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Source link: http://archive.mises.org/8477/fill-in-the-blank-article-about-price-gouging-laws/

Fill-in-the-Blank Article About Price-Gouging Laws

September 8, 2008 by

As surely as summer follows spring, natural disasters are followed by saber rattling about “price gouging,” which is usually defined very lucidly and clearly as an “unconscionable” increase in the price of a necessity. These tend to follow a formula, so I thought that instead of writing a new article discussing the unintended consequences of every price-gouging law that goes into effect after a natural disaster, it would be useful to write a universal, fill-in-the-blank article discussing the economics of price-gouging laws. Whenever there is a natural disaster, you can just fill in the relevant blanks for a complete analysis of the economics of the situation. FULL ARTICLE

{ 53 comments }

Fephisto September 8, 2008 at 8:56 am

Ha! Nice style.

michael September 8, 2008 at 9:06 am

Overly simplistic to say, as the author does, “A price control by any other name is still a price control, and price controls have always served to compound the miseries wrought by natural disasters.”

Always? Isn’t there a sliding scale in these matters?

Let’s take the flood following a hurricane as our timely example. One possessor of a rowboat heads off to high ground and buys a boatload of food and bottled water. He then goes back into the flooded area to sell it to the stranded. Is he entitled to a markup for his effort? Certainly.

Here’s another possessor of a rowboat. He goes about finding people stranded on their roofs, yelling up to them “Boat ride into town. Only $500.” A fair markup for his time?

Let me first offer agreement with the notion that the forces that govern can’t always be relied upon to get this distinction right. Let’s instead posit that in the wake of price gouging in disaster areas, we put into place a policy of lax persecution, for firebombings of stores that gouge during a disaster, or shootings of individuals seeking to capitalize on misery. Such predatory impulses must be discouraged with extreme prejudice.

chuckv September 8, 2008 at 9:19 am

Price controls don’t exist to keep people from being “ripped off” by “unconscionable” prices after a disaster: they exist so that people will be forced to turn to the political establishment and not other members of the market for relief from the disaster.

magnus September 8, 2008 at 9:43 am

You have a cartoon view of the world, Michael. You seem to be forever abusing strawmen and railing against grotesque outrages that don’t exist.

Let’s take your melodramatic fantasy-parable of the rowboat rescue-service charging $500. Let’s look at what would happen if this faux-outrage were to occur, even once.

If it were to happen, then the word would get out. Soon, following every disaster, there would be a swarm of rowboats rushing to the scene! What happens then? The price drops. Suddenly, we see critical services reaching people at exactly the moment they need them.

As Hazlitt taught us, economics is the study of the big picture — we need to look at the effects of government policies over an extended period of time, including the secondary and tertiary effects, not just the immediate effects.

You seem to be fixated on the plight of the poor price-gouged person stuck on a roof paying $500 for a rescue. But you should be looking at every other person who will be caught on a roof and finds himself with no rescue at all, at any price.

Each time I have lived through a natural disaster, I would have been FAR better off if some enterprising businesses had been there seeking to capitalize on my misery. I was begging them — Please capitalize on my misery!!! I would have gladly paid a premium for businesses with predatory impulses, because those would have been the ones that met my urgent needs.

Instead, I got a whole bunch of government buffoonery and ineffective bureaucrats lecturing me about how I had to be patient. The Soviet-style electrical service came after a week or two, although power outages would have occurred in the first place if the government-run power company had simply buried the power lines, like they do in every PRIVATE housing development built in my state in the last 15 years.

Inquisitor September 8, 2008 at 9:52 am

Michael: it is you who is simplistic. And mixing up “fairness” with economics. But if you want to go down that route: there is nothing more or less fair about asking for a given price for a good one possesses. That is what they want in exchange for it. And that is the end of it.

magnus September 8, 2008 at 9:52 am

“… although power outages would [not] have occurred in the first place…”

Curt Howland September 8, 2008 at 10:05 am

Let’s not forget that rising prices also signal the fast-moving entrepreneur to bring more of the product to where it is selling at that higher price.

Without that price signal, there is no motivation for people who are “coming to the rescue” to bring those items most needed. We’re right back in the Socialist Calculation Problem the moment that prices are not allowed to change to meet changing needs.

Price controls are for people who cannot grasp that profits are a signal of opportunity.

michael September 8, 2008 at 10:12 am

Magnus comments “You have a cartoon view of the world, Michael. You seem to be forever abusing strawmen and railing against grotesque outrages that don’t exist.”

In fact the scenario I describe used to be a commonplace in the aftermath of floods, prior to modern media coverage. Whenever there was such a disaster, boat owners in the South used to come out offering to rescue people for extortionate sums.

It was televised publicity that killed the practise.

Curt Howland September 8, 2008 at 10:14 am

Michael, you ignore the fact that by trying to charge $500/ride, the one who comes by and bids $250/ride will get more business.

But the one who bids $100/ride will get even more business.

So where in this “sliding scale” of yours is any room for competition? I just don’t see it. You decide what’s fair and unfair in your opinion, and then get to shoot people or firebomb their businesses if you think they’re not being “fair”?

