The Persistent and Unfortunate Myth of Price Gouging

Economic fallacies persist for a variety of reasons. The most pernicious of these reasons – the one that guarantees the continued flourishing of such faulty thinking – is dissatisfaction with reality. On one hand, dissatisfaction with reality is, of course, the root of our motivations; the reason we better our situations and improve our lots. However, on the other hand, such dissatisfaction can lead people to believe in the impossible and in impossible ways to achieve their beliefs. As long as these inadequate believers are only fooling themselves this is not a problem. However, when such flawed believers hold the power to control and coerce others they can seriously harm those who must kowtow to their desires.

This dissatisfaction is always the motive when legislators attempt to countermand the fluctuations of a free market in an attempt to instill more “justice.” Yesterday the Colorado House committee on Business and Labor passed a bill (hb 06-1251) that would prohibit the practice of “price gouging” during an emergency. True to the spirit of fallacious thinking, the bill carries with it a sense of self-evidence and moral righteousness – feelings of “how could this not be good?!?” and “how could this not work?!?” – that obscure its speciousness and fuel the ardor of proponents. The bill does serve, however, as an excellent object lesson in the poor economic thinking of lawmakers and their eagerness to consistently codify their ignorance and force the populace to bear the brunt of their uninformed meddling.

The advocation of price ceilings has proven to be a ceaseless activity. In this situation the author of the bill has attempted to mollify his aspirations by only asking for a snippet of control – a fragment of legislated justice. As the language of the bill conveys it is a law that would simply try to curtail unjust profits: not all profits, just those deemed to be “unconscionable.” After all, as the reasoning goes, if the goods can be priced in such a way that allows everyone to have unfettered access to enough them during normal situations why can’t they behave similarly, with similar prices, during emergency situations?

Your feelings towards this type of legislation depend upon your answer to this question. You can either rely on the question’s rhetorical nature, shrug a half-hearted “why not?” and continue about your day with your belief in price ceilings intact, or you can earnestly try to answer it. For those who behave in the former manner I have little hope that you have made it even this far into this essay; for those who behave in the latter I will give you the answer right here: the price cannot remain the same in an emergency situation because every single factor that contributes to the determination of a market price has changed. To attempt to control the price is to do nothing different than to pretend these factors haven’t changed. It is the “fingers-in-the-ears-while-chanting-la-la-la-I’m-not-listening” approach to reality.

A disaster situation can destroy supply and create new demands that previously were not a part of the economy. It can change the entire nature of the game in a nano-second and leave everyone on their heels. If there existed a system of information transmission that could immediately account for the new realities of supply and demand and convey those realities to those in need quickly then these situations wouldn’t pose an insurmountable problem. Such a system and its ability to constantly update with regard to relevant information would seem magical in the way it pulled together massive amounts of disparate information about supply and demand and communicated it to those in need. Thankfully this magical system exists in the form of freely fluctuating prices.

A price is simply a method of conveying information – information about how much is available and how much is desired – to the people. When left to freely fluctuate it will perform this task better than any human, group of humans or even massive collection of supercomputers ever could. Furthermore, a profit and a price exist in an inexorable relationship. A profit (possibly not monetary Рi.e. giving away something that is taking up space Рbut usually monetary) represents the only incentive for the seller to engage in a transaction.

What always lies behind any use of the term “price gouging” is the incorrect belief that there is something special, just, and right about a price at a given time – usually the time when consumers could purchase as much as they wanted and have little concern for the cost. If you happen to hold this belief dispelling it from your head is an essential first step towards achieving even the most moderate level of economic literacy. It is precisely because there is no “right” price that the pricing system has any meaning and is able to function at all. Because of this fact you will almost never hear an economist seriously use the term “price gouging” except in refutation.

It would behoove you to ask yourself which of the following situations is an example of “price gouging:”

– Selling a baseball card purchased for $2 for $1000
– A bar that sells a martini for $10 ten miles from a bar that sells the exact same martini for $5
– The rent of an apartment in the city increasing $200 in five years

The answer; none of them. Numerous factors will cause prices to fluctuate. This is the point of a price and, ultimately, why the system works at all. We must also remember that coupled with the right to make a profit is the right to take a loss. The two are inexorably intertwined.

During a transaction a seller wants to sell at the highest price and a buyer wants to buy at the lowest price. What happens when the price is legally mandated to be below the confluence of these two desires; i.e. the market price? Simple, the seller sells what he has and then packs up and goes home. Due to the artificially low price the buyers are left wanting more. Whenever a buyer and seller disagree on quantity to be sold the lowest desired quantity always wins – because they can pack up and go home. The buyers are left unfulfilled in their demands as the seller’s doors are locked tight.

