Would price gouging not just apply to essential products (with the caveat being 'who determines what is essential')? My city flooded a few years ago and gas stations were selling bottled water for super high prices. I think that's an obvious case of price gouging. However, a dumbbell set that is sold out online, listed for $300. I think you could argue that's just free market at work.
Even if we could easily draw a line between essential and non-essential goods (pretty much impossible), you'd still have the problem that banning "price gouging" doesn't help anyone.
Sure, it keeps prices down, but by artificially lowering prices when under high demand, it incentivizes hoarding and exploitation. It also decreases the incentive for increased supply. When local prices increase drastically, it gives incentive for non-local suppliers to enter the market, increasing the quantity of supply.
That’s what I don’t understand about the argument against price gouging. Fresh water is hard to come by, ergo the price goes up.
If the product wasn’t in demand it wouldn’t go up in price. By artificially forcing a low price it guarantees there’s going to be shortages.
By allowing the price to go up it will also enforce people use water wisely. That is they won’t start taking showers or watering plants with bottled water as it will be expensive.
+ Some people in need are priced-out, which is very bad.
+ Many for whom the price isn't really a problem given it's become a 'health issue' will stock up dramatically, further driving prices up and hoarding from others.
The 'shortage' FYI is probably inherent in a flood type situation.
By far a better solution is rationing, which is exactly what is done in these situations and has been for quite some time. Rationing can be enforced at the point of sale i.e. 'Max 3 per household', definitely through social conditioning, i.e. making sure community members are aware of the need to do this, much like mask-wearing and social distancing, and possibly through more specific measures, i.e. 'ration cards'.
The immediate problem with rationing maybe 'lineups' which is the visual epitome that many people like to point to from the Soviet Era as an example of 'bad economics' from centrally planned economies, and it surely is in the long run, but in the short-run, i.e. in disaster type scenarios, rationing is often a very obvious and useful strategy.
>>>> First - we 100% can draw the line between 'essential goods'.
We already do, we've been doing it long before the pandemic and we continue to do it. We classify all sorts of goods, for all sorts of reasons.
Just because at any given time, the hard-line in the sand may be a little fuzzy, does not mean that we can't still continue to reasonably category goods.
Depending on your country, things like food, drugs, healthcare, dental, water, childcare service, tobacco, cigarettes, alcohol, luxuries - are taxed differently due to their different meaning to society. And yes, there are always fuzzy areas where the lines are drawn.
In trade agreements, we make all sorts of distinctions for a variety of reasons.
Anyone who believes in 'Socialized Medicine' to any extent must grasp the obvious - that this is a social recognition of a separate class of services that are going to be managed differently.
Literally, if you support even Medicare, then you need to grasp this is what happening.
>>>> Second - stopping 'gouging' is absolutely beneficial to people and society at large.
'Price gouging' is bad captialism.
Understand what price gouging is, and that it's different from normal market conditions. Price-gouging happens when events cause a spike in supply or demand that's typically much faster than the systems to support supply (or demand) can manage effectively. A factory cannot 'product and ship barbells' on a dime. Over months, yes, but immediately no.
The negative effects to the system of price-gouging can definitely be bad, and we should try to stop it where it makes sense.
A simple example would be 'bottled water during a flood'. The local store could very well charge such vastly high prices that people would be seriously inconvenienced, or worse - not be able to afford it, while the wealthier people stockpile. The 'free market' (really not in any real sense, just the sense some HN commenters here think) is utterly dysfunctional in that sense, as pooling swaths of capital in the hands of the owner of the 'service station' because he just happened to be sitting on something that became a hyper valuable commodity ... is absolutely, positively, in no way beneficial for anyone in the long run.
The 'local store' gouging people during a flood is in fact one of the better examples of 'bad capitalism' and how in certain circumstances, capitalism completely fails to be an intelligent means to manage goods and services, if fact, at least at that moment, it's maybe the absolute worst kind of system.
Consider a more extreme example of market imperfection related to, but not precisely 'price gouging': Company ABC develops a COVID vaccine. The spent $1B developing it (doesn't matter), and they determine that the 'profit-maximizing price' for their vaccine is $1000 per person, and they'll sell it on credit, i.e. people pay it off $50 a month. They don't care that most of planet earth cannot afford it, because that's not part of the equation.
More nefariously, the company literally does not want large swaths of the world to get it also because they literally want COVID to keep spreading, thereby keeping the demand for their vaccine high.
This example is obviously extreme, but these kinds of dynamics are absolutely already at play, all over the world, in many markets - especially in healthcare, and especially with respect to vaccine development.
On the whole, price-gouging is bad. That it's sometimes a little grey means we have to wade through the subject intelligently.
> That it's sometimes a little grey means we have to wade through the subject intelligently.
I see all too often in threads here this all or nothing thinking. I have no idea if it's more prevalent in technical people, but for some reason people seem to think that unless we can come up with an absolute rule that can be applied blindly in all circumstances, then we shouldn't even try. Human society and human activity aren't like that in practice, and we have a grey, fuzzy, ponderous set of laws governing our society because we keep learning as we go along, and we think and debate our way through grey areas.