Just don’t use their services. The $500/ride guy is going to be very unhappy when he goes home with no sales. He can’t learn his lesson if he’s shot by the first person to which he offers his services.

magnus September 8, 2008 at 10:21 am

It was televised publicity that killed the practise.

I imagine that criminal attacks, up to and including arson and murder, such as the ones you advocated in your first post, also contributed.

That makes you a cheerleader not only for the kinds of crimes you described, but a contributing cause of all of the hardship and unnecessary deaths resulting from the lack of emergency services.

What made you want to be a criminal, and an apologist for criminals, Michael? What made you so anti-social and immoral?

michael September 8, 2008 at 10:24 am

Inquisitor offers “Michael: it is you who is simplistic. And mixing up “fairness” with economics. But if you want to go down that route: there is nothing more or less fair about asking for a given price for a good one possesses. That is what they want in exchange for it. And that is the end of it.”

No, that’s not quite the end of it. You didn’t go into what happens when there is an effective monopoly or a tightly controlled cartel of suppliers– as is the case with most of the important things in life. Health care, gasoline, electrical service, telecommunications… all are controlled by either a single provider or by a small, circumscribed number acting in concert.

I’d love to believe your scenario, that all goods and services are offered on an open market, and that any time consumers are dissatisfied it represents an opportunity for a new startup to jump right in, offering better service, product or prices.

Only trouble is, we hardly ever see that happen any more. But please, bring a competing electrical company or cable television service to us.

Rob H September 8, 2008 at 10:27 am

Following Katrina, a flotilla of private boats (fishermen, shrimpers, recreational boaters, etc.) made their way to New Orleans from Lafayette only to be turned away by government bureaucrats. I’d be willing to bet that the THOUSANDS of stranded people in the area would have preferred to have the choice of paying for a rescue versus being stuck for several days. Of course, the tremendous outpouring of PRIVATE support following the storm leads me to believe that the boaters probably had no intention of charging anything for their services. Thanks to our government protectors we’ll never know.

Jim Fedako September 8, 2008 at 10:31 am

One man’s price gouge is another man’s conservation mechanism.

Example: On the afternoon of 9/11, a local gas station raised its price to offset increased demand. Keep in mind that gas is typically not the profit item for gas stations — it’s the pop and other incidentals that keep gas stations open. Therefore, a gas station owner does not want to sell all of his gas since the result is no casual sales until additional gas can be acquired.

So the gas station owner in question raised his gas price to conserve gas (and possible profit along the way). Afterwards, folks complained to the state attorney general and the gas station owner ended up paying huge fines. But there is more than just the seen …

I was stuck at work on 9/11 and could not top off my tank, even if I wanted to. I saw the cars lined up at gas stations as the product of hoarding. These car owners wanted to top-off their tanks at the 9/10 price with no thought to my need for gas. And I am supposed to feel for the folks who sought to make certain that no gas would be available when I was finally sent home? No chance.

Let the market rule.

michael September 8, 2008 at 10:43 am

Curt offers a comment that actually goes, without the histrionics, to the heart of this debate:

“Let’s not forget that rising prices also signal the fast-moving entrepreneur to bring more of the product to where it is selling at that higher price.

“Without that price signal, there is no motivation for people who are “coming to the rescue” to bring those items most needed. We’re right back in the Socialist Calculation Problem the moment that prices are not allowed to change to meet changing needs.

“Price controls are for people who cannot grasp that profits are a signal of opportunity.”

The sentiment is well captured, Curt.

In every disaster, where there are supply lines disrupted temporarily, there are those who, moved by a common decency and regard for their fellow man, move assistance and necessities to the afflicted without asking for compensation. Interviewed on television, such people say they would be embarrassed to ask for money, for doing what their hearts and minds tell them should be done. These people will risk their lives to get you off that roof and to shelter.

They are remembered by their community long after the disaster has passed.

There also people such as you describe, who look at every disaster in terms of the opportunities for profit it presents to them.

They also are remembered long after the event.

Michael A. Clem September 8, 2008 at 10:52 am

But please, bring a competing electrical company or cable television service to us.
Would love to see competition in these areas, but government has royally fouled up their “deregulation” in these areas. Next, they’ll be saying that the results of their “deregulation” prove that government needs to control those things.

magnus September 8, 2008 at 10:55 am

Curt offers a comment that actually goes, without the histrionics, to the heart of this debate

Do your calls for arson and murder qualify as “histrionics” in your book?

The sentiment is well captured, Curt.

Yes, it was, and yet again, you totally neglected to address any of it.

You didn’t go into what happens when there is an effective monopoly or a tightly controlled cartel of suppliers– as is the case with most of the important things in life. Health care, gasoline, electrical service, telecommunications… all are controlled by either a single provider or by a small, circumscribed number acting in concert.

These problems are the direct result of government mandates.

Therefore, the obvious solution is to make these markets freer by repealing those artificial cartel-producing restrictions.

