Capitalizing on hurricanes Irma and Harvey: $6,785 for an economy seat(washingtonpost.com)
washingtonpost.com
Capitalizing on hurricanes Irma and Harvey: $6,785 for an economy seat
https://www.washingtonpost.com/news/get-there/wp/2017/09/07/capitalizing-on-hurricanes-irma-and-harvey-6785-for-an-economy-seat/?deferJs=true&outputType=default-article&utm_term=.5f61ee42a5f3
168 comments
You're a good capitalist I guess.
Hopefully after making your million bucks ripping off desperate people you can sleep at night.
The reality is that profiteering in a short term crisis is just a scummy thing to do. In the majority of cases basic supply services will be available in days anyway.
Hopefully after making your million bucks ripping off desperate people you can sleep at night.
The reality is that profiteering in a short term crisis is just a scummy thing to do. In the majority of cases basic supply services will be available in days anyway.
If people are willing to pay that much for gas, water, plane tickets, it means they really need it
Uhhhhh no. It means those people can afford it, nothing else. Your personal wealth has nothing to do with your need.
Uhhhhh no. It means those people can afford it, nothing else. Your personal wealth has nothing to do with your need.
What part of his argument do you think is wrong? He's absolutely correct.
If highly-demanded goods become expensive, that incentivises creative behaviour to supply more of those goods. That's a good thing.
If you're not allowed to charge fair market value, that won't make everything magically cheaper, it'll just mean there's not enough to go around.
If highly-demanded goods become expensive, that incentivises creative behaviour to supply more of those goods. That's a good thing.
If you're not allowed to charge fair market value, that won't make everything magically cheaper, it'll just mean there's not enough to go around.
"If highly-demanded goods become expensive, that incentivises creative behaviour to supply more of those goods. That's a good thing."
Maybe in a NORMAL F*CKING MARKET! Not a crisis. How long do you have to be creative when the water is rising in your living room? How quickly can you start an airline that charges reasonable rates when a hurricane is bearing down on your house? What is the economic incentive to rescue you neighbor from their roof during a flood?
Sorry for the yelling but jesus, you're suggesting "incentivizing" saving lives.
Maybe in a NORMAL F*CKING MARKET! Not a crisis. How long do you have to be creative when the water is rising in your living room? How quickly can you start an airline that charges reasonable rates when a hurricane is bearing down on your house? What is the economic incentive to rescue you neighbor from their roof during a flood?
Sorry for the yelling but jesus, you're suggesting "incentivizing" saving lives.
You're suggesting not incentivising saving lives, and you think I'm the crazy one?
We could choose to go to extraordinary efforts to give these people what they need without seeking monetary compensation. The analysis lacks empathy.
Also parent is saying ability to pay doesn't correlate well to need. Many people need plane tickets or water who can't afford sky high prices.
Also parent is saying ability to pay doesn't correlate well to need. Many people need plane tickets or water who can't afford sky high prices.
Why should those who CAN afford to pay the higher prices be discriminated against by fixing prices and creating shortages so that it's first-come-first-serve instead of the supply being sold to the highest bidder?
Fixing supply only creates shortages, you can't repeal the laws of supply and demand.
Fixing supply only creates shortages, you can't repeal the laws of supply and demand.
>Why should those who CAN afford to pay the higher prices be discriminated against by fixing prices and creating shortages so that it's first-come-first-serve instead of the supply being sold to the highest bidder?
Look up discrimination, you're abusing the word. For example why should those who are poor but live close to the store be discriminated against by price gouging? Under first-come-first serve there would be no shortage for them.
Also wealth is not a moral virtue and the wealthy don't deserve to survive disasters any more than the poor.
Look up discrimination, you're abusing the word. For example why should those who are poor but live close to the store be discriminated against by price gouging? Under first-come-first serve there would be no shortage for them.
Also wealth is not a moral virtue and the wealthy don't deserve to survive disasters any more than the poor.
So why not create an organization that voluntarily creates the outcome you desire, why do you have to use coercion to solve the problem?
Markets are coercive.
Please define coercion.
You're the one who brought it up. Lay it out.
Coercion: The use of physical force or the threat of physical force in as a mean to get someone to comply with your wishes.
Continuing to run with this example -- if you are the owner of a pack of water that you typically sell for $10, and you decide to change the price you're offering it for sale to $100, no coercion (using the above definition) has taken place. Potential buyers are free to accept your offer of $100 for a pack of water, or they are free to reject it.
Continuing to run with this example -- if you are the owner of a pack of water that you typically sell for $10, and you decide to change the price you're offering it for sale to $100, no coercion (using the above definition) has taken place. Potential buyers are free to accept your offer of $100 for a pack of water, or they are free to reject it.
So under this definition the only thing preventing me from stealing all the water is coercion, right?
>The analysis lacks empathy.
The existence of the need shows a lack of empathy. There is no one alive who doesn't know that there will be emergencies and unexpected events. Their failure to prepare and subsequent expectation that they will have their needs met by tapping the resources of someone who did prepare is selfish and greedy.
The existence of the need shows a lack of empathy. There is no one alive who doesn't know that there will be emergencies and unexpected events. Their failure to prepare and subsequent expectation that they will have their needs met by tapping the resources of someone who did prepare is selfish and greedy.
If people have an expectation that they do not need to be prepared for a disaster because they expect care from others, I might call them foolish. But I have a hard time seeing the sense in accusing people who were unprepared for this of being selfish and greedy.
I think the fact that you're claiming these flood victims (who do not all "expect" others to care for them, but may appreciate it) greedy shows a lack of empathy for their difficulty.
I think the fact that you're claiming these flood victims (who do not all "expect" others to care for them, but may appreciate it) greedy shows a lack of empathy for their difficulty.
I am making more a response to those who are saying (paraphrasing) "you won't give away all the stuff you have to these unfortunate people who are affected by this huricane? you're a shitty person and you should feel bad."
Let's say you have two similarly situated people. Right now everything is fine, as has been the case for years. One of these two people, however, feels that it can't always be good, so they spend some percentage of their income, time, and effort on ensuring they are prepared for some particular severity of disaster. There is an opportunity cost to this choice. They don't get to go to Disneyland with their kids one summer or they don't get to go to the bar every weekend or they skip buying a new phone. Whatever it is, there is definitely something they are giving up. Now the second person figures that the future emergency may never happen and they make a different calculus and instead spend their money and time by taking their kids to Disneyland or by going to the bar every weekend and stay up-to-date with their latest tech gadgets.
We could reasonably score these two people's lives and say that the first person has a quality of life score of 10 and the second person has a quality of life score of 15.
Eventually Irma or Jose or Katia shows up and rips up all the services, destroys the municipal water service and what not. Suddenly the second person has needs that they cannot meet on their own. The reason they can't meet these needs on their own is because of their decisions about how to allocate their resources. If at this point they say, "well I made my choice and went to disneyland and now i'm fucked, i'd appreciate help, but if you don't provide it i understand." Then that's a very respectable answer. On the other hand if they say "I need what you have, give it over or you're a rotten person." That's not a respectable answer. The expectation that one doesn't need to prepare for bad eventualities and instead just expect to be able to take from others is greedy and selfish.
I'm not pointing at specific individuals right now, but rather the general idea that those who don't prepare for their own future actually are being greedy and selfish. Arguments of the nature "I'm going to die if I don't get it" really aren't legitimate if the situation is even somewhat predictable and avoidable.
Let's say you have two similarly situated people. Right now everything is fine, as has been the case for years. One of these two people, however, feels that it can't always be good, so they spend some percentage of their income, time, and effort on ensuring they are prepared for some particular severity of disaster. There is an opportunity cost to this choice. They don't get to go to Disneyland with their kids one summer or they don't get to go to the bar every weekend or they skip buying a new phone. Whatever it is, there is definitely something they are giving up. Now the second person figures that the future emergency may never happen and they make a different calculus and instead spend their money and time by taking their kids to Disneyland or by going to the bar every weekend and stay up-to-date with their latest tech gadgets.
We could reasonably score these two people's lives and say that the first person has a quality of life score of 10 and the second person has a quality of life score of 15.
Eventually Irma or Jose or Katia shows up and rips up all the services, destroys the municipal water service and what not. Suddenly the second person has needs that they cannot meet on their own. The reason they can't meet these needs on their own is because of their decisions about how to allocate their resources. If at this point they say, "well I made my choice and went to disneyland and now i'm fucked, i'd appreciate help, but if you don't provide it i understand." Then that's a very respectable answer. On the other hand if they say "I need what you have, give it over or you're a rotten person." That's not a respectable answer. The expectation that one doesn't need to prepare for bad eventualities and instead just expect to be able to take from others is greedy and selfish.
