.
Patrick – even powered milk does not appear to be in local supermarkets in my home town in England “sorry not in stock” say signs, why not in stock? No answer. Supply chains appear to be breaking down – but there is no obvious reason why this is happening.
But this is nothing compared to what is happening in rural areas of the United States (Republican strongholds) where there appears to be a deliberate government effort to harm the local population – it appears to be more than the normal incompetence and corruption of the Federal Government, it appears to be a deliberate effort to harm people in wide areas of North Carolina and Georgia, cut off supplies, prevent locals repairing roads, prevent people voluntarily helping others.
Is it “just” to try and cut these people off from voting, or is it a much wider and longer term agenda to depopulate areas so the can be “rewilded” (or taken for some other use) – handed over to government and pet corporate entities?
As for mainstream journalists – when the local people desperately try and tell them what it is happening, the international media just frame everything as “Trump” (not the local people – “Trump”) making “false claims” (which are true claims) which are doing “harm”.
People, in various parts of the United States people are getting more and more angered by the media – by the media just repeating, as truth, the lies of government agencies (and their corporate partners) and the media calling every complaint from local people “false claims” that are doing “harm”.
Being a journalist should be about talking with local people – really listening to them. Not repeating official press releases from government agencies and their partners.
Don’t know whether price-gouging’s good or not, but it’s definitely remembered – and not in a good way. In my voluminous quotes page, I have an example of a town in Kansas under threat from a weather event, and all the stores jacked prices on bread, water, batteries &c – except one store that kept its prices at normal levels and had more supplies trucked-in. Even twenty years later, there were people in the area who’d only shop at that store – and were happy to tell anybody who asked why.
Y. Knott.
That was their choice – and the local people were entitled to choose not to shop (even years later) in places that increased their prices.
But government, local-State-or-Federal, has no right to tell people what prices they should sell goods and services at.
And such government edicts do terrible harm.
Patrick Crozier and Y.Knott make the fair point that it is in the interest of a local shop that wants to retain the loyalty of its customers to ration goods rather than raise prices when there is a shortage, or to raise prices as little as possible and make it very clear to customers that they are only are doing so because it is costing them more to buy supplies.
That doesn’t change the basic point that stopping sellers from setting whatever price they think will maximise their profits makes the position of people in a disaster zone worse. The calculation of what price maximises profits in the long term is often complicated, which is why we should leave the decision to those with skin in the game.
The incentive to not raise prices in order to keep on good terms with your neighbours doesn’t apply to sellers or manufacturers from outside the area who change what they are making/selling in order to profit from prices in the disaster zone being temporarily high. Their motives may not be as pure, but the contribution they make to alleviating the shortages can be considerable.
The consumer market in the US where retailers will relentlessly push up prices when the market is in short supply to ration demand is car sales. People hate car dealers.
Practically speaking, it is generally a bad idea for a retailer that relies on steady repeat business to make a decision to increase prices to clear a short term supply crunch. Much better to limit how much a customer can buy and ration out the supply, even if it means stock outs. People will blame prices on the store while they will blame stock outs (if they even remember them) on the supplier. The businesses that can get away with maximizing price during a shortage are those who can afford not to see those customers again during normal times, and there really aren’t many of those.
And there is actually a deep rationality to this. As a customer, you really can’t know what is going on in the supply chain of any given item you use. And it is perfectly possible for businesses to manipulate supply in order to generate artificial shortages. Go back and look at the disaster that was California’s electricity market in the 1990s. In markets controlled by a few large companies (and that is true of a LOT of consumer products in the US and Europe) this is a very real risk, and it makes sense for the public to push back against short term price spikes even if they make sense from an economics POV in a specific situation in order to deter these companies from engaging in this behavior in more borderline cases. And the threat of government action is part of that push back.
Everything is trade offs.
@phwest
Much better to limit how much a customer can buy and ration out the supply, even if it means stock outs.
When you say “better” here it is important to recognize that it means “better” for the retailer, it is in actuality much worse for the customers. Running out of water and generators when demand is particularly high for them due to disaster conditions is far worse for the people who need them than it would be if they had to pay more. So businesses taking the approach you mention would really be acting in quite a selfish manner by not raising prices. “I might have to watch my children die of dehydration or water bourne illness, but at least I didn’t get ripped off at Krogers” doesn’t seem a great sentiment to me.
The businesses that can get away with maximizing price during a shortage are those who can afford not to see those customers again during normal times, and there really aren’t many of those.