Glen September 8, 2008 at 11:14 am

I wonder which is more unconscionable, an organization that uses the power of the gun to prevent people from being rescued or a guy who gives you some hope of rescue? A guy who will be reviled by most of the community and, in the end, will help create (or increase) truly charitable rescue efforts and/or generate ‘for profit’ competitors.

michael September 8, 2008 at 12:16 pm

MA Clem: “Would love to see competition in these areas [electrical grid], but government has royally fouled up their “deregulation” in these areas. Next, they’ll be saying that the results of their “deregulation” prove that government needs to control those things.”

A. When California was regulating electricity it was working fine;

B. Once they deregulated, costs to users instantly skyrocketed. And not because costs were artificially being kept low. Vast, undeserved fortunes were made in the trading.

C. Once they re-regulated, things returned to normal.

From the evidence, it looks like it was the DE-regulation that threw the train off the tracks. And the regulation that is required for consumer protection.

Are you saying we’d all be better off if we allowed Enronism to return?

Michael A. Clem September 8, 2008 at 12:29 pm

Just because they called it deregulation doesn’t mean that it actually was deregulated. Take a closer look at what “deregulation” allowed them to do and what it didn’t allow them to do, and it’ll be obvious what caused California’s problems and skewed the market in electricity.
The current “re-regulation” is just deferring (and increasing) the problems Californians will have in the future to obtain sufficient electricity at a reasonable cost.

michael September 8, 2008 at 12:38 pm

I can’t help but note a common thread in all your comments. Collectively, you seem unable to conceive of a single motivating factor for human behavior other than the desire to profit from your fellow man in some way. That fact speaks volumes about your chosen philosophy.

But onward and upward. Magnus wants to elicit a response from me with this: “Do your calls for arson and murder qualify as “histrionics” in your book?” …while Glen seeks the same by rhetorically asking “I wonder which is more unconscionable, an organization that uses the power of the gun to prevent people from being rescued or a guy who gives you some hope of rescue?”

So I will address it by reference to the history, and not to any abstract vision of morality.

The course I suggested has been proven to be efficacious. At points in the historical past, flood victims were rescued by neighbors who demanded from them exorbitant sums in payment, rather than doing so from simple kindness.

Weeks or months after the fact, said rescuers had on occasion found themselves shot up, or beat up, or with extensive damage to their homes, vehicles and/or possessions.

Following which the local authorities decided on a course of lax enforcement. And the aberrant behaviors effectively ceased.

Had the community instead elected for a policy of tolerance, the behavior would have become entrenched, and today we’d see a world in which no governmental agency ever got involved. Instead, in the wake of every calamity for-profit disaster teams would be scanning the horizon like buzzards for road kill, for victims rich enough to deserve rescue. That’s not my world; it sounds like it’s yours though.

Inquisitor September 8, 2008 at 12:54 pm

And there’s the non sequitur, the strawman: for-profit must mean for the rich, and because we believe for-profit activities should not be outlawed, it therefore follows we ONLY value for-profit activities. Please save this pathetic crap for people stupid enough to fall for it. This isn’t some “liberal” country club, Michael. It is interesting how your historical argument was pretty much shrieking about how utterly HORRIBLE the world would be if it were all for-profit. Small tip: all action yields psychic profit if successful. You just happen to dislike it when money is involved. So sad.

Now Michael, do illuminate us, how “deregulation” entails “Enronism”, a massive government fuck up with little to do with actual deregulation? Oh wait – you’re just repeating “liberal” canards. From the evidence, it looks like you live in a cartoon world. “Protect” the consumers indeed.

Inquisitor September 8, 2008 at 1:00 pm

Oh and Michael, thank you for musing so ignorantly on monopolies. You pretty much deliver your own empty head on a silver platter for us.

PR September 8, 2008 at 1:09 pm

If the victim in the $500 boat ride scenario refuses to pay, he’s no worse off than if the rescuer had never come along in the first place. If that’s supposed to be the free market worst case scenario, I’m not impressed. I can imagine far worse things happening if the hypothetical heartless rescuer were in charge of FEMA instead!

magnus September 8, 2008 at 1:20 pm

So I will address it by reference to the history, and not to any abstract vision of morality.

… and then you go on to gleefully describe acts of murder, arson, battery and destruction of property, all of which you applaud.

Of course we could expect you to casually toss aside concerns for morality and property — you’re a criminal! You’re immoral! As expected, you reject morality and property, because you do not fare well when these basic standards of decency are applied to you.

All kinds of hideous atrocities have been committed throughout history, many of which have been undeniably “proven to be efficacious” in achieving their intended results. They denigrated both morality and property, just like you.

Congratulations. You have revealed your true nature as an aggressive scumbag.

Eric September 8, 2008 at 2:06 pm

Micheal’s story might simply be fiction. Was he there? After all, he said all this happened in an absence of news reporting, so how does he know what truly happened.

This subject is similar to a story I just read on how government firefighters (at the upper levels) don’t want to let property owners fight their own fires and instead want to let the homes burn themselves out.

What both these issues have in common is the government attempts to hold a monopoly on rescue services. No different than the mob controlling its competition on protection. And as we see, the government will also come after you if you try to use a competitor’s service – or even if you just do it yourself.