A line forms.

In an emergency situation, when basic rational decision making will be countermanded by fear, a line will most certainly form. It must be realized that this line increases the real cost of the good. If one can only acquire a good by idly standing in a line for hours this lost time most certainly represents a cost to the consumer. This time-cost must be added to the monetary cost that will be paid once the good is acquired. In an emergency situation what will be lost in this idle time is time for preparation (i.e. nailing boards on windows, moving belongings to higher ground, etc) that may save lives and property. Many may not be willing to pay this time-cost and simply go without the goods. However, it must be remembered that a new, albeit more complex, price emerges that must be paid to acquire the goods.

The ultimate distribution of the goods becomes dependent on a number of factors, most of which have little to do with money; position in line, number of members in the family who can trade-off on line-standing, etc. Of course, without other rules applied the entire situation may end before it begins. Without a “limit one per customer” rule when the seller’s doors open the first person will simply buy an exorbitant amount of the product; a product which now, with the buyer’s increased, in-the-face-of-danger demand and the artificially maintained price, seems like the bargain of the century. This situation is not like the recent rush for Xbox 360s. In an emergency situation the majority of “life and death products” do not satisfy demand with a single unit. The demand becomes ravenous and an excess is seen as desirable. The seller may try a “limit only what you absolutely, truly, cross-your-heart-and-hope-to-die need” rule but I doubt it will do any good.

Meanwhile, the guy who got to the head of the line and bought a large amount of bottled water at a ridiculously low price is out in the street selling the product at three times what he paid for it (price gouging?). Others may wish to overcome the time-cost by simply offering more money to the supplier – money above the legally mandated price; a twenty slipped across the table. Or, they may use their money to pay another to stand in the line. A system of illicit transactions will emerge; otherwise known as a black market. All of this happens even when an emergency isn’t pressing upon the will of the populace and bringing the pot to a boil. During an emergency the stakes become even higher. In one way or another – with time, money, criminal acts, etc. – people will pay the increased price to obtain the goods.

Hmm…I wonder if there is a simpler way to avoid all these boondoggles?

For all intents and purposes nothing is ever sold with zero profit. The profit represents the only incentive for the seller to engage in the transaction in the first place. The only way to reasonably encourage a seller to engage in a higher number of transactions than are normally called for, as during an emergency, is a corollary increase in profit. When the profit is increased the seller will be willing to stay open longer, provide more efficient store functioning, maybe drive a couple hundred miles to pick up stock, in addition to a variety of other actions that will increase the seller’s ability to sell the goods. The high price, that is the high profit, will serve as the incentive for sellers and distributors to move as much of the desired commodity to the affected area as fast as possible. After all, if they don’t they are going to miss out on the profits. Such incentive cannot be legislated or pulled from thin air. Furthermore relying on “man’s goodwill to man” in a time of heightened self-interest will be equally inadequate. And, as the tragedy surrounding hurricane Katrina demonstrated, governments – working solely from governmental incentives – are inadequate at delivering required relief during emergency situations.

Of course, in an emergency situation, the increased profit generally comes from an increased demand. It is a demand, as has been pointed out, that could be ravenous and irrational. However, the increased price will serve to rationalize, even if only slightly, irrational demand. The buyer will ask himself if buying ten cases of bottled water and thirty-five first aid kits makes complete sense. In doing so the goods, whose distribution to everyone in need is so paramount, will be automatically rationed. People will be forced to readdress what they “need” in light of what they can get. When essential goods are in short supply one cannot count on people to ask themselves, due to sheer good will, if they really “need” that second bottle of water when maybe they should go a little thirsty so their neighbor can have a drink.

Hotels in disaster areas may triple or more in price. This represents the change in supply (housing destroyed) and the change in demand (willing to stay anywhere with a roof). The price change, however, will force rationing of those very essential goods. Families will rent one room for all when they may have previously rented three at a lower price. Others may decide to stay at a relative’s rather than a hotel. The owner of the hotel will charge what the market will allow; just as he did when everything was “normal.”

In other words, it is just as justified to describe pricing under “normal” economic conditions as “price gouging” as it is to do so under emergency economic situations. The seller will always attempt to charge what the market will allow. You have an orange. Someone offers you $2 for it. Another comes along and offers you $3. Under the ideological commitments of anti-price-gougers if you do not take the $2 bid (or some other price that is randomly pulled out of the air and deemed “just”) you are “unconscionable” and possibly liable to criminal prosecution. Such laws do little more than criminalize rationality.

