Harvey Is When We Need Price Gouging, Not Laws Against It

Forbes Magazine posted, then deleted this article supporting price gouging during Hurricane Harvey..................

Hurricane Harvey has hit Texas and is doing a great deal of damage to both life and property. Which is exactly when we need, positively desire, there to be price gouging, instead of the laws we have against it. The basic underlying economics being that we want whatever scarce resources there are to be applied to their most valuable uses. Further, we want to encourage the provision of more supply of them--both of these being the things which the price system manages for us. That is, allowing prices to rise in the aftermath of a disaster does exactly what we want to happen.

So, why all these laws against it? As Texas does indeed have laws against it :
. @KenPaxtonTX : We will deal with price gougers as we find them @lauraingle | https://t.co/wHmuI25k1f
— Fox News Video (@foxnewsvideo) August 27, 2017
My own version of dealing with price gougers would be to thank them for the good work they're doing--I doubt that's what Ken Paxton has in mind there.
Ah, no, it's not what he has in mind :
Price gouging by Texas merchants in the path of Hurricane Harvey has drawn the attention of Texas Attorney General Ken Paxton, who said Saturday that his office is looking into such cases.
“We’ve already found one big retailer that was charging $42 for a case of water,” Paxton told Fox & Friends. “Another, a gas station $99 for a case of water.”
"We’ll be dealing with those people as we find them,” he said.
He wants to punish such people. The economics of this is really terribly, terribly, simple. As a result of the disaster--of any disaster that is--some things are in short supply. Perhaps because some of the supply got damaged, or perhaps because people need to substitute. Floods could, for example, knock out the municipal water supply, leaving people needing bottled water. So relative to the available supply demand has risen. We now need some method of rationing that limited and scarce supply over that increased demand. Rationing by price is always the efficient way of doing this

We also want something else to happen--we want supply to increase as fast as we can manage that. As we know from our basic Econ 101 supply and demand curves the way to increase supply is for the price to increase. We want, for example, people to start trucking bottled water from Louisiana to Texas. More money to be made by doing so will encourage people to do so. And as that extra supply arrives then prices will go down again as demand is met.

We want people to use less of the scarce resource, we want people to supply more of the scarce resource, allowing the price to rise is the one known way of achieving both those goals. So, why is it that we have these laws against it all? The answer is that we're human, we are interested in both efficiency and equity and the people more interested in that equity are the ones who have written these laws. The balance, to my mind at least, going much too far toward that equity and against that efficiency.


but... but... capitalism.
#3  Top Rated Post
Price gouging.

Nothing like f*cking your neighbor while they are down. The people who are doing this should be embarrassed. Share share share share share share share..
+2 / -1
The article is correct in economic terms but not in PC terms.
There's always a silver lining in the dark cloud of destruction.....

Hurricane Harvey could put some spark back in inflation if gas prices keep rising and the rebuilding results in a national shortage of construction workers or puts pressure on building materials prices.

Competition for construction workers could raise wages, and prices for autos and lumber are expected to rise.

Devastating Hurricane Harvey , unprecedented in its rainfall, may actually be a slight positive for U.S. economic growth this year, despite deadly flooding and the destruction in a major urban hub.

That's because rebuilding efforts to restore Houston will probably be stimulating and lend a very slight amount to third and fourth quarter GDP growth, analysts said. There are also some ways the storm could spark a rise in inflation, which has been surprisingly weak this year.

JPMorgan chief U.S. economist Michael Feroli said JPMorgan analysts estimate physical damage from Harvey at between $10 to $20 billion, putting it in the top 10 costliest storms but still well below the record $159 billion damage from Katrina. He said it could add about 0.1 percent to growth, but so far he is not changing his forecast for 2.3 percent third quarter growth and 1.8 percent fourth quarter growth.

"Usually what we see is transitory. Usually, you see a little bit of weakness as interruption to businesses occur. Houston is not a small footprint. You can see a disruption to business, then you tend to see a spurt," said Diane Swonk, CEO of DS Economics. "This is a different kind of area than Katrina. It has airport hubs and things like that."

Growth is tracking at just around 3 percent in the third quarter. Swonk estimates that Harvey could add a few tenths of a percent of growth to the fourth quarter, which she sees at 2.4 percent.

President Donald Trump Monday said he expects "very rapid action" on Harvey relief funding. The president was expected to visit Texas on Tuesday.

Feroli , in a note, points out that the economy in the affected region could suffer while the national economy benefits. He noted that after Sandy in 2012, New York's economy suffered but the national economy did not. The same happened with the Louisiana economy after Katrina in 2005.

Curious Cdn
Supply and demand normally work that way, unfortunately, It's older than the hills ... older than capitalism that scarce resources cost more.
^North Korea^
Quote: Originally Posted by Walter View Post

The article is correct in economic terms but not in PC terms.

True enough, and PC does count.
The economic terms also speak about trends over time, whereas Harvey is (hopefully)
only a very short term situation, which will be corrected soon.
Quote: Originally Posted by Cliffy View Post



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