And it seems to me that $500 to save one’s life (assuming you’re in big trouble if you’re stranded on the top of your roof) is quite a bargain. One can always refuse the service and wait for the “free” government rescue. But if you don’t survive the wait, was the free service a good deal?

Besides, what is the downside of letting a rescue boat charge whatever they want? Is this going to mean that there will be less rescues or more? Micheal says that the practice stopped after word got out and boat owners were attacked. But he didn’t mention the results of having nobody privately rescued.

This reminds me of the story about people complaining that the direct rail costs to Erie PA. in the 19th century were too costly, as compared with the competitive ones that went roundabout. This led to government solutions whereby all routes had to charge the same high prices – not the lowering of the prices thought to be too high by some.

So here, we see that those being rescued for free end up having to foot the bill of the vastly more expensive government rescue (who’s poor service causes death and destruction at a higher price than a mere $500). Even if this is reported, it is simply to say that “but for” the government, it would have been far worse.

This is a good example of the “what is seen and what is not seen” problem in government policy.

josh m September 8, 2008 at 2:10 pm

Michael, PR is exactly right:

“If the victim in the $500 boat ride scenario refuses to pay, he’s no worse off than if the rescuer had never come along in the first place.”–PR

What you (Michael) don’t realize is that scarcity is an EVER-PRESENT REALITY of our existence, and every human on the planet is in a CONSTANT struggle against the environment in order to survive–ALWAYS and EVERYWHERE. All that has happened during a time of natural disaster is that nothing has changed, only this FACT has become more glaringly obvious. Unless one is self-reliant, voluntary trade and cooperation with others is the ONLY way that an individual can improve his situation. The threats of violence that you seem to condone would only limit people’s options and make them worse off. You’re the humanitarian, right? So how is it that limiting people’s options in a disaster is somehow humanitarian ?

josh m September 8, 2008 at 3:06 pm

(Woops, when I wrote, “…voluntary trade and cooperation with others is the ONLY way that an individual can improve his situation” I forgot to add parenthetically, “without making someone else worse off.” )

Daniel M. Ryan September 8, 2008 at 3:46 pm

Wow, a template for all crises! And you can even get an Asimo robot to read it out on the air!

michael September 8, 2008 at 6:35 pm

Eric, you say “Micheal’s story might simply be fiction. Was he there? After all, he said all this happened in an absence of news reporting, so how does he know what truly happened.”

Did I say there was an absence of news reporting? No, I don’t recall that I did. But I do live in a hurricane zone, and those stories form a part of small town lore. I suppose you’ll be telling me people who live in a small town don’t know what goes on there.

Was I personally ever in such a situation, so as to be a first hand source? No… so you are free to discount the stories, which were passed around so as to deter such low-life behavior in the future. That was back in the 1950s, when there was little in the way of any official response and flood victims were pretty much on their own.

As for the rest of you, those are stirring defenses you put forth in forgiveness of despicable moral behavior. And as for the canard that I am somehow against all profit, or equate such with the evil motives of the rich, it turns out that I’ve lived my entire life pretty much at a profit. I found early on that it’s far better than the other way, living in debt.

However I’ve always given good value for my price. And never had my customers hate me. That is why I get on my high horse about people who would save a life only at a price.

BTW $500 was pretty serious money back then… the equivalent, in a rural area, of $5,000 today.

Francisco Torres September 8, 2008 at 9:35 pm

Here’s another possessor of a rowboat. He goes about finding people stranded on their roofs, yelling up to them “Boat ride into town. Only $500.” A fair markup for his time?

BTW $500 was pretty serious money back then… the equivalent, in a rural area, of $5,000 today.

As for the rest of you, those are stirring defenses you put forth in forgiveness of despicable moral behavior.

I am pretty sure that the second possessor of a rowboat would not be the only one available, and that such a person would have to consider a competitor before pricing his services. Pricing a service, by the way, is not morally despicable in itself, unless you happen to be applying your own subjective valuation in the matter (which is a mistake).

Francisco Torres September 8, 2008 at 9:56 pm

Collectively, you seem unable to conceive of a single motivating factor for human behavior other than the desire to profit from your fellow man in some way. That fact speaks volumes about your chosen philosophy.

You are mistaken, Michael. The single continuous issue in this discussion is your supposition that the act of pricing, in itself, must follow some moral guideline for the price to be just. That unfortunately begs the question, for putting a price in itself is morally neutral, since the price is an agreement between seller and buyer.

In this discussion, the rowboat owner might seem like a miserable price gouger by offering his services for the $500 you mentioned. The problem with your assertion is that you cannot possibly know the motives behind the rowboat owner – for all we can know, he may feel he is offering a good deal. Motives are NOT important, what’s important in assessing the morality of an act is the act itself, not the motive. So, what if the rowboat owner is only seeking profit? Or, what if he truly believes he’s being charitable by only wanting $500 for his services?

What matters is that he is not violating anybody’s rights by asking for a price for his services, since it is his rowboat and his services, not somebody else’s. In a market, a buyer may take it or wait for a better deal, in a voluntary way. There is hence nothing intrinsically immoral in asking for a price for a service, even if that service could save a life.

