Monday, May 02, 2011

Who Should Decide On Prices After a Disaster?

Several years ago, Art Carden provided the fill-in-the-blank "price gouging" form below, and it's being put to good use now in Alabama and Kentucky following the tornadoes in those states:

"Fearing increases in the prices of basic items as a result of    (disaster)   , officials in    (state or municipality)    have declared a state of emergency whereby restrictions on "price gouging" are now in effect. According to    (politician or law enforcement official)   , the law is designed to protect innocent consumers from "unconscionable" increases in the prices of food, gasoline, ice, electric generators, and home-repair services. The unintended, unseen consequences, however, are predictable, unfortunate, and avoidable."

MP: It's only in the fantasy world of politics that the "anointed elected officials" think they get to be the "price deciders," and determine if sellers are guilty of "price gouging." In the real world of the marketplace it's much different and much more democratic - the impersonal market forces of supply and demand become the "price deciders," and we're all much better off with those market-determined prices than with the artificial prices determined by politicians and bureaucrats.

If the goal is eliminate shortages of critical goods in Alabama and Kentucky by directing scarce resources as quickly as possible to the areas where they are needed the most, then there's no mechanism more efficient than the price system to achieve that outcome.   Just like an earthquake, hurricane, flood or massive price breaks don't change the fundamental laws of physics, gravity or aerodynamics, those disasters also don't change the basic laws of supply and demand.  

And it's those market forces, not political rhetoric, that are the best friend of the disaster victims.  Suppressing the very price mechanism that most effectively eliminates critical shortages after a natural disaster for political reasons will certainly make the situation worse, not better; and the recovery period longer, not shorter - and those are the unintended, but inevitable consequences of "price gouging" laws.

160 Comments:

At 5/02/2011 9:12 AM, Blogger Robert said...

Granted the market is much better than a bunch of bureaucrats in making any economic decision. But when people make decisions about "the impersonal market forces of supply and demand," there's nothing impersonal about it.

 
At 5/02/2011 10:01 AM, Blogger geoih said...

Either the people own their property, and are free to sell it (or not sell it) for whatever price they wish, or they don't own it, and the state gets to decide what happens to it.

You don't get to have it both ways.

 
At 5/02/2011 10:03 AM, Blogger Larry said...

I've never understood why its 'bad' when resources are unavailable to a person because they can't afford them but not bad when they are unavailable to a person because of government created shortages due to price controls. Either way, some people get things that others don't.

 
At 5/02/2011 11:15 AM, Blogger Benjamin said...

Interesting debate.

Should a wealthy man water his lawns if there are people thirsting to death?

 
At 5/02/2011 11:40 AM, Blogger VangelV said...

This is a simple property rights issue. Nobody is forcing anyone to buy anything. If prices rise after a disaster it limits wasting by squeezing out those that do not need the goods and leaves more for those that do need them. If prices are set artificially low there will be shortages.

 
At 5/02/2011 12:05 PM, Blogger morganovich said...

"Should a wealthy man water his lawns if there are people thirsting to death?"

this breaks down into 2 issues:

1. should he be allowed to? (legally)

2. should he do so? (ethically)

the answer to 1. is yes. it's private property. the government has no right to interfere. if they could, they they could come into your house, grab your dinner off the table, and feed a starving guy in an alley. at that point, you do not have private property.

the answer to 2 is "it depends".

watering your lawn in LA when people are thirsting in alabama makes no difference.

if i found myself with a working well during the aftermath of a disaster where people had water supplies disrupted, i would be happy to share it. i'd feel like it was the right thing to do. that's my ethical choice. might someone else make a different choice? sure. that's how individual decision making works.

but to compel me to do so is unjust and violates my rights.

one of the facts of legal rights is that they must protect ethical and unethical acts alike. to do otherwise is to put the government in charge of your ethics.

 
At 5/02/2011 12:17 PM, Blogger DeeBee9 said...

I have a more practical view on this subject, having experienced a few bad hurricanes in Florida, which can be illustrated using the example of bottled water. When a disaster threatens and retailers are forced to continue selling at pre-disaster prices until supplies are exhausted, people rush to the store and buy much more than they're likely to need. For this hoarding they pay no penalty; after all, if they normally consume bottled water, they're simply buying ahead. People who delay or who can't get to the stores early are out of luck. If on the other hand the retailer could double the price, the hoarder is faced with a choice -- pay double and maybe suffer a loss (if the disaster is not long-lived) or try to limit his hoard. Until I saw people dragging multiple shopping carts loaded down with bottled water (and other staples) I didn't realize the extent of hoarding that takes place. Of course, this just makes life very difficult for those who miss out. (In the same vein, I recall just missing out on buying a generator and as I left the store I passed the checkout lines and noticed how many people were buying several generators! My guess is they were then going to resell them at far higher prices to local residents. But, heck. Who cares what suffering price controls cause so long as we prevent those greedy store owners from making and "windfall" (pun intended) profits.

 
At 5/02/2011 12:48 PM, Blogger Hydra said...

then there's no mechanism more efficient than the price system to achieve that outcome.

===========================

Try telling that to someone who needs water and has no money.

 
At 5/02/2011 12:52 PM, Blogger Hydra said...

"Nobody is forcing anyone to buy anything."


"...directing scarce resources as quickly as possible to the areas where they are needed the most"

==============================

OK no one is "forcing" anyone to buy anything. But making this argument denies the preface of the arguent being made, you know the one that starts with "if".

 
At 5/02/2011 1:00 PM, Blogger Ron H. said...

DeeBee9

"My guess is they were then going to resell them at far higher prices to local residents. But, heck. Who cares what suffering price controls cause so long as we prevent those greedy store owners from making and "windfall" (pun intended) profits."

Hoarding as you describe it, is predictable after any event that might cause a shortage, if prices aren't allowed to rise. People hoard for their own use or as arbitragers, and soon shelves - and gas station tanks - are empty.

The probable resellers you describe, are performing the function that retailers would perform, if allowed to do so.

In your case, you only suffered if you left without buying a generator from someone in the parking lot.

 
At 5/02/2011 1:04 PM, Blogger Benjamin said...

Morgan Frank:

Dicey answer. So, legally, a guy can water his lawns even when people are thirsting to death outside his gates. It is his property rights.

Hmm, so when someone pollutes, and my property is polluted, does such an extreme definition of property rights also apply?

Can I go after air and water polluters? Am I entitled to totally clean air and water? Or just to try to collect damages?

If you say I can collect damages, then should that not also apply to the rich man with water in a drought? That is, we take his water, give water to the thirsty, and just pay damages? Why or why not?

Okay, three people fall off of a luxury cruise liner. You grab a lifesaver.

You say you will toss the lifesaver to the highest bidder.

Good?

 
At 5/02/2011 1:04 PM, Blogger Ron H. said...

"Try telling that to someone who needs water and has no money.

...

OK no one is "forcing" anyone to buy anything. But making this argument denies the preface of the arguent being made, you know the one that starts with "if".
"

Are you going to start spouting this kind of nonsense again?

 
At 5/02/2011 1:05 PM, Blogger Benjamin said...

In truth, sometimes the price mechanism fails. Every ideology fails at some point. Reality gets in the way.

I love free markets, but even more I like things that work. Usually, free markets show the way. Sometimes they don't.

 
At 5/02/2011 1:17 PM, Blogger VangelV said...

one of the facts of legal rights is that they must protect ethical and unethical acts alike. to do otherwise is to put the government in charge of your ethics.

Our friend presents a false choice. First, there is no market pricing for water so it is accessible to everyone regardless of conditions. Without a market pricing mechanism there is nothing to tell anyone not to water their lawn. Of course if prices went up there would be a price signal to water providers that there is money to be made and they would increase supplies. That would make it easier to all consumers.

Once again, this is a simple property rights issue. End of story.

 
At 5/02/2011 1:20 PM, Blogger VangelV said...

...I recall just missing out on buying a generator and as I left the store I passed the checkout lines and noticed how many people were buying several generators! My guess is they were then going to resell them at far higher prices to local residents. But, heck. Who cares what suffering price controls cause so long as we prevent those greedy store owners from making and "windfall" (pun intended) profits.

That is the side that some of the economically challenged miss. When profits are denied to the suppliers they simply go to those who get to the goods faster and buy them at below market prices. For some reason there is no desire on the part of the government to prevent such individuals from making profits.

 
At 5/02/2011 1:22 PM, Blogger VangelV said...

Try telling that to someone who needs water and has no money.

I don't know about you but in the place where I live you need money to use water. The city, which has a monopoly, certainly does not give it away for free. And neither do the bottling companies.

 
At 5/02/2011 1:23 PM, Blogger VangelV said...

OK no one is "forcing" anyone to buy anything. But making this argument denies the preface of the arguent being made, you know the one that starts with "if".

What does this even mean?

 
At 5/02/2011 1:24 PM, Blogger VangelV said...

In your case, you only suffered if you left without buying a generator from someone in the parking lot.

Correct. But the retailer suffered because he was not allowed to charge a market clearing price.

 
At 5/02/2011 1:26 PM, Blogger Ron H. said...

Bunny

You already know the answers to every one of your questions, as this subject has been discussed at great length here before.

The subject comes up whenever a disaster occurs, and the same nonsense questions get asked. Someone with patience, often morganovich, answers them correctly.

As for the "rich man waters lawn while people dye of thirst" scenario, You have to ask your self whether you really believe there's some rich person who would actually allow this to happen.

If you beleive there is, you then have to ask how he got rich, when he makes such poor decisions. As a practical matter, the rich person would decide that providing water to prevent death is cheaper than dealing with rotting corpses outside his gate later. Why would he allow the higher cost to occur if he could easily prevent it?

 
At 5/02/2011 1:31 PM, Blogger Hydra said...

If on the other hand the retailer could double the price, the hoarder is faced with a choice -- pay double and maybe suffer a loss (if the disaster is not long-lived) or try to limit his hoard. Until I saw people dragging multiple shopping carts loaded down with bottled water (and other staples) I didn't realize the extent of hoarding that takes place.

============================

Higher prices just represent hoarding on the part of the store owner(trying to keep his inventory in stock). Once he runs out, he is losing money.

But higher prices don't prevent hoarding on the part of buyers: higher prices just make hoarding a privilege for those that can afford it.

Or, as DeeBee points out maybe they plan to resell anyway.

There may be other reasons, too: Last time I bought a generator on an emergency basis (mine crapped out), I bought three, one for me and one for each of my neighbors, who had none to begin with. No gouging going on, just to save them the trip. This is common in my neighborhood, even in non-emergencies.

Finally, price controls may change the dynamic and the distribution, without changing the result: if you don;t have enough stuff, you don't have enough stuff. Eventually the market will adjust, but in the meantime, some needs are not going to be met.


Whether it succeeds or not, government can at least attempt to use tools in addition to price, in order to see that minimum needs are met. The market has no tool other than price, and therefore it does one thing very well.

Metrorail does one thing very well, but that does not make it a transportation system. Blind obeisance to the market system as if it were the best and only system reminds me of those that build a boat out of ferro-cement. Makes a perfectly fine hull, but you might not want to make the mast, deck, and furniture that way.


It seems to me that Morganovich is right: If governmetn can come and take things from you, then you have no private property. However, he is also correct when he says, "it depends".

Government may have no right to steal from you, and still have the right to decide when your activities amount to (or are perceived as) stealing from someone else.

Government may be wrong in how they make that decision and be no less wrong than the market decision alone.

TC = PC + EC + GC.

The market decision is going to boil down to dollar weighted democracy, with some people being unable to vote. Government parctitioners are also influenced by dollar weighted democracy at work, but to a slightly lesser extent, and different direction.

It should not be surprising that the two systems will yield different results, but it is hard to describe one or the other as "wrong" without considering the goals going in.