But “there really aren’t that many of those” is true only if you ban price gouging. If there is a massive shortage in an area then outside businesses can take advantage of the situation and find ways to fulfill the demand if doing so is profitable for them. Then when the storm is over they can go back to their normal lives never having to see North Carolina again. This is an extremely good thing, not a bad thing.
This is because, as Natalie pointed out in the OP, increased prices not only effectuate a rationing scheme but ALSO can dramatically increase the volume of supply. These are exactly the things needed during a crisis of these types. Keeping prices low is not at all important during disasters.
Further to phwest, my theory is that the behaviour of merchants is inversely proportional to the chances of repeat business. Dealers in everyday goods like bread want a reputation for honest and trustworthiness so customers come back regularly. Estate agents and car dealers don’t care about repeat business because their products are bought very infrequently, so have no incentive not to screw customers over
‘Estate agents and car dealers don’t care about repeat business because their products are bought very infrequently’
Maybe, but their customers may describe their experiences to their friends.
SteveD – yes indeed Sir.
And government regulations end up creating both shortages and, in the longer term, higher (rather than lower) prices than would otherwise be the case.
Five minutes ago, on US NPR, two stories, in immediate sequence:
– Biden admonishing against profiting from the distressed Floridians. Report of a few hundred complaints filed about prices.
– A gas station in the Tampa area, with electric power. Open, pumping gas for lines of cars. Until the gas ran out.
I literally chortled.
Merchants might make unwise pricing decisions during times of high demand, but that’s their business.
It’s far more important to make it clear that those decisions are the merchants’ to make.
Talking of pricing, right now the federal government is pouring out bucket loads of cash. It seems to me that the federal government really should have nothing to do with this. The state government certainly has a lot of responsibilities, and I suppose individuals should have insurance to cover this possibility.
If you live in Florida it is not a big surprise that a hurricane blows in every year, so it is down to you (and to some degree the state) to be prepared for that. So why is some corn farmer in Iowa, or electronics manufacturer in California or Banker in New York paying for this disaster? There are a lot of advantages to living in Florida over Iowa, but surely you have to take the good with the bad….
As for things the Feds do this is pretty low down on my list of things to get them to stop doing. But I saw what happened when George Bush sent 100 billion dollars to Katrina. Breathtaking levels of graft and corruption. Heck, though, those were to good old days when we thought 100 billion dollars was a lot of money.
Fred the Forth – it is not just NPR, it is almost all the major media outlets. They all repeat government propaganda as truth – and treat any complaints as “false claims” (or “lies”) which cause “harm” – dissent is automatically “false” (especially when it is obviously true) and it automatically causes “harm” – because it undermines faith in the government and in the partners of government.
bobby b and Fraser Orr.
Good points Gentleman.
Fraser Orr, at October 10, 2024 at 1:25 am,
If you see DeSantis run for POTUS, you will know he has been compromised by the Uni-Party. Hard to see any other way he gets there…unless Trump is allowed to win and then installs DeSantis in some way that he becomes heir apparent, notwithstanding JD Vance’s position.
I’m also not sure DeSantis is ready for the national/world stage…I’d much rather find an American Milei who could somehow (!) get elected.
@GregWA
If you see DeSantis run for POTUS, you will know he has been compromised by the Uni-Party.
I don’t understand. He already has run, he just got overshadowed by the Trump campaign and in particular the lawfare the left initiated against him which really is the reason Trump won the primary. Had that not happened to Trump, and especially if Trump had stepped aside, Desantis would no doubt be the nominee of the Republicans.
Hard to see any other way he gets there…unless Trump is allowed to win and then installs DeSantis in some way that he becomes heir apparent, notwithstanding JD Vance’s position.
Not going to happen. Trump is too pissy that he dared run against him. Vance will be the next Republican nominee almost regardless of whether Trump wins or not. Though if Harris is installed (which seems EXTREMELY likely to me notwithstanding the optimistic gushing on Right Wing media here in the USA), with a Dem house and senate (much less likely), we should expect the end of the filibuster, DC and PR to become states, and the naturalization of tens of millions of illegal immigrants. Which is to say, the republicans in the wilderness for twenty five years. After that there won’t be much worth saving.
I’m also not sure DeSantis is ready for the national/world stage…I’d much rather find an American Milei who could somehow (!) get elected.
Well one of them ran too, and I voted for him. Ramaswamy is a true to the core libertarian. After all he planned to fire 75% of the federal workforce. Desantis is far more ready for the world stage than Vance, Ramaswamy or, god help us, Kamala or, even-god-can’t-help-us Tim Walz.