One of libertarians’ most controversial views is that people may engage in “price gouging”—that is, charging extremely high prices for goods and services when demand is unusually high and supply is unusually low.
Good peace, but I’m not so sure this is “libertarian” in nature. Of course many libertarians would agree with the premise, but it’s also very wide spread among economists—including progressive ones—and you somewhat hinted on this by way of taxes, after all prices are supply and demand at work.
Something I often embrace as someone who is a strong defender of liberalism and markets, but is vaguely center-left is preserving price signals while also looking for creative ways to socialize or subsidize costs. You have a hurricane in zip code XXXXX, the government shoots you $50 for supplies so you’re not priced out of the market. It’s really not something too difficult to implement with modern tech, we effectively do a lower-tech version of this with EBT, food stamps, housing vouchers etc.
Interesting that Richard leads with it being an IQ test. It’s easy enough to apply a libertarian or econ 101 attitude to anything. Any midwit can do it.
No morality has been proven here, the morality is rather assumed - that people are to make a profit regardless of circumstances. Once you start with that premise then everything else follows.
Richard is only correct in arguing that “gouging” is just the free market working - so from that point of view the defenders of simplistic economic theories are correct to dislike the term, leading the rest of us to dislike free market absolutism.
In a food shortage it’s probably better to ration than to allow the free market to reach its natural price level. That way everybody gets something - hopefully enough to survive - rather than 20% of people getting nothing, as others feed quite well.
(It’s not like there’s no example of this happening in history).
The argument in favour of prices reaching their natural level during a crisis seems to be that very high prices will induce more production. There are, of course, problems with that.
One is that there is often no way to produce more of the scarce product, food in a famine is an example, or that production can’t ramp up in time, or the free market has failed completely and doesn’t see any profit in supplying bottled water to a crisis driven city.
Sometimes you just have to abandon the free market - see it as a tool rather than a perfect system.
“ In a food shortage it’s probably better to ration than to allow the free market to reach its natural price level. That way everybody gets something -”
Sorry, but this statement is just not true.
Fundamentally because it kills incentives to get more food (supply).
Second who and how gets to determine what the best mechanism to ration is, and the best mechanism to get the food to people?
Your “food in a famine” argument is particularly specious given modern transportation and communications technology. Having incentives to solve the food supply problem - as quickly as possible - surely trumps your “it’s better not to allow the free market to function for ‘faintness’ reasons, no
So sure if you are at the bottom of a mine after an avalanche your point may be valid. But that’s about it.
OTOH, border czar Kamala is on your side here, so you *do* have that…
Usually when we see instances of price gouging, they come from someone who is in a position of monopoly, and has no competition. There is no real market working there.
A man is driving down the street on his way to watch his favorite team play against their biggest rivals. He spent 1K on the ticket. He takes a quiet backroad hardly anyone ever travels.
He comes across a woman who just broke her leg on a hiking trail nearby. The woman begs the driver to take her to the hospital. But if the driver does this, he won’t make it to the game on time.
So the driver tells the woman he’s charging her 5K for the ride to the hospital. Cash up front.
I hate all anti-“price gouging” laws, but since yours is not a law question but a morality question (clearly you are using the term in its normally understood pejorative as immoral), it’s one of the rare ones where the answer isn’t cut and dried: it depends.
If it’s modern times and there is cell phone technology available (either to simply call an ambulance or to sell to her), her life and even her leg is in no danger of long-term harm, then the answer is clearly no.
If the probability of her dying there, or losing her leg to gangrene, if he leaves her there has any meaningfully high chance, then yes he is acting immorally if he charges her $5K…
…unless of course he knows that she or her family is very rich.
OTOH she is unlikely to have that much cash up front in the first place! Potentially massive moral problem there…
So such morality questions can’t be reasonably answered by a reasonable person without a lot more information than you put into your hypothetical! 😀
That said, border czar Kamala’s answer is that any “price gouging” is inherently evil, and the country will be a much better place when such evil is banned at the national level:
Well, it depends on who it is that’s doing the viewing. Any *reasonable* economist - even a leftist one - will acknowledge that anti-so-called-“price gouging” laws are bad; the more leftist ones might argue that “they’re not *that* bad, perhaps.
With the public that’s ignorant of economics and has had this issue demagogued to them for years, then of course you are correct.
And of course amongst cynical politicians trying to get votes, and the media that supports them, it’s not “controversial”, it’s an evil to be exploited as part of doing whatever is necessary to win.
So if border czar Kamala is against it, then price gouging MUST be evil and require a ban at the federal level, right… 😏
I was surprised - and a bit disappointed - in reading your piece that while you knocked down each of the bad arguments against so-called “price gouging”, you never came out and stated that such laws are ALWAYS bad.
I'm not sure how true #2 is. Sure, you're not going to force someone at gunpoint to bring water to a disaster area. But I can definitely imagine disaster scenarios where no one is going to prosecute someone for breaking into a closed store and taking some water. In such a case, I think the owners of that store were forced to provide water.
Good peace, but I’m not so sure this is “libertarian” in nature. Of course many libertarians would agree with the premise, but it’s also very wide spread among economists—including progressive ones—and you somewhat hinted on this by way of taxes, after all prices are supply and demand at work.