As long as there are things that affect us that are not priced, it is probably a mistake to think that a market that considers only priced goods can lead to optimum results.

 
At 5/02/2011 1:31 PM, Blogger VangelV said...

Hmm, so when someone pollutes, and my property is polluted, does such an extreme definition of property rights also apply?

It is not extreme at all. Common law says that I have no right to dump my trash on your lawn. Of course, governments may allow companies and individuals the privilege of polluting that would be denied to them under free markets and common law but I do not think that you intend to go there.

Can I go after air and water polluters? Am I entitled to totally clean air and water? Or just to try to collect damages?

You would be under a common law system if you were truly harmed. Of course, you can't move next to a pig farm and argue about the smell or next to an airport and argue about the noise because you are not entitled to such protection if you knowingly choose to live in that area. The way property rights work is that nobody can come in and build an airport or a pig farm next to you without proper compensation.

If you say I can collect damages, then should that not also apply to the rich man with water in a drought? That is, we take his water, give water to the thirsty, and just pay damages? Why or why not?

Because it is theft. But as I argued in a posting above, our pal presented a false choice. In a truly free market environment there would be no shortage because the price increases would squeeze out the marginal users so that essential uses could be serviced.

Okay, three people fall off of a luxury cruise liner. You grab a lifesaver.

You say you will toss the lifesaver to the highest bidder.

Good?


If it is your lifesaver than you are entitled to do with it whatever you wish even if it includes not throwing it at all.

 
At 5/02/2011 1:31 PM, Blogger Benjamin said...

Vange-

Why are commodities collapsing today, and in the last week?

Also, what are my property rights when it comes to others polluting my property? Can I force others to stop polluting my property?

Collect damages?

If I can only collect damages, then can I steal other people's property, and just pay damages?

 
At 5/02/2011 1:34 PM, Blogger Ron H. said...

"Correct. But the retailer suffered because he was not allowed to charge a market clearing price."

Yes, and his shelves are now empty. The rationing function a market price would provide has been defeated.

 
At 5/02/2011 1:34 PM, Blogger Bob said...

Hiding in this article, behind the academic purity of free market economics, is the ugly immorality of greed. Is the author so enamored with the pricing dynamics of a pure free market that he's blind to the manipulative influence psychology can have on the market?

We're just emerging from a recession fueled in large part by otherwise rational people driven to illogical extremes by fear and greed. This is the same psychological dynamic that drives price gouging.

When you factor the moral dimension back into this situation it become very easy to see the difference between retailers responding to the extraordinary forces affecting supply and demand; and those retailers pushing into extremes of exploitation. A simple statistical analysis can reveal those outliers who deserve additional attention.

Without some minimal moral standards to guide our actions in the marketplace or in our government an academic justification can be made for increasingly horrific activities - just look at the darkest chapters throughout the course of human history. It is from these shadows that folks like price-gougers emerge.

 
At 5/02/2011 1:34 PM, Blogger VangelV said...

In truth, sometimes the price mechanism fails. Every ideology fails at some point. Reality gets in the way.

I love free markets, but even more I like things that work. Usually, free markets show the way. Sometimes they don't.


Empty words only make you appear to be very stupid. Provide an example please.

We certainly know that government set prices do not work. If water were priced properly farmers could not grow rice in California while cities were suffering drought conditions because the cities would bid up the prices from those that owned the water rights. If those owners were farmers they would find it more profitable to supply cities with water than to grow rice in a desert.

 
At 5/02/2011 1:44 PM, Blogger Ron H. said...

"If I can only collect damages, then can I steal other people's property, and just pay damages?"

If you think stealing can be justified in some cases, excluding any discussion of government, then you might want to try it, but keep in mind that when you steal other people's property, you risk being shot and killed.

 
At 5/02/2011 1:44 PM, Blogger VangelV said...

f you beleive there is, you then have to ask how he got rich, when he makes such poor decisions. As a practical matter, the rich person would decide that providing water to prevent death is cheaper than dealing with rotting corpses outside his gate later. Why would he allow the higher cost to occur if he could easily prevent it?

Our friend Bunny does not live in the real world. In his fantasy world the rich are evil and do not need to make good decisions to become rich in the first place. They are all like the Kennedy's who get their money through inheritances and by living off the poor.

 
At 5/02/2011 1:46 PM, Blogger James said...

Let us say there is a disaster of some kind and the power is out and everybody inside the disaster area can not get batteries. Now 50 miles away a dude gets on his dirt bike rides over to a buddy as says to him let us go buy all the batteries we can find and take them off-road to the disaster area and sell them for $10 a piece. His buddy points out that there is a law against it and they should not do it. Is this good public policy? I would prefer to pay the $10 rather than go without.

Just another effort to make us dependant on government when the market place will get the job done better all be it unfairly in the eyes of some.

 
At 5/02/2011 1:49 PM, Blogger Hydra said...

Correct. But the retailer suffered because he was not allowed to charge a market clearing price.

=================================

The net suffering was no different. Someone stil has no generator, someone still made the profit premium, someone still got a generator and paid more for it.

One could argue that government interference made no net difference, so why bother?


Let's suppose the same thing happens (with loower deltas) in a non emergency state. The retail buyer still has the right to sell at a higher price. Did the retailer "suffer" for this?

Where is it written that the retailer has first rights to all the profit in the chain? As long as he is not forced to sell for less than he expected to (absent the crisis), how is he suffering?

Let's suppose that he had stocked enough generators to meet demand without raising the price. His profit from the extra sales would be consumed by his extra carrying costs. Again he would have been no better and no worse off.

If anything, he might pass alog the higher carrying costs. In this case one could look at this as getting the normal price and markup for the generator, and an addtional bit for providing "insurance"

 
At 5/02/2011 1:51 PM, Blogger Hydra said...

be it unfairly in the eyes of some.

===============================

Government and the market have different purposes. Government has to answer to democracy and the market does not.

 
At 5/02/2011 1:51 PM, Blogger VangelV said...

Higher prices just represent hoarding on the part of the store owner(trying to keep his inventory in stock). Once he runs out, he is losing money.

That is not true. The goods would be available at a higher price that would be set by the market. There is no incentive for a store owner not to sell his goods because he makes money by getting rid of his inventory, not hoarding. If prices rise the hoarders would have to make a much tougher choice. If they bought goods that they could not use they would be stuck wasting their money. Because many people would decide to only buy what they needed there would be more left for those that got there later.

Think of baby formula as the perfect example. If the price stayed the same many people would buy two or three extra cases just in case the crisis lasted longer than they thought. That would deny people who also needed baby formula from getting it. And because the prices were low there would be no extra effort made by arbitragers to get baby formula to the area quickly.

By denying the store the opportunity to balance supply and demand by increasing prices you send a false signal to the market and people are worse off. That is not very smart. Of course, being smart is not something you socialists are often accused of.

 
At 5/02/2011 1:55 PM, Blogger Hydra said...

As a practical matter, the rich person would decide that providing water to prevent death is cheaper than dealing with rotting corpses outside his gate later.

============================

Then, as a practical matter, as long as only suffering and not death is involved, the rich person wouold do nothing?

 
At 5/02/2011 1:59 PM, Blogger Hydra said...

"If I can only collect damages, then can I steal other people's property, and just pay damages?"

=============================

If I am allowed to prevent any and all damage to my property, then can I require others to incur expenses against their property that are greater than the damage would be to mine?

Am I alloowed to demand infinite property rights, paid for at the expense of others?

 
At 5/02/2011 2:06 PM, Blogger Hydra said...

"Once he runs out, he is losing money.

.........

That is not true."

=======================

Not what was taught in my marketing class.

As soon as he runs out he is losing money and market share.

If he charges too much, he sells nothing and incurs carryig costs.

There is one price that is exactly right for him, and it is time dependent on whne his next stock will arrive.


But that says nothing qabout whether his "right" price is the best market price, except in his local market space and time.

 
At 5/02/2011 2:13 PM, Blogger Hydra said...

Of course, being smart is not something you socialists are often accused of.

========================

Getting needed baby food to those who need it is not something you capitalists are accused of.


How does higher price guarantee those that also need baby food will get it? It guarantees that those who need baby food and have money will get it.
Until those babies are dying outside his gate the capitalist will have no price incentive to do anything.

That is called being smart.

 
At 5/02/2011 2:17 PM, Blogger Hydra said...

Empty words only make you appear to be very stupid. Provide an example please.

======================

Provide a set of criteria that you would use to evaluate an example, please.

If the only criteria involve money and prices, then you will have circumscribed a system boundary within which you will always be correct.

 
At 5/02/2011 2:26 PM, Blogger juandos said...

"Should a wealthy man water his lawns if there are people thirsting to death?...

What an insanely ridiculous question!!!

Why should anyone be forced to divert what they own to someone else just because that someone else doesn't have any?

That's the socialist mentality behind 'progressive' income extortion...

 
At 5/02/2011 2:28 PM, Blogger juandos said...

"Try telling that to someone who needs water and has no money"...

LOL!

Just wait around a little bit longer and the problem will solve itself hydra...

 
At 5/02/2011 2:30 PM, Blogger juandos said...

pseudo benny strikes again: "Hmm, so when someone pollutes, and my property is polluted, does such an extreme definition of property rights also apply?"...

Well if its YOUR property then I don't see it as a problem...

Can't you ever stay on topic?

 
At 5/02/2011 2:30 PM, Blogger Benjamin said...

It seems Carpe Diem readers have decided that yes, a rich man can water his lawns from his private well even as people are dying of thirst at his gate. Property rights are that solid and extreme.

But no, I cannot stop polluters from polluting my private well (even if they came after I owned my land, even if the well is destroyed forever). I must try to collect damages. I have no ironclad right to preemptively halt pollution, even of my private well.

Hmmm.

Why do I get the sensation that libertarians are just catamites for plutocrats?

 
At 5/02/2011 2:33 PM, Blogger juandos said...

"Government may have no right to steal from you, and still have the right to decide when your activities amount to (or are perceived as) stealing from someone else"...

Hey hydra are you drinking the same kool-aid pseudo benny is drinking?

 
At 5/02/2011 2:35 PM, Blogger juandos said...

Why do I get the sensation that pseudo benny is just catamite for the socialists?

 
At 5/02/2011 2:51 PM, Blogger VangelV said...

Why are commodities collapsing today, and in the last week?

While nobody really knows, a number of possible answers can be given.

One is that what you see is simple volatility. All investors know that commodities, stocks, and currencies can be very volatile and that reversals are common.

Another is that what you have are technical triggers that are effecting trading in the futures market. This is also not unusual. (When both gold and silver are well above the 200 day moving average and the newsletter writers have been telling their subscribers to sell for months it is not surprising that you will see pullbacks going into the period of seasonal weakness. It is not unusual to see substantial declines between April and August and many PM investors are almost conditioned to sell in the spring and get back in during the late summer.)

Also, what are my property rights when it comes to others polluting my property? Can I force others to stop polluting my property?

Not if the government lets them.

Collect damages?

You should be able to under a common law system. Under the current system you have a crap-shoot. People that do not pollute or cause damage can be wiped out or innocent people damaged by polluters can be denied their rights.

If I can only collect damages, then can I steal other people's property, and just pay damages?

You are not allowed to steal.

 
At 5/02/2011 3:28 PM, Blogger Benjamin said...

Fascinating questions. Morgan Frank says ethics are distinct from law. It is unethical to deny a thirsting man water, even to point of death, but not illegal, in Morgan Frank's world.

Yet, ethics are embedded in law. Murder is illegal.

So, why are some ethics embedded in law, but not others?

I suspect denying people water until death is manslaughter, and property rights or not, such a property owner would go to prison, or the gallows. Deservedly.

A reasonable question is why if you pollute a well, and people die as a result, the same result is not forthcoming?

 
At 5/02/2011 3:59 PM, Blogger morganovich said...