What happens if he does not charge for his services? He can nevertheless only hold a limited number of people. At zero price, demand becomes infinite; applying that concept in this case, people may actually wait for the “free” rowboat to take them, instead of taking the $500 boat or any of his less expensive competitors right now – maybe waiting too long, and drowning! So, who becomes the real villain?

Vanmind September 9, 2008 at 1:08 am

Well, just be sure to vote, michael. That’s key to your well-being.

Curt Howland September 9, 2008 at 7:12 am

Michael, the difference is force.

The $500 rowboat trip is voluntary. You are free to say no, he then simply goes away.

Say no to FEMA, they kill you.

michael September 9, 2008 at 9:53 am

FT suggests “I am pretty sure that the second possessor of a rowboat would not be the only one available, and that such a person would have to consider a competitor before pricing his services. Pricing a service, by the way, is not morally despicable in itself, unless you happen to be applying your own subjective valuation in the matter (which is a mistake).”

What I’ve been trying to educate everyone on is that there is a whole wide world out there, beyond the confines of an economics narrowly based on personal greed. And in that wide world, people who capitalize on misfortune are considered to be worthless scum.

Yes, there are other possessors of rowboats. And back when that was the way we responded to misfortune, they were mostly manned by volunteers who, filled with brotherly spirit, would never ever ask for payment. They were merely doing what was expected. And when interviewed, such apparent heros nearly all tell the camera “That’s what I would expect if I were in need of rescuing”.

Collectively, you Misians should live in a world all your own, where the monetary basis of all worth is the only value worth considering, everyone is on his own, and simple human decency is worth zero cents. Your society could function quite nicely, with such a low bar of expectations from your fellow man.

Around here? Tell you what. Next time there’s a bad hurricane somewhere, seize the opportunity and go down there. Start a for-profit rescue service. See how that goes over with your fellow man.

PR September 9, 2008 at 10:49 am

Yes, there are other possessors of rowboats. And back when that was the way we responded to misfortune, they were mostly manned by volunteers who, filled with brotherly spirit, would never ever ask for payment.

Ok, so the $500 boat ride guy gets a lot of dirty looks and goes home empty-handed. What’s the problem again?

Next time there’s a bad hurricane somewhere, seize the opportunity and go down there. Start a for-profit rescue service. See how that goes over with your fellow man.

No thanks. I’ll gladly help people in that situation for free if I have the means. I imagine I’d be busy helping people and not have time to get all self-righteous. I certainly don’t see the point in shooting someone for charging. What good is that supposed to do anyway? Now there are two fewer rescuers, one dead and one in jail. More hurricane victims will be left stranded. Great job, give yourself a pat on the back.

magnus September 9, 2008 at 11:02 am

Start a for-profit rescue service. See how that goes over with your fellow man.

Like AAA.

And all of the private firefighting crews employed by insurance companies.

And all of the government-owned and operated rescue services out there — fire, EMS, police, etc. — who, last I checked, get paid by the millions for their jobs. But Michael is not concerned about government employees (with their six-figure salaries, above-market benefits, vacation time and cushy retirement pay for life) who capitalize on the misfortunes of others.

At least they are not murdering and assaulting people and burning down their houses. (Unless, of course, you fail to pay the money they decree you shall pay, in which case they will show up, put you in jail and take all your stuff.)

Jesse September 9, 2008 at 11:12 am

michael: You aren’t “educating” anyone. You are merely repeating over and again that, in your subjective opinion anyone who fails to donate all their time, energy, and possessions to those “in need” is “worthless scum”. Naturally, the rest of us disagree with you; no one likes to be called “scum”, and your claim of positive obligation has no basis in objective reality. In addition, you are mistaken with regard to at least the following specific points:

1. Economic profit does not necessarily mean currency, or other material goods. “Profit” includes purely psychic benefits, such as internal satisfaction with one’s own character or reputation.

2. A desire for monetary compensation (or any other kind) is not synonymous with greed. Greed is a drive to possess a good purely for the sake of possession, and not for of any actual benefit it may be expected to convey. This is similar to the way that envy is the desire to possess something simply because someone else has it; greed occurs when possession of a good becomes an end in itself. The point at which this occurs cannot be determined objectively, as the compensation necessary to justify the cost of providing a good or service depends entirely on one’s own subjective preferences.

3. The fact that we argue that there is no positive obligation to provide non-profit rescue to victims of a natural disaster in no way implies that any of us would be unwilling to do so in practice. The art of separating objective legal/ethical rights and obligations from subjective, personal concepts of morality is an essential prerequisite of meaningful debate.

Curt Howland September 9, 2008 at 11:24 am

Michael, “Collectively, you Misians should live in a world all your own, where the monetary basis of all worth is the only value worth considering, everyone is on his own, and simple human decency is worth zero cents.”

I’ll be blunt: How do you know this? What gift of prescience do you have to know what values we each have?

Because that inability to know is very much the whole point of economics, and the root of Austrian economics: You Can’t Know My Values.

The one and only measure by which YOU can know MY values are by my actions. The only universal and comparable yardstick to make that measure is money. Economics, money. Get it?