I'm not pointing at specific individuals right now, but rather the general idea that those who don't prepare for their own future actually are being greedy and selfish. Arguments of the nature "I'm going to die if I don't get it" really aren't legitimate if the situation is even somewhat predictable and avoidable.
Many people who could afford something won't buy it unless it's in a range they consider reasonable...or they need it. The market for airplane seats at that price going that distance is usually zero. But given the disaster, the market grows quite a bit. Not because they "can afford it", they could afford it before, but because they need it.
> gives you a clean way (even if it's not necessarily fair or good) to figure out who gets the last 10 bottles of water.
I think op makes a point that it isn't necessarily fair or good but that it is effective way to get more scarce goods to people.
I think op makes a point that it isn't necessarily fair or good but that it is effective way to get more scarce goods to people.
Theoretically, you're completely correct.
But, if we're selling bottled water at $99 per crate,
I can do all sorts of crazy things to bring in water.
If so I'd be fascinated to hear about it!
Seems unlikely. Say a hedge fund calculated out that they could get a 20% return by buying warehouses throughout the hurricane belt and filled them with bottled water to sell at a huge mark-up (price gouging) during a disaster. Seems like more people would get the water they needed, if this happened, but it seems unlikely that the hedge fund would not be prosecuted for something after the public outrage at their actions.
I think having people default reaction to rare events of scarcity to be sharing any surplus, instead of grabbing all they can get, is a good one. Try to encourage a more rational but complicated reaction is unlikely to be successful. Who can know in such a complex system of millions of people and a disaster the best way to minimize harm. If everyone just stored a 5 gallon jug ($20 for a really nice one at Home Depot) of water for each person in their home, that would go a huge way to preventing dehydration during these disasters.
I think having people default reaction to rare events of scarcity to be sharing any surplus, instead of grabbing all they can get, is a good one. Try to encourage a more rational but complicated reaction is unlikely to be successful. Who can know in such a complex system of millions of people and a disaster the best way to minimize harm. If everyone just stored a 5 gallon jug ($20 for a really nice one at Home Depot) of water for each person in their home, that would go a huge way to preventing dehydration during these disasters.
I often hear this argument, but if it was fact, wouldn't it prevent the price to get very high? As new merchants start selling, they would fight by offering lower price than competitors down to the rate they feel is still worth the business (supposedly still way higher than usual price).
It seems to me that those things happen so fast, nobody has time to settle a new trade route and local businesses are the only ones to profit from it, with no side effect. I guess this argument would be right if we were talking about long term situation.
It seems to me that those things happen so fast, nobody has time to settle a new trade route and local businesses are the only ones to profit from it, with no side effect. I guess this argument would be right if we were talking about long term situation.
While I don't disagree with your analysis, I think it misses something important.
There are people - living, breathing people - who are experiencing trauma and danger and who are starving and thirsty.
We could choose to spend our own money on gasoline to drive down and distribute water. We do not need to seek compensation for everything we do. We can choose to lose money to help people who are in need. And I think charging $99 for a crate of clean water is adding insult to injury to people who have lost their livelihood.
The calculus of your argument is correct but it lacks empathy.
There are people - living, breathing people - who are experiencing trauma and danger and who are starving and thirsty.
We could choose to spend our own money on gasoline to drive down and distribute water. We do not need to seek compensation for everything we do. We can choose to lose money to help people who are in need. And I think charging $99 for a crate of clean water is adding insult to injury to people who have lost their livelihood.
The calculus of your argument is correct but it lacks empathy.
The people who will donate their time, gas and energy to supply water to those who need it will not vanish if we allow prices to fluctuate freely. But we do lose the resources of those who are not willing, or cannot afford, to donate their time and energy for free.
Empathy would be better directed toward donating money to the needy so they can purchase the things they need at the higher market prices. Price fixing may feel empathetic, but if it actually makes the scarcity problems worse, it's not.
Empathy would be better directed toward donating money to the needy so they can purchase the things they need at the higher market prices. Price fixing may feel empathetic, but if it actually makes the scarcity problems worse, it's not.
The more I read what people today say (or worse: think) the more I worry that Atlas Shrugged is no longer fiction...
You almost directly quoted just now the excuse used by the looters in the book.
You almost directly quoted just now the excuse used by the looters in the book.
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Raising prices economizes scarce resources. It ensures that one family doesn't buy all the water in the store for themselves, and that there is more for others. If it's an emergency then the high price is worth it. If the price is too high to be bought, the seller can't sell anything. The price finds an equilibrium which is useful, not harmful. If you want to help, send the victims money afterwards.
>If the price is too high to be bought, the seller can't sell anything.
This is the trick in your sentence. We're talking about aggregate demand and aggregate supply but at the individual level there is certainly the possibility that the price is too high for someone to buy.
Here's the problem, economic utility cannot be a moral guide in this situation, look at this example:
(1) Water is normal price but with a limit per customer or lottery.
(2) Water is very expensive and the richest person or people in town buy a lot and hoard it.
#2 generates a lot more economic utility, but we can all agree that it's not an optimal situation here.
This is the trick in your sentence. We're talking about aggregate demand and aggregate supply but at the individual level there is certainly the possibility that the price is too high for someone to buy.
Here's the problem, economic utility cannot be a moral guide in this situation, look at this example:
(1) Water is normal price but with a limit per customer or lottery.
(2) Water is very expensive and the richest person or people in town buy a lot and hoard it.
#2 generates a lot more economic utility, but we can all agree that it's not an optimal situation here.
It also ensures that poor people can't afford it. For many, even normal prices can be difficult to afford.
> We could choose to spend our own money on gasoline to drive down and distribute water. We do not need to seek compensation for everything we do. We can choose to lose money to help people who are in need.
And many people do choose to do that and they may still do so. But I don't think there should be a prohibition on someone that does not have the luxury to help the needy at a great personal expense
And many people do choose to do that and they may still do so. But I don't think there should be a prohibition on someone that does not have the luxury to help the needy at a great personal expense
>Price gouging incentivizes creative and extreme tactics to increase the supply of a scarce good. And even when supply is inherently fixed, it at the very least gives you a clean way (even if it's not necessarily fair or good) to figure out who gets the last 10 bottles of water.
If we're willing to discard fair and good there are plenty of "clean" ways to distribute water that aren't gouging.
>If you create a law that bans me from selling water for $99, I'm not going to be able to do any of that. Not only am I no longer incentivized to drop everything and spend a week organizing a water supply chain, even if I was incentivized I don't have the kind of budget I need to get water bottles into a city that's underwater.
Good. Listen markets work in certain situations but maybe it's time we stop trying to marketize everything. Disasters are not your business opportunity. This is firmly in the government's realm and we should ask government to do more. If our social contract is a kind of insurance on the harshness of nature then it's hard to see a situation more deserving of government intervention than a natural disaster. This is the exact same problem we have with healthcare: find a market where people need your product to live, push that price up as high as you can. Charging the needy $100 for water is sick and reminds me of a Galbraith quote, namely that you are:
engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
If we're willing to discard fair and good there are plenty of "clean" ways to distribute water that aren't gouging.
>If you create a law that bans me from selling water for $99, I'm not going to be able to do any of that. Not only am I no longer incentivized to drop everything and spend a week organizing a water supply chain, even if I was incentivized I don't have the kind of budget I need to get water bottles into a city that's underwater.
Good. Listen markets work in certain situations but maybe it's time we stop trying to marketize everything. Disasters are not your business opportunity. This is firmly in the government's realm and we should ask government to do more. If our social contract is a kind of insurance on the harshness of nature then it's hard to see a situation more deserving of government intervention than a natural disaster. This is the exact same problem we have with healthcare: find a market where people need your product to live, push that price up as high as you can. Charging the needy $100 for water is sick and reminds me of a Galbraith quote, namely that you are:
engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.
Let's suppose that it is government's charter to make sure that those who need water get it in a time of emergency. Restricting prices does not do anything to solve that issue. It exacerbates it by removing incentives for the market to get more water into the area.
If this is government's charter, then government should seek to solve this issue by trucking in additional water to help alleviate the shortage and reduce prices naturally. Either directly, or by paying private firms the market price to truck it in and distribute it for free based on some criteria of neediness.
I still don't think this is an ideal solution, but it is far preferable to government restricting prices and falsely claiming that will have any positive effect.
If this is government's charter, then government should seek to solve this issue by trucking in additional water to help alleviate the shortage and reduce prices naturally. Either directly, or by paying private firms the market price to truck it in and distribute it for free based on some criteria of neediness.