"Hmm, so when someone pollutes, and my property is polluted, does such an extreme definition of property rights also apply?"

your logic here seems flawed and your analogy makes no sense.
this is a completely different issue. if my pollution encroaches on your property, then i have damaged your property and violated your rights. you are free to try to collect damages and may (justly) be entitled to them.

this is not true of my refusing to let you onto my property to drink my water.

in that case, it is my property. you have no right to it and i have every right to keep it if i choose. i do not violate your rights by keeping my water. you would violate mine by taking it by force.

your lifesaver example is equally flawed. it is not my property, it is the shipowners. it is not mine to sell. if it were mine (say it was in mu luggage), then it is mine to sell. that's how property works. without such, there is no private property. as soon as you say "it's yours unless someone else really needs it" it's not yours anymore.

do you want to live in a world where the indigent can walk into your kitchen and make a sandwich because they are starving?

as i said before, this does not make it ethical. that is a whole separate issue and one of personal conscience. it's up to you to decide whether or not to give water to those at the gates or a sandwich to a homeless guy. you may feel it is the right thing to do. you may not. but coercing you to so against your will is never the correct answer.

 
At 5/02/2011 4:12 PM, Blogger morganovich said...

benji-

your ramblings here are just that: ramblings.

law is always distinct from ethics. law is based on ethics, but does not (nor should it) encompass all of ethics.

the sort of standards you propose eliminate the concept of private property.

should you be legally entitled to walk past a hungry homeless guy eating a sandwich?

of course. it's yours. you can do with it as you like. you can keep all your money if you want to too. that's the law. you may feel ethically inclined to donate some to charity, but that is up to you.

your water example is just the exact same thing.

it's yours, you can do with it what you want.

i can throw away clothing instead of giving it to good will. that is my right. that doesn't make it a good thing to do, but that's precisely why ethics and law are different.

saudi law offends our sense of both law and ethics, but that will not make you any less subject to it if you travel there.

and again, your pollution argument is a totally different issue. if you have had your property harmed, then you have resource. what is so difficult about that for you to understand? harming your property infringes on your rights.

not sharing with someone else does not. their rights are intact.

as ever you are 3 parts buffoon and 1 part charlatan and take what was a civil discourse and drag it into the gutter. you hide your weak logic and uninformed stupidity behind accusations that others are catamites. gee, i wonder why no one respects you.

 
At 5/02/2011 4:13 PM, Blogger Charles said...

I'm in Georgia and recently unemployed. If I were allowed to make a market based profit, I would load my truck with all I could carry, take it to AL and sell it. As would any number of other unemployed Georgians. And guess what would happen... AL would have more than they need and the prices would fall. And all us greedy Georgians would head back home.

Why is this so hard to understand?

 
At 5/02/2011 4:16 PM, Blogger morganovich said...

"Why are commodities collapsing today, and in the last week?"

because the CME and MF are upping margin requirements on futures contracts.

eg. MF Global on Friday raised its margins on one contract of silver from $14,513 to $25,397, an increase of 75 percent. Over the weekend CME increased margins by 13 percent.

this is happening in many commodities.

it's also a reflection of the weak economic data.

the GDP figure last week was VERY low. that tends to drive down commercial commodities.

 
At 5/02/2011 4:24 PM, Blogger morganovich said...

"So, why are some ethics embedded in law, but not others?"

are you really this stupid?

our law is based predominantly on rights. you cannot have a right that requires someone else to do something.

thus, you can have a right to free speech, but not free healthcare. you can have a right to the sanctity of your person or to private property, but not to batter others or steal if you are in need.

you cannot have a right that impinges on another's right. so you cannot have the right to not be offended by the speech of others.

you can have a right to private property, but not to take the property of others.

can you really not see how that provides a basis for law?

seriously, do you think at all about this stuff?

 
At 5/02/2011 4:28 PM, Blogger morganovich said...

hydra-

you are just being deliberately obtuse and fomenting class war through straw men.

property is property. why is it the obligation of a store owner to makes sure everyone is fed or a homeowner to makes sure everyone has enough to drink? by what right can his property be so taken?

do you feel that way about your property?

 
At 5/02/2011 4:45 PM, Blogger Benjamin said...

Morgan Frank-

Well, let us hope strangers in dire need never cross your path.
Or even friends.

BTW, in some cultures, notably desert cultures, it is against the law to refuse a man a drink. Much of the ballyhooed sentiment about Islamic hospitality actually stem from this tradition. So the right of a traveling stranger to water supersedes property rights in such cultures.

BTW. I concur with you somewhat on commodities. The trading rule changes had an impact. But commodities are reaching a natural peak, right about the 2008 levels. At this point, we get demand destruction and new supplies, the usual boom-bust.

The next big rallies are in real estate and equities.

 
At 5/02/2011 5:17 PM, Blogger morganovich said...

banji-

as ever, you demonstrate you ignorance an inability to even read for comprehension, much less understand complex ideas.

perhaps before accusing me of not being someone a thirsty man would want to cross paths with, you should go back and read my first comment in which i stated:

"if i found myself with a working well during the aftermath of a disaster where people had water supplies disrupted, i would be happy to share it. i'd feel like it was the right thing to do. that's my ethical choice."

so much for your reading comprehension.

regarding your desert people example, it shows nothing at all. in some cultures you can legally kill your wife if you suspect her of infidelity. so what? that shows nothing at all about our discussion. the cultures you mention also lack what we would view to be rudimentary concepts of human rights.

you seem unable to separate morals from law. law tells you what you must do. ethics what you should. the latter often goes further than the former.

i am not legally required to donate time and money to charity, but i do because that suits my ethics.

if i were forced to, that would impinge upon my rights.

can you seriously not see this distinction at all?

can you not see that the system you seem to be supporting would lead to all manner of theft? if a man with water is forced to share it with those he would rather not, then what's next? should the homeless be allowed to sleep on your couch? can they eat your food? drive your car? wear your coat if they are cold? once you open up this sort of gap in property rights, there is no end to it.

rights are rights. you either have them or you do not.

 
At 5/02/2011 5:18 PM, Blogger morganovich said...

"So the right of a traveling stranger to water supersedes property rights in such cultures."

that's not a right.

you cannot have a right that forces others to do things.

 
At 5/02/2011 5:20 PM, Blogger Ron H. said...

"Higher prices just represent hoarding on the part of the store owner(trying to keep his inventory in stock). Once he runs out, he is losing money."

This is just nonsense

"But higher prices don't prevent hoarding on the part of buyers: higher prices just make hoarding a privilege for those that can afford it."

More nonsense

"There may be other reasons, too: Last time I bought a generator on an emergency basis (mine crapped out), I bought three, one for me and one for each of my neighbors, who had none to begin with. No gouging going on, just to save them the trip. This is common in my neighborhood, even in non-emergencies."

So, you decided that your neighbors were more deserving than everyone else who wanted to buy a generator. I thought you hated your neighbors for stealing your right to build on your own property.

"Finally, price controls may change the dynamic and the distribution, without changing the result: if you don;t have enough stuff, you don't have enough stuff. Eventually the market will adjust, but in the meantime, some needs are not going to be met."

Nonsense

"Whether it succeeds or not, government can at least attempt to use tools in addition to price, in order to see that minimum needs are met. The market has no tool other than price, and therefore it does one thing very well."

What could this mean?

"Metrorail does one thing very well, but that does not make it a transportation system. Blind obeisance to the market system as if it were the best and only system reminds me of those that build a boat out of ferro-cement. Makes a perfectly fine hull, but you might not want to make the mast, deck, and furniture that way."

Unrelated nonsense. This has nothing to do with the subject of prices.

"It seems to me that Morganovich is right: If governmetn can come and take things from you, then you have no private property. However, he is also correct when he says, "it depends"."

It seems you misunderstood everything past "it depends".

"Government may have no right to steal from you, and still have the right to decide when your activities amount to (or are perceived as) stealing from someone else."

Nonsense. Stealing is stealing. "Government" doesn't decide when it is or isn't OK.

"Government may be wrong in how they make that decision and be no less wrong than the market decision alone."

Meaningless nonsense.

"TC = PC + EC + GC."

Silly nonsense. If only the world were that simple.

"The market decision is going to boil down to dollar weighted democracy, with some people being unable to vote. Government parctitioners are also influenced by dollar weighted democracy at work, but to a slightly lesser extent, and different direction.

It should not be surprising that the two systems will yield different results, but it is hard to describe one or the other as "wrong" without considering the goals going in.

As long as there are things that affect us that are not priced, it is probably a mistake to think that a market that considers only priced goods can lead to optimum results.
"

All of the forgoing is meaningless drivel.

Try to make sense. Your ignorance of economics and market forces is astounding.

 
At 5/02/2011 5:22 PM, Blogger Ron H. said...

"...just look at the darkest chapters throughout the course of human history. It is from these shadows that folks like price-gougers emerge."

Oh, Bob, you're soooo dramatic!

 
At 5/02/2011 5:30 PM, Blogger Benjamin said...

Charles-

I have long advocated a total elimination of local regs/permits etc on one-person businesses. Jitneys, push-cart vendors, recreational drug dealers, prostitutes etc.
The pick-up truck retailer might be another category.

 
At 5/02/2011 5:42 PM, Blogger Ron H. said...

Let us say there is a disaster of some kind and the power is out and "everybody inside the disaster area can not get batteries. Now 50 miles away a dude gets on his dirt bike rides over to a buddy as says to him let us go buy all the batteries we can find and take them off-road to the disaster area and sell them for $10 a piece. His buddy points out that there is a law against it and they should not do it. Is this good public policy? I would prefer to pay the $10 rather than go without."

That's exactly the point. Laws against "price gouging" hurt more than they help. By helping those who need batteries, these guys would benefit also.

John Shepperson found out the hard way, that helping others may not be worth the effort.

 
At 5/02/2011 5:57 PM, Blogger Ron H. said...

"One could argue that government interference made no net difference, so why bother?"

But government action chose who should get generators. In this case, on a first come first served basis, rather than on the basis of who needed them most, as the market would have done.

This is better than your last comment. Keep up the good work.

 
At 5/02/2011 6:03 PM, Blogger Hydra said...

John Shepperson found out the hard way, that helping others may not be worth the effort.

==============================

Shepperson was not "helping people" he was taking advantage of their situation: called price gouging.


In Alababma we see how helping people really works. People using their own pick up trucks are distributing bottled water they paid for -- for free.

That is what you call helping people. Even if Shepperson broke even, as a nonprofit he would have been helping people. Even if he sold for a small surcharge to cover transportation, he might have helped people. But if his transportation and other expenses were so high he legitimately needed to double the price, then he wasn't helping anyone that way, either.

Regardless that the
Alabama efforts are VOLUNTARY and not enforced, it is providing a service the market will not, except, in the case of maybe Coors delivering canned water, when there is a PR gain to be had.

But in either case, what is going on is a wealth transfer, which is what is desperately needed by some of these folks. Wealth transfer can be voluntary or government enforced, but when it is necessary, it is probably going to happen, and the market isn't going to be the agent.

The market is a great and powerful thing, but lets not make it what it isn't, which is the answer to everything.

 
At 5/02/2011 6:04 PM, Blogger Ron H. said...

Charles

"And guess what would happen... AL would have more than they need and the prices would fall. And all us greedy Georgians would head back home.

Why is this so hard to understand?


You are absolutely right that this is what SHOULD happen, but in reality, all you greedy Georgians would likely have been arrested, and your goods confiscated.

Those in AL would still be no better off, but that's how political responces to emotional outcries from the economically ignorant seem to work. Go figure.

 
At 5/02/2011 6:07 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 5/02/2011 6:08 PM, Blogger Hydra said...

Nonsense. Stealing is stealing. "Government" doesn't decide when it is or isn't OK.

