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Comment by hcurtiss | Hacker News Reader

This is all so silly. I work in the lumber business. We always, every day, at all times, sell our lumber to the highest bidder. But for the first ~3 weeks of the pandemic, our sawmills ran flat out -- more production than ever. Notwithstanding that fact, we saw unprecedented pricing -- because demand was radically outpacing supply. A true "super cycle" driven, I believe, by robust federal stimulus. That's since corrected significantly as interest rates have cooled home building and repair/remodel. But the idea that we made a bunch of money during the pandemic because we were greedy and jacked up prices is hilarious. We are just as greedy today as we were a year ago -- and making very little. We always sell to the highest bidder. I have no idea how we'd even do it otherwise -- a lumber lottery? All of this reporting about corporate greed is truly dumb.

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Maybe for lumber. But the grocer CEOs are literally on record on a recorded phone conference explicitly stating that yes, they use inflationary periods to cover intentional price jacking because the customers won't revolt. https://pluralistic.net/2021/11/20/quiet-part-out-loud/ https://pluralistic.net/2023/03/11/price-over-volume/

I admit I don't know much about the grocery business. But you make it sound like those phone conferences were recorded surreptitiously, when in reality they were just their public earnings calls. And, by my read, they were saying that the consumer was willing to pay more and, in an effort to preserve their margin given increased supplier pricing, they were increasing store pricing. None of that strikes me as surprising. How else are they to set their pricing, other than to charge what people are willing to pay? At some point, large margins will cause more participants to enter the market, driving down pricing. Without that price signal, supply would never increase, leading either to increased prices or shortages. This is all Econ 101. I agree that a monopoly position can compromise market dynamics, and maybe that's the case with grocers, but I don't see that in the articles you link.

Nowhere in the post you replied to is an implication that the record was recorded surreptitiously. It explicitly says, "on record."

If they were only increasing prices to a degree that covered their (temporary) higher costs, they wouldn't be making record profits. Since they generally brag on these calls about their record-breaking profits, and say that their record-breaking profits are linked to the fact that they raised prices, we can safely deduce that they're increasing prices more than they had to.

No clue about the general topic, but if you hold margins constant during inflation, you should expect record-breaking nominal profits by default.

> I work in the lumber business. We always, every day, at all times, sell our lumber to the highest bidder.

This is auction-style pricing. Good for lumber and some other commodities, but not great if you want to buy eggs, bread, medicine, or gas on the way to work.

>We always sell to the highest bidder. I have no idea how we'd even do it otherwise -- a lumber lottery? All of this reporting about corporate greed is truly dumb.

Well, the other way to sell it is to put a price on it and sell it to the first person willing to pay that price!

You mentioned that you have a lot of competition. That along with auction-style pricing will normally get very close the the WTP ("ideal") price of a product. This is not always possible. It is usually difficult to dial in the "right" price of a consumer product. They can just not buy your chips or cheese! It is no big issue for them and the psychological effect of raising prices for no reason will cause just that reaction. That is why shrinkflation has been a thing.

Imagine having to outbid someone at the grocery store for milk. Or having to outbid someone at the pharmacy for your child's insulin. You can see why certain products cannot be sold to people that way.

Another way of looking at this whole situation is that every company is greedy to some extent. Pricing is hard. And they took advantage of certain events and situations to try new pricing. Many lied about why (claiming supply issues, because saying "we just want more of your money" doesn't sit well with people), which is not cool. If the new pricing sticks then it is probably closer to the "real" price. If it is too high, people will not buy the products and the price may go back down. I say "may" because there is always the possibility that selling fewer items at a higher price might produce more end profit than selling more items at a lower price.

And what price would we choose? Yesterday's price? Last year's price? And if we sold out immediately, what then? Would we just have a race every morning for buyers to secure the prior day's production? Why wouldn't we increase price and see if we sold out again? And do the same the next day? You'd quickly wind up at the same place -- that is, charging what the market will bear. And while I was doddling along, my many competitors would be selling to the highest bidder, then using that money to bid up the logs I have to buy, thereby putting me out of business.