You’ve already stated that you value human life so little that you would kill someone just because your subjective valuation of their services is different from their subjective valuation.

You display the perfect mind-set for a bureaucrat. I suggest a career in the IRS or FEMA.

michael September 9, 2008 at 12:21 pm

Good response, Jesse. And I’ll agree no one likes to be called “scum”– although that was merely the way I characterised people who would troll for victims and demand a high price for their rescue. If I were ever to use the word in regard to Misian School followers generally, I would be in error. But in fact I haven’t. What I said was “people who capitalize on misfortune are considered to be worthless scum.”

Not that some among you are immune from slur-slinging. Yesterday I got this from someone: “You have revealed your true nature as an aggressive scumbag.”

But are my comments in fact my own “subjective opinion”? No. In fact my point was that I live well inside the Bible Belt of America, the hurricane zone. And across the south, that would be the universally held opinion of the average man or woman. I’m just reporting the news here.

In these parts trolling for profit in adversity is considered to be very nearly the lowest behavior imaginable– although still well above the behavior of those people who steal pet dogs from back yards and sell them as disposable sparring partners for fighting pit bulls (note: this is another income-producing opportunity). I bring you this news as I’m getting the impression that the people appearing on these pages don’t get many opportunities for interaction with the non-Misian portion of the population.

You should utilize this opportunity to see yourselves as others see you. It would leaven your philosophy– which otherwise does hold some degree of merit. We all like to live at a profit, not a loss. Profit is not in itself a bad word. However there are many among us who’ve decided there are some things we just won’t do for money (we won’t, for instance, go through the pockets of a hit-and-run victim before bringing him to the ER). And we get downright judgmental about those who do.

magnus September 9, 2008 at 1:03 pm

Your posts reflect no grasp of the concept of property.

Stealing dogs and money from unconscious people is a crime.

Charging people for your services is not a crime.

It’s a real brain-twister, huh? The key to this Gordian Knot, Einstein, is property.

(Of course, stealing stuff, while despicable, is certainly a less severe crime than, say, murdering people and burning down their houses because you disagree with their right to charge for their services, and anyone who commits THAT crime, or applauds those who do, is indeed a scumbag.)

I still see no answer from you regarding your obvious self-contradiction — you fail to appreciate the fact that lots of government agencies charge lots of money for rescuing people in distress. In fact, they don’t even “charge” people; they take it by force! And they cost a far sight more than $500, too!

Jesse September 9, 2008 at 1:04 pm

michael: “although that was merely the way I characterised people who would troll for victims and demand a high price for their rescue”

It was not my intent to mischaracterize your position. As I see it, having the ability to assist and refusing to do so at any price is no different from demanding a price sufficiently high that no one is willing to pay. In other words, “troll[ing] for victims” willing to pay some price is the best one could do without offering unlimited aid for free, the alternative being no aid at any price. (What counts as a “high” price is, of course, a matter of perspective. Any price accepted voluntarily will seem high to some and low to others.)

michael: “In these parts trolling for profit in adversity is considered to be very nearly the lowest behavior imaginable”

We are aware the many people, perhaps a majority, see things this way; thus the purpose of this article. People are free to hold that opinion, but that doesn’t make it rational.

michael: “However there are many among us who’ve decided there are some things we just won’t do for money…. And we get downright judgmental about those who do.”

Well, in this case you’re (pl.) getting judgmental toward those who won’t do certain things without an offer of compensation, which is hardly the same issue.

If you simply don’t like people who expect payment in exchange for aid, that is your prerogative, and I doubt anyone here would have a problem with that — although it would be looked upon as an irrational preference. However, you cast violent and aggressive behavior toward such individuals as a useful, even desirable, outcome, and that is something that very few here are inclined to tolerate, myself included.

Ron September 9, 2008 at 1:39 pm

Michael,

I’m curious as to what you think of the following adjustment to your rowboat scenario:

If the rowboat owner approaches a rooftop on which 6 people are stranded and offers to convey 3 of them to safety at no charge, simply because the rowboat can only carry 3 people. All other things equal, if the 6 stranded people start a bidding war to pay the rowboat owner for his services, who’s evil…the people offering more money for rescue, or the rowboat owner who accepts the 3 highest offers?

michael September 9, 2008 at 5:39 pm

Ron gives us this:

“I’m curious as to what you think of the following adjustment to your rowboat scenario: If the rowboat owner approaches a rooftop on which 6 people are stranded and offers to convey 3 of them to safety at no charge, simply because the rowboat can only carry 3 people. All other things equal, if the 6 stranded people start a bidding war to pay the rowboat owner for his services, who’s evil…the people offering more money for rescue, or the rowboat owner who accepts the 3 highest offers?”

In the real world, this is the way that would turn out. He calls up to the stranded “I only have room for three of you. Once I drop them off I’ll come back for the rest.”

It would be up to the six on the roof which ones get on the boat. That’s not the boat owner’s issue.

