you may not like the laws of economics, but the are called “laws” and not “suggestions” for a reason.
if demand is constant and supply drops, then all else equal, price will rise.
some like to call this “price gouging” and cite examples like "charging double for bottled water after a hurricane” but this misses the larger point: it is not gouging, it is reflective of simple economic processes at work and the higher price has several beneficial effects:
it discourages hoarding
it encourages more supplies to be produced or sent to the area
it incentivizes those who can do without to forgo consumption
it incentivizes those with surplus to make it available
it leads to allocation of scare resource toward greatest need
one can always find fault in specific outcomes, but this is true of any economic system or system of allocation. let’s consider, for example, not raising prices despite reduced supply:
oops, look, runs on gas stations!
and now cannot get any at any price.
perhaps rather than being thankful no one price gouged and vilifying any who would suggest such a course, we should be asking, if prices had jumped to $5 or $7 a gallon, would we have gasoline available right now instead of a complete absence?
would the world have flocked to fill tanks and jerrycans and spare vehicles?
would the people who really need gasoline today be able to get some?
if gas prices in the east and south are the same as in the west, there’s no point in shipping gas from the west to the south. but if they are higher, then it does. you can pay to ship, still make extra money, and mitigate the shock because… wait for it… you have incentive to do so.
price and profit are incentives. break that structure and do not act surprised when your market graunches.
price rises responsive to supply and demand conditions are not gouging. that’s just a loaded epithet used by the economically illiterate to substitute emotional thinking for rational.
won’t this be fun when some ambulance company has to suspend service because they are out of dinosaur juice?
(coming soon to a hospital near you)
the alternative to higher price in a supply shock is not “we all get some at low prices,” it’s “the market runs out of stuff.”
the only other option is “some regulator limits purchase quantity” which just makes the market twice as stupid and wasteful before it runs out of stuff. the lines get longer, you have to go buy at 4 places instead of one, etc.
“price gouging” is really “market adaptation” and if you prevent it, well, you’ve earned a broken market. so let’s remember that.
while i’m up on my soapbox du jour, let’s also speak of the other hilarity emerging from stupid long term policies and positions here.
watching politicians cast around for solutions and blame is fun. even the normally wonderful desantis is getting this one wrong.
the reality is this: we’re in this mess because both the left and the right pushed us here through regulation and the prevention of market development.
watching the right, who has steadfastly opposed strong encryption and real infosec for decades because “then how can we spy on the terrorists?” suddenly get the vapors every time the weak informational security ecosystem they so love gets hacked BY the terrorists (or the data thieves) has the same genuine feel of crocodile tears.
watching the left, who has so steadfastly opposed building new pipelines that would add capacity and redundancy by yelling “eco-NIMBY!!” at anything that looks like it could carry fuel suddenly act baffled that “what, we don’t have another way to get gasoline to market here?!?” is like watching the same guys that oppose freeway construction wonder why they’re stuck in traffic.
welcome to the urkelocracy.
i hope you have enough gas in the tank to make it home from it.
Given your vice-grip on statistics and logic, I should not be surprised you also understand economics. Complaints about "price gouging" always disturb me. People *really* do think economic laws are just suggestions, that only vary dependent upon which animal-shaped idol their lying-sack-of-crap politician marches under.
I love this issue because it's almost always a clear marker of who understands markets and who doesn't. If you want the crisis to be over as quickly as possible, allow markets to do their thing!
Let's say there's a crisis in a neighboring state, and for some reason water is selling for $5/bottle. In a regular market, I load up my truck with water and sell it for $4.50/bottle. But I'm not the only one. Soon the price is falling because so much supply is coming into the area trying to take advantage of the price increase.
OR we can make it illegal for me to bring my water to the crisis and sell it at market price, meaning that I'll simply stay home (and so will everybody else). This obviously puts ALL the burden on charity/government and extends the crisis.
"Price gouging" is simply the market signaling that some things are URGENTLY needed in a specific area. This is the most effective way of returning the market to "normal" conditions.
This is basic economics. Price ceilings create shortages:
“To economists, the price system is central to how market economies allocate resources. Sometimes prices need to rise to balance supply and demand, even if that outcome is politically unpopular. Talk of price gouging raises the specter of price controls, which in the 1970s led to widespread shortages and long lines at gas stations.”
April CPI came in at 4.2% today! The Federal reserve likes 2% or less!
There is all together too much cash roiling around the world (especially US) economy. The Fed has "covered" nearly $8 Trillion (Big T!) in notes and bonds that reflect a lot of greenbacks out there to chase prices up!
That $4T (big T) in new Biden largesse is going to explode demand pulls. Boundless cash chasing a finite stock of good and services.
The politics is: keep tossing money. The Fed will do a Paul Volcker and stop buying bonds, drive up interest rates and slow the non Biden largesse economy.
Being a retired Boomer I hope you all do as "well" I did in the 1970's.......
I'm a little dubious that price gouging is a good thing, but I see your point. Despite that, I love the last point. This is what happens when we treat politics like a zero-sum game. The regular people get hurt because politicians have no motivation to fix anything.
Since FL has “gouging” laws to stop nasty hurricane profiteering, I am not surprised at Desantis
Everything you write is spot-on. Love this.
Shades of Thomas Sowell right there. Well done.
They should have allowed "price gouging" during the early days of Covid for all PPE items. Would have solved the problem of scarcity in no time.
Great article, people who hoard during times of crisis are either desperate, dumb or not well prepared. All of it gets remedied by naturally selecting "is it worth it", "can i simply steal it", "must i murmur this guy to get some", "why did i buy so much at twice the price".
Will remember that.