Now you are getting it! Pricing is hard. You work in an industry where it isn't a problem, but it is if you sell potato chips. The point being that nearly nothing in a normal person's life is priced and sold the way you do it, so comparing them is silly.

btw, auction-pricing is the wet-dream of every MBA that runs a company. It is the closest thing that people have to find out a person's WTP, for exactly the reason's you outlined in our comment. But you can't do that with loaves of bread, or bacon, or laundry detergent, or nearly anything else.

But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most. We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated.

Many industries don't have many manufacturers or operate on different regions. You get an illusion of choice at the grocery store, but many times the a single factory produces product under a dozen different brands.

Well, even in a highly competitive industry like lumber, with many manufacturers competing daily for the sale of identical products, we saw significant price increases. This due almost entirely to a dramatic increase in demand relative to supply. So much has been said about supply constraints and greedy corporate shenanigans, but lumber is an excellent example of neither being true. I think the inflation we're experiencing is a product of people spending more money, and having more money to spend, likely as a direct result of historic and unprecedented federal stimulus. And I attribute fault to both parties. Trump juicing the economy at the top of the business cycle, Biden blowing the lid off, and "it's-only-transitory" Powell keeping rates too low for much too long.

This is a good point. I think canned vegetables, in particular, are processed in just a few factories and just have different labeling.

>But certainly the manufacturers can. And the grocers compete with one another. I honestly don't see the differences you do. Lowe's competes with Home Depot in much the same way Safeway competes with Roth's. And the manufacturer selling to those grocery stores is going to sell to the one that pays them the most.

No. In fact the manufacturer might sell through the distributor that pays the least, if they have high enough sales/coverage (think Walmart) and the total profit is acceptable. Think about selling your product through a mom and pop store that pays you more per item and you clear $1 but they sell 10, or selling 100,000,000 million of your items but you are only clearing $0.05 each. It is much more complicated and larger grocer chains do not have to pay as much wholesale, because they have access to a lot of loyal customers. So they don't compete they way you think and they sure as hell don't have to "bid" on items if they are a large chain. If anything, sometimes it is the reverse, where manufacturers have to pay for self-space and placement. All the ones of a similar size likely sell the product for about the same (in the same demographic area), but may pay different wholesale prices. Or they may not. It is much more complicated. The main point is that it is not like your business. Yours is special and highly-sought after in business, but almost never available.

>We don't sell on auction boards like you're implying. Our sales floor takes calls from buyers, and they makes calls to buyers, and every day our traders close sales on the basis of who's willing to pay the most. It's not that complicated.

Auctions don't have to be complicated. Whenever anyone "bids" on something and the winner gets it, it is auction-style pricing. There are many kinds. The ebay style is one. The one at estate sales or Christie's is another (called open-cry), etc. But it is the holy-grail in business of determining price. The only thing better would be to somehow scan the brain of a person and know the maximum that would pay and charge that.

>In fact the manufacturer might sell through the distributor that pays the least, if they have high enough sales/coverage (think Walmart) and the total profit is acceptable.

There's where you lose the thread. They sell to Walmart not because "total profit is acceptable." They do it because they believe it will make them the most money in the long run. Maybe potato chip manufacturers are different than lumber manufacturers, but I doubt it.

>There's where you lose the thread. They sell to Walmart not because "total profit is acceptable." They do it because they believe it will make them the most money in the long run.

I mean that the exact same way you do. If the word "acceptable" is tripping you up, we can substitute "maximize" and it means the same to me.

>Maybe potato chip manufacturers are different than lumber manufacturers, but I doubt it.

I mean, the fact that people call every day to bid on your product and (presumably) the prices changes daily and they don't on theirs, objectively means that it isn't, right?

Yes, that much is likely true. Yet, I maintain that the market dynamics we saw in lumber very likely played out in other sectors. There's been so much discussion of price gouging, when at least in my industry, I know for a fact the pricing was a product of radically increased demand. It seems very likely to me the same is true for potato chips.

>Yes, that much is likely true. Yet, I maintain that the market dynamics we saw in lumber very likely played out in other sectors.