Disasters are unfortunate situations in which reality has made total satisfaction of all needs difficult. Because disasters produce new situations the price cannot remain the same. Wishing that everyone in a disaster area had a place to stay and fresh water to drink doesn’t change the simple truth that these things have become hard to come by. But, an abundance cannot be legislated into existence. Somehow what goods are there must be distributed. Therefore, a distribution system must be chosen from alternatives. Unfortunately, a magical distribution system that executes perfect justice is not one of those options. Price-ceilings and government control are an option but, as I have shown, are totally inadequate. A free-fluctuating price system is the only viable option to create a rational (even if it is not perfect) distribution.

Of course the quickest objection to this idea is that it will be a distribution based on wealth, not need. However, in a situation where demand exceeds supply due to price control a higher price will emerge (lines, black market, etc.) that must be paid to acquire the goods. This is exceedingly true in a situation with emotionally-driven fervor. In this situation a distribution of goods will result that is based on criteria other than wealth; criteria that are equally unrepresentative of need: i.e. how far you live from the seller, how many people you know to stand in line, whether you’re friends with a store-owner, or just pure and simple luck. Would you rather goods be distributed on the basis of these random inequalities? However, what will not emerge is an increased supply of the goods. More people will go without. If the seller‚Äôs incentives cannot rise with the buyer‚Äôs then someone‚Äôs demands will not be met. In an emergency situation this lack of goods will have dire consequences.

It is incontrovertibly true that such legislation as the Colorado “price gouging” bill cannot and will not work. Although you would be hard-pressed to find an economist in the world who believes this to be a good idea you will not be equally hard-pressed to find legislators who are willing to ignorantly cast a “yea” vote. This, of course, is the unfortunate problem.

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18 Responses to The Persistent and Unfortunate Myth of Price Gouging

  1. Lionel Barret says:

    The “price gouging” bill is indeed stupid and inefficient as you say but your presentation is quite simplistic.
    “Price gouging” does exist : some energy monopolies do exactly that and there are some efficient means to prevent it.
    Some nuances would add to the article. at this point, it borders on the obvious and the biased.

  2. Anonymous says:

    “A price is simply a method of conveying information ‚Äì information about how much is available and how much is desired”

    theoretically. In a perfect world maybe. In the real world it doesn’t work like that. In the real world corporations buy and sell policians. In the real world corporations get fat subsidies. In the real world corporations get fat tax breaks. In the real world corporations get to kill without regret or responsibility. In the real world corporations get to poison waters, make people sick, ruin lives all the while increasing shareholder value.

    In the real world the corporations live high on the hog from the taxpayers. In times of crisis is it so much to ask they only profit grossly rather then obcenely?

    I tell you what lets stop all corporate welfare, let’s stop pretending that corporations (who are soul-less entitites) have the same rights as human beings, lets put people in jail when they kill using a corporation as a weapon and then maybe we won’t push for laws against price gauging.

    What say you?

  3. Trevor Burrus says:

    First Lionel Barret: I am willing to discuss this matter but first I must hear your answer to two important questions: first, define price gouging. Where is the barrier that one crosses that creates “gouging?” Is it a percentage of the price at some time? Which time?

    The second question: what mechanism – legal and rational – would effectively determine the “real” price of a good/service and thus allow a judgment of “price gouging” to be made?

    These questions are integral to any discussion that advocates the existence of price gouging. If they cannot be answered then a position cannot be maintained.

    Second, Anonymous: We clearly have incommensurable views of the world. These views cannot be realistically flushed-out and discussed in any reasonable time or space. However, I must ask you this simple question; why are you more willing to kowtow to government control then to corporate control? You seem more willing to want the gun at your back then the carrot on the stick. At least the latter incentive requires your desire to be effective. The former just requires you to be kill-able.

  4. Kerry Lange says:

    Hmmm… In an effort to point out ‚Äúfingers-in-the-ears-while-chanting-la-la-la-I‚Äôm-not-listening‚Äù thinking you’re using “I-know-the-price-of-everything-but-the-value-of-nothing,” “perfect-world” economics. The world isn’t perfect and markets don’t function perfectly–particularly in the absence of regulation.

    Without competition and regulation, pharmaceutical companies price their drugs according to the pharmaceutical company’s needs. In other words, if someone is going to die without it–regardless of whether it can be produced for a fraction of a penny–they’ll price it where they can generate the highest profit–monopolistic pricing or economic profit.

