OnPoint: On Price Gouging
171 Responses
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Matthew Poole, in reply to
Economists should and do think about issues like fairness, morality and being a fricking human being. Some give it more consideration than others.
Sadly, the economists whose thinking has shaped much of the developed world's functioning for the last couple of decades have, it seems, considered "fairness, morality, and being a fricking human being" to be irrelevant concepts that are subordinated to the mythical "perfectly rational actor" or whatever the precise theoretical term-of-art happens to be.
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Classical economics is weak, often perverse. The poor person starving and the rich person hungry both have similar needs, but one is priced out of the market immediately.
This is why prices are poor expressions of preferences - rather than perfect ones as stupid economists like Mr Crampton assume - in anything other than an egalitarian society.
Well put, George. To me, it's trying to impose a simplistic fantasy world onto our messy one. Which no doubt makes some people feel more comfortable and relaxed, but at quite a price for everyone else.
They are asking a vital question: If there's a fixed amount of resources, how do we distribute it?
Which is a *political* question. Situations like this show just how inadequate economists can be as substitutes for a political process. Especially neolib ones who don't really believe in such things unless it's about how to protect their own property. Treasury's likely influence over this government's response is worrying.
Others think more broadly, sure. But the global financial crisis has demonstrated that prevailing models are generally anaemic and conveniently exclude the social and long-term costs discussed here.
If there's not enough, *someone* will have to miss out.
Funny how the answer often seems to be "poor people" as if wealth somehow endows folk with a moral entitlement to a bigger share. That's what I find most offensive about spoilt little pricks from Act on Campus suggesting that pricing things out of reach is a 'rational' solution to anything.
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Okay, let's not get all down on the economists. Economics is a useful tool, as long as it's remembered that it's ONE of a kit of tools, not the only view there is. And I don't think anyone here is pushing that 'everything is nails' point of view.
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Yes, it's worth remembering that there are also Marxist economists, and other flavors. There's lots of ways to count beans, but they still need to be counted and distributed, by some mechanism.
It's even possible to explain the anti-gouging tendency in Chch using "classic" theory, you just have to take more factors into account in your pricing signals. Goodwill, for instance.
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Matthew Poole, in reply to
I don’t think anyone here is pushing that ‘everything is nails’ point of view.
Sure about that? I reckon there are some chippies who're busy hunting for a hammer :P
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Sacha, in reply to
And I don't think anyone here is pushing that 'everything is nails' point of view.
Not here, but elsewhere
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So what's wrong with rationing? (rather than gouging) Gouging seems like such a blunt instrument to do something important (like making sure everyone has enough to eat). Actually planning disaster relief seems a so much saner response.
I live in Dunedin, milk and bread are being rationed in our supermarkets so that there's enough to go around in Christchurch - it seems to be working well. Simply upping the price of bread in Chch is maybe going to result in stale bread finding it's way from Dunedin to Chch - but actually planning on sending half of Dunedin's bread north as it's made is a much more sensible plan.
(last time around there were gaps in the shelves in our supermarkets - strangely it was mostly beer)
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Idiot Savant, in reply to
I'd emphasis again that the price of price gouging is NOT lynchmobs, at least not in our society.
Not yet. But they raise the risk, and if price gouging for essentials becomes common, then non-market resource allocation solutions (AKA "stealing") and non-State justice solutions (AKA "lynching") start to look like a reasonable reaction to the circumstances.
And yes, as you point out, it creates a climate of everyone for themselves (and Shoggoths eat the hindmost), which in the short-term hampers recovery efforts. In the long-term, well, that's the mindset which defines the State of Nature. Its not fear of the (not really) all-powerful Leviathan which keeps us in civil society; its our mutual desire to cooperate which price gouging and an ideology of selfishness undermine.
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Fortunately the better aspects of human nature seem to be at the fore.
Mr Heap said the shop had not tried to take advantage of the demand for essential goods.
"There's certainly been no tampering of prices in terms of putting it up knowing that people are going to buy it anyway. None of that will happen at Bunnings, they just wouldn't allow it and I wouldn't work for them if they did to be honest," he said.
The store had been discounting large orders and selling at cost to emergency services and groups of volunteers.
"We're helping where we can," Mr Heap said.
Scott Stephen, who manages the Bivouac Outdoor store in Riccarton, said they were contacting suppliers to get more goods like portable toilets, sleeping bags and gas canisters.
"Business here is going to pick up as an unfortunate result of what's happened," he said. We've actually taken 30 percent off all of this stuff that wasn't already on sale to try and help people out a little bit more.''
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Steve Barnes, in reply to
This is why prices are poor expressions of preferences -
This was illustrated beautifully in a Herald Article about the latest Household Economic Survey figures. Apparently we bought $99 million worth of tomatoes in 2010 compared to potatoes, at $98.9 million. I don't think I have ever seen potatoes for the same price as tomatoes and off the top of my head I would say that tomatoes, seasonally adjusted, are about twice the price so that would surely mean people ate twice as many potatoes as tomatoes, you would think, no?.
As for hoarding petrol, I remember the 1970s "Fuel Crisis" when people were doing just that and the consequences were several massive fires leading to several deaths, not a good idea.
It is the job of Government to attempt to maintain a stable, if not growing, society and part of that is how we share and trade. A good society has a balance of both economy and social justice, something that seems to elude this bunch of tossers. Unfortunately I think that the present Government has "Got Lucky" over the last few years, lurching from one crisis to another they have the excuse for not achieving much at the same time as appearing to be doing something.