I still don't think this is an ideal solution, but it is far preferable to government restricting prices and falsely claiming that will have any positive effect.
Your missing that the government inherits a duty to provide services to the profiteers who manage to get themselves stuck or otherwise in trouble, as well as wasting resources on things like tax and health enforcement.
Just because you don't like how markets work doesn't mean a market failure has occurred.
If you would like goods to sell at lower prices during times of crisis, you are free to start stockpiling them now (or convincing others to do so) and selling them the next time a crisis arises. We don't need to bring coercion (AKA govt) into the equation, you can meet your own needs for creating a world that seems "fair" to you without resorting to violence.
If you would like goods to sell at lower prices during times of crisis, you are free to start stockpiling them now (or convincing others to do so) and selling them the next time a crisis arises. We don't need to bring coercion (AKA govt) into the equation, you can meet your own needs for creating a world that seems "fair" to you without resorting to violence.
You're confusing violence with coercion. Violence cares about physicality; coercion does not. While others may think the distinction is too thin to care, I care to elaborate on the nuance, so I prefer to have two terms for what I see as two concepts.
An intersection exists somewhere, but not all violence is coercive, and not all coercion is violent.
When the government collects taxes from you, it is coercive. The underlying threat of violence is gated far from you. Imagine a government that didn't understand the full range of coercion, and only had violence in its tool bin for collecting government revenue. Then you wouldn't need two separate terms, as the government clearly isn't seeing any nuance either.
An intersection exists somewhere, but not all violence is coercive, and not all coercion is violent.
When the government collects taxes from you, it is coercive. The underlying threat of violence is gated far from you. Imagine a government that didn't understand the full range of coercion, and only had violence in its tool bin for collecting government revenue. Then you wouldn't need two separate terms, as the government clearly isn't seeing any nuance either.
Fair point!
The broader point I'm trying to make is that violence (or the threat of violence) is wrong in all cases except self-defense (including the protection of private property).
The broader point I'm trying to make is that violence (or the threat of violence) is wrong in all cases except self-defense (including the protection of private property).
I'm not denying how markets work... I'm denying that we should rely on them in a crisis like this.
>We don't need to bring coercion (AKA govt) into the equation, you can meet your own needs for creating a world that seems "fair" to you without resorting to violence.
Oh put the talking points away. Why don't you go ask some disaster survivors which is more violent: $100 for water sold privately by a gouger or government provided water? This is exactly the situation that government is created for.
>We don't need to bring coercion (AKA govt) into the equation, you can meet your own needs for creating a world that seems "fair" to you without resorting to violence.
Oh put the talking points away. Why don't you go ask some disaster survivors which is more violent: $100 for water sold privately by a gouger or government provided water? This is exactly the situation that government is created for.
The threat of violence is against the taxpayers, not the recipients of govt assistance. False dichotomy.
What is your definition of violence? You'll have to explain how voluntarily buying water and then selling it to a willing buyer is violent.
I'm not defining violence, I'm not even posing an answer to the question. I'm suggesting that you go ask some survivors what they think. I'm sure there are a few hard Mises-lovers who may agree with you but I think the vast, vast majority is going to disagree with you. Maybe you can tell them that government is violence and that all liberty is economic liberty and that $100 water during a disaster is proof that they live in a free society and maybe you can record it because I'd really like to see the responses.
Well, FWIW, I live in Houston, just endured Harvey, my car was totaled and part of my house was flooded -- still luckier than many people no doubt -- but even after having gone through this disaster, I STILL believe that coercion is wrong.
I'm not against private charity, or communities voluntarily coming together to prepare for the next disaster, but that doesn't justify using coercion.
I'm not against private charity, or communities voluntarily coming together to prepare for the next disaster, but that doesn't justify using coercion.
Alright, well I'm sorry about your property but I'm still gonna ask you to go to those bad areas and ask them which is more violent, price-gouged water or government assistance.
It won't let me respond to your comment below ("Alright, well I'm sorry about your property but I'm still gonna ask you to go to those bad areas and ask them which is more violent, price-gouged water or government assistance.") so I'm doing it here.
Again I ask you to define the term violence. Because you're saying violence, but I don't see what is violent about charging a high price for something, so that's why I'm asking you to define violence, otherwise how can anyone have a reasonable debate about what's actually occurring?
Again I ask you to define the term violence. Because you're saying violence, but I don't see what is violent about charging a high price for something, so that's why I'm asking you to define violence, otherwise how can anyone have a reasonable debate about what's actually occurring?
I'm not having a debate with you. I'm urging you to pack up this debate you obviously want to have, take it off the internet and out into the real word and to have it with affected people. People who have paid gougers during natural disasters. Go talk to them, tell them what you believe, have a dialogue with them. I don't really believe people change their minds on the internet, it's too easy to escape the cognitive dissonance. Which is why I question if you have the courage to stand in front of someone who has lost everything, someone who almost surely will disagree with you, and explain why the government shouldn't supply water in disasters. Seriously, go do it.
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Shorthand:
Market economy is best, market society is less...
THIS.
No law can ever repeal the laws of supply and demand, demand increases MASSIVELY during times of crisis, the result is prices must increase until supply increases or demand decreases again.
The alternative scenario that anti-gouging laws attempt to realize is for sellers to keep the cost of goods (now in high demand) the same, meaning they will quickly run out and shortages will arise, leaving those willing to pay higher prices unable to purchase goods.
Also, from a practical standpoint, if businesses are forced to keep prices the same, nothing stops people from buying up all the (now in high demand) goods and reselling them at a (much higher) current market price.
No law can ever repeal the laws of supply and demand, demand increases MASSIVELY during times of crisis, the result is prices must increase until supply increases or demand decreases again.
The alternative scenario that anti-gouging laws attempt to realize is for sellers to keep the cost of goods (now in high demand) the same, meaning they will quickly run out and shortages will arise, leaving those willing to pay higher prices unable to purchase goods.
Also, from a practical standpoint, if businesses are forced to keep prices the same, nothing stops people from buying up all the (now in high demand) goods and reselling them at a (much higher) current market price.
Fundamentally, a lot of people think it's okay/desirable for some to be deprived of a scarce resource because they lost a government lottery, but not okay when they're deprived of it because they can't afford it.
If your moral framework views "deprived by the government's fair/random centrally planned allocation" and "deprived by the market's prices" as roughly equivalent, then you won't have a lot of common ground with those people.
It's the same in urban housing.
Some want to minimize deprivation, others only want to distribute it more evenly across the socioeconomic spectrum.
If your moral framework views "deprived by the government's fair/random centrally planned allocation" and "deprived by the market's prices" as roughly equivalent, then you won't have a lot of common ground with those people.
It's the same in urban housing.
Some want to minimize deprivation, others only want to distribute it more evenly across the socioeconomic spectrum.
I fundamentally disagree with the use of all forms of coercion unless its in self-defense.
I would love to see an example of people using their price-gouging-acquired wealth to create a disaster relief supply chain. And that's only half sarcasm - if there are examples of people doing this and it's being reported on, I think it would be fascinating to read about. But something tells me real-life examples of this will be difficult to find.
In what reality do you think some random person on the side of the road is price gouging water bottles in order to fund an efficient supply chain to deliver bottles of water to the needy in the affected disaster area?
In what reality do you think this person isn't just pocketing the cash or using it to fund their own escape or reconstruction efforts?
In what reality do you think some random person on the side of the road is price gouging water bottles in order to fund an efficient supply chain to deliver bottles of water to the needy in the affected disaster area?
In what reality do you think this person isn't just pocketing the cash or using it to fund their own escape or reconstruction efforts?
There was that article about the guy who loaded up a truck of generators and brought them to a disaster area where they were needed.
He got caught by gouging laws, the generators were confiscated and never distributed.
He got caught by gouging laws, the generators were confiscated and never distributed.
Back of the envelope math says helicopter transported gas shouldn't cost $20/Gallon! A small turbine helicopter costs less than $1000/Hr to fly and could effectively transport gas/diesel/kerosene into difficult to access parts of Houston.
This is right on many levels however there are major exceptions. The problem often isn't that the goods are not available in a disaster area so much as that the people on the ground are poorly informed where to find relief and how to prepare. Also it encourages situations similar to ticket scalping, where an adequate but limited supply is bought up by a small group of profiteers before a disaster and re-sold at high prices.
In the case of the airlines it is likely that the situation you are proposing is happening. Airlines diverting planes and running them empty to provide more available and higher cost transportation to evacuees. However the free market CAN encourage some truly amoral and economically inefficient behavior in edge cases like natural disasters.