    “Economic profit”–everyone seeks it. In a “normal” market, economic profit approaches the total cost of producing the goods and services in question. In an imbalanced market, those in a position to increase economic profit–be it monopolies, oligopolies, other “opolies”, or individuals–will price accordingly.

    Everyone sees the value of stable markets and enormous effort is put out to achieve stability. Basic economic theory based on “utility” posits that people will try to spread utility over time to avoid spikes & troughs in whatever “utility” they seek.

    The bottom line is that disasters produce an “imbalanced” market–one not in equilibrium. Yes, you can stand back and allow the market to find equilibrium again. But there is nothing wrong in attempting to even out such imbalances.

    You’re right about clumsy and simplistic legislation that attempts to regulate pricing in a disaster. That doesn’t mean you have to sit back and accept these fluctuations either.

  5. Trevor Burrus says:

    Kerry Lange; I disagree but I like your post. The law of unintended consequences always rears its ugly head. Legislation attempting to redress most market problems should always be critically addressed with a skeptical eye. However, I am not an anarchist. As libertarians go many would see me as an unforgivable “statist.” I do believe that free market transactions must exist within a legalistic framework that occasionally must sink its teeth into the matter.

  6. Anonymous says:

    You asked if I would prefer a gun at my back or a carrot and a stick. This is typical response of a zealot. It’s a non-sequitor and a false dichotomy. You as a laisser faire zealot do not see that corporations too wield guns. Sometimes directly as in “private contractor” mercenaries in Iraq who have killed lots of people for profit and sometimes as in mining companies in the south pacific who are paying the local police to kill and maim opponents to mining.

    The only reason corporations do not wield guns as a matter of course is that it’s cheaper to buy politicians and laws and then let the police do your bidding for you.

    Take the RIAA for example. The govt has very kindly agreed to bust into peoples houses, confiscate their computers, and then turn over the evidence to the RIAA. The courts then “enforce” the laws RIAA bought fair and square and fine people thousands of dollars. If you don’t pay? Well you go to jail. Why would a corporation want to erect an army, train them, build prisons, and house people when they can simply buy the govt for much much cheaper?

    Wake up and look around. Corporations kill, they not only kill they visit profound violence on people. Sometimes that’s physical pain, sometimes it’s jailing, sometimes it’s poisoning and cancer, and sometimes it’s just economic violence and lifetime of suffering because of bankrupcy or worse. I won’t even start on corporate sponsored drug addiction and how devestating of a thing that is.

    No we don’t see eye to eye. You live in La-La land. In your world corporations are nice cuddly teddy bears who hand out candy and kiss babies and the purpose of the govt is to kill you with guns. It’s not like that is it? When was the last time the govt killed you? When was the last time the govt shot at me? US corporations kill more US citizens then the US govt does every year. Go check the stats!.

    Who should I be more afraid of? The numbers are against corporate america. They are much more likely to kill or maim me then the US govt. As a bonus I get to vote on how the govt is run too!.

    It’s a no brainer don’t you think?

  7. Trevor Burrus says:

    You are impugning me for statements that I neither made nor implied. I did not say that I love corporations and everything that they do. I did not say that corporations do not do horrendous things. Calling me a zealot when I offered you a rhetorical device to point out our difference of opinion does not effectively form a counterargument. In fact, as most readers will be able to see, the only one exhibiting any sign of zealotry is you.

    The reality of any situation is usually far too complex to label it with black and white epithets. It is not the case that one is either pro-corporation or anti-corporation. I have not advocated a unilaterally pro-corporate view. You attacking me for a view I did not and do not advocate is a classic example of the straw-man fallacy. You, however, most assuredly seem to be advocating a unilaterally anti-corporate view. And I am the “zealot?”

    The open-ended rhetorical questions that constitute the majority of your argumentative style ring with the credibilty of an “Unsolved Mysteries” segment; “could it be that this happened only by coincidence?” Readily, however, I do have an answer to two of your questions: the last time the government killed its own people/shot at them? Ruby ridge, waco, kent state, to name a few. Not that this solves anything but I just thought I would mention it.

    Otherwise, I do not plan to argue against your carefully crafted world view. My points would not be heard. I do, however, wish you well.

    Have a nice day.

  8. Anonymous says:

    “The reality of any situation is usually far too complex to label it with black and white epithets. ”

    BINGO. Welcome to the real world. In the real world you can’t say silly things like “prices reflect supply and demand” and other pithy feel good statements.

    “I do have an answer to two of your questions: the last time the government killed its own people/shot at them? Ruby ridge, waco, kent state, to name a few.”