Let us not be fooled... -
And in the Dunedin Bunnings there are whole shelves empty (stuff like generators) with polite notes saying that the contents have headed north
If the were gouging they'd leave a few in Dunedin and bump the prices there too
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Idiot Savant, in reply to
Economists should and do think about issues like fairness, morality and being a fricking human being. Some give it more consideration than others.
I think the problem with many economists (and the reason why they are so publicly disparaged, despite being engaged in a vital inquiry) is precisely that they don't think about those things, dismissing them as "value-laden" - while all the time pretending that the unstated moral assumptions in their theories are not similarly "value-laden". Its spectacularly hypocritical, and it does the entire discipline an enormous disservice.
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Idiot Savant, in reply to
They are asking a vital question: If there's a fixed amount of resources, how do we distribute it?
Which is a *political* question.
In practice. But its also a moral one. Regardless of efficiency or otherwise, we can always ask "is this fair"? "Is this right"? And ATM, the answers of economists seem to be falling down even more than they do in ordinary circumstances.
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The people supporting price gouging in Christchurch are not evil.
Actually, I'd take issue with this. To the extent that they are predicated on unstated assumptions of ethical egoism - that people should do whatever is in their best interests, and screw everyone else - then that is exactly what they are.
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Bart Janssen, in reply to
They are asking a vital question
Yup that's quite true. And of course you are right there are moral, decent economists.
However the vast majority have been taught that because in any society there are arseholes who will rip you off the logical solution is to assume everyone is an arsehole and behave accordingly. Hence if supplies are short you price gouge because if you don't rip people off someone else will and then folks will buy all your stock and you'll have nothing to sell while the arsehole got rich.
Of course there is another option and that is asking folks to take only just as much as they need and leave stuff for others, without price gouging. And oddly that's pretty much what most folks did. Because contrary to the assumptions behind price gouging most folks are decent caring and fair.
Personally I'm really over having our economy managed by folks whose first assumption is people won't be honest, decent and fair.
By all means we need folks who will address those questions but why do we have so many of them whose first assumption that we are all basically amoral, when as the last week has demonstrated that is not true?
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Matthew Poole, in reply to
I’m really over having our economy managed by folks whose first assumption is people won’t be honest, decent and fair
Not only is that their first assumption, their actions are based on the same assumption. Witness the WWG, whose entire predicate is that there is nobody receiving a benefit who is in any way deserving of the State's unqualified support but, rather, that they're all shirking, malingering bludgers who need a good kicking to get them onto the workforce where they belong.
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Sacha, in reply to
I'm really over having our economy managed by folks whose first assumption is people won't be honest, decent and fair.
The whole disabilty support system is based on spending huge amounts to ration and monitor spending; funds that could be better used actually providing support services and opportunities for decent people and families (who have never done anything to give reason to distrust them).
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"If you fuck with this, you're fucking with the core that's holding a community in crisis together"
Do you think Keith that you could keep the English language more accurate and less offensive, by using "mess" and "messing" instead of the f.... words above.
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Speaking of welfare, another gouging-apologist red-herring is that people won't go without because there are emergency payments being made by WINZ, and so on. But apologia for price-gouging correlates strongly with end-all-welfare-now rhetoric, so ...
L
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Matthew Poole, in reply to
Do you think Keith that you could keep the English language more accurate and less offensive, by using “mess” and “messing” instead of the f…. words above.
Hate to break it to you, but that's how Keith rolls and he's not alone. The 'f' word is commonplace on PAS.
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Emma Hart, in reply to
Also, frankly, I can't think of a more appropriate time for swearing.
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Economists should and do think about issues like fairness, morality and being a fricking human being. Some give it more consideration than others.
And the answer is always shit - but that's just because the question was shitty to begin with. If there's not enough, *someone* will have to miss out.
It's the suspiciously high proportion of economists who conclude '90% of the population should miss out and the 10% of the population I happen to be a member of should get everything' that casts the wider profession into question.
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Moz,
I haven't quite made up my mind about builders gouging though
I think people are much more accepting of the notion that each builder has a fixed supply of buildering and what they're doing is bribing their builder to work more and rest less. Call it "overtime pay" if you like. We also have the "tradesman charge a fortune" meme, and most people have no idea what builders charge anyway. People buy groceries every week, but few people hire a builder in any normal year. So the resentment of gouging will be lower.
We just had our house rewired (in Oz) and the three quotes were interesting... $12k, $15k and $6k. Was the $15k guy gouging? Or offering to do a better job? I have no idea, and no real way to find out. I suspect most people in Christchurch are in a similar position, except without any real ability to get three quotes (realistically, it's going to cost a lot to get a quote - a tradesman faced with a choice between "come and quote" vs "come and fix, I'll pay whatever it takes" is almost always going to take the latter job).
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Che Tibby, in reply to
that casts the wider profession into question.
i would question that it is a profession.
that is a little too close to regarding economics a science. when in fact is a social science
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Like Ben said there are lots of different species of economist out there. If anyone's interested Chris Hayes article in the Nation from a few years ago is a great intro to a bunch of thinkers who all sit somewhere to the left of the orthodoxy.
Also, Eric Crampton himself is a particular type of economist, heavily influenced by Public Choice type arguments, so I'd be careful generalising about the whole discipline from his arguments alone.
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