=============================

I agree, govenement does not decide when it is OK. What it does is wrtie and enforce a bunch of rules and regulations to explain it in excruciationg detail to those who don't seem to undertand.

Often they are business people.

 
At 5/02/2011 6:17 PM, Blogger Hydra said...

"Then, as a practical matter, as long as only suffering and not death is involved, the rich person would do nothing?"

Wow! You really know how to demolish that straw! Try again, but stay on topic.


===============================

I agree that straw is demolished. where did I go off topic?

We agree there is no economic advangtage to be surrounded by dead people outside your gate.

It is OK for some to suffer though, as long as the economic rules allow the rich to accumulate their hoard.

I'd go farther and say there is no economic advantage to having slums and shanty towns and homeless surrounding your gate, Yet that still happens. Good thing capitalism is doing such a splendid job for all concerned.

 
At 5/02/2011 6:17 PM, Blogger Ron H. said...

"Then, as a practical matter, as long as only suffering and not death is involved, the rich person wouold do nothing?"

Wow! You really know how to demolish that straw! Try again, but stay on topic.

Again, the rich person might judge the giving of water to be a better choice than listening to the constant crying and moaning outside his gate that might interfere with his sleep, or might at least annoy his hired help.

 
At 5/02/2011 6:21 PM, Blogger Hydra said...

Am I entitled to totally clean air and water? Or just to try to collect damages?

=================================

I would argue that you are entitled to air as clean as what you exhale.

I would argue that you are NOT entitled to totally clean air, unless you are willing to share equally the price it will cost.

 
At 5/02/2011 6:23 PM, Blogger Hydra said...

"Try telling that to someone who needs water and has no money."

I don't know about you but in the place where I live you need money to use water. The city, which has a monopoly, certainly does not give it away for free. And neither do the bottling companies.

==============================

Well, like I said.....

 
At 5/02/2011 6:25 PM, Blogger VangelV said...

The net suffering was no different. Someone stil has no generator, someone still made the profit premium, someone still got a generator and paid more for it.

But it is very different. If the retailer can use the best market clearing price for him people do not have to know someone who has hoarded goods or grovel to get what they want. All they need is their money.

It seems to you that you would prefer the Soviet system where those in the inside can pick and choose winners because they have access to goods that are rationed and in high demand. That seems very demeaning for those who are desperate. It is much better not to discriminate and to treat everyone equally regardless of status. The people who need baby formula or batteries need to meet the market price and they have access. They do not need to know anyone or owe anyone any favours.

One could argue that government interference made no net difference, so why bother?

Dignity matters. I do not expect you to understand.

Where is it written that the retailer has first rights to all the profit in the chain? As long as he is not forced to sell for less than he expected to (absent the crisis), how is he suffering?

It is a property rights issue. The retail can dispose of his property as he sees fit. If he guesses right he will make a profit. If not he will make a loss. End of story Karl.

 
At 5/02/2011 6:26 PM, Blogger VangelV said...

Government has to answer to democracy and the market does not.

Let me get this straight. If 51% of people said that Muslims or Japanese Americans can be imprisoned and robbed of their property it is all right to do so? If they can't do that then where do they get the right to rob store owners?

 
At 5/02/2011 6:27 PM, Blogger Hydra said...

the rich person might judge the giving of water to be a better choice than listening to the constant crying and moaning outside his gate

================================

He might. Or he might invest in a better gate and more buffer space. If that was a better economic answer, he has no moral obligation to distribute water.

In his world, suffering and even death is OK, as long as it represents a better economic outcome for him.

 
At 5/02/2011 6:29 PM, Blogger VangelV said...

Am I alloowed to demand infinite property rights, paid for at the expense of others?

You can demand that my trash is not dumped on your property. You can't make up false claims of harm where none exist or claim damages that are not true. If my dog goes on your land and kills your cat you have the right to demand that I get you a new cat. You can't claim that your old cat was worth $1 million.

 
At 5/02/2011 6:31 PM, Blogger Hydra said...

"One could argue that government interference made no net difference, so why bother?"

But government action chose who should get generators. In this case, on a first come first served basis, rather than on the basis of who needed them most, as the market would have done.


===============================

Over time, that is no net difference.


What makes you think that someone who got there later, but with more money "needed" the generator most?




Is this a time value of money problem where the emergency makes the discount rate really high?

 
At 5/02/2011 6:31 PM, Blogger VangelV said...

"Higher prices just represent hoarding on the part of the store owner(trying to keep his inventory in stock). Once he runs out, he is losing money."

Not what was taught in my marketing class.

As soon as he runs out he is losing money and market share.

If he charges too much, he sells nothing and incurs carryig costs.

There is one price that is exactly right for him, and it is time dependent on whne his next stock will arrive.

But that says nothing qabout whether his "right" price is the best market price, except in his local market space and time.


It is not true that higher prices are hoarding. You can't spin any narrative to justify that statement.

 
At 5/02/2011 6:39 PM, Blogger Hydra said...

"Government may be wrong in how they make that decision and be no less wrong than the market decision alone."

Meaningless nonsense.

"TC = PC + EC + GC."

Silly nonsense. If only the world were that simple.


============================

I'll be sure to pass that along to my gradueate economics professors.


The problem with TC = PC + EC + GC is not that it is simple, but that it is deceptively complex.

 
At 5/02/2011 6:43 PM, Blogger Hydra said...

Also, what are my property rights when it comes to others polluting my property? Can I force others to stop polluting my property?

Not if the government lets them.

Collect damages?

You should be able to under a common law system. Under the current system you have a crap-shoot. People that do not pollute or cause damage can be wiped out or innocent people damaged by polluters can be denied their rights.

If I can only collect damages, then can I steal other people's property, and just pay damages?

You are not allowed to steal.


=============================

But government decides what constitutes stealing, and even what constitutes property. government may allow others to steal from you, and may even help them to.

 
At 5/02/2011 7:41 PM, Blogger VangelV said...

Getting needed baby food to those who need it is not something you capitalists are accused of.

Ever been to Wal Mart? Who do you think makes and sells the stuff?

How does higher price guarantee those that also need baby food will get it?

It ensures that someone won't come in and buy cases of it that s/he does not need that much. If prices will fall in a week or two because there will be a new supply that is all they are likely to buy.

It guarantees that those who need baby food and have money will get it.

Of course you have to get money from somewhere. The last time I checked few people were in the business of giving away free food.

Until those babies are dying outside his gate the capitalist will have no price incentive to do anything.

But that is the point dumdum. Capitalism has prevented children from dying because it has been very good at producing what was needed when government got out of the way. And what was needed was determined by the market price, not central planners.

That is called being smart.

As I said, nobody has accused you socialists of ever being smart about the real world.

It seems to me that you idiots have never seemed to understand the unintended consequences of economic planning. Socialism did not work not because democracy was subverted by the Lenin/Stalin/Mao types. It does not work because in a government directed economy there is no price signal to allow productive people to plan properly. The character and intelligence of the planners do not matter because disaster will always take place.

 
At 5/02/2011 7:46 PM, Blogger VangelV said...

Provide a set of criteria that you would use to evaluate an example, please.

If the only criteria involve money and prices, then you will have circumscribed a system boundary within which you will always be correct.


You wrote:

In truth, sometimes the price mechanism fails. Every ideology fails at some point. Reality gets in the way.

I love free markets, but even more I like things that work. Usually, free markets show the way. Sometimes they don't.


I am simply asking you to support your empty rhetoric with real references. We already know that government subsidies produce surpluses and that price controls produce shortages. That certainly shows that government meddling has unintended consequences and that it does not work. You claim that you can show that the free market fails. All I ask is for you to support your claim with real facts.

The fact that you can't says a lot.

 
At 5/02/2011 7:48 PM, Blogger VangelV said...


Why do I get the sensation that libertarians are just catamites for plutocrats?


Pick one:

1. You can't read very well.

2. You have no critical thinking skills.

3. Your ideology gets in the way.

4. You can't think logically.

5. You are stupid.

6. All of the above.

 
At 5/02/2011 8:48 PM, Blogger VangelV said...

...the GDP figure last week was VERY low. that tends to drive down commercial commodities.

The 1970s were an example of low real GDP and high commodity prices. If the dollar collapses commodities will rise regardless of what happens to the economy. And while it is very possible to have a washout and see them collapse there are too many marginal producers that will close down for prices to stay low for very long. A perfect example is natural gas. We just saw Chesapeake report losses on their shale gas operations and have seen management talk about cutting back and going to shale liquids. There are many marginal copper, zinc, and gold mines and we have already seen the majors sell stakes in juniors with low grade deposits in anticipation of a pullback. What this means is that many projects slated to go on-line never will and that many of the marginal producers will close a few years sooner than expected. Given the lack of inventories (a few weeks of use for most metals) a collapse in demand should clear as supply falls even faster and shortfalls cause inventories to be reduced. Add currency fears and we could have a very interesting time coming up in the next few months.

 
At 5/02/2011 9:07 PM, Blogger Benjamin said...

Vange-

Pollution is an obvious example of a problem without a free market solution. He who excretes at lowest cost to himself wins.

Bona fide military threats are another problem without free market solution (not the bogus, hyped threats we face today).

The man watering his lawn while people die from thirst is probably only hypothetical, but your "solution"--let them die to honor the ideology, if necessary--is not a solution. It reeks of the same fanaticism of a devout communist.

Vange, you have ideological blinders on, and a case of jaundice.

 
At 5/02/2011 9:17 PM, Blogger Ron H. said...

"Not what was taught in my marketing class.

As soon as he runs out he is losing money and market share.
"

You should ask for your money back. You were cheated out of an education.

 
At 5/02/2011 10:26 PM, Blogger Ron H. said...

"Getting needed baby food to those who need it is not something you capitalists are accused of."

So, you accept the label of socialist. Good. We are getting somewhere at last.

"How does higher price guarantee those that also need baby food will get it? It guarantees that those who need baby food and have money will get it."

That last sentence is true at all times, and has nothing to do with changes in price.

You either don't understand some very basic economic principles, or you are playing games.

Try reading s comment starting at "think of baby formila..." Now read it again, and again, until comprehension sets in. If it never does, then you should consider moving on to some other thread or blog at this time, as you are not only wasting your own time, but everyone else's as well.

A higher price helps guarantee an adequate supply of baby formula - not baby food - as those in the supply chain will work harder to answer that higher demand, as signaled by the higher bids.

The retailer has no reason to keep his doors open if shelves are empty, and may decide to close up shop until he is resupplied.

Those who need baby formula will likely find an adequate amount available if prices are allowed to rise. We can assume that they are used to paying on a regular basis for formula, or their baby would have already died, and this discussion of prices would be moot.

They may need to prioritize their needs differently, for example maybe putting less powder up their noses during the current crisis and instead paying more for baby formula, but your question about needing formula and having no money has no place in a discussion of price gouging.

"Until those babies are dying outside his gate the capitalist will have no price incentive to do anything."

That is correct. The price must be higher to guarantee an adequate supply, otherwise, the shelves will be empty because those greedy, thoughtless baby killers have bought more than they really needed.

 
At 5/02/2011 10:28 PM, Blogger Hydra said...

Educate me.

Explain how he is not losing money when he runs out of stock.

Instead of complaining about my education.


Seems pretty simple to me: too much stock or too little, and he loses money.

BTW, I'm running a clearance sale on my overstock, if anyone wants a thousand bales of hay.

 
At 5/02/2011 10:29 PM, Blogger Ron H. said...

"If the only criteria involve money and prices, then you will have circumscribed a system boundary within which you will always be correct."

Wow! Big important sounding words.

You are correct: this discussion involves prices, and in particular, the concept of "price gouging".

 
At 5/02/2011 10:35 PM, Blogger Hydra said...

That last sentence is true at all times, and has nothing to do with changes in price.

==<===========<<<<<<<<

Wrong.

You guys are way too easy to agitate. It is a sure sign of insecurity to be hyperdefensive.