    Right. Lets get the numbers together. Let’s presume you are in your thirties (if not just plug your age into this formula). Count the number of people in the US govt has killed in your lifetime. Then count up how many people in the US have been killed by corporations. Do the same exercize for maimings, diseases etc.

    If the corporations have killed more people then the US govt then you are more likely to be killed by a corporation then the govt. This is simple mathematics. Just add up the numbers.

    I would venture to guess that firestone alone has killed more people in the US then the govt and that’s just one corporation. Add up the number of people killed in hospitals, the prison/industrial complex and the people who died from airplane crashes and it would not surprise me one bit if you didn’t have a hundred times more people killed by corporations then the govt. Do the math, you have a much higher chance of being killed by a corporation then by the govt. A rough back of the envelope calculation ought to convince you that it’s perhaps hundred or a thousand percent more chance.

    So where does that leave your zealotry based remarks about guns, carrots and sticks? remember you were the one who told me that the corporations didn’t wield guns and only used carrots and sticks. I have pointed out cases of not only corporations actually wielding guns but also bribing police to wield guns for them and of course buying laws so that the govt will automatically wield guns on their behalf.

    So where does that leave the rest of your thesis? You know about price gauging. Well that too is a silly argument based not on reality but some theoretical feel good epitath isn’t it? Take a look at the copyright and patent situation for example. RIAA and other “content providor” corporations have bought laws like the DMCA, copyright extensions, liberal patent laws and other forms of intellectual property protections. These laws have created an artificially high price for music and movies and such. Right now if you download a song your punishment could be thousands of dollars of fines but if you actually steal a CD chances are you will not even serve community service. By continually buying an extention to copyright and more liberal patent laws the corporations gauge consumers, set artificial barriers to entry, and punish people who put out products in the marketplace. So much for supply and demand huh?

    Your polyanna world does not exist. We live in the real world. As you said the reality of any situation is far too complex to lable with black and white epitaths. In the real world we NEED laws to keep corporations in check when they attempt to profit from the misery of others.

  9. Trevor Burrus says:

    You have demonstrated nothing. You have shown nothing. You have laughingly asked me to “do the math” with numbers that, like you, I am supposed to make-up.

    Your assertions about situations where “corporations kill” would require a philosophical rubric that describes the nature of responsibility. For example, I assume you believe that corporations are responsible for cigarrette deaths. I do not. Thus, our debate rests upon the nature of responsibility as opposed to your “number crunching.” There are philosophical issues that must be dealt with before we can move on to your “evidence.”

    It seems you are willing to blame corporations for plane-crashes and malfunctions of products; in addition to something mysteriously referred to as “the prison/industrial complex.” Perhaps for selling too hot of coffee too. In most cases I am not willing to solely blame “corporations” as an abstract entity for these problems. Again, philosophical dischord.

    Furthermore, I am willing to blame government for many things that you, seemingly, would not. Therefore, as opposed to attempting to browbeat me with your “facts” it is important to realize that our debate is not a factual dispute. Let me reiterate: OUR DEBATE IS NOT A FACTUAL DISPUTE.

    Secondly, your comments about the RIAA are not germaine to my essay. Insofar as you attempt to address points about price gouging, I will restate what I had said previously to another poster. There are two things that are NECESSARY to claming the existence of price gouging: First a definitiion of price gouging that explains how one determines that a price is too high and gouging is taking place? Second question: a mechanism Рlegal and/or rational Рthat would effectively determine the “real” price of a good/service and thus allow a judgment of “price gouging” to be made?

    Thirdly, to fully demonstrate how our dissonance of opinion is rooted in higher-order philosophical concepts than those you are drawing upon let me quote your last sentence: “In the real world we NEED laws to keep corporations in check when they attempt to profit from the misery of others.” I totally, completely and 100% agree with this statement. This, however, clearly does not make us in agreeance. The manner in which one agrees with that statement depends on how one answers questions of responsibility, justification, freedom, and desert. Since you seem unwilling to debate the question on the level it requires I am continuing to refuse to engage in this debate with any substantial rejoinders.

    I do, however, hope you have a good day.

  10. Anonymous says:

    “Your assertions about situations where ‚Äúcorporations kill‚Äù would require a philosophical rubric that describes the nature of responsibility.”