In the case of the airlines it is likely that the situation you are proposing is happening. Airlines diverting planes and running them empty to provide more available and higher cost transportation to evacuees. However the free market CAN encourage some truly amoral and economically inefficient behavior in edge cases like natural disasters.
the only reason that kind of price gouging is possible is because you have the law on your side. since that business plan owes its feasibility to civil society, you owe it to civil society to not gouge. cover your costs, make a fair profit, and otherwise be glad you don't have to pay for the muscle needed to keep you from getting strung up.
Price gouging [0] is when the price is excessively raised to profit from a disaster. Including the reasonable cost of special transportation required (off-road vehicle, helicopter etc.) after a disaster is not considered price gouging.
By one estimate, helicopter transported gasoline "cost" around $8/Gallon to get it into difficult to access parts of Houston. Charging $20/Gal would be considered price gouging.
A small Helicopter (Bell 206L4 Longranger) could handle a 200 Gallon cargo tank, and costs under $1000/Hr to fly. I'd have to run the numbers but the ballpark figures make sense.
[0] https://en.wikipedia.org/wiki/Price_gouging#Laws_against_pri...
By one estimate, helicopter transported gasoline "cost" around $8/Gallon to get it into difficult to access parts of Houston. Charging $20/Gal would be considered price gouging.
A small Helicopter (Bell 206L4 Longranger) could handle a 200 Gallon cargo tank, and costs under $1000/Hr to fly. I'd have to run the numbers but the ballpark figures make sense.
[0] https://en.wikipedia.org/wiki/Price_gouging#Laws_against_pri...
I think the picture of the shopper with hundreds of bottles of water illustrates the problem nicely.
In a disaster, demand changes. If you artificially keep prices from increasing, you'll have shortages. And likely those shortages are due to customers buying a ton of product and just selling it on the side at a higher price.
In a disaster, demand changes. If you artificially keep prices from increasing, you'll have shortages. And likely those shortages are due to customers buying a ton of product and just selling it on the side at a higher price.
Ah, the "well someone else is going to be a shit about this so I might as well be the one that profits" argument.
If you're worried about resellers, then limit how much a single person can walk off with. Raising the price doesn't magically prevent shortages. It also makes it so some can't get what they need, just by the principle of who can afford it as opposed to first come first serve.
Also known as, "Embrace reality argument", because this is what people actually do.
Capitalism works because people are greedy, and it takes advantage of that.
Capitalism works because people are greedy, and it takes advantage of that.
But it only works when that 'greed' (I prefer 'self-interest') is directed toward creating value. Greed can be a good motivator but greed can be destructive to the market, too. See: Rent Seeking, Predatory Pricing, Protection Racket etc.
Or we could stop saying "races to the bottom are inevitable, just accept them" and work on preventing them, especially in disaster situations.
> And likely those shortages are due to customers buying a ton of product and just selling it on the side at a higher price.
So have a max per person? Economic theory is nice and all, but limiting disaster supplies to wealthy people is not an acceptable answer.
So have a max per person? Economic theory is nice and all, but limiting disaster supplies to wealthy people is not an acceptable answer.
Well, economic theory would ordinarily indicate that supply would increase to meet demand. That is, if a plane ticket starts costing $6500 for an economy seat, more people will enter the airline industry, and the prices will fall. And in the case of more elastically supplied goods (e.g. water) during a disaster, that's probably correct. But airplane seats are fairly inelastic. So, I think that's the tension we're seeing here. I'm not sure what the solution is though. The reason for the high price is fundamental: there are a limited number of seats available. You'd better believe every available seat will get sold to someone, and they have to be allocated somehow.
> they have to be allocated somehow
There's a proven algorithm to allocate scarce resources without price-gouging.
That algorithm is called "first-come-first-served-with-quantity-limits".
There's a proven algorithm to allocate scarce resources without price-gouging.
That algorithm is called "first-come-first-served-with-quantity-limits".
This is the best algorithm to emerge a black market. Then you can have both first-come-first-served AND price gouging!
Given the existing laws, stores engaging in price gouging essentially are a black market. You don't stop trying to manage a disaster just because there's no perfect solution.
No, that's simply 'market'. It becomes black only when you outlaw it in an attempt to enforce perceived fairness† but not backing the supply side.
[†] we can argue long and hard about morality of "first to grab wins" vs "deepest pockets win", but let's agree in most societies neither is seen as a virtue.
[†] we can argue long and hard about morality of "first to grab wins" vs "deepest pockets win", but let's agree in most societies neither is seen as a virtue.
I doubt its as efficient. People will still buy as much as they can and then turn and sell their surplus. Unless you can accurately gauge their need, which is requires way more work. "Price gouging" will allow the most efficient utilization of goods. While they likely will price out the less wealthy, the goods will help more people in general.
This doesn't even address the infrastructure and politics behind setting prices and managing limits. Changing price is faster, easier, and more efficient.
It also leaves out the political power involved. Someone in charge of setting limits probably gets to makes sure they, their family and friends all get resources before anyone else. You just trade the power of wealth for political power.
This in my mind becomes a trade off between helping the most people, and having less bias (because politics) towards who you help.
This doesn't even address the infrastructure and politics behind setting prices and managing limits. Changing price is faster, easier, and more efficient.
It also leaves out the political power involved. Someone in charge of setting limits probably gets to makes sure they, their family and friends all get resources before anyone else. You just trade the power of wealth for political power.
This in my mind becomes a trade off between helping the most people, and having less bias (because politics) towards who you help.
> I'm not sure what the solution is though.
The solution is pretty obvious, require that companies don't raise prices during a disaster. That might mean they don't quite maximize profits, but it also gives everyone a shot regardless of their wealth. Anti price gouging laws are pretty common and are nearly universally popular.
The solution is pretty obvious, require that companies don't raise prices during a disaster. That might mean they don't quite maximize profits, but it also gives everyone a shot regardless of their wealth. Anti price gouging laws are pretty common and are nearly universally popular.
Being lucky enough to be first in the queue doesn't make you more morally deserving any more than being lucky enough to be rich. Worse, making it illegal to raise prices constrains supply so that a lot fewer people can be helped.
I'm not saying that absolutely everything should necessarily be allocated by price. Making it illegal to allocate things by price makes sense in the case of something like land whose supply is inelastic. If you want to say the price of land should be controlled and nobody should be allowed more than their fair share, okay; it's not like a price increase will allow more to be supplied. But clean water and airline seats have an elastic supply, and outlawing allocation by price means there will be less to go around.
I'm not saying that absolutely everything should necessarily be allocated by price. Making it illegal to allocate things by price makes sense in the case of something like land whose supply is inelastic. If you want to say the price of land should be controlled and nobody should be allowed more than their fair share, okay; it's not like a price increase will allow more to be supplied. But clean water and airline seats have an elastic supply, and outlawing allocation by price means there will be less to go around.
> it also gives everyone a shot regardless of their wealth
No, it doesn't. It means there's no incentive for entrepreneurs to go to great lengths to increase the supplies of (e.g.) bottled water during a disaster.
It doesn't mean everyone gets what they need, it means only the first few people get what they need.
No, it doesn't. It means there's no incentive for entrepreneurs to go to great lengths to increase the supplies of (e.g.) bottled water during a disaster.
It doesn't mean everyone gets what they need, it means only the first few people get what they need.
And yet businesses in the real world are working hard to increase supply of these very goods right now just so that they can sell them at a regular price. Some companies even give away stuff like bottled water, what's the economic explanation of that?
tl;dr left out of your economic models are things like good will and civic pride.
tl;dr left out of your economic models are things like good will and civic pride.
They're not working as hard as they would be. And there are no new entrants to the market. Sure, companies might, on their own good will, work hard to deliver more water bottles. But if people are buying water bottles for $100 a pop, i'm gonna drive over there myself with a case of Arrowhead, and i'd bet so are you. High prices motivate people who wouldn't otherwise involve themselves to provide the supply. This is the essence of a market. Markets abhor an arbitrage opportunity, and price gouging is an arbitrage opportunity.
A recent article I read regarding that illustrated the point a bit from the other side. One of the airlines artificially capped their prices to $99 per flight, and predictably sold out very quickly. That did very little good to all the truly desperate people (Luckily, other airlines that didn't cap had open, but pricier, seats).
What this meant was that people who weren't necessarily in all that much danger, or had plenty of time to evacuate via other means, used up all the tickets. But the ones that were really needy and couldn't use other evacuation means, E.g. pregnant women, were not even given the option of the higher price.