Then again, when you have an indefensible position........

 
At 5/02/2011 10:49 PM, Blogger Hydra said...

You have the right to live. Anything you do to live will create some kind of trash, and not all of it is controllable.

If common law says you have absolutely no right to foul my space, then I have the absolute right to prevent you from doing anything whatsoever, thereby denying your right to life.

Unfortunately, those rights are equally reciprocal so we are both dead, unless we make a reasonable accommodation for the production and disposal of waste.

This common law is unworkable because it provides for unlimited protection of one persons property.

 
At 5/02/2011 11:01 PM, Blogger Hydra said...

You are correct: this discussion involves prices, and in particular, the concept of "price gouging".

======>>>>>==>>>=


If the system boundary includes only money, prices, and trade, then you are correct: there is no gouging.

To consider gouging you must introduce ethics to the system.

Whatever ethical standard you introduce will have a price.

That is uncomfortable, so we postulate an economic system devoid of ethics, hence gouging is not allowed under the rules.

You are free to delude yourself that there is no gouging, and the market will cure every ill.

 
At 5/02/2011 11:04 PM, Blogger Hydra said...

We put prices on ethical choices every day.

I see the big branch mine is to be closed.

 
At 5/02/2011 11:21 PM, Blogger Hydra said...

f the goal is eliminate shortages of critical goods in Alabama and Kentucky by directing scarce resources as quickly as possible to the areas where they are needed the most, then there's no mechanism more efficient than the price system to achieve that outcome.

====<<<<<<<<<<<<=<<<==

I think that is called the premise for this argument.

The premise limits the system boundary. Whithin that boundary the argument is correct.

The existence of price gouging laws tell us that someone is spending enough money on democracy to suggest there may be multiple system boundaries, each with a different set of correct answers.

You can believe in only one if you like.

Or, you can consider democracy like a huge mass that warps space time. It is not a violation of some immutable natural law.

 
At 5/02/2011 11:26 PM, Blogger Ron H. said...

"Shepperson was not "helping people" he was taking advantage of their situation: called price gouging."

Did you miss the part about people thanking him and eagerly paying the price he asked?

Maybe they didn't realize they were being exploited as they happily began repowering their homes. You should tell them that what they thought was their good fortune really wasn't.

"In Alababma we see how helping people really works. People using their own pick up trucks are distributing bottled water they paid for -- for free."

This is a fine and noble thing. No argument here. People are welcome to help in whatever way they like.

"That is what you call helping people. Even if Shepperson broke even, as a nonprofit..."

Let me just interject some clarification here. You may not be aware that nonprofit doesn't mean benevelent, but is merely a tax status. It requires that a corporation spend all its earnings each year, rather than retain any profit. Sometimes this results in nonprofits paying company executives huge salaries, so as to use all the money.

"...he would have been helping people. Even if he sold for a small surcharge to cover transportation, he might have helped people. But if his transportation and other expenses were so high he legitimately needed to double the price, then he wasn't helping anyone that way, either."

So YOU can define what is helpful and what isn't, rather than the people involved?

Such arrogance!

Voluntary wealth transfer is just fine. Everyone should be free to do whatever they wish, and one of the points I keep trying to make with you. Do you now agree? Is this another "argue both sides" thing for you? It is FORCED wealth transfer that is wrong.

 
At 5/02/2011 11:30 PM, Blogger Ron H. said...

"I agree that straw is demolished. where did I go off topic?"

You really don't see it, do you.

"It is OK for some to suffer though, as long as the economic rules allow the rich to accumulate their hoard."

Well, the idea of only suffering, instead of dying wasn't part of the original argument, and I said nothing about suffering, only actual dying of thirst. There's your strawman.

"I'd go farther and say there is no economic advantage to having slums and shanty towns and homeless surrounding your gate, Yet that still happens. Good thing capitalism is doing such a splendid job for all concerned."

This is pretty much off topic.

 
At 5/02/2011 11:37 PM, Blogger Ron H. said...

"He might. Or he might invest in a better gate and more buffer space. If that was a better economic answer..."

It's hard to see how spending any significant amount of money can lead to a better financial outcome than providing a little water, that in the tiny amounts necessary to preserve life, is virtually free.

"...he has no moral obligation to distribute water."

He does if he thinks he does.

"In his world, suffering and even death is OK, as long as it represents a better economic outcome for him."

What evil monsters rich people are!

You're funny. Do you just make this stuff up because you think it has a good ring to it?

 
At 5/02/2011 11:41 PM, Blogger Ron H. said...

"Try telling that to someone who needs water and has no money."

I don't know about you but in the place where I live you need money to use water. The city, which has a monopoly, certainly does not give it away for free. And neither do the bottling companies.

==============================

Well, like I said.....
"

What does this have to do with price gouging? Is the city price gouging? Are bottled water companies price gouging? You need to think before you type.

 
At 5/02/2011 11:45 PM, Blogger Ron H. said...

"I agree, govenement does not decide when it is OK. What it does is wrtie and enforce a bunch of rules and regulations to explain it in excruciationg detail to those who don't seem to undertand.

Often they are business people.
"

Fraud is illegal, as it should be. we all have remedies. Only government can steal and remain immune and continue in business. A "bunch of rules and regulations" aren't necessary, and in fact, may be counterproductive.

 
At 5/03/2011 12:01 AM, Blogger Ron H. said...

"I'll be sure to pass that along to my gradueate economics professors."

If that's their true understanding, and what you were taught, then you were robbed. I take that back about business not being able to steal.

If you came away with that understanding of what they tried to teach you, then you have robbed yourself.

"The problem with TC = PC + EC + GC is not that it is simple, but that it is deceptively complex."

It is not complex, it is impossible to properly quantify some of the terms. It is open to continual arguments that are circular. It's just plain silly.

 
At 5/03/2011 12:03 AM, Blogger Hydra said...

Shepperson was out to doubloe his money, not to help people.

I have no way of knowing how many people parted with their money happily or grudgingly.

Some may have saved money on the deal, by not losing what they had hoarded in the freezer.


We have a pretty good idea what their normal price point for power is. Why would that suddenly change? I have a generator for portable power, and "emergency" power is a marginal benefit.

But put it this way, if the power company goes out of business permanently, I will do without power before I rely on my generator. I sure wont be buying one for 2x normal.

 
At 5/03/2011 12:15 AM, Blogger Ron H. said...

"Nonsense. Stealing is stealing. "Government" doesn't decide when it is or isn't OK.

=============================

I agree, govenement does not decide when it is OK.
"

"But government decides what constitutes stealing..."

Can you reconcile those two statements?

You are again forgetting what your position is, and arguing both sides. You have been reprimanded before about that.

"...[government decides] even what constitutes property."

No, government doesn't decide what property is, it enforces property rights. Big difference.

"...government may allow others to steal from you, and may even help them to."

Well, how refreshing! You have actually correctly stated something. But, that doesn't make it alright. Legal and legitimate are not the same things.

"Over time, that is no net difference.

What makes you think that someone who got there later, but with more money "needed" the generator most?

Is this a time value of money problem where the emergency makes the discount rate really high?
"

Are you being deliberately obtuse? Try to make sense.

 
At 5/03/2011 12:27 AM, Blogger Ron H. said...

banji

"The man watering his lawn while people die from thirst is probably only hypothetical..."

Oh! Thank goodness! I certainly hope it is. I was starting to feel really bad, and Hydra is currently searching Google maps for this rich fiend's location, so he can truck those poor thirsters some bottled water at his own expense.

And, why have you changed your name again? How are we to keep up with this nonsense?

 
At 5/03/2011 1:06 AM, Blogger randian said...

There is something far worse than price gouging laws hurting the victims of these storms: contractor licensing laws. Out of state contractors cannot make up the shortage created by the spike in demand for such services because they are not licensed in the relevant states. Indeed, there would be far less "gouging" in the prices for their services if in-state contractors weren't protected from competition by state licensing laws.

 
At 5/03/2011 1:39 AM, Blogger Ron H. said...

"Educate me.

Explain how he is not losing money when he runs out of stock.

Instead of complaining about my education.

Seems pretty simple to me: too much stock or too little, and he loses money.
"

OK, thanks for asking, here it is:

A merchant usually sells 10 cases of baby formula a week. He takes delivery on Sunday night, and opens for business on Monday.

Due to a natural disaster on Monday, idiots who should know better, are in the store all day Tuesday stocking up. by Tuesday night, his shelves are bare.

Without any price changes, he has already sold a week's worth of merchandise, and has made a week's profit. He can't get any more stock until Sunday, so he might as well just lock up and stay home for the rest of the week.

He has not lost any money, except he has forgone some additional profits he could have gotten by raising prices. And, it might not all be additional profit, as his next delivery might cost more due to higher demand region wide.

But, regular everyday low prices, have allowed the hoarders and speculators to acquire all the stock, regardless of real need.

Anyone in true need on Thursday will be unable to buy formula at ANY price, unless they can get it from a clever entrepreneur parked by the side of the road selling out of his car at high prices. Be aware, that I don't condemn this practice, it is only serving the function the merchant could have provided, if allowed to raise prices.

If all the hoarding has ended up in private hands without any reselling, then the truly needy, no matter how much they are able or willing to spend, can't have any.

This price controlled system has failed to help those in need, as it invariably will, for those exact reasons.

The market price system would have directed the product to those most in need of it, while discouraging hoarding.

Had the merchant been allowed to raise prices, the hoarders would most likely NOT have stocked up, but bought only what they actually needed for the week, as usual, then waited for next week's return to normal prices. No matter what, they wouldn't be as likely to buy as much at high prices as they would at regular prices.

This would ration the supply, as people are unlikely to buy more than they actually need at the higher prices, and perhaps make it last the entire week.

Only those with a real need would be willing to pay the higher price.

I don't know why this seems so hard to understand. This is supply and demand at its most basic. It's not evil, it's human nature.

Your unrealistic scenarios of an evil lawn waterer who allows others to die is just silly. I don't know of anyone so heartless as to allow another person to die for lack of something as easy and cheap as a glass of water, and neither do you. It's just not human nature to do so.

Your question about someone needing something but having no money to buy it with is also not something that is related to a discussion of price gouging. That person is the subject of a different conversation.

The market system isn't perfect, and I don't believe anyone suggests that it is. It just works better, for more people, than any other system we know of.

 
At 5/03/2011 1:50 AM, Blogger Ron H. said...

"If common law says you have absolutely no right to foul my space, then I have the absolute right to prevent you from doing anything whatsoever, thereby denying your right to life.

Unfortunately, those rights are equally reciprocal so we are both dead, unless we make a reasonable accommodation for the production and disposal of waste.
"

This is just silly. You don't understand that rights are negative.

"This common law is unworkable because it provides for unlimited protection of one persons property."

Common law is unworkable? That will be surprising news to hundreds of millions of people, who are aware, unlike you, that common law has been the basis of almost all English law for hundreds of years, and therefore the basis for most US law, and in fact the basis of most law in the western world.

Phew! What a shock this is going to be..

 
At 5/03/2011 1:59 AM, Blogger Ron H. said...

"The existence of price gouging laws tell us that someone is spending enough money on democracy to suggest there may be multiple system boundaries, each with a different set of correct answers."

The existence of price gouging laws tells us that economic illiterates, in positions of power, can impose rules that have serious unintended consequences, based on the emotional appeal they generate in other equally economically illiterate people.

 
At 5/03/2011 2:04 AM, Blogger Ron H. said...

"You can believe in only one if you like.

Or, you can consider democracy like a huge mass that warps space time. It is not a violation of some immutable natural law.
"

Democracy? We are talking about basic human nature here. You cannot repeal the laws of supply and demand by voting to do so. It has been tried and just doesn't work. That should be more obvious to you..

 
At 5/03/2011 2:24 AM, Blogger Ron H. said...