    That’s an interesting discussion in and of itself. Since the primary purpose of setting up a corporation is to shirk personal responsibility in the first place you are going to have to address that sooner or later. Let’s take firestone for example. If a human being killed 100+ other human beings they would get the electric chair. When firestone kills 100+ people nobody even goes to jail. Somebody made a decision to save some dollars by skimping on something but nobody gets the electric chair. Corporations unfortunately are very successful in shielding the humans beings that work for them from having to exercize personal responsibility.

    “or example, I assume you believe that corporations are responsible for cigarrette deaths. I do not. ”

    That’s because you are a zealot. Like most zealots you believe the world to be black and white. Either the corporation is responsible or it’s not. I on the other hand believe that the corporation shares in the responsiblity.

    “It seems you are willing to blame corporations for plane-crashes and malfunctions of products”

    Who should we blame for the malfunctions of products? The govt? The consumers of those products? I am most anxious to hear your viewpoint on this.

    “OUR DEBATE IS NOT A FACTUAL DISPUTE.”

    I keep trying to bring it to a factual basis but you refuse to.

    For example you said that governments wield guns while corporations wield carrots and sticks. If I point out the fact that corporations wield guns doesn’t that prove you wrong? If I point that corporation bribe police to kill people who oppose them doesn’t that undermine your argument?

    The same goes for price gauging. You keep railing about the ignorance of the lawmakers while exhibing a profound ignorance of price fixing, and creation of artificial shortages via bogus IP laws by companies. It seems to me you are one ignorant of what is happening in the real world.

    It’s impossible to have a philosophical or a factual discussion with you. You refuse to accept facts presented to you when they disagree with your lassier faire wold view. You have bought this “governments wield guns, free markets are the one true way” pablum hook line and sinker.

    “The manner in which one agrees with that statement depends on how one answers questions of responsibility, justification, freedom, and desert.”

    Indeed. I am for holding people responsible for their decisions. If a person makes a decision that ends in the deaths of hundreds of people then that person should be tried and executed like any other murderer. Just because the person is a CEO and the decision was made to save or make money they should not be able to walk away scott free. If not murder then manslaugher or criminal negligence or even conspiracy to commit murder. The entire board of directors and everybody else who was involved in the decision should be punished and be held personally responsible for their actions.

    If my dog bites my neighbor I can go do jail and my dog will be shot. A corporation should not be treated differently then a dog.

  11. your mom says:

    Ding! Round one goes to Anonymous!

  12. Trevor Burrus says:

    I said, “OUR DEBATE IS NOT A FACTUAL DISPUTE.”

    You said, “I keep trying to bring it to a factual basis but you refuse to.”

    Yes, I refuse to because…let me say it again…OUR DEBATE IS NOT A FACTUAL DISPUTE.

    You believe that I am willfully denying “facts” that you have brought to the fore. As you say, “I refuse to accept facts that are presented to me.” I have not explicitly denied any of your “facts.” I am only denying your interpretation of the “facts.” Furthermore, and most importantly, I am denying your belief about what should be done to adequately address the problem. Centrally, I seek not to choose an idealistic committment that will allow me to believe that a perfect world can be actualized, but rather to choose between alternatives with trade-offs in mind.

    You continue to impugn me, both in general and for positions I did not maintain. Your continual dwelling upon a rhetorical quip I made regarding the generally differing methods of coercion between corporations and governments (guns and carrots) is also gaining you no ground.

    Furthermore, as you have seen, I have not brought other “facts” to the table because I know you will be as unreceptive to them as I am to yours. Our own world-views imbue “facts” we hear with significance and credibility that they do not have in and of themselves.

    Likewise, those reading this debate will side with myself or you in accordance with the significance that already exists in their own heads. Some will find your “facts” damning and my “rebuttals” simply to be skirting the issue and avoiding questions at hand. Others may believe that I handled your comments with equanimity and cool-headed resolve. Either way, allegiances will not change because of our insignificant dalliance.

    Your goal seems to be my complete capitulation and acceptance of your world-view; it seems you will continue to berate and impugn me until I do so. I, of course, cannot do so because I do not know what your world-view is. You have still failed to do anything more than cite “facts” and imply their obviousness and significance. I have likewise failed to cite “facts” or construct a contrary world-view. In the absence of these things, however, you have chosen to assume my world-view, attack that assumption, and assume and my opinion on your “facts;” neither of which have been given. My goal in this discussion has been to clarify the issues at hand and attempt to restate and reanalyze the pertinent questions. Often, this is the best that philosophical discourse can hope for.

    But, we are not playing the same game. Seeing as this debate has been stagnated from the get-go, I will not respond to another post you make. Feel free to do so. I will read it. I do appreciate your comments, I am glad you read my essay and feel strongly enough to comment upon it, and I have truly enjoyed our debate – despite the incessant vitriol you have lobbed at me. Furthermore, feel free to believe that you have shown me whats-what and I am retreating with my tail between my legs.