What this meant was that people who weren't necessarily in all that much danger, or had plenty of time to evacuate via other means, used up all the tickets. But the ones that were really needy and couldn't use other evacuation means, E.g. pregnant women, were not even given the option of the higher price.
...and then Air Canada sent down more flights to get people out.
http://www.marketwatch.com/story/r-e-p-e-a-t----air-canada-o...
In the event of irregular operations, the supply of seats is somewhat elastic.
http://www.marketwatch.com/story/r-e-p-e-a-t----air-canada-o...
In the event of irregular operations, the supply of seats is somewhat elastic.
Who's to say that those in most need can afford the gouging? If the price is allowed to flex based on demand, only the rich could afford the service, and money != need.
I'm not saying that that can't happen. There are probably people that are needy and can't afford the increased prices.
But, by making it "cheap" enough for the poor & needy to pay, you've effectively made it "cheap" for the poor and not needy to pay as well. The latter group being much larger and will probably drown out access for the former, so it's a lose-lose if you ask me.
But, by making it "cheap" enough for the poor & needy to pay, you've effectively made it "cheap" for the poor and not needy to pay as well. The latter group being much larger and will probably drown out access for the former, so it's a lose-lose if you ask me.
"There are probably people that are needy and can't afford the increased prices."
I would imagine most people fall into this category during a crisis.
Access is "drowned out" for everyone ... equally. The alternative is that only the rich have access. Which is better? In both scenerios people die, except in one onnly one class of people die.
My point is there should be no "economic" model for private business in a natural disaster where lives are on the line.
I would imagine most people fall into this category during a crisis.
Access is "drowned out" for everyone ... equally. The alternative is that only the rich have access. Which is better? In both scenerios people die, except in one onnly one class of people die.
My point is there should be no "economic" model for private business in a natural disaster where lives are on the line.
Then isn't it a proof that the economic theory doesn't work in practice? We're talking two economy seats paying the price to charter the whole jet: https://www.privatefly.com/us/private-jets/large-airliner-hi...
The charter cost from PrivateFly looks like it includes allowances for empty-return flights etc.
The actual block hour cost for a 737-800 is a third that rate. eg. $3500/Hr.
For a small group, something like a CJ3 is more typical.
https://www.privatefly.com/us/private-jets/small-jet-hire/Ce...
$2676/Hr on PrivateFly
Here is the block hour cost for a variety of small airliners.
http://www.planestats.com/bhsn_2017mar
737-800 is $3500/Hr depending on the operator. $6785 per economy seat for a 2 Hour flight is outrageous.
The actual block hour cost for a 737-800 is a third that rate. eg. $3500/Hr.
For a small group, something like a CJ3 is more typical.
https://www.privatefly.com/us/private-jets/small-jet-hire/Ce...
$2676/Hr on PrivateFly
Here is the block hour cost for a variety of small airliners.
http://www.planestats.com/bhsn_2017mar
737-800 is $3500/Hr depending on the operator. $6785 per economy seat for a 2 Hour flight is outrageous.
I don't think the issue is elastic versus inelastic goods. The issue is the barrier to entry in the market.
If water bottles were selling for 20 dollars each, and I were in an unaffected but relatively nearby area, I might load my truck with a couple thousand water bottles that I buy for 50 cents, drive for a day, and enjoy a big return. In this way, the market is extremely useful. People like me are motivated by profit incentives to move the resources that people in the disaster area need to them. This is because the water bottle market has a very low cost to enter.
Conversely, the airline market has a very high cost to enter. Even if I would like to take advantage of high prices, I can't get myself a passenger plane, necessary permits, agreements with airports, etc, in time to do anything about the hurricane. On the other hand, people with small private planes may be able to fly their planes down, and take on passengers, in a profitable way, and that may be an incentive for more of them to do so than would otherwise.
If water bottles were selling for 20 dollars each, and I were in an unaffected but relatively nearby area, I might load my truck with a couple thousand water bottles that I buy for 50 cents, drive for a day, and enjoy a big return. In this way, the market is extremely useful. People like me are motivated by profit incentives to move the resources that people in the disaster area need to them. This is because the water bottle market has a very low cost to enter.
Conversely, the airline market has a very high cost to enter. Even if I would like to take advantage of high prices, I can't get myself a passenger plane, necessary permits, agreements with airports, etc, in time to do anything about the hurricane. On the other hand, people with small private planes may be able to fly their planes down, and take on passengers, in a profitable way, and that may be an incentive for more of them to do so than would otherwise.
Some fun context: Walmart is selling water at normal prices and shipping it in from distribution centers as far away as Nevada.
> Well, economic theory would ordinarily indicate that supply would increase to meet demand.
That's precisely it, it's just a theory and it doesn't apply here.
How are they supposed to increase supply of bottled water during a category 5 hurricane?
That's precisely it, it's just a theory and it doesn't apply here.
How are they supposed to increase supply of bottled water during a category 5 hurricane?
Supply is only half of "supply & demand". Price increases discourage buying more than you need, which can help ensure that more people are able to get the things they need.
Unfettered price increases may not be the best solution, but capping prices too low just creates different problems.
Unfettered price increases may not be the best solution, but capping prices too low just creates different problems.
Yeah, I'm sure the gas stations selling the gas at $20/Gal are thinking about the greater good of the community.
The whole point of capitalism is that individuals pursuing their collective self-interest actually promotes the public interest more effectively than if each of those people tried to help each other.
In the long run you would see supply increases for an inelastic good, but, due to the demand shock that is a natural disaster, the demand curve moves to the right in the short run, thus increasing price.
Not sure what the best solution is, though.
Not sure what the best solution is, though.
If you could drive into Florida and sell bottles of water for $5, people will do it.
Same with gasoline. Price signals work.
Same with gasoline. Price signals work.
You can, but Florida has a price gouging law and prosecutions of people selling overpriced water are quite popular.
http://myfloridalegal.com/pages.nsf/Main/5D2710E379EAD6BC852...
> Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer for lease essential commodities, dwelling units, or self-storage facilities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber.
http://myfloridalegal.com/pages.nsf/Main/5D2710E379EAD6BC852...
> Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer for lease essential commodities, dwelling units, or self-storage facilities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber.
Our mindset in society is that the wealthy survive and prosper. From my experience most wealthy people are terrible out of shape - probably would have a heart attack if asked to run a mile. While I don't live anywhere near these disasters, if I saw a wealthy person purchase all the water because they could afford it, I would hope they are carrying. The strong survive, not the wealthiest.
>In a disaster, demand changes. If you artificially keep prices from increasing, you'll have shortages.
You'll have shortages anyway. The idea here is that in a disaster it's immoral to ration essentials by wealth.
You'll have shortages anyway. The idea here is that in a disaster it's immoral to ration essentials by wealth.
I agree it's immoral to price gouge during a disaster. While rationing solves the allocation issue, it provides zero incentive for people to introduce more supply by opening up warehouses of goods or re-routing airplanes from other regions to fly more people out.
A man during Katrina bought 19 generators, drove 600 miles, and sold them for 2x his cost. I would argue his actions were moral and helpful. He was jailed for price gouging.
http://abcnews.go.com/2020/Stossel/story?id=1954352&page=1
A man during Katrina bought 19 generators, drove 600 miles, and sold them for 2x his cost. I would argue his actions were moral and helpful. He was jailed for price gouging.
http://abcnews.go.com/2020/Stossel/story?id=1954352&page=1
"zero incentive for people to introduce more supply"
Of course! That's why we have government, and pay taxes, so that things like disaster relief can be executed without working about "economic incentives".
See health care. ducks
Of course! That's why we have government, and pay taxes, so that things like disaster relief can be executed without working about "economic incentives".
See health care. ducks
FEMA to the rescue! /sarcasm
FEMA might have been a joke during Katrina, but that doesn't mean we should simply blow it up and turn to the "free market". Fix FEMA or your government if they are dysfunctional.
> While rationing solves the allocation issue, it provides zero incentive for people to introduce more supply by opening up warehouses of goods or re-routing airplanes from other regions to fly more people out.
And yet
http://www.denverpost.com/2017/08/29/hurricane-harvey-canned...
And yet
http://www.denverpost.com/2017/08/29/hurricane-harvey-canned...
I don't understand your position, do you believe gouging is immoral or moral? You've stated both.
Say we have two lines. One line for disaster charity contains water for free but you have to wait two hours and you only get two bottles per person per day. The other line with Joe Capitalist where you can get as much water as you want right now for $10 a bottle. Is there any problem with having both lines in a disaster?
I would say no, because it increases the total supply of water and allows those without wealth to get more since the people with wealth will spend it to get water from Joe Capitalist.