I agree. The exogenous shocks from Covid (and the shutdowns/working from home) and the money that the govt. lavished on people and businesses caused a lot changes in market dynamics. Some temporary, some seemingly permanent, and some still in flux. As an example, I own rental property on the side. In the town I live in, there hasn't been a decrease in housing and there hasn't been an increase in population. However rents doubled in the span of 3 years. As for why, it seems, they just did it because others where doing it. Taxes didn't go up. Insurance didn't go up. Repairs cost the same. It appears that you can just charge more and people will pay it and so that is what happened.

>There's been so much discussion of price gouging,

When I think of price gouging, I think of someone buying up all of the bottled water after a hurricane and then selling it for 10 times as much when there is no other option available to people. What these companies are doing is testing new price points. In fact, if they are publicly traded and didn't try to maximize shareholder profits they could be facing being ousted or even legal threats.

On a side note, HN has a funny relationship with "price gouging" because many love dynamic pricing (like Uber uses) which is literally price gouging, but if someone tries a new price point on bacon or a dozen eggs they flip the fuck out.

>I know for a fact the pricing was a product of radically increased demand. It seems very likely to me the same is true for potato chips.

I mean, you know your business. I believe you. But there really are companies out there testing new price points just because it is convenient and they won't face the typical backlash from customers because "inflation", or "supply chain issues", or whatever, but really they are just seeing if they can get more profits. This shouldn't be shocking to anyone but it rubs consumers the wrong way when it happens and when everyone does it, it contributes to CPI inflation which people feel at home.

I don't know about lumber, but for groceries, I know the goods can be sold up to a year before delivery. So while you might have some of the dynamics you mention, that changes the responsiveness a fair bit.

An option to prevent running out is quotas. They are pretty common. For example, during the pandemic some groceries restricted toilet paper to a certain number of packs per customer. Similar things happen with discounts ("50 percent off, limit one per customer") or products vulnerable to scalping like new game consoles.

Somehow the demand-siders always work their way around to quotas.

Lumber is not in quite the same boat as everything else: virtually every year the US reenacts protectionist import policies banning Canadian softwood lumber from being imported. The easiest way to lower lumber prices is to allow imports of Canadian lumber to resume.

Canada cuts old growth. We don't. Until they quit, the import ban is very reasonable.

Canada also replants the old growth that has been cut. Not sure what more people expect to be done. It's not like the US didn't cut their old growth in the past.

I expect them to leave it alone. We leave ours alone and Canada is supposed to be the more enlightened ones.

That's a fantastical viewpoint that borders on hypocrisy if you look at what the US did over the past 300 years. Forestry is quite sustainable when old growth trees are re-planted with new trees that can be harvested in a few decades. It's not like oil, gas or minerals where once it's gone it is never coming back. Americans seems to be completely fine with exploiting those non-renewable resources until they're gone forever.

That's exactly how old growth works - once it's gone, it's gone forever.

https://www.theguardian.com/environment/gallery/2021/apr/16/...

I promise, spend time in old growth vs forest cleared in the last 150 years. They're completely different places.

I live rurally and know the difference, and guess what: the forest I'm in the middle of right now was actually cleared to fields by settlers 150+ years ago. Since it hasn't been farmed for more than 60-70 years, it's reverting back to a more natural state all on its own. I have watched over the past 40 years how the fields have been filled in with more and more trees, and, yes, it's wonderful. Old growth forests can regrow perfectly fine when left alone. Nature is awesome in that regard.

If the US actually gave the slightest care about preserving the environment, then they should rein in the companies that are destroying the environment with no chance of nature being able to recover. Cut back on the amount of oil being pulled from the ground and burned, stop bleeding all the rivers dry because of century old water rights, stop creating newer and worse pesticides and stop building bigger and bigger SUVs for the love of god. That it's being done on softwood lumber is entirely a protectionist measure. It has absolutely nothing to do with the valuing the environment; it only matters because the lumber industry has a vested interest in maintaining high prices.

Our company has large sawmills on both sides of the US/Canada border. Notwithstanding the anti-dumping and countervailing duties, pricing was equally high/lucrative in Canada. There are no bans or quotas.

The article is specifically saying that in instances like yours, the problem isn't the large demand driving up prices - it's that businesses are driving it up even beyond the natural demand price having been emboldened by the former.

But I have no means of doing that. It's a commodity market, and there are many, many suppliers competing with me, and ruthlessly. As pricing rose, we even saw surges in European imports. The only thing that drove up lumber prices was extraordinary demand. And if that happened for lumber, I'm inclined to believe that was the driving factor in other product prices too.