    And, I do, once again, wish you well.

  13. Anonymous says:

    You made a smug and smarmy blog post about how stupid and ignorant those silly lawmakers were for tyring to prevent price gauging. In the process you made numerous very silly arguments about supply and demand.

    I am pointing out that in the real world supply and demand is not the sole arbiter of price. In the real world corporations manipulate both supply and demand by buying politicians and laws.

    Given the above it only seems reasonable that the consumers push to counteract some of that influence and try to limit the amount of damage done to them especially in times of crisis like natural disasters.

    You have not addressed any point I have brought up.

    You said governemts kill, i pointed out corporations kill even more.

    You said this discussion ought to be about reponsibility and I agreed and pointed out that corporations are designed to shirk responsibility.

    You said corporations are not responsible for product defects, I asked you who was but you didn’t answer.

    I know I am beating a dead horse here but you are wrong. You are wrong about the nature of the marketplace, you are wrong about how corporations behave, you are wrong about how governments behave. You are simply parroting the lassair faire liberterian party line. It’s an old song and dance and I for one am tired of hearing about it. The market doesn’t work in the real world. The real world is messy and it’s corrupt. None of your pristine and pure theories work out here.

  14. Trevor Burrus says:

    Alright, I’ll dip back in.

    Two very simple questions:

    What am I wrong about? Granted, you think I am wrong on my view of price gouging but we left that arena long ago. You are attacking my overall viewpoint. Please tell me what my view is on all of these subjects because I certainly haven’t stated them. What do I think is the “nature of the marketplace?” How do I feel “corporations behave?”

    Why, for example, must one either believe corporations are morally responsible for product defects or are not? I believe that sometimes they are and sometimes they aren’t.

    Secondly, and most important: what are you advocating in place of the free-market? This question is paramount. I do not advocate the free-market in warranted situations because it is a perfect solution; I advocate it because the alternatives suck even worse. You have failed to offer a solution to the problems you state or a better way of approaching the situation. This is the biggest reason I have remained silent in responding directly to your attacks. Choosing which economic policy to promote is itself an economic choice – a choice that must take into account the effects of alternatives and the trade-offs of choice. You will find no one who laments the failings of the free-market system and the injustices it creates more than those who advocate it. Adam Smith opined at length on the stark and unpalatable wealth disparities capitalism creates. Hayek, Freidman and Sowell have done likewise. I am no different.

    Corporations kill: Sometimes yes and sometimes no. Governments kill: sometimes yes sometimes no. Corporations attempt to manipulate supply and demand: sometimes yes and sometimes no. Governments attempt to manipulate supply and demand: sometimes yes and sometimes no. People should be held responsible for actions that injure others no matter how much money they have: yes for governments and corporations.

    All of these problems. All of these injustices. So, what do you do about it? I am asking you, “anonymous,” what do you do about it? If you are a communist; fine. If you believe in strict dictatorial control; fine. If you are an advocate of the barter system; fine. If you are a Keynesian; fine. If you believe no business should be allowed to grow beyond a certain point; fine. If you believe prices should be fixed; fine. If you believe that the free market always fails; fine. I would be interested to know if you believe there is no justified existence for a free market. If you do believe this then we are categorically different. If you do not believe this then our disagreement is about “how much?” and “when?” as opposed to whether it should happen at all. Any position that I can find you to advocate would put us in a place in which we can discuss the relative merits of our competing viewpoints – talk about the costs and benefits through the analysis of alternatives.

    However, you do seem to think believing in the free market is an all-or-nothing proposition? Is this correct? Is there no room for nuance in your beliefs?

    The free-market stance is a resolutely critical stance. Rather than saying, “look I have the perfect solution,” libertarians et al. are saying, “there is no ‘solution’ and your ‘solutions’ could unintentionally harm many people.” This is what my essay claims; not that the free-market is ideal, but that it is better than the alternatives. You have given me no alternatives, just “facts” that to which my attitudes are far more nuanced than you seem to wish.

    Does this make any sense? Do you understand why we are in disagreement? Do you understand why I am reluctant to dip into your world of false dichotomies and all-or-nothing “facts” that must accepted no ifs ands or buts?

    All of this is very bizarre in light of my original article because I do not mention corporations. My article is about economic theory; theory that applies to Ma and Pa stores or Walmart. You turning it into a discussion only about corporations only shows your particular axe to grind.

