Hacker News Reader

Comment by slg | Hacker News Reader

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.

View on HN

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.

Reply on news.ycombinator.com