Something I often embrace as someone who is a strong defender of liberalism and markets, but is vaguely center-left is preserving price signals while also looking for creative ways to socialize or subsidize costs. You have a hurricane in zip code XXXXX, the government shoots you $50 for supplies so you’re not priced out of the market. It’s really not something too difficult to implement with modern tech, we effectively do a lower-tech version of this with EBT, food stamps, housing vouchers etc.
Interesting that Richard leads with it being an IQ test. It’s easy enough to apply a libertarian or econ 101 attitude to anything. Any midwit can do it.
No morality has been proven here, the morality is rather assumed - that people are to make a profit regardless of circumstances. Once you start with that premise then everything else follows.
Richard is only correct in arguing that “gouging” is just the free market working - so from that point of view the defenders of simplistic economic theories are correct to dislike the term, leading the rest of us to dislike free market absolutism.
In a food shortage it’s probably better to ration than to allow the free market to reach its natural price level. That way everybody gets something - hopefully enough to survive - rather than 20% of people getting nothing, as others feed quite well.
(It’s not like there’s no example of this happening in history).
The argument in favour of prices reaching their natural level during a crisis seems to be that very high prices will induce more production. There are, of course, problems with that.
One is that there is often no way to produce more of the scarce product, food in a famine is an example, or that production can’t ramp up in time, or the free market has failed completely and doesn’t see any profit in supplying bottled water to a crisis driven city.
Sometimes you just have to abandon the free market - see it as a tool rather than a perfect system.
“ In a food shortage it’s probably better to ration than to allow the free market to reach its natural price level. That way everybody gets something -”
Sorry, but this statement is just not true.
Fundamentally because it kills incentives to get more food (supply).
Second who and how gets to determine what the best mechanism to ration is, and the best mechanism to get the food to people?
Your “food in a famine” argument is particularly specious given modern transportation and communications technology. Having incentives to solve the food supply problem - as quickly as possible - surely trumps your “it’s better not to allow the free market to function for ‘faintness’ reasons, no
So sure if you are at the bottom of a mine after an avalanche your point may be valid. But that’s about it.
OTOH, border czar Kamala is on your side here, so you *do* have that…
https://www.nytimes.com/2024/08/14/business/kamala-harris-price-gouging-inflation.html
Usually when we see instances of price gouging, they come from someone who is in a position of monopoly, and has no competition. There is no real market working there.
A man is driving down the street on his way to watch his favorite team play against their biggest rivals. He spent 1K on the ticket. He takes a quiet backroad hardly anyone ever travels.
He comes across a woman who just broke her leg on a hiking trail nearby. The woman begs the driver to take her to the hospital. But if the driver does this, he won’t make it to the game on time.
So the driver tells the woman he’s charging her 5K for the ride to the hospital. Cash up front.
Is this price gouging?
I hate all anti-“price gouging” laws, but since yours is not a law question but a morality question (clearly you are using the term in its normally understood pejorative as immoral), it’s one of the rare ones where the answer isn’t cut and dried: it depends.
If it’s modern times and there is cell phone technology available (either to simply call an ambulance or to sell to her), her life and even her leg is in no danger of long-term harm, then the answer is clearly no.
If the probability of her dying there, or losing her leg to gangrene, if he leaves her there has any meaningfully high chance, then yes he is acting immorally if he charges her $5K…
…unless of course he knows that she or her family is very rich.
OTOH she is unlikely to have that much cash up front in the first place! Potentially massive moral problem there…
So such morality questions can’t be reasonably answered by a reasonable person without a lot more information than you put into your hypothetical! 😀
That said, border czar Kamala’s answer is that any “price gouging” is inherently evil, and the country will be a much better place when such evil is banned at the national level:
https://www.nytimes.com/2024/08/14/business/kamala-harris-price-gouging-inflation.html
So there’s that… 😏
“One of libertarians’ most controversial views…”
Well, it depends on who it is that’s doing the viewing. Any *reasonable* economist - even a leftist one - will acknowledge that anti-so-called-“price gouging” laws are bad; the more leftist ones might argue that “they’re not *that* bad, perhaps.
With the public that’s ignorant of economics and has had this issue demagogued to them for years, then of course you are correct.
And of course amongst cynical politicians trying to get votes, and the media that supports them, it’s not “controversial”, it’s an evil to be exploited as part of doing whatever is necessary to win.
https://www.nytimes.com/2024/08/14/business/kamala-harris-price-gouging-inflation.html
So if border czar Kamala is against it, then price gouging MUST be evil and require a ban at the federal level, right… 😏
I was surprised - and a bit disappointed - in reading your piece that while you knocked down each of the bad arguments against so-called “price gouging”, you never came out and stated that such laws are ALWAYS bad.
Hedging your bets, perhaps?
I'm not sure how true #2 is. Sure, you're not going to force someone at gunpoint to bring water to a disaster area. But I can definitely imagine disaster scenarios where no one is going to prosecute someone for breaking into a closed store and taking some water. In such a case, I think the owners of that store were forced to provide water.