    Good day.

  15. “why are you more willing to kowtow to government control then to corporate control? You seem more willing to want the gun at your back then the carrot on the stick”

    EXTREMEMLY LUCID POINT

    This, as you pointed out, are the most basic premises by which the ideaologies of socialism and capitalism are at odds — especially in today’s society — and incompatible in the realm of debate. It’s like theists and atheists have such different premises that they have nothing constructive to say to each other except to agree to disagree.

    But between Trevor and “Anonymous” it is obvious to me who is being far more rational — not because I agree with one over the other, but because one is discussing economics and politics logically (correct or not) and the other is merely touting conspiracy theories (true or not) backed by endless and yet still negligibly relevant facts based on even more elsuive premises.

    Anonymous – if you were on my side in a debate team, I would keep you around to win the emotionally-led audience. You’re so good at that you even bought it yourself. But the truth is that even though there IS truth to much of what you say, you have made no sense of it at all in terms of valid conlcusions from those facts.

    Sorry … Trevor wins this one (a fight he didn’t even pick) and the score isn’t even close.

  16. T. Roswell says:

    I liked the article, and I understand your point- that price ceilings are at best a poorly-conceived to restore balance to an economy blasted by a disaster. But what, then, do you suggest the government do?

    Secondly, I strongly disagree with the notion that “price gouging” is a an anti-capitalist myth. It may be incorrectly identified in a disaster situation, but haven’t you ever been to a sports arena? They sell food and drinks often for twice the market price because they know their market is essentially captive, too worried they’ll “miss something” to leave the arena. This is not the same situation as a disaster, where a force of nature changes supply and demand. The arena has an incredibly strong influence a hungry consumer’s sense of choice, as anyone who’s gudigingly bought a five dollar slice of pizza at an arena can attest. They’re not erasing competition, but they are clouding the consumer’s sense of it, and the strength of that sense of one of the key pillars of a free market economy. How is messing with it not price gouging? Because it’s a legitimate outcome of a free market economy? So is monopoly, but no one thinks that’s a great idea.

  17. FreeMarketMan says:

    In a free market, there is a certain axiom which governs all choices: “A person does that which is of value to him, and does not do that which is not.”

    In regards to prices, people pay for goods and services based on whether or not paying that amount of money is worth it. There’s a sure way of telling whether or not they deem it valuable: if they buy it, it is; if they do not, it is not.

    It works both ways too. If a business thinks that selling a good or service at a certain price is worth it, they will; if not, they raise or lower the price accordingly.

    In the example of a sports arena, the vendors sell food and drinks at “high” prices because people buy them because it is worth it to those people. If it were not worth it, they would not buy it, and it would no longer be of value to the vendors to continue to sell at those prices.

  18. Steve M. says:

    It is interesting how the root of the differences of opinion boils down to a fundamental belief about markets. To believe in the free market is not tantamount to believing that it is perfect. On the contrary, it is filled with flaws but at least people are free to make decisions for themselves. I would hate to wait on a line for a size 12 shoe only for some planner to have miscalculated and then I get a size 10.

    Let’s compare the productivity of a free market economy and that of socialist states. Although not perfect and filled with unintended consequences, the facts speak for themselves. What system has created the greatest prosperity in the history of mankind? The free market has so much so that the US (as the largest consumers) drives other economies. If the US and other Western nations did not buy oil, would oil rich nations’ standard of living go up or down? The same could be said for many other industries. What about nations of the world that can not feed their own people yet their impoversihed people continue to depend on others’ charity and “aid” (system of dependency). How cruel and irresponsible is it to bring children into the world that you can not even feed? What if the US and other western nations did not set up the world bank or food bank? How does the US have the money (we really don’t) to feed these people? The answer is taxation and the money ultimately comes from the private sector. However, goverment is necessary to prevent corruption and monopolistic practices and provide certain services that a free market might not be able to provide without a conflict of interest. Viewing the free market as an all or none proposition is a false dichotomy.

    Let’s just look at the failures of the collectivist movements —– communism, socialism, fascism (Nazi is an acronym for National Socialist Party). In these systems there were actually people who believed the they knew what was best for the greater good. For the greater good was a favorite phrase of Benito Mussolini.

    The failed systems of the collectivist movements speak for themselves. They were not perfect and they failed miserably. Stalin and Hitler murdered more people than we can count.

    The free market system, although not perfect, has created the greatest prosperity that the world has ever seen. People can try to relabel collectivist systems to “solve” problems all they want. But guess what? Nobody has all of the answers.

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