I would say no, because it increases the total supply of water and allows those without wealth to get more since the people with wealth will spend it to get water from Joe Capitalist.
And those with wealth would then not be in the "free" line, which would slightly reduce demand on that line
[deleted]
So either you have hoarding or you have price gouging. This isn't a natural inevitability, it is specifically tied to markets. In extreme situations like natural disasters, markets behave in this way. So some people blame price gougers, and others consider it the only reasonable thing to do. I think we should consider such extreme situations as evidence of the limits of markets for distribution. There are other ways to distribute goods and they may very well be superior in such situations. However, it is completely untenable because markets are politically inviolable these days.
Even if you want to stop something you consider perverse (price gouging), you have to do it with a market mechanism (price controls), but this is a failure mode of markets, not something you can band-aid while staying within markets.
And to emphasize the point: It isn't worthwhile to consider gouging a moral failure on the part of individual actors. Either they do it, or someone else hoards. You can call both despicable but that doesn't fix the economic pathology. Focusing on individual actions blinds one to the setting in which they take those actions.
Even if you want to stop something you consider perverse (price gouging), you have to do it with a market mechanism (price controls), but this is a failure mode of markets, not something you can band-aid while staying within markets.
And to emphasize the point: It isn't worthwhile to consider gouging a moral failure on the part of individual actors. Either they do it, or someone else hoards. You can call both despicable but that doesn't fix the economic pathology. Focusing on individual actions blinds one to the setting in which they take those actions.
Price gouging is not perverse, price gouging is a control on hoarding.
You can't think of any perverse effects on distribution that price gouging can have?
It's the stores inability or unwillingness to charge a higher market price that allows the hoarder to buy all that water.
When you shame pricing based on market realities, known entities like grocery stores don't do it but unknown entities like random guy down the street will take advantage of the opportunity. And chances are he won't be paying taxes on his profit either.
And if somehow you are successful at stopping higher prices from being paid, you take all the profit out of rushing resources to the disaster zone. You can even reduce the flow of resources BEFORE the storm hits.
People also may not realize how scarce a resource is or will be in the price stays as low as it usually is. Prices SHOULD be going up when a storm is imminent.
High prices greatly increase the chances that products will be available even when scarce. And prices that are too low for market realities ensure shortages.
I, for one, would rather pay a higher price than not have access to the resource at all. Prices serve useful functions in the marketplace and we benefit most when everybody understands that.
We'd be far better off if we let the market function and instead give victims extra cash to get what they need.
When you shame pricing based on market realities, known entities like grocery stores don't do it but unknown entities like random guy down the street will take advantage of the opportunity. And chances are he won't be paying taxes on his profit either.
And if somehow you are successful at stopping higher prices from being paid, you take all the profit out of rushing resources to the disaster zone. You can even reduce the flow of resources BEFORE the storm hits.
People also may not realize how scarce a resource is or will be in the price stays as low as it usually is. Prices SHOULD be going up when a storm is imminent.
High prices greatly increase the chances that products will be available even when scarce. And prices that are too low for market realities ensure shortages.
I, for one, would rather pay a higher price than not have access to the resource at all. Prices serve useful functions in the marketplace and we benefit most when everybody understands that.
We'd be far better off if we let the market function and instead give victims extra cash to get what they need.
It's the store's unwillingness to do the obvious thing and limit sales of water given the sharp rise in demand in the face of a life threatening disaster.
Resources aren't rushed to disaster areas in response to profits - they're rushed in response to the disaster. See FEMA, USRC, etc.
Resources aren't rushed to disaster areas in response to profits - they're rushed in response to the disaster. See FEMA, USRC, etc.
Stores compete with each other. While it might be great if retailers limit what people can buy, they have to punish themselves to do it. So it's not a very useful expectation.
And, no, resources aren't rushed to disaster areas if those that have to expend extra effort to do so will simply be punished.
I'd rather rely on those who've been delivering everything efficiently already than wait for the government to do it.
It's not clear to me that government doing this costs us less. Most of the cost is hidden away in the federal budget. At least when I am paying a high price for gas, I am paying for the actual cost of getting it to me, including paying for logistics.
And, no, resources aren't rushed to disaster areas if those that have to expend extra effort to do so will simply be punished.
I'd rather rely on those who've been delivering everything efficiently already than wait for the government to do it.
It's not clear to me that government doing this costs us less. Most of the cost is hidden away in the federal budget. At least when I am paying a high price for gas, I am paying for the actual cost of getting it to me, including paying for logistics.
In fairness, we don't know if she was buying for her or her and several of her neighbors. So, while a picture tells a thousand words, it can very well tell the wrong thousand.
Bingo!
At the end of the day this is a failing of the government (both State and Federal).
We have a Federal oil reserve. The government bears the cost of storing it (and in turn all taxpayers bear a small cost) so that when something happens and we need oil, we have it.
The state of Florida should have a bottled water and canned goods reserve. They (and their taxpayers) should bear the cost of storing those goods so they are available for a disaster.
Then there wouldn't be price gouging.
You could do the same with planes. They could store planes for times of emergency, or they could repurpose military transports or at the very least they could let the airlines set demand based prices and then subsidize people's purchases based on income and need, so that the airlines are incentivized to send more planes, but everyone can still get out.
If you believe that the government is the ultimate collective risk pool then it makes sense for it to act like one.
We have a Federal oil reserve. The government bears the cost of storing it (and in turn all taxpayers bear a small cost) so that when something happens and we need oil, we have it.
The state of Florida should have a bottled water and canned goods reserve. They (and their taxpayers) should bear the cost of storing those goods so they are available for a disaster.
Then there wouldn't be price gouging.
You could do the same with planes. They could store planes for times of emergency, or they could repurpose military transports or at the very least they could let the airlines set demand based prices and then subsidize people's purchases based on income and need, so that the airlines are incentivized to send more planes, but everyone can still get out.
If you believe that the government is the ultimate collective risk pool then it makes sense for it to act like one.
I'm in South Florida and facing this trying to book flights out (getting stuck on I-95 with a two year old won't work for us).
The airlines have adjusted their rates (it seems) but you can only find tickets if someone cancels.
I used the Chrome Puppeteer API to check Delta once per minute and grabbed tickets for $130 per passenger.
The airlines have adjusted their rates (it seems) but you can only find tickets if someone cancels.
I used the Chrome Puppeteer API to check Delta once per minute and grabbed tickets for $130 per passenger.
There is also the increased cost of getting this merchandise to an area that is in shortage. If the roads are in disrepair, or there is flooding, it's gonna cost more to stock it. I have a feeling that not all increased prices are gouging... a lot of it is just that people don't want to have to pay more when crisis strikes. But preparedness counts in a situation like this. Waiting until the day before landfall to go and stock up is just plain idiotic. People need to think and plan ahead. If things cost more when you do it - you probably just waited too damn long to get your supplies.
Why does everyone making these analysis ignore the context and the choices leading up to the moment in question?
Hurricanes are not stealthy, there are multiple day's warning before they make any kind of landfall. One person gave up something in the days prior to the hurricane so that they could have sufficient supplies to last out the event. Another person didn't make the same choice, and now it's being deemed unfair and unjust that the second person has to do without or pay a premium for their decision.
Hurricanes are not stealthy, there are multiple day's warning before they make any kind of landfall. One person gave up something in the days prior to the hurricane so that they could have sufficient supplies to last out the event. Another person didn't make the same choice, and now it's being deemed unfair and unjust that the second person has to do without or pay a premium for their decision.
If price-increases are allowed during severe shortages, then people would make a business of "pre-stocking" disaster-prone areas so that there is enough to satisfy this increased demand (at even reasonable prices, not extreme ones). Sounds like a perfectly reasonable business model.
But pre-stocking, specifically the long-term storage of supplies (as most preppers will probably note), is costly. At that point, it's not price gauging, just simply the cost that that person/business spent trying to store the supplies in preparation for the natural disaster. Heck, it might even be something that certain businesses can can incorporate into their existing warehousing/storage facilities. But that won't happen unless they're allowed to charge normal rates during normal periods, and increased ones during shortages. Because they'll simply go out of business, being the shop that sells the "priciest" fuel and water.
But, to be honest, this really should be the responsibility of the government (while it claims to protect us). Price-gauging would then not even be an issue, because the government should be pre-stocking disaster-prone areas already. I think that's who I'll reserve my moral indignation for, and not the price-"gaugers".