Are you telling me that your understanding of human nature is such that you think they’ll spontaneously offer the boatman money? And that he will await the results of a bidding war? I’m curious as to your experiences in dealing with members of the human race. This would decidedly not be the norm in any place I’ve ever lived.

It would be more like a Titanic scenario, where the women and children were all out of luck while the richest guys outbid each other for a place on the boat. If you were rich enough you could get one all to yourself, and not be bothered by the riff raff.

magnus September 9, 2008 at 10:00 pm

Are you telling me that your understanding of human nature is such that you think they’ll spontaneously offer the boatman money? And that he will await the results of a bidding war? I’m curious as to your experiences in dealing with members of the human race.

You are in no position to be asking questions when you have at least one question that’s been put to you that you have failed to answer — Do you or do you not acknowledge the fact that government employees are paid a great deal of money for rescuing people in distress, thereby deriving above-market incomes (especially inflated when one also considers their padded benefits, vacation and retirement packages for less work than is required by private employers) and thus benefiting financially from the “misery” of others, and that these government-provided services end up costing more than private alternatives?

I’m curious as to your experiences in dealing with basic questions of economics.

Ron September 9, 2008 at 11:01 pm

Michael,

You still haven’t answered my question. Rather, you sidestepped the issue by saying it “wouldn’t work out that way”. So are you gonna answer the question? Is the boat-owner evil for taking the money, or are the people on the rooftop evil for even offering?

No one here will disagree with you that voluntarily helping others in a time of need is a noble, human thing to do. We are all supporters of private, non-coerced charity. If we all owned boats, we’d probably be the first ones on the water to help our fellow man. However, we would never advocate holding a gun to the boat-owner’s head and forcing him to go pick up people from rooftops if he didn’t want to. We would denounce such a thing as evil. You probably would too. But this is exactly what price controls are, an assertion of State ownership of private property, under threat of force. I doubt you would ever hold a gun to a store-owner’s head and force him to sell you a bottle of water at the pre-hurricane price, but you seem willing to let the State do so on your behalf.

michael September 10, 2008 at 10:52 am

Now comes the barrage of diversions. From magnus: “You are in no position to be asking questions when you have at least one question that’s been put to you that you have failed to answer — Do you or do you not acknowledge the fact that government employees are paid a great deal of money for rescuing people in distress, thereby deriving above-market incomes (especially inflated when one also considers their padded benefits, vacation and retirement packages for less work than is required by private employers) and thus benefiting financially from the “misery” of others, and that these government-provided services end up costing more than private alternatives?”

Mag, apparently you’ve been traumatized by a “government worker” at some early, formative age. No, most toilers in the bowels of government are not making a killing at the taxpayers’ expense. Your basic GS-11s and GS-13s are only just scraping by.

Further, they are no longer playing any active role in the process. If you’d been reading the papers you’d have seen that the niche once occupied by FEMA has been thoroughly militarized. FEMA itself was disemboweled from within, by purposeful plan.

If you have a gripe about the way we address disasters now, go tell it to the National Guard.

Secondly, “I’m curious as to your experiences in dealing with basic questions of economics.”

It should be apparent that I’ve treated the scenario as a question of the acceptable bounds of behavior, not one of economics in isolation. Economic theory alone doesn’t address the scenario.

Next, Ron comes in with this: “You still haven’t answered my question. Rather, you sidestepped the issue by saying it “wouldn’t work out that way”. So are you gonna answer the question? Is the boat-owner evil for taking the money, or are the people on the rooftop evil for even offering?”

Ron, I addressed this question just as carefully and completely as I possibly could. In the real world, no one would offer the boatman money. And if they did, he would no doubt decline it. “Evil” would be an inapplicable concept.

Human beings are generally ruled by what you would consider to be emotionalism, rather than the rationalism you so esteem. And most would regard your scenario as being wildly off base.

When disaster strikes, most of us with access to a boat will spontaneously go off to assist others. In our culture, that’s the obvious and decent thing to do. They don’t normally ask for pay because (a) it would mark them as curs among their fellow men, and (b) it would long be remembered in the community in which they would continue to live.

Finally “I doubt you would ever hold a gun to a store-owner’s head and force him to sell you a bottle of water at the pre-hurricane price, but you seem willing to let the State do so on your behalf.”

What an odd thing to be thinking about. Let’s imagine three cases.

In the first, the store is closely held by a single individual. Let’s call him Pop. Pop can give his water away if he chooses… in which case his customers will think of him as a great guy after the storm, and give him lots of business as well as high regard.

Or, Pop can charge ten bucks a gallon for his water. Short term, he comes out ahead financially. Longer term, he needs to close up shop and move somewhere where no one knows him.

In the second, the store is owned by a commune: the collective stockholders of, oh let’s say Home Depot. Or Food Lion. Upper management will probably frown on local stores changing the price of anything, for reasons of PR.

In the third, we live in some People’s Republic, and the government owns the store. They can do anything they like, we probably don’t like them in the first place and we probably won’t be moving elsewhere because of pricing policies.

I trust this deals with the matter of unanswered questions.

Ron September 10, 2008 at 1:12 pm

No, Michael, it doesn’t answer the questions at all. Here, I’ll ask it point blank, then:

Do you feel that it’s right for the State to make it illegal to sell a necessary item at a higher price during a time of crisis? Yes, or no?