If it's commodity, then it's traded on futures. Distributors would sell to retailers who shape consumer-facing pricing to maintain stability. Essentially, Home Depot sells out, looks to their supplier/distributor who says it'll be a few weeks to get enough to meet demand, commodity prices jump as demand increases for short term supply and Home Depot raises their prices.

This is a fabricated sequence of events. It's the SEC/CME/FTC, etc's job to verify the following in this example: 1. Did Home Depot raise their prices _more_ than was necessary to respond to increasing consumer demand and decrease supply? 2. Did the suppliers stockpile or falsely report their availability to result in over charging? 3. Did pricing between sawmills/loggers and suppliers increases proportionally? Did pricing between retail and suppliers increase proportionally?

These questions will help to understand possible unnatural inflation was introduced. In the sequence of events the sawmill behavior is just a single indicator along the way.

Some lumber is traded on futures, some is not, but nearly all of it is manufactured to universal specifications (set dimensions and grades), making it a commodity market. Home Depot and the other box stores were constantly running out. We struggled for several quarters to keep the distribution centers supplied. The box stores were buying lumber everywhere they could. If they were price gouging, the consumer certainly didn't flinch, as quarter after quarter we witnessed historic take-away.

Sellers have a moral imperative to figure out how much their stuff is worth by charging as much as they can.

When people stop buying what they’re selling, we know the product or service isn’t worth it, so the price comes back down.

If you're selling luxury goods, then sure, exercise your imaginary "moral imperative" all you want.

When you're selling something people need to survive, like food or medicine, your moral imperative runs in the other direction, and profiteering at the expense of deep need is immoral in the extreme, especially if there are factors preventing competition so you have a captive market, like increased corporate concentration or a government-enforced monopoly.

According to what morality? Most religions and secular philosophies that I'm aware of don't believe that.

https://en.wikipedia.org/wiki/Objectivism

Economic ideas that embrace human freedom and human flourishing are likely to consider truth a virtue.

You won't find it in Marx, Keynes, etc.

Defining "truth" and "virtue" is like nailing jelly to a wall; nobody agrees on what they are. That's why economists like Marx and Keynes didn't try to measure them. Essentially nobody that aspires to any kind of rigour appeals to truth and virtue.

This reliance on the free market falls apart instantly when there is collusion and price fixing, and the conditions we're seeing with increased prices is literally the textbook example of evidence of price fixing.

The only reason capitalism isn't 100% broken is because of regulation. Therefore we must accept that pure free market forces are not the morally superior path.

OK, but lumber isn't a monopoly controlled market, whereas a lot of other things in this country (medications, eggs, real estate recently, power, lysine, cable internet) are and are therefore subject to price fixing.

I remember that the day before gmail went into beta, yahoo mail was charging 25 dollars a month for 100mB of storage. Gmail went beta and offered 1 GB for free, and the next day, yahoo mail offered the same thing. They always could have done that, they just had no competition to force them to do it. So they charged artificially inflated prices.

This is what many older people don't understand. Back when they were young, there were many competing businesses in many fields, but now, there are often one or a small number, and they engage in widespread price gouging. Because they can.

This is the natural evolution of a capitalist economy- no conspiracy is required. The point of competition is, after all, to win, and after you win, you get to set the price of goods and services to be whatever you want it to be. Just ask Martin Skreli. Price fixing in this country is ubiquitous and standard practice. In that case, sometimes the government can step in and introduce competition to a market where there is none- as California is doing to insulin- or they can regulate prices- as they do with power.

>This is what many older people don't understand.

If you remember before gmail, then you are ancient.

Tell us, gramps, more about these $25/month Yahoo! email accounts.

I’m 43, gmail was in beta when I was a teenager. I’m gen x, born 1 year too early to be a millennial.

It was just an example. I think it’s a pretty good example, I remember thinking, wait, yesterday it was 25 a month and now you get 10 times as much for free?? How does supply and demand explain that?

Anyways the people making most of the decisions in our society are 30 years older than me.

