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Comment by Taek | Hacker News Reader

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.

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.

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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.

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.

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

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.

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.

>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.

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.

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.

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.

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?

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.

Wow.

I know, your courage is being questioned!

The threat of violence is against the taxpayers, not the recipients of govt assistance. False dichotomy.

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.

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).

Shorthand: Market economy is best, market society is less...

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.

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.

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.

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.

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.

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.

>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.

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.

So under this definition the only thing preventing me from stealing all the water is coercion, right?

Not sure that follows from my definition of coercion.

Certainly coercion is a deterrent to theft, but most people don't steal because they're socialized when they grow up to believe that stealing is wrong.

Come on, you're dodging. Most people are raised to know that paying their taxes is right. So taxes aren't coercive right?

If coercion is the threat of physical force to get me to comply then property and contract law are just as coercive as tax law. In a disaster if everybody's price gouging water so it costs me $100 a case and I could steal it and get away with it you betcha I'm doing it. The only thing preventing me is the threat of physical force. That's coercion. So now the question is why is coercion okay to protect $100 water, but not okay to give out free water?

A important part of coercion is that it must cause action, it does not count as coercive if it prevents action.

If I have a gun and say, "don't take my water or I shoot you" I have prevented you from acting thus not coercion.

If you have a gun and say, "give me your water or I shoot you" you have caused me to act thus coercion.

Markets are not coercive because you are not threatened with force if you don't participate. Taxes are coercive because if you don't pay, the government comes and takes your stuff or puts you in prison.

I understand you can make an argument that in a disaster situation you are "forced" to act but that is because of your own need not because of outside influence.

>If I have a gun and say, "don't take my water or I shoot you" I have prevented you from acting thus not coercion.

This is an alteration of the definition given. Up above, you can see that this exact situation falls under "threat of physical force in as a mean to get someone to comply with your wishes"

>Markets are not coercive because you are not threatened with force if you don't participate. Taxes are coercive because if you don't pay, the government comes and takes your stuff or puts you in prison.

But you are! Markets rely on property and contract law. Let me lay out the example. You are selling water for $100. I choose not to participate in the market and instead steal a case of water and take it home. Later the government comes and takes my stuff and puts me in prison.

So here we see that by the same token tax law is coercive, so are property and contract law. If property and contract law are coercive I don't see how you could ever say that markets aren't since they are the foundation of a market system.

Well, I'm not intentionally dodging, so feel free to call out what you think I'm dodging.

You say "most people are raised to know that paying taxes is right. So taxes aren't coercive right?"

I agree that most people are raised to believe this, but I don't agree with it. Taxes ARE coercion. If taxation were voluntary, I believe the VAST majority of people would not pay them.

Using your example, using coercion to defend yourself or your property (a case of water in this example) is in fact coercion, but it's justified. Self-defense and defense of private property are the only times when I believe coercion is justified.

If you don't believe in private property, then we're just talking past each other.

Do you believe in private property?

>Using your example, using coercion to defend yourself or your property (a case of water in this example) is in fact coercion, but it's justified. Self-defense and defense of private property are the only times when I believe coercion is justified.

We are talking past each other a bit so let's get back on track. The quoted above is what I'm getting at. What is the moral foundation for your belief that coercion is justified in cases of property. Why is coercion justified when defending your $100 case of water but not justified when the government taxes us?

Because I believe in private property -- the right to do as you please with your own property to the extent you are not violating someone else's person or property.

Government taxation, by definition, is a violation of private property, it is not voluntary, people have no choice but to comply or be jailed.

If you don't believe in private property, but instead believe in a socialist or communist society where the means of production and private property are controlled by the government, then you will not share this belief.

But see we started off with taxes bad because coercion and coercion is bad but now we're at property is okay because property is property. My position is irrelevant because what I'm really interested in is the foundation of yours. I don't see it. I don't see where property gains some magical virtue that taxes don't which exempts it from being bad despite requiring coercion.

Because property rights are inextricably linked with human rights -- if you believe in human rights, you also have to believe in property rights. You can't have one without the other, this short essay does a good job of explaining why the two are inextricably linked:

https://mises.org/blog/property-rights-and-human-rights

There is no reason that human rights require property. Let's take free speech. Rothbard notes that:

The human right of free speech is simply the property right to hire an assembly hall from the owners, or to own one oneself

But property rights don't guarantee you an assembly hall, hired or owned. In fact property rights explicitly give the owners of an assembly hall the right to deny you. Okay, so you want to build one, well here too property rights give landowners the right to deny you access to any land. Timber and concrete companies can choose not to sell to you, the effect here is that, to you, property has simply granted the right to refusal, the right for others to refuse to allow you to speak. Without property rights, who can exclude you from the assembly hall? No one. In fact property rights here conflict with a right to free speech.

Also can I take this as confirmation that we are moving on from coercion? That you agree that coercion is not, in itself, bad?

>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.

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 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.

"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.

You're suggesting not incentivising saving lives, and you think I'm the crazy one?

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.

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.

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.

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?

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.

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.

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.

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...

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.

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.

Did you, or anyone else profitably do this at scale?

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.

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.

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.

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