“Human beings are generally ruled by what you would consider to be emotionalism, rather than the rationalism you so esteem.”

You’re absolutely right, and it’s a darn shame, for people are willing to advocate all manner of evil to satisfy emotion.

Look, I’m in agreement with you that there would most likely be negative social outcomes resulting from an individual’s refusal to give away his help or property during a crisis. I would probably think that person was an asshole, too, and I might curse him under my breath for wanting $20 for a quart of water. The thing is, that’s the way it’s supposed to be. Just as positive PR is created by giving things away, so might negative PR be created by charging what some people feel are unconscionable prices. At the end of the day, though, both I and the water-nazi are still free. He is free to sell his water at whatever price he wishes, and I am free to never buy anything from him again. This is how social interactions encourage the kind of behavior we hope and expect to see from our fellow man during a time of need. I’m not arguing with you over whether or not this is the case. I agree that it is, but this is not what the author of the article was saying.

The article talks about the harmful effects of government preventing prices on some goods from rising to meet demand during an emergency. That’s all. Laws against price-gouging prevent necessary resources from being directed into a disaster area.

Take plywood, for example. After a hurricane, more plywood than usual is needed in the area, right? This increases demand for plywood in that area, which causes the price of plywood in that area to rise. Here’s the cool thing, though. The higher price causes more plywood to be shipped to the hurricane-stricken area from other parts of the country, thus ensuring that the demand for plywood is met. The people who really need plywood will get it, versus those who may have just been planning to build a shed in some other state. The beauty of the whole thing is that a plywood reseller out in Oregon doesn’t even need to know that there’s been a hurricane in order to know to send more plywood that way.

We all agree that we should be willing to help our fellow man out of the kindness of our hearts during a time of need. What we seem to disagree on (though you still haven’t made it clear by answering my questions) is whether or not the State should force people to do so against their will.

michael September 10, 2008 at 2:52 pm

Ron cuts to the chase: “Do you feel that it’s right for the State to make it illegal to sell a necessary item at a higher price during a time of crisis? Yes, or no?”

Thank you for returning us to the gist of the article, Ron. I think we’ve probably done the rowboat thing to death.

I would not advocate such a law, as it would be impractical. It would have the effect of disrupting sales. However I would advocate that certain actions be taken by the state on those occasions that profiteering distorted the normal market pricing mechanisms. (I can hear the howls of the faithful already.)

Let’s take longer term, structural profiteering as our instructive example. Not supplies in the aftermath of a storm, but ordinary profits in the field of pharmaceuticals.

The first objection everyone will posit is this: “Who gets to determine whether a certain profit level is excessive?” And the answer would be “Any level that adversely impacts the rest of the economy, so that an undue expenditure on pharaceuticals restricts available funds to purchase other needs.”

Sure, such an evaluation must be in large part subjective. However we are there now in an objective sense, to wit: many other nations on earth enjoy similar or superior health outcomes while spending a far lesser proportion of their worth on pills and meds; they endure no shortages in supplies of meds; the absolute cost of meds is far less; pharm suppliers still enjoy a degree of profit, so stay in business; etc.

So what would I do were I the king? I wouldn’t make it illegal to sell above a certain scheduled price. I might very well instigate a sliding scale for taxes, so that profits above a certain percentage of one’s gross receipts were taxed at a higher rate. (Note: this approach is being successfully tried out in Alaska in regard to oil and gas field profits; it is the initiative of their very able governor, Sarah Palin.)

Or, in a system of national health care, I would determine the limits of payments that the government would offer. The providers could take it or leave it.

I would evaluate these levels in terms of the vendor’s continuing willingness to provide meds. If they elected to take the money being offered, great. If they encountered problems staying in business, or balked at serving such a difficult customer, I would hike up my offering price.

This is what should have been done back when the prescription benefit for Medicare was being pushed through Congress. Instead, it was designed cynically, to provoke a collapse of the system by running Medicare rapidly into the red.

The above would be a form of collective bargaining, and the principle is much the same whether it’s the government determining what level of profit in a given industry has no adverse impact on society in general, or whether labor bands together to effectively inform management what their acceptable pay scales will be.

Without collective bargaining, industry holds an excessive degree of pricing power over the rest of us. And the economy is accordingly out of balance.

Jesse September 10, 2008 at 3:24 pm

That isn’t “collective bargaining”. Your incentives derive their power from taxation (theft), an act of aggression. Raising taxes in response to increased profits is no different than imposing fines for making more than what you arbitrarily deem sufficient. You might as well have imposed a hard price ceiling; the objection would be the same.

If you can’t tell the difference between voluntarily boycotting some producer or potential employer (“collective bargaining”) and imposing an involuntary, aggressive tax to coerce people into acting in accordance with your social and political views, I’m afraid there is indeed no hope for you at all.

michael September 10, 2008 at 7:49 pm

Duly noted, Jesse.

This has to be the final word on the subject:

http://www.dilbert.com/strips/comic/2008-07-16/

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