I agree with your overall post, but the demand was likely less driven by federal stimulus, than everyone being stuck home and looking around and realizing maybe its time to finally fix that fence/deck, and knock out that project I have had on the to-do list for years now... I mean maybe the injection of the stimulus helped turbocharge it, but three years ago virtually all of my discretionary spending just stopped overnight. There were no restaurants or movies to go to, practically all activities were canceled, etc.

I mean its a real indictment of the state of America if a $1200 check can just radically reshape the economy. I guess its possible the even larger corporate checks were a factor here too, but I was really surprised that restaurants and other establishments didn't take the time as an opportunity to remodel or update, but obviously there was a lot of fear, probably a lack of willing workers, etc that prevented a lot of that.

As a personal anecdote, I didn't receive any stimulus funds of any sort, but thought a nice covid-safe project would be to get my driveway redone- its a pretty simple outdoor concrete driveway, but no one would do this in all of 2020. I still can't get anyone to do my punch list of small $5-15k projects.

> but the demand was likely less driven by federal stimulus, than everyone being stuck home and looking around and realizing maybe its time to finally fix that fence/deck, and knock out that project I have had on the to-do list for years now…

Yes, and also, aside from the general stimulus payments, there was also the combination of a whole lot of unemployment plus federally increased and extended unemployment payments that were designed to approximately, on average, to boost unemployment payments to 100% of last employment level. So you had lots of people with extra time on their hands (whether newly remote workers saving commute or people completely out of work) with less “normal” activities to spend time and money on, with their normal money or more. So, yeah, there were lots of opportunities to knock out household projects that were otherwise being deferred, or to discover and take on ones that hadn’t been planned.

> if a $1200 check can just radically reshape the economy

It was far more than that. There were child tax credits, student loans were paused, evictions were paused, unemployment insurance payouts were massively increased etc. With the covid boosts my wife made no less on unemployment than she did working, and some people got a moderate raise to stay home!

>I mean its a real indictment of the state of America if a $1200 check can just radically reshape the economy.

It sounds like a very small amount of money when you put it that way.

What do you get if you multiply by the number of people who got it?

Also, do you not recall more than one check?

I was not eligible for any COVID relief. I was above income limits. Wasn't it two $600 checks though?

The total (maximum; there was an income phaseout) amount under the CARES Act was $1,200 credit per single filer ($2,400 for married filing jointly) + $500 per dependent child, the amount under the American Rescue Plan (which had a different income phaseout) was $1,400 per individual (including adult and child dependents).

And, yeah, there were lots of other payments in those bills besides the income-tested-only stimulus payments to individuals. (

I did get a similar check from my state government too.

The demand was driven by REQUIRED construction to meet safety measures. Instead of the attack on 'free money' he thinks he is making he is showing that his company profited from big government (IE rent seeking).

I am sorry, I don't understand- can you explain this? What construction was required for safety measures? Especially such that required wood specifically?

In NYC, some restaurants could reopen and conduct business as usual if they were classified as outdoor venues. This interacted oddly with another regulation that let a restaurant count as “outdoor” if part of its seating area had outdoor seats, so you had a lot of restaurants in the middle of the bustling city build these gazebo-type structures that put some number of tables right on the sidewalk in the midst of pedestrian foot traffic.

For a small restaurant owner, the combination of these two loopholes created an intense pressure where building out this outdoor seating was simply a requirement of doing business

You really think this causes lumber prices to fly through the roof though? It may have been a factor but it seems a stretch that NYC restaurants would increase demand that much.

Lumber is a homogenous commodity in a transparent market that is auction driven, so of course it will be more difficult to control pricing … there is little pricing power.

Now, your iPhone, prescription drugs, favorite personal products, chicken, meat and eggs are a different story. These markets are controlled by a few dominant producers that distribute through tightly controlled retail markets and hold great pricing power.

Yet, even with so little pricing power, lumber witnessed extraordinary price increases. Why would we expect anything different in other product categories? If anything, most products witnessed less price inflation than lumber. My point is that lumber makes for an excellent case-study in demand driven inflation. Everyone wants to point to supply shortages and cartelization -- and greedy corporations -- when given what we saw in commodity pricing, there's plenty of reason to conclude the rest of the market was adjusting rationally in the face of increased demand and money supply, and without collusion or monopoly influence.