"I have no idea if it's more prevalent in technical people"
I think it's technical people. It's like we're all on the 'autism spectrum' a little bit and have serious difficulty with ambiguity and want to see the 'outcome of the equation, exactly'. Like an obsession with perfection.
There is really no such thing as a purely free market in the end, because everything is deeply dependent on externalities such as education, military, government intervention, investment, trade between nations which is not free, legal asymmetries. We have a 'context' in which a 'free market' exist, but that context is a big deal.
This was my thought too. If you feel you absolutely need a new barbell in the middle of a pandemic, then maybe you'll have to pay a little extra for it.
Everyone is demanding that workers get extra hazard pay and additional expenses like PPE, which they absolutely should, but where's that money going to come from?
gas stations were selling bottled water for super high prices
Chances are, what they were doing was illegal, especially if there was a formal state of emergency declared.
Did you report it to your state attorney general? They're usually pretty good about enforcement and handing out fines when these things are brought to their attention.
I've done quite a few wilderness expeditions lasting up to 3 weeks. You couldn't bring enough bottled water with you. Sometimes I was filter-pumping water from clear streams, other times we had to remove solids from muddy water, boil it, let it settle, filter it, then bleach it.
Self-dosed chlorinated water isn’t the worst option, but I wouldn’t call alternatives a luxury. Only people I’m familiar with that still use that technique frequently are PCT through-hikers, who are pretty desperate to cut any weight possible.
I think we need to draw a distinction between "normal" and "abnormal". What is "normal" for thru-hikers is off-the-charts privation for most people (source: am an AT thru-hiker GA->ME '10).
Under the sorts of circumstances where most people would seriously consider using bleach to render water safe to drink (i.e. highly abnormal ones), bottled water is a luxury. Bleach allows us to meet a biological need starting with water people in the developed world would consider unsafe for drinking.
Bottled water meets the same biological need at greatly increased distribution and packaging costs; that makes it a luxury. Under normal circumstances, there's sufficient capacity in our logistical systems that we don't see those costs. Under abnormal circumstances, bottled water rightly should be one of the first things to be shed from the supply chain given available water that can be made potable with bleach.
On a thru-hike the last link in the supply chain is your back, and as the GP points out there much more important things to carry than bottled water given the ability to purify water found along the way.
As an aside, most of us don't use bleach. Polar Pure has long been my favorite (it's cheap and extremely robust), AquaMira is extremely popular (at higher cost per liter), filters are quite popular on the PCT, particularly the Sawyer Squeeze, and UV solutions (Steripen) also have their adherents. Basically nobody uses Potable Aqua. I'm not even sure why they still make that stuff; clearly it sells.
Thank you. This is exactly me point. Bottled water is one of the things that should be shed from the supply chain during emergency situations for precisely the reasons you have given.
but it's not "no water available", but that the seller knows the value of water has grown due to an unavoidable problem (e.g., natural disaster). And without state intervention, the freemarket is gonna cause the price to skyrocket.
As a society, people have decided that it's wrong for price gauging.
OK, but the other side of the coin is this: Water shortages due to unavoidable circumstances happen from time to time. It's good for society to have stockpiles of water in those situations.
But here's the thing: storing that excess water isn't free. Water is already commoditized, which means it's low-margin. If you as a private business, stockpile water for an emergency but can't charge more, you're probably selling at a loss. Which means, it's not economically sustainable to stockpile -- which means, absent the government planning ahead, shortages are going to be pretty bad.
On the other hand, if you know that you can charge 4x for a bottle of water during an emergency, then you might decide to stockpile, knowing you can make your money back when an emergency happens.
So which is worse -- "price gouging" but having the water available, or not having the water available at all?
Or to put it a different way: Stockpiling for emergencies is not free, and it's of value to society. Doesn't it make sense to compensate the people who do it?
> only with the higher demand they can now sell a whole lot more of them
But they can only sell what they have in stock, which is adjusted to normal times. In the disaster they simply sell out. GP is saying the high prices in a disaster are an incentive to make various investments which won't pay off in normal times.
>> storing that excess water isn't free. Water is already commoditized, which means it's low-margin. If you as a private business, stockpile water for an emergency but can't charge more, you're probably selling at a loss.
> During a disaster they can keep selling at $X/bottle and keep making a profit
You ignored the point of the person you're replying to.
This applies to the entire supply chain, too. If there's any disruption (including increased demand), it's the stockpiles -- anyone that stores inventory beyond what they sell regularly -- that compensate. No one is obligated to do this, and there are significant carrying costs to store inventory (space, spoilage, capital tied up).
Both are essentially gouging. One is for an essential item, the other is not.
It's generally not considered the 'free market' in a healthy sense, because long-run/short-run economics are different. Something that costs massively more than the cost of production is usually just the representation of a severy asymmetry in power.
It's obviously not so bad for unessential items, but it's a thing. Most large businesses would not want to gauge because they are looking at the long term, they want to maintain relationships with customers etc..