"Shepperson was out to doubloe his money, not to help people."

I assume you're familiar with what Adam Smith had to say on this subject, but I take it you don't agree with him?

"I have no way of knowing how many people parted with their money happily or grudgingly."

The fact that they DID part with it tells us they valued the generator more than the money they spent on it.

"Some may have saved money on the deal, by not losing what they had hoarded in the freezer."

Well, then, what's the problem? Aren't you happy for them?

"But put it this way, if the power company goes out of business permanently, I will do without power before I rely on my generator. I sure wont be buying one for 2x normal."

Good for you! Stick to your principles, that should fix those nasty gougers. Those winter days are pretty short. Hope you can get everything done during daylight. And I guess your wife will be out shopping for clothespins again, as well as a new washboard. Is she OK with this determination to not be gouged for a generator? Is your water artesian, or do you have a wind thingy?

Boy, the questions just keep popping up.

 
At 5/03/2011 2:33 AM, Blogger Ron H. said...

Randian

"There is something far worse than price gouging laws hurting the victims of these storms: contractor licensing laws. Out of state contractors cannot make up the shortage created by the spike in demand for such services because they are not licensed in the relevant states."

True enough. Yet another example of unintended consequences.

I understand that after hurricane Katrina, when so many in New Orleans were unemployed, they weren't hired by contractors to help with cleanup due to prevalent wage laws that required that they be paid at union scale, which no one was willing to pay them..

 
At 5/03/2011 6:20 AM, Blogger Jet Beagle said...

Benjamin: "In truth, sometimes the price mechanism fails. ... Usually, free markets show the way. Sometimes they don't."

What do you mean by this, Benjamin? Please provide an example of a free market pricing failure. And be decent enough to explain why you believe that example is a failure.

 
At 5/03/2011 6:26 AM, Blogger VangelV said...

thus, you can have a right to free speech...

You need to rethink this statement because this is a property rights issue. Nobody has the right to unconditional free speech anywhere.

You can't come into my house and make a speech because you would trespass on my property and violate my rights. You can't go into a theater and yell fire when there isn't one because you violate the property rights of the theater owner and the customers. What you have the right is to purchase your own press or to make any speech anywhere you have permission given to you by the property owner.

 
At 5/03/2011 6:40 AM, Blogger VangelV said...

I would argue that you are entitled to air as clean as what you exhale.

Why would you assume otherwise? Or that the air that you exhale is not totally clean? There is no standard for clean air. If you live in some parts of Quebec or California your clean air includes a great deal of asbestos that is naturally found in the area. If you live in a desert environment it includes a great deal more particulates than are found in many other areas.

 
At 5/03/2011 6:43 AM, Blogger VangelV said...

I agree, govenement does not decide when it is OK. What it does is wrtie and enforce a bunch of rules and regulations to explain it in excruciationg detail to those who don't seem to undertand.

In a free society government is not entitled to write tedious and arbitrary rules that make criminals of every citizen who minds his own business and goes around living his life without interfering or violating the rights of others. Each day most individuals violate hundreds of laws, many of which they are totally unaware of. That makes the statutory law illegitimate.

 
At 5/03/2011 6:44 AM, Blogger VangelV said...

I don't know about you but in the place where I live you need money to use water. The city, which has a monopoly, certainly does not give it away for free. And neither do the bottling companies.

==============================

Well, like I said.....


You say lots of things that make no sense. Should a hungry person be free to walk into your home and take your food just because he is hungry? If you say no, then you have no case.

 
At 5/03/2011 6:50 AM, Blogger VangelV said...

He might. Or he might invest in a better gate and more buffer space. If that was a better economic answer, he has no moral obligation to distribute water.

In his world, suffering and even death is OK, as long as it represents a better economic outcome for him.


You are a rich person. There are people who are short of water, fuel, and food in many parts of the world. Do you give your possessions away to those people? If not, why do you expect some other rich person to do so if he does not wish to?

And let me note here that most rich people would have no problem helping people who were starving or dying of thirst. And that the false scenario does not hold because the water is supplied by the municipality, which is more than capable of providing water to those in need. Why should the rich person be forced to do something that the municipality is not willing to?

 
At 5/03/2011 6:56 AM, Blogger VangelV said...

Over time, that is no net difference.

What makes you think that someone who got there later, but with more money "needed" the generator most?


I go to the store and buy ten generators for $350 because the store is forced to sell them at a low price and I expect to sell them later at a profit. I certainly do not need ten. Someone who desperately needs a generator comes later and is willing to pay $700 because he has $1000 worth of meat in a freezer that will go bad. I would say that the person who came later is in more need than me. I would also say that if the price were $700 I would not buy ten generators because there would be no incentive for me to do so and I did not need ten.

We see this happening all the time. There are people with shopping carts full of batteries, baby formula, bottled water, etc. They buy two or three month's worth of goods even though the crisis is only expected to last a week or two. The hoard because there is no financial penalty imposed on them by the market.

 
At 5/03/2011 6:57 AM, Blogger VangelV said...

The problem with TC = PC + EC + GC is not that it is simple, but that it is deceptively complex.

The problem is that it is nonsense.

 
At 5/03/2011 7:03 AM, Blogger VangelV said...

But government decides what constitutes stealing, and even what constitutes property. government may allow others to steal from you, and may even help them to.

As Jefferson pointed out, legitimate governments do not create unalienable rights. They are put into place to protect those rights. Of course, bad governments usually allow someone the privilege of violating the rights of others, which is a good reason to get rid of them. The US has a big problem because its legal system is broken and no longer considered legitimate by many of its citizens. That said, expect things to get a lot worse.

 
At 5/03/2011 7:04 AM, Blogger VangelV said...

Pollution is an obvious example of a problem without a free market solution. He who excretes at lowest cost to himself wins.

That is because you have a property rights issue in a society that does not recognize those rights. It has nothing to do with free markets because you have no free market mechanism at work.

 
At 5/03/2011 7:13 AM, Blogger VangelV said...

Bona fide military threats are another problem without free market solution (not the bogus, hyped threats we face today).

That is not true. The free market is more than capable of offering protection to those willing to pay for it or to insure individuals against damage to their property or their persons. You certainly would not have private insurance companies building weapons systems that did not work properly or overpaying for military equipment the way that the government does. Protection would be significantly cheaper and more effective.

The man watering his lawn while people die from thirst is probably only hypothetical, but your "solution"--let them die to honor the ideology, if necessary--is not a solution.

I do not advocate that anyone die. All I advocate is that property rights are protected. Why would a man who gets his water from the municipal system cheaply enough to water his lawn not give that water willingly to people in need? And why would the municipality rely on that one man to give water away when it has all that water itself? As usual the socialists on this board present a false choice because they cannot justify their position that property rights should be taken away. The fact that resorting to such false choices is the best that they can do shows how poor their position really is.

It reeks of the same fanaticism of a devout communist.

Hardly. Communists are taking your side that there are no property rights and that rights are provided by the state at the point of a gun. They are on your side, not mine.

 
At 5/03/2011 7:25 AM, Blogger VangelV said...

Educate me.

Explain how he is not losing money when he runs out of stock.


Your logic is very poor. The retailer runs out of stock much sooner if the goods are sold below market prices. He does not sell anything if prices are set well above market. The most amount of money is made if goods are sold at the market price. Now this does not mean that the last piece will fetch an infinite amount of money because there will be a point at which the retailer's costs of staying open will not justify trying to sell the little stock that is left. At that point the retailer may choose to sell what is left at below market prices and stay closed until new inventory comes in.

Instead of complaining about my education.

I agree that you should ask for your money back. I think that you got ripped off.

 
At 5/03/2011 7:35 AM, Blogger VangelV said...

"How does higher price guarantee those that also need baby food will get it? It guarantees that those who need baby food and have money will get it."

That last sentence is true at all times, and has nothing to do with changes in price.


Wrong.

You guys are way too easy to agitate. It is a sure sign of insecurity to be hyperdefensive.


Actually, your inability to think clearly is getting in your way. He is right. it is true that people without money can't buy baby formula. It is true that if you have money you can go into a store and get it. The fact that you think that pointing out a true statement is being 'hyperdefensive' shows just how weak your position is.

 
At 5/03/2011 8:31 AM, Blogger VangelV said...

If common law says you have absolutely no right to foul my space, then I have the absolute right to prevent you from doing anything whatsoever, thereby denying your right to life.

You obviously need a better education. Common law is about reason and assumes that people live in a real human society, not some utopia where there are absolutes that are impossible in nature.

As I said, common law recognizes that people who own pig farms will produce smells and some runoff. That means that if you decide to build a house next to that pig farm you are not entitled to anything different than what you saw when you got there. The pig farmer does not have to do anything different and as long as he does not increase the levels of smell and runoff he will not be bothered by the common law judges. But that does not mean that he has the right to dump manure on your property or to increase the level of activity and make things worse for you.

 
At 5/03/2011 8:33 AM, Blogger VangelV said...

That is uncomfortable, so we postulate an economic system devoid of ethics, hence gouging is not allowed under the rules.

There is nothing unethical about market prices. They are set by the interaction of buyers and sellers at the margin and regulate activities to optimize returns for consumers.

 
At 5/03/2011 8:38 AM, Blogger VangelV said...

Or, you can consider democracy like a huge mass that warps space time.

Warps space and time??? How arrogant of you.

It is not a violation of some immutable natural law.

I don't know about that. Democracies can violate natural rights just as easily as tyrannies. Democratic governments have no problem trampling on the rights of individuals so that they can provide special privileges to the ruling elite and its supporters.

 
At 5/03/2011 8:39 AM, Blogger morganovich said...

hydra-

you whole pollution argument is just a poorly conceived misrepresentation of fact.

the law is VERY clear.

if i damage your property, i am responsible for that damage.

pollution is just a kind of damage.

you seem to be objecting to the idea that you may have to prove that yo have been harmed, but objecting to proof is just a back door war of supporting fiat rule and fascism.

pollution is about rights. as vangel has tried to explain to you, you just need to set up rights and enforce them. i recommend reading coase on this issue.

regarding your "TC = PC + EC + GC" equation, it's just the silly sort of definitional game played in the halls of academia. it cannot be calculated in any real sense, which is why so many people are calling it meaningless. it's just the sort of thing regulators trot out when they are looking to expand their powers.

finally, i think your whole notion of "price gouging" is flawed. what the hell is price gouging? price is a function of supply and demand. if supply drops and demand spikes, price will rise. that's economic reality.

the concept of "gouging" is inherently completely subjective and ignores basic economics.

to hold price low when demand rises and supply shrinks is a recipe for scarcity and will make a problem worse in the case of something like water after a disaster.

high prices attract supply. without them, you'll have less water, shortages, and arbitrary rationing based on who got to the store first and bought up all the water at a below market price. you will also not attract more water into the market.

how are any of these a good thing?

 
At 5/03/2011 8:41 AM, Blogger morganovich said...

ps.

take a look at venezeula for an excellent example of how below market price controls destroy a market.

they were a well fed nation and a net exporter of food before chavez enacted price controls on food. now they are starving and are net importers.

 
At 5/03/2011 8:45 AM, Blogger morganovich said...

v-

i was just talking about the near term move in commodities. if you get a disappointing gdp number, you tend to get a sell off. it may be very short term in nature, but you tend to get it just the same.

i agree with you that so long as we keep printing money hand over fist and debasing the dollar, commodities are not going to get cheaper.

the CME is upping margin requirements again today though, which will also continue to provide some near term pressure.

that will equilibrate out at some point, but near term, if they keep reducing the leverage in the market, it's going to cause some nasty price moves, especially if it starts a margin call cascade.

 
At 5/03/2011 10:11 AM, Blogger morganovich said...