But pre-stocking, specifically the long-term storage of supplies (as most preppers will probably note), is costly. At that point, it's not price gauging, just simply the cost that that person/business spent trying to store the supplies in preparation for the natural disaster. Heck, it might even be something that certain businesses can can incorporate into their existing warehousing/storage facilities. But that won't happen unless they're allowed to charge normal rates during normal periods, and increased ones during shortages. Because they'll simply go out of business, being the shop that sells the "priciest" fuel and water.
But, to be honest, this really should be the responsibility of the government (while it claims to protect us). Price-gauging would then not even be an issue, because the government should be pre-stocking disaster-prone areas already. I think that's who I'll reserve my moral indignation for, and not the price-"gaugers".
The assumption that a cart with that much water must be for a single family is annoying etc. It could just as easily been a shelter stocking up.
I really hope that shelters aren't sending people out to buy water by the case at retail prices.
Like, the state emergency management should be selling it to them by the pallet at wholesale and delivering it.
(Florida devotes lots of resources to these problems; they are providing fuel tankers with police escorts to gas stations...)
Like, the state emergency management should be selling it to them by the pallet at wholesale and delivering it.
(Florida devotes lots of resources to these problems; they are providing fuel tankers with police escorts to gas stations...)
Logistics is hard. You can get it right 499/500 and still end up with someone going to the local office supply store etc.
It could just as easily have been someone stocking up to sell on the side of the road for $10 a bottle.
You can't fix this. You either have a free economy or you don't. What you need to ensure is that there is at least a few airlines and they are not cooperating to manipulate prices.
Now you say: But there is the case of "natural disasters". So what? There are ordinary people going through disasters everyday, not necessarily natural. Should we go out of our way to accommodate them.
Most importantly, if you accommodate enough people during natural disaster, you no longer have this supply/demand imbalance. Bam, problem solved.
Also consider the following: Capitalism kills the lower end who can't sustain itself. Socialism, so far, kills the whole system because the whole system can't sustain itself. Pick which one.
Now you say: But there is the case of "natural disasters". So what? There are ordinary people going through disasters everyday, not necessarily natural. Should we go out of our way to accommodate them.
Most importantly, if you accommodate enough people during natural disaster, you no longer have this supply/demand imbalance. Bam, problem solved.
Also consider the following: Capitalism kills the lower end who can't sustain itself. Socialism, so far, kills the whole system because the whole system can't sustain itself. Pick which one.
This is just deification of capitalism and conflating decency in the face of a life threatening situation with "socialism". Others have already answered the question of what to do, but I'll repeat. Don't raise prices and let the goods sell FIFO with reasonable limits on quantities. Raising prices during a disaster does absolutely nothing to increase supply.
So you are just picking a different population. How is that more efficient than the free market other than making you feel good and compassionate.
A different and likely larger population that's more likely based on need.
In the event of a disaster, I assert the thing you're sat-solving for is "as many people as possible getting enough of a constrained resource to survive long enough to get out of the disaster condition". In my mind, that's both good and compassionate.
In the event of a disaster, I assert the thing you're sat-solving for is "as many people as possible getting enough of a constrained resource to survive long enough to get out of the disaster condition". In my mind, that's both good and compassionate.
I believe in my case, the population would be people who can make it to the store - unchanged from what it was before the store started limiting quantities.
I'm having a hard time not getting snarky here because, to be honest, you don't seem to be arguing in good faith.
I'm having a hard time not getting snarky here because, to be honest, you don't seem to be arguing in good faith.
> I'm having a hard time not getting snarky here because, to be honest, you don't seem to be arguing in good faith.
Really? Not in good faith? I'm neither a shareholder of these airlines, neither live in the US, and recently most of my income is not related to the US. I'm just stating my opinion.
Really? Not in good faith? I'm neither a shareholder of these airlines, neither live in the US, and recently most of my income is not related to the US. I'm just stating my opinion.
Depends on the outcome and how you measure efficiency.
Say there is a water shortage and lots of hoarding resulting in high profits and a couple of deaths.
Is that outcome more efficient than forced rationing resulting in less profit and less death?
Say there is a water shortage and lots of hoarding resulting in high profits and a couple of deaths.
Is that outcome more efficient than forced rationing resulting in less profit and less death?
Another reason "gouging" has good side effects (including incentivizing companies to rush more flights down there ASAP, driving down "gouging" prices) is that it helps stop hoarding of scarce resources:
http://money.cnn.com/2017/09/07/news/economy/gas-shortages-f...
^-- Here, Floridians aren't "gouged" for gas, so they stock up on more than they need "just in case", leaving the pumps empty and leaving companies with little incentive to rush their workers down w/ more gas.
I mean, do you want to drive a gas truck to Florida right now?
http://money.cnn.com/2017/09/07/news/economy/gas-shortages-f...
^-- Here, Floridians aren't "gouged" for gas, so they stock up on more than they need "just in case", leaving the pumps empty and leaving companies with little incentive to rush their workers down w/ more gas.
I mean, do you want to drive a gas truck to Florida right now?
I see people advocating the implementation of quantity controls as a means to control hoarding as if those words had some intrinsic magical merit. Think about it carefully for a moment and you will realise there is no actual way for a single monopolistic store (let alone competitive stores, plural) to fairly ration something in who supply.
Is the rule one per person? What if I go back to the store N times? What if I have kids or aged parents that cannot come to the store themselves?
What if I buy a few per store?
Is it even fair to preclude these courses of action?
Is the rule one per person? What if I go back to the store N times? What if I have kids or aged parents that cannot come to the store themselves?
What if I buy a few per store?
Is it even fair to preclude these courses of action?
The flight prices increases makes it look like someone (neglectfully?) forgot to disable the supply/demand price modification algorithm...
I don't know why they would disable it, or why it would be neglectful for them not to, from a business perspective. As long as they are charging the same prices for the same supply/demand ratio that they normally would, then it's not considered gouging (I don't know if they are or not). Granted, it would be nice for them to disable it so that people can get affordable flights, but they are a business after all is said and done, and I have no doubt they'll fill all their seats regardless of the prices.
In regards to the airlines, is most of the price setting automated? Or is it a manual process?
A mixture of both. There are immense applications calculating fares based on a ton of factors (estimated demand, seasonality, competitor prices, and much much more) but analysts can tweak and modify markets manually as well.
And yet, JetBlue capped their rates out of Florida at $99.00.
Not sure if they fly out of South Florida or not, but that is certainly a wonderful gesture on their part.
There are sound, morally justifiable reasons for allowing the prices of goods and services to be set by market conditions, even during times of crisis and severe shortages. But it's a waste of time to try to explain them to someone who exhibits the same knee-jerk response as this article.
Okay, what's one? How do you defend price gouging water and airline seats during an emergency?
I don't see how it's defensible...
Let's say airline X jacks rates during a crisis. The "free market" reaction would be that people would be outraged by airline X, and would then during the crisis and in the future not use them - thereby hurting their business/brand. A competitor, airline Y who didn't jack rates would then get current & future business based on their noble actions during the crisis. The free market would solve the problem by itself ... right?
Except wait... the people in the current crisis, aren't helped at all. And of course, there's no guarantee that airline Y doesn't jack rates during the next crisis.
Anyone else have a reasonable counter-argument?
Edit: Meant for my reply to be for rhapsodic - sorry.
Let's say airline X jacks rates during a crisis. The "free market" reaction would be that people would be outraged by airline X, and would then during the crisis and in the future not use them - thereby hurting their business/brand. A competitor, airline Y who didn't jack rates would then get current & future business based on their noble actions during the crisis. The free market would solve the problem by itself ... right?
Except wait... the people in the current crisis, aren't helped at all. And of course, there's no guarantee that airline Y doesn't jack rates during the next crisis.
Anyone else have a reasonable counter-argument?
Edit: Meant for my reply to be for rhapsodic - sorry.
> I don't see how it's defensible...
I'm trying to answer for the sake of debating - not necessarily my point of view.
First, regardless of how much the airline charges, there will be a fixed number of people that will get a seat.
Now, suppose the price is kept low, like $99. Maybe some people that don't want the seat that much will get it. They may have other options and wouldn't pay $200 for the seat, but think $99 is ok. Conversely, some people who value the seat much more (to the point they would pay $4000 for it) may not be able to get it. So you can argue that the seats will be attributed randomly, which is worse than basing the allocation on who wants the seats the most (well, then there's the issue that $5000 is peanuts for some people, and a lot for others, not sure how to answer to that).
Also, with the seats getting so expensive, the airlines may try to sell extra seats (re-routing planes for instance).
Finally, this happens all the time in different contexts. People go to all sorts of trouble because they don't have access to the best lawyers, doctors or can't afford their medication. It's not really an argument but if we are consistent, we shouldn't be shocked by one and not the other.