Lack of pricing power does not mean that the fundamental forces driving prices cannot have an impact like increased prices. It means that the industry/company/supplier cannot solely or significantly control the price.

Lumber initially shot up if I recall due to a supply issue when covid caused mills to shut down with limited labor supply and even outright restrictions to operation by local governments. It subsequently whipsawed to much lower prices once mills came back online as evidenced by the volatile lumber spot prices shown here:

https://markets.businessinsider.com/commodities/lumber-price

As for corporate profits and their impact on recent inflation, see the following article which states:

“Since the trough of the COVID-19 recession in the second quarter of 2020, overall prices in the NFC sector have risen at an annualized rate of 6.1%—a pronounced acceleration over the 1.8% price growth that characterized the pre-pandemic business cycle of 2007–2019. Strikingly, over half of this increase (53.9%) can be attributed to fatter profit margins, with labor costs contributing less than 8% of this increase. This is not normal. From 1979 to 2019, profits only contributed about 11% to price growth and labor costs over 60% …”

https://www.epi.org/blog/corporate-profits-have-contributed-...

Maybe you don't understand how the average person thinks of corporations, if you think all this reporting about corporate greed is so dumb.

There's all this reporting about corporate greed because the average person think corporations wouldn't do this, and that it is quite bad for corporations to do this.

Or that the media is making a mountain out of a molehill, like they often do.

If the pandemic MANDATEs new isolation systems, I have to build them, whether you charge me a fair price for lumber I am now required to purchase or you choose to jack the price up. My only other option is to CLOSE MY BUSINESS. You definitely price gauged, your company acted shady and is not a responsible member of society. Flat out. Period. You took advantage of government mandated demand that was in response to keeping people safe in order for you to make more $$$. Your business is a profiter at others expense.

What you describe is the definition of price gouging. A global disaster occurred which caused supply shocks, demand shocks, or both in various industries which led to companies increasing their prices as a response. Society only has so much tolerance for selling to the highest bidder, especially when a product is more of a necessity than a luxury. People still have a fair price in their mind and it is viewed as unethical to charge more than that even if some people are still willing to pay that price.

There was no supply shock. In the last three years, there was more lumber produced than ever. It was a demand shock driven by federal stimulus. And, again, what were we supposed to do? Tell the highest bidder we wouldn't sell to them? And then what? Lottery our lumber to lower bidders? That's ridiculous.

I was being general. Lumber might not have had supply shocks, but the pandemic did cause many supply shocks across industries.

I wasn’t offering a solution. I was remarking on the idea of we’re just selling to the highest bidder as a universal defense for this behavior. We can recognize it when a grocery store raises the price of water after an earthquake. We should be able to recognize it elsewhere.

At the very least, you could have been a whole lot more clear than responding to a comment of "But for the first ~3 weeks of the pandemic, our sawmills ran flat out -- more production than ever. Notwithstanding that fact, we saw unprecedented pricing -- because demand was radically outpacing supply." with "What you describe is the definition of price gouging."

I'm not clear on what you think wasn't clear in my original comment. Are you suggesting that increased production can't happen in situations of price gauging?

My intent was to link the logic OP described with the logic behind price gouging. I didn't think it was expecting too much of the reader to have a negative view of price gouging and therefore view my comment as a criticism of OP's explanation.

If you were intending all along to be speaking generally, replying to the description of what they experienced with lumber prices and mills operating at maximum capacity with "What you describe is the definition of price gouging" could lead many readers (including this one) to conclude that you were speaking specifically about their situation rather than generally about the topic.

Even now I can't be sure whether you think the multi-quarter increase in price of building supplies in 2020 and 2021 was price gouging or not.

I was speaking to their specific logic and not their specific situation. Whether their situation qualifies legally as price gouging depends on the degree they raised prices and the jurisdiction in which they do business. Neither of those were mentioned in the original post, so whether their situation was truly and legally was price gouging was unanswerable to any of us.

I specifically used general terms in my comment. This included using "disaster" instead of "pandemic" or "COVID". I included an "or" in "supply shocks, demand shocks, or both". I also referred to "various industries". I thought collectively that was enough to make it clear that I was speaking more broadly than just referring to OP's specific situation. I don't know exactly were I lost you, was it just the fact that my comment was a direct reply to their and you took that as an indication that I wouldn't speak beyond that initial context?