"There is nothing unethical about market prices. They are set by the interaction of buyers and sellers at the margin and regulate activities to optimize returns for consumers."

i would even take this a step further.

market prices are voluntary transactions. as such, they enhance freedom.

the fixing of prices by governments does the opposite.

it forces one party to trade at a price he would rather not.

you cannot build a system of ethics upon that sort of coercion.

 
At 5/03/2011 10:39 AM, Blogger morganovich said...

vangel-

"You can't come into my house and make a speech because you would trespass on my property and violate my rights. You can't go into a theater and yell fire when there isn't one because you violate the property rights of the theater owner and the customers"

you are confusing two issues.

what does coming into your house have to do with free speech? free speech is about content, not location.

yelling "fire" or committing libel are different because they impinge on the rights of others.

this does not necessarily limit your right to free speech. it just sets you up to face the consequences of exercising your freedom in a way that is harmful to others.

i think it is you who need to rethink this. you seem to be confusing/conflating a number of issues particularly content vs location and freedom vs liability.

 
At 5/03/2011 11:22 AM, Blogger Hydra said...

it forces one party to trade at a price he would rather not.

================================

No one is forced to trade. they can wait until after the disaster and trade in a free market with free competion.

In this case the EMERGENCY has limited free trade, by eliminating adequate competition, required for a free market.

Government compensates for this (natural) disruption in the free market by declaring an artificial one.

By declaring it in advance of emergencies, government discloses to both parties what their expectations should be. Both sides have the same information, and the same constraints.

Absent the emergency, I would STILL rather sell at twice the price, but I am restrained from doing so. In that regard the emergency situation is no different, other than the source of the restraints.

 
At 5/03/2011 11:33 AM, Blogger Hydra said...

The problem with TC = PC + EC + GC is not that it is simple, but that it is deceptively complex.

The problem is that it is nonsense.

===============================

So you say. But, in what respect?

Basic economic theory is a model, which is useful but incorrect or inaccurate in some respects as regards the physical world. Some treat it as almost a religion, guided by an infallible Pope of Profits with an Invisible Hand.

This is a different model. It recognized that both industry and government cause inadvertent or external costs. While these costs are not PRICED by the market (at least not directly) the costs themselves are very real.

At present there is disagreement on how to measure those costs. By suggesting this is nonsense you are simply denying their existence.

That seems like a bad idea, because whtever those costs are, you are going to be stuck with a share of them, whether you agree they exist, or not.

 
At 5/03/2011 11:37 AM, Blogger Hydra said...

They are set by the interaction of buyers and sellers at the margin and regulate activities to optimize returns for consumers.

==================

Absent consideration of unpriced costs. It is false to claim that the market alone optimizes returns for consumers. If you grant equal property rights to everyone involved in the trade, you get a different result.

 
At 5/03/2011 11:40 AM, Blogger Hydra said...

if supply drops and demand spikes, price will rise. that's economic reality.

======================

Notice that "IF" premise and how this restricts the argument to "economic reality".

I don't know about your world, but my world includes a lot of things that do not have prices on them. sometimes thats good, and sometimes its bad, but it ALWAYS distorts the prices charged inthe economic only world.

 
At 5/03/2011 11:42 AM, Blogger Hydra said...

the concept of "gouging" is inherently completely subjective and ignores basic economics.

=========================

Economics ignores basic ethics, so of course wht you say is true. In the economic model there is no ethics and therefore no gouging.


So, why do we have a word for it, if it does not exist?

 
At 5/03/2011 11:44 AM, Blogger Hydra said...

Just wait around a little bit longer and the problem will solve itself hydra...


============================

Precisely.

Unless the definition of the problem includes ethics.

 
At 5/03/2011 12:05 PM, Blogger morganovich said...

"Economics ignores basic ethics, so of course wht you say is true"

now you're just being petty.

you are also ignoring economic and moral reality.

we've already been over why you want price to rise when demand does (attract more goods, prevent hoarding by a select few who are buying below market, etc) so i won;t belabor that.

ethically, you are on even shakier growund.

how is it ethical to force someone to sell their property below the price they want to.

if the government came to you and said it needed your farmland and that you had to sell it at 10% of market price, you'd scream bloody murder (and you'd be right to).

so how is it any different for them to tell you at what price you can sell your water?

ethics must foremost be based upon rights and freedom. you are seeking to abridge that and call it ethics, but the foundation from which you seek to build is fatally flawed.

how can you build an ethical system on coercion?

"So, why do we have a word for it, if it does not exist?"

and this is just silly. we have a word for unicorn and Pegasus and smurf too. would you care to produce one?

we have a phrase "free lunch" too. does that make it real? how about "enlightened despotism" or "moral majority"?

 
At 5/03/2011 1:19 PM, Blogger Ron H. said...

"if supply drops and demand spikes, price will rise. that's economic reality.

======================

Notice that "IF" premise and how this restricts the argument to "economic reality".
"

OK, let's reword that, as we know it's not really IF, but WHEN:

"When supply drops and demand spikes, price will rise. that's economic reality."

Does that work better for you?

That is one of the immutable laws of economics, commonly referred to simply as "supply and demand", and no amount of government regulation can repeal it.

Notice that in the examples we have used so far in this thread, just the PERCEPTION of supply disruption is enough to spike demand. We have been calling it hoarding.

You have also ignored - because you may not understand it - the fact that without a rising price signal, suppliers have no incentive to increase supplies to the area affected by an emergency.

"I don't know about your world, but my world includes a lot of things that do not have prices on them. sometimes thats good, and sometimes its bad, but it ALWAYS distorts the prices charged inthe economic only world."

You should reread that carefully. Is that really what you want to say?

Occasionally someone - not me - explains things to you so clearly, and so plainly that, I believe even you will understand it, but then you prove me wrong once again.

 
At 5/03/2011 1:28 PM, Blogger Ron H. said...

"Basic economic theory is a model, which is useful but incorrect or inaccurate in some respects as regards the physical world."

For example...

A reference please!

Supply and demand would be a good place to start, as that's what most of this thread has been about, unless you prefer to disprove some other immutable economic law, such as "incentives matter", as that's also been part of the discussion.

 
At 5/03/2011 4:30 PM, Blogger Hydra said...

"Economics ignores basic ethics, so of course wht you say is true"

now you're just being petty.



====================

How can you say that, considering the post above, and many others of a similar vein?

This isn't my idea. It is widely considered that a businesses only goal and only moral imperative is to make money for the shareholders.

As long as that is the only consideration, then there is no concept of price gouging and no need for it - under that model.

But Vange and Juandos and others act as if the model IS reality or models it very closely. For them, there is no consideration of ways that might make the model better, to incrementally improve it.

They are willing to convince themselves that EVERYONE is HAPPY, HAPPY, HAPPY, to pay twice as much this week as they would have last week or would next week. Anyone who is not happy is stupid, because that's the way it works, or would if government would get out of the way.

And it is a self supporting argument because the proof that they are HAPPY, HAPPY, HAPPY is that they parted with their money. They valued what they got at the moment more than the cash.

It is a nice argument, but I don't buy it. A fair number of others don't buy it either, because they raised enough stink, and/or money to get a bill introduced and passed.

The argument is orrect, so far as it goes, but it does not go far enough. One paqrt of the evidene is that "if" clause, which has been introduced in various ways and acts as a caveat to the theory.

 
At 5/03/2011 4:30 PM, Blogger Hydra said...

This comment has been removed by the author.

 
At 5/03/2011 4:47 PM, Blogger Hydra said...

incorrect or inaccurate in some respects as regards the physical world."

For example...

A reference please!

=============================

I suggest you look out the window at the physical world.

It is replete with examples, both positive and negative, that are external to the economic world, and yet a result of it. They represent costs or benefits not captured in your mythical, free trade, voluntary transaction. As a result those transactions are an inaccurate representation of the the trade that actually took place.

What you are describing is like getting a speeding ticket when your mileage computer proves you have only been going/averaging 55. Your claim that the peak condition is only normal according to the guage, probably won't change the opinion of the traffic officer.

 
At 5/03/2011 4:51 PM, Blogger Hydra said...

"I don't know about your world, but my world includes a lot of things that do not have prices on them. sometimes thats good, and sometimes its bad, but it ALWAYS distorts the prices charged inthe economic only world."

You should reread that carefully. Is that really what you want to say?

==========================

Except for the misspelling, yes.

Trades are about property rights, but we do not have proeprty properly defined, or defended. When we do, the economic world will look much different.

 
At 5/03/2011 4:54 PM, Blogger Hydra said...

just the PERCEPTION of supply disruption is enough to spike demand. We have been calling it hoarding.

=========================

Well, that pretty much spikes the idea of a rational, efficient market, doesn't it?

 
At 5/03/2011 4:57 PM, Blogger Hydra said...

take a look at venezeula for an excellent example of how below market price controls destroy a market.

====================

Argument does not apply to the case at hand, invloving the relationship of market conditions to temporary emergency market conditions: market aberrations indicated by irrational fear and hoarding.

 
At 5/03/2011 5:01 PM, Blogger Hydra said...

OK, let's reword that, as we know it's not really IF, but WHEN:

=====================

Ah, that is a different argument. In an emergency situation the government is not trying to repeal an immutable law.

It is a temporary situation, when the market is normal and level, play can begin again.

Would you play darts or roullette when the game is shaking during an earthquake?

 
At 5/03/2011 5:16 PM, Blogger Hydra said...

The fact that you think that pointing out a true statement is being 'hyperdefensive' shows just how weak your position is.

===========================

You missed the change in premise.

In a free market economic model supply and demand guarantees efficient pricing of baby food.

It does not guarantee that all babies will have food.

For that, you need a different premise, and a diffeent model. Maybe you think we are using the best one available (so far).

But if the premise is all babies should be fed, then the present "best" model isn't working.

If that is the case (notice the premise), then we might want to work on a better one. You believe the present laws are immutable, so there is no point in trying to do better.

I thinke we can do better, but first we have to decide to look.

 
At 5/03/2011 5:23 PM, Blogger Hydra said...

regarding your "TC = PC + EC + GC" equation, it's just the silly sort of definitional game played in the halls of academia. it cannot be calculated in any real sense,

======================

Of course it can, and we do it every day. Every time you get in a car you put a price on the externality of being delayed, injured, or killed.

MJP has pointed out that the wage difference is partly associated with unpriced risks.

We just don't do it well or consistently. But there are real world examples, and these are what (some) academicians study.

 
At 5/03/2011 5:30 PM, Blogger Hydra said...

Eventually the market will adjust, but in the meantime, some needs are not going to be met."

Nonsense

===========

Aren't we talking about markets exhibiting temporary shortages?

Or are you simply defining away shortage by claiming there is no shortage when the price is high enough?

 
At 5/03/2011 6:18 PM, Blogger Ron H. said...

Chip! Chip! Chip!

Many of us are trying hard to penetrate that shell of ignorance you insist on living in, but nothing seems to work.

"But Vange and Juandos and others act as if the model IS reality or models it very closely."

And in fact it does. Economic theories attempt to explain human action in the real world. Some are so well known and so indisputable that they are called laws. One of these is commonly known as the law of supply and demand, and it relates supply, demand, and price as follows:

An increase in demand requires an increase in price in order to create an increase in supply.

Pretty much everything in this thread has been some form of that idea.

It should be obvious even to you that government interference causes a worse outcome than letting things work according to this law, but you refuse to consider that there might be some truth to what people are telling you.

When you asked, I gave you one of the must careful, thoughtful and non insulting explanations I could manage. It has had no apparent effect. Your nonsense comments continue unabated.

morganovich is right. Your silly formula is a fun thing to play with in a classroom setting, but is woefully inadequate for the real world, for the simple reason - and this has been explained to you many times - that it's impossible to price EC and GC correctly, as you yourself admit. What's the point in using something that doesn't work?

The alternate common law solution has been suggested many times but you refuse to consider it, or perhaps don't understand it.