I'm trying to answer for the sake of debating - not necessarily my point of view.
First, regardless of how much the airline charges, there will be a fixed number of people that will get a seat.
Now, suppose the price is kept low, like $99. Maybe some people that don't want the seat that much will get it. They may have other options and wouldn't pay $200 for the seat, but think $99 is ok. Conversely, some people who value the seat much more (to the point they would pay $4000 for it) may not be able to get it. So you can argue that the seats will be attributed randomly, which is worse than basing the allocation on who wants the seats the most (well, then there's the issue that $5000 is peanuts for some people, and a lot for others, not sure how to answer to that).
Also, with the seats getting so expensive, the airlines may try to sell extra seats (re-routing planes for instance).
Finally, this happens all the time in different contexts. People go to all sorts of trouble because they don't have access to the best lawyers, doctors or can't afford their medication. It's not really an argument but if we are consistent, we shouldn't be shocked by one and not the other.
It seems like the ideal solution scales the price increase to an individual's income. A flat $200 increase does not impose the same burden on everyone, and only helps out company profits.
No, the free market reaction is that all the airlines notice airline seats from the Caribbean are way more valuable right now, so they divert resources from nonemergency areas to put on extra flights out of the Caribbean, as many as the airports can take, so more people are helped. If there's a law against price gouging, the airlines won't bother doing any such thing, because they have no incentive.
LOL. So you're saying a for-profit company, who's sole purpose is to increase revenue/stock value is going to do the right thing, and divert flights, leave their gouging money on the table, just to serve those in need? Don't hold you breath.
Er, you've got it the wrong way around. Failure to divert flights would leave money on the table - there's no profit in potential customers who would have been willing to pay you for a service that you don't deliver. It's diverting flights that lets you actually charge the 'gouging' money and increase profits and stock value. This is the principle of how capitalism works. It's the reason why capitalism turned out to work better than communism. We shouldn't ignore our knowledge of basic economics in a disaster area, because that's where it's most badly needed of all.
Really? A disaster is where we need capitalism the most? All you've said is how much of a profit companies can make via price gouging, but you've made absolutely no mention about the people that need the help. Great, companies make a killing in profit, but fewer people than ever can afford the help that they need.
How are you going to look someone in the face and tell them that they should be glad that they can no longer pay for a service that used to be affordable, right when they need it most?
How are you going to look someone in the face and tell them that they should be glad that they can no longer pay for a service that used to be affordable, right when they need it most?
My claims have been all about the people that need the help. Stop, take a deep breath, go back and actually read my last few posts.
How are you going to look someone in the face and tell them that they should be glad that the service they need is now not available for any price, right when they need it most?
How are you going to look someone in the face and tell them that they should be glad that the service they need is now not available for any price, right when they need it most?
Not really, you only suggested that companies will send more flights to disaster areas which somehow means more people will be helped even though they can't afford it anymore.
Your suggestion that flights will somehow "run out" doesn't make sense. If demand is huge for flights during a disaster, airlines don't need to increase the profit margin exorbitantly to make more money. They already will.
Your suggestion that flights will somehow "run out" doesn't make sense. If demand is huge for flights during a disaster, airlines don't need to increase the profit margin exorbitantly to make more money. They already will.
Suppose I'm in an area where all of the dialysis clinics have been shut down by a hurricane and floods, and I have a family member who needs dialysis within the next 48 hours. My only hope is to fly them to an area where they can get dialysis. I'm much more concerned with whether or not there is a seat available, than the amount it will cost me. A $350 seat is of no use to me if someone else has already bought it.
Conversely, suppose my whole family is healthy and able bodied, but we just don't feel like living in a temporary shelter set up in a high school gymnasium for the next week. I'm on the ball, and I check flights to my brother's city, and because I'm in early enough and the flights are normal price, I spring for tickets for the entire family. Other people who need the seats far more than I do are out of luck. I realize this, but I figure someone else will snap up the seats, regardless of whether they need them as little as I do.
Conversely, suppose my whole family is healthy and able bodied, but we just don't feel like living in a temporary shelter set up in a high school gymnasium for the next week. I'm on the ball, and I check flights to my brother's city, and because I'm in early enough and the flights are normal price, I spring for tickets for the entire family. Other people who need the seats far more than I do are out of luck. I realize this, but I figure someone else will snap up the seats, regardless of whether they need them as little as I do.
> I'm much more concerned with whether or not there is a seat available, than the amount it will cost me.
You're in a very privileged position to not care about the cost, but you're talking like everyone can do this. Many people don't have that option. Your solution favors the wealthy with zero recourse for those less fortunate.
You're in a very privileged position to not care about the cost, but you're talking like everyone can do this. Many people don't have that option. Your solution favors the wealthy with zero recourse for those less fortunate.
Increased prices would mean that it's then profitable to "stop" normal flights in other regions. Then divert all those planes to the disaster-area so that you can "take advantage" of those horrible prices. E.g. By letting the price increase, you're also incentivizing private entities into aiding in the relief effort.
The other moral argument for it is that this increase in "supply" at a higher price, also reduces the load on free/volunteer/government-provided relief and evacuation efforts. E.g. Rich/Wealthy/Middle-class people pay more so they don't have to worry about being evacuated and because they want to spend more money on mitigating risk. Those people then won't need to be transported out on the congested freeways and such.
The other moral argument for it is that this increase in "supply" at a higher price, also reduces the load on free/volunteer/government-provided relief and evacuation efforts. E.g. Rich/Wealthy/Middle-class people pay more so they don't have to worry about being evacuated and because they want to spend more money on mitigating risk. Those people then won't need to be transported out on the congested freeways and such.
Letting the price increase to incentivize companies only makes sense if the government subsidizes the difference. Otherwise, more people that need the help suddenly can't pay for a resource that used to be affordable, right when they need it most.
It increase total supply and increases availability of free supplies for the poor and needy.
It increase total supply by encouraging people to come and sell goods at the increased price. If you can load up your care with water bottles, drive 5 hours, and make $5k that is tempting and some people will do it that would not do it if there is no price increase.
It increases the availability of free supplies for the poor and needy because those that are needy and not poor will pay more to get the more water. This of course presumes that those selling water provide a better service than those giving water for free. Which I think is a justified assumption because if they were not, they would not be able to sell anything.
It increase total supply by encouraging people to come and sell goods at the increased price. If you can load up your care with water bottles, drive 5 hours, and make $5k that is tempting and some people will do it that would not do it if there is no price increase.
It increases the availability of free supplies for the poor and needy because those that are needy and not poor will pay more to get the more water. This of course presumes that those selling water provide a better service than those giving water for free. Which I think is a justified assumption because if they were not, they would not be able to sell anything.
The unicorn case of a couple bad actors working to profit off the increased demand is hardly a reason to justify price gouging on everyone. If you're actually afraid of people taking advantage of reasonable prices, just institute a cap on the amount that people can buy at once.
Plus, the argument doesn't work on a service like airplane flights. Nobody can buy tickets and scalp them for profit.
Plus, the argument doesn't work on a service like airplane flights. Nobody can buy tickets and scalp them for profit.
Higher prices encourage supplying more emergency supplies either through transporting them into the area or storing them in preparation for a disaster. Airlines are more likely to make heroic efforts to fly people out if they can charge more for it.
Oh that's great that companies can make a greater profit, but higher prices mean that more people that need the help can't afford it. I really don't empathize with corporations here.
I think that as a society, we have learned that a market works best if it is free.
If we think there should be cheaper flights, then that is a service that we should provide via means of the government.
If we think there should be cheaper flights, then that is a service that we should provide via means of the government.
America has _never_ had a free market. This is doubly true for airlines.
If you're not prepared you will pay somehow.
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But, if we're selling bottled water at $99 per crate, I can do all sorts of crazy things to bring in water. I can convince my friends to take a week of their vacation to help me figure out how to get an extra 10,000 crates of water to the disaster area for a cool million bucks. And then we've got a fat budget to rent boats, off-road vehicles, even helicopters to bring in crates of water. At $99 per crate, I can think of a lot of absurd supply chain tactics that are actually economical with that kind of revenue.
If you create a law that bans me from selling water for $99, I'm not going to be able to do any of that. Not only am I no longer incentivized to drop everything and spend a week organizing a water supply chain, even if I was incentivized I don't have the kind of budget I need to get water bottles into a city that's underwater.
If people are willing to pay that much for gas, water, plane tickets, it means they really need it, and that you can do some funky and extreme things to increase the supply while still being fully profitable.