I went astray when I read your first sentence as being in reference to the specific situation. "What you describe is the definition of price gouging." What percentage of the blame for that misread is on the reader and what percent is on the writer is surely a matter on which opinions could differ.

After an earthquake and when people have no access to tap water demand for bottled water goes up. Yet raising the price of bottled water in that situation is still considered price gouging.

Water is a life necessity without a comparable alternative. Nothing else in this discussion comes close to comparing. Eggs are just one kind of nutrient vessel, we have a lot of different foods. There isn't a right to have access to specifically eggs. Lumber is not a life necessity.

Water is worth more after an earthquake. Is this not obvious?

What point are you trying to make with this? Yes, it is obvious. I was not denying that. I was pointing out that raising the prices too much (10% in California) in response to that increase in value is illegal.

High prices for a product means there is an incentive to produce more of it.

Obfuscating the true value of something discourages new production, so California remains stupid.

I don't know what states you consider smart, but Texas is generally the polar opposite of California and they have laws on price gouging too. They just don't put a percentage on it and instead prevent "exorbitant or excessive" pricing.

If I'm considering a pricing strategy for my business, want to stay on the good side of the law, and am given a choice between a set percentage and two vague words in which there is no exact definition, give me California's stupidity any day.

You're free to be stupid. The probability that there will be less water available than there could be will be higher there than places that are less idiotic.

Build more sawmills? https://www.wsj.com/articles/despite-lumber-boom-few-new-saw...

That article is comically wrong. There's over 4 billion board feet coming on line in the US South [1], and there have been several more recent announcements. There are fewer new mills anticipated in the PNW (though still some major announcements [2]), but that's mostly because log supply is declining at a rapid clip.[3]

[1] https://forisk.com/blog/2021/09/15/sawmill-expansions-in-the...

[2] https://www.timberprocessing.com/sierra-pacific-industries-a...

[3] https://www.forest2market.com/blog/are-you-planning-for-the-...

Who wouldn't rush in to build a 20-year sawmill to take advantage of the very tail end of a 2-year temporary bulge in lumber prices?

If it didn't make sense for you to build a sawmill in 2019, it probably didn't make sense to build one in 2021 either.

> It was a demand shock driven by federal stimulus.

The few thousands in stimulus dollars was minor compared to two coasts of high income earners wanting to improve / expand their houses to support work from home.

$2,000 is almost nothing when it comes to home improvement. A couple large appliances, or maybe replacing 2 windows + trim.

There was also a huge demand for new houses in areas that traditionally had lower population density, this shift in living location also drove part of the housing boom.

People who have a notion of the price last month as being the "fair price" are welcome to not buy the limited supply of sawmill output until the price recovers to something that they find fair. If there is only capacity to produce Y 2x4x8s, while there's demand for 1.3xY, how do you propose to allocate them? Pricing serves to tend to allocate them to the place where they will create the most value.

This is not water in a several-week-long shortage after a hurricane. These are building supplies for several-quarters-long chronic shortages. Delaying having drinkable water is not feasible. Delaying building is.

> Pricing serves to tend to allocate them to the place where they will create the most value.

No, price just puts a floor on the value creation required. It doesn’t actually enforce the efficient use of scarce resources. Beyond that floor, higher prices tends to allocate goods to the people with the most money.

> Pricing serves to tend to allocate them to the place where they will create the most value.

Yeah, because my house is more valuable than yours, as exemplified by the fact that it costs more money to buy lumber for it, so it can create more value. Clearly I'm a more valuable human than you (because I've got more money), and I deserve better and more valuable house.

https://en.wikipedia.org/wiki/Price_gouging

"Laws often include exceptions for price increases that can be justified in terms of the increased cost of supply, transportation, demand, or storage."

IANL Based on the above definition, it sounds like OP is not describing price gouging. Their business is not setting the price of the goods directly. The buyers are competing for a limited supply and pushing each other to bid higher amounts. That sounds like a justifiable increase.

Now, if the mill saw the emergency and said "we won't take less than cost + 45% ..." or something like that, it would likely fall into price gouging territory.

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