"For them, there is no consideration of ways that might make the model better, to incrementally improve it."

How can you make a simple law of supply and demand better? I'd love to hear your suggestions. Keep in mind that central planning has only made matters worse, not better.

"They are willing to convince themselves that EVERYONE is HAPPY, HAPPY, HAPPY, to pay twice as much this week as they would have last week or would next week. Anyone who is not happy is stupid, because that's the way it works, or would if government would get out of the way."

"And it is a self supporting argument because the proof that they are HAPPY, HAPPY, HAPPY is that they parted with their money. They valued what they got at the moment more than the cash."

That's pretty much it. You pointed out that no one is forced sell. Likewise, no one forced to buy.

Those HAPPY, HAPPY, HAPPY, folks are in that euphoric state, because they expected to pay triple the regular price, and are ecstatic that the price has only doubled. They would have paid much more to keep their child alive, and double the price seems like a real bargain, under the circumstances.

"It is a nice argument, but I don't buy it."

That's not a stain of any kind on its veracity.

"A fair number of others don't buy it either, because they raised enough stink, and/or money to get a bill introduced and passed."

What a silly argument. Is every law a good one because someone spent the time & money to get it passed? You should think longer before typing such trash.

You and the "fair number of others" are economically challenged. This shows nothing about the value of the bill.

 
At 5/03/2011 7:32 PM, Blogger VangelV said...

So you say. But, in what respect?

I don't think that you know what you are talking about. You throw down an equation without saying what you really think that it shows or proves. You throw around meaningless gibberish like "dollar weighted democracy," and talk about warping space time. All muddled nonsense produced by muddled thinking.

If you really knew what you were talking about you would not use codes and equations that have no material meaning in the real world. You would use plain language to make a case for your position. The fact that you can't tells us what we need to know.

 
At 5/03/2011 7:33 PM, Blogger Benjamin said...

Property rights?

And to exactly what date do we trace back our property rights in California or the American Southwest?

Be very careful how you answer.

Actually, most of us are standing atop stolen land. But let us beat our chests about property rights.

 
At 5/03/2011 7:35 PM, Blogger VangelV said...

Absent consideration of unpriced costs. It is false to claim that the market alone optimizes returns for consumers. If you grant equal property rights to everyone involved in the trade, you get a different result.

Everyone does have equal rights in the free market. Producers and consumers have the right not to carry on a transaction if they do not wish to. They may use their own property as they wish to. They may not trespass on the property of others, initiate violence, or commit fraud. As has been pointed out to you many times, you seem to have no idea that rights are negative.

 
At 5/03/2011 7:37 PM, Blogger VangelV said...

ethics must foremost be based upon rights and freedom. you are seeking to abridge that and call it ethics, but the foundation from which you seek to build is fatally flawed.

how can you build an ethical system on coercion?


Our friend has been clear on this part. You use democracy as a big mass to bend the space time continuum. Why don't you get it?

 
At 5/03/2011 7:40 PM, Blogger VangelV said...

It is replete with examples, both positive and negative, that are external to the economic world, and yet a result of it. They represent costs or benefits not captured in your mythical, free trade, voluntary transaction. As a result those transactions are an inaccurate representation of the the trade that actually took place.

Example please. And a valid one that makes sense, not your space time bending crap or other such nonsense.

 
At 5/03/2011 7:56 PM, Blogger VangelV said...

In a free market economic model supply and demand guarantees efficient pricing of baby food.

It does not guarantee that all babies will have food.


Of course not. Those that have no means to buy food will have to depend on the charity of others. But that is a better system than the one that you propose. In that system there is no incentive to produce because property rights are not secure, there are no market price signals to coordinate resource allocation, and there are many more babies who do not get food.

For that, you need a different premise, and a diffeent model. Maybe you think we are using the best one available (so far).

We are. You seem to believe in some Utopian fantasy where everyone can be looked after because resources are unlimited and men are angels. But reality if very different than what you think it is.

But if the premise is all babies should be fed, then the present "best" model isn't working.

What is it that prevents you from seeing that rights are negative? You have been reminded time after time by a number of individuals but somehow it has never stuck.

If that is the case (notice the premise), then we might want to work on a better one. You believe the present laws are immutable, so there is no point in trying to do better.

It is a false premise. You should have the right to use your property to acquire what you need for your family. You do not have the right to take the property of others without their permission. That should not be too hard to understand. Even for someone as dim as you seem to be.

I thinke we can do better, but first we have to decide to look.

But that is the point. You can't do better by stealing and pretending that you are being ethical.

 
At 5/03/2011 8:06 PM, Blogger VangelV said...


Of course it can, and we do it every day. Every time you get in a car you put a price on the externality of being delayed, injured, or killed.

MJP has pointed out that the wage difference is partly associated with unpriced risks.

We just don't do it well or consistently. But there are real world examples, and these are what (some) academicians study.


Equations in which you can't figure out the values of the terms are useless. Just like most of the crap that you have been promoting.

 
At 5/03/2011 8:11 PM, Blogger VangelV said...

Actually, most of us are standing atop stolen land. But let us beat our chests about property rights.

Nonsense. To own land you have to homestead it. You have to take what is found in nature, mix your labour with it and show that it is yours. Nomads can never own land because they do not stay long enough to do so. If someone comes in and uses that land after they have abandoned it they are out of luck.

 
At 5/03/2011 11:15 PM, Blogger Ron H. said...

"Well, that pretty much spikes the idea of a rational, efficient market, doesn't it?"

No one has suggested that markets are efficient. You are making stuff up. If left alone, markets tend toward efficiency, but several of the people trying hardest to educate you wouldn't be able to make a living be if markets were efficient.

[Venezuela] "Argument does not apply to the case at hand, invloving the relationship of market conditions to temporary emergency market conditions: market aberrations indicated by irrational fear and hoarding."

That wasn't an argument, it was an example, and was clearly described as such. Better reading comprehension would help you a great deal.

The fear might NOT be irrational, and hoarding is a natural impulse when security of supply is threatened, even if the threat is more perceived than real. The counterbalance to hoarding is an increase in price, that makes it less advantageous to hoard, and helps distribute existing supply to those who really need it. Another effect is to signal suppliers to increase supply to the higher priced area.

"Ah, that is a different argument. In an emergency situation the government is not trying to repeal an immutable law.

It is a temporary situation, when the market is normal and level, play can begin again.
"

This is just so unbelievably stupid, it defies all logic. In an emergency the laws of supply and demand can be seen to work most strongly. Any government intervention at those times, proves more clearly that they can't be repealed.

"In this case the EMERGENCY has limited free trade..."

No, free trade hasn't been limited in any way, except by government. Supply may be disrupted, or a fear of disruption may exist. To pretend it hasn't, by forcing prices, disrupts what would otherwise be a natural and beneficial course of events.

"...by eliminating adequate competition, required for a free market."

Government can determine what "adequate competition" should be in any given emergency? Give me a break. This is just stupid. The competition you recommend appears in the form of people like John Shepperson, who increase the supply of needed items in response to a higher price signal.

"Government compensates for this (natural) disruption in the free market by declaring an artificial one."

There is no disruption in the free market, only perhaps a disruption in supply, moron.

"By declaring it in advance of emergencies, government discloses to both parties what their expectations should be. Both sides have the same information, and the same constraints."

Who are "both parties"? The information government provides is that there will be shortages, as prices are capped, and the law of supply and demand dictates that increased demand won't be met with increased supply because there is no signal to do so. People no longer need to wonder if there will be shortages, they know for certain there will be.

This law operates at all times in good times and during emergencies. There is nothing government can do to repeal it. Only those who don't understand human nature and economics think otherwise.

Learn some economics!

 
At 5/04/2011 8:46 AM, Blogger VangelV said...

i was just talking about the near term move in commodities. if you get a disappointing gdp number, you tend to get a sell off. it may be very short term in nature, but you tend to get it just the same.

Let me be clear here. I agree with many of the things that you wrote on this but pointed out that we need to consider something else as well. Given the number of degenerate gamblers and momentum chasers, any trigger that causes a pull-back can lead to a massive decline if you have an overbought condition and the price is well above the 50 or 200 day moving average. My point is that when you have such conditions ANY event can be a trigger, not just the margin change games played by the exchanges.

I still think that the real picture will become clearer when we see how the physical markets do over the medium to long term. During the last silver price collapse I tried to buy coins near spot. But even though the price was under $9 the best prices I could find were in the $15 to $16 range. I think that the futures are a false market removed from reality. Eventually the shorts in silver and gold will have to deliver. If they cannot there will be a serious problem for many of the idiots who purchased paper commodities and avoided exposure to the real thing.

If I were to make a wild guess I would say that the margins will go to 100% OR EVEN HIGHER to force a washout that will cause the mandated cash settlement to be less disruptive to the banks and brokers who were caught on the wrong side of the trade.

 
At 5/04/2011 8:48 AM, Blogger VangelV said...

you cannot build a system of ethics upon that sort of coercion.

According to our friend we need democracy to bend space and time first. Than ethics is what the mob defines it to be.

Welcome to relativism.

 
At 5/04/2011 8:59 AM, Blogger VangelV said...

what does coming into your house have to do with free speech? free speech is about content, not location.

Speech is also a property right. You can say what you want as long as you are permitted to by the person on whose property you are. As I said, you have no right to walk into someone's house and make a speech. What your right of speech means is that you have the right to buy paper and a press and issue pamphlets. Or that you can set up a site and say what you want. But you can't invade the office of a company and make anti-capitalist speeches because you are violating the rights of that company to use its own property as it wants to.

yelling "fire" or committing libel are different because they impinge on the rights of others.

You can yell fire in your hose as much as you want even if there is no house and it upsets your guests. You can't yell fire in a theater if there isn't one because you violate the rights of the patrons or the owners.

The libel issue is tougher. You don't own your reputation so it is doubtful that libel laws make any sense.

this does not necessarily limit your right to free speech. it just sets you up to face the consequences of exercising your freedom in a way that is harmful to others.

i think it is you who need to rethink this. you seem to be confusing/conflating a number of issues particularly content vs location and freedom vs liability.


Again I disagree. I tend to side with Rothbard on this one. You may wish to take a look at his argument rather than my poor caricature of it.

Or you may want to look at Thomas Woods', Who Killed the Constitution. Take a look at Chapter 1 for some clarification.

 
At 5/04/2011 10:21 AM, Blogger VangelV said...

In this case the EMERGENCY has limited free trade, by eliminating adequate competition, required for a free market.

You have no clue again. There is plenty of free trade during emergencies. That is why prices go up; with limited supply and rising demand they have to go up. Tell the stores not to sell for market prices and you get shortages develop.

 
At 5/04/2011 10:26 AM, Blogger VangelV said...

Government compensates for this (natural) disruption in the free market by declaring an artificial one.

Government makes things worse by eliminating the price signal that would attract new supply to meet the demand. It creates shortages.

By declaring it in advance of emergencies, government discloses to both parties what their expectations should be. Both sides have the same information, and the same constraints.

Government can't repeal the law of supply and demand. If there is a disruption demand will rise faster than supply and prices HAVE to rise in order to minimize shortages and to attract new supplies into the area.

Absent the emergency, I would STILL rather sell at twice the price, but I am restrained from doing so. In that regard the emergency situation is no different, other than the source of the restraints.

You are not restrained at all. You can try to sell for what you want but that does not mean that you will get it. In a free market transactions are voluntary and require both sides to agree.

 
At 5/04/2011 5:19 PM, Blogger Ron H. said...

"Government compensates for this (natural) disruption in the free market by declaring an artificial one.?"

"Government makes things worse by eliminating the price signal that would attract new supply to meet the demand. It creates shortages.
"

It's apparent from his repeated nonsensical claims on this subject, that our friend has no clue, and refuses to accept any little ray of enlightenment. "We must find a better way." he shrieks.

 

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