Saturday, November 3, 2012

Yglesias Gets It Right: Let the Price Gouging Begin

Matthew Yglesias may not understand the broken window fallacy,but he sure gets the problems with price controls:
...look at these photos of miles-long lines for gasoline in New Jersey and you'll see that there's a real issue here. The Christie administration fined a gas station for breaking price gouging rules back in September, and issued a press release before Sandy hit noting that case and explicitly warning retailers not to respond to the hurricane by raising prices. The failure to allow prices to adjust doesn't magically eliminate the supply side problems, it just means that the gasoline is misollacated and lots of people need to waste time in line. You can also see that the combination of shortage and underpricing seems to be leading people to overconsume when they do get to the front of the line.
Last but by no means least, the lack of price gouging is harming things on the supply side. If it were possible to earn windfall profits by transporting gasoline into the affected areas, then human ingenuity would be finding ways to do it. But if you restrict retailers to earning merely ordinary profits, then people won't take extraordinary measure to increase supply. Worse than that, gas stations are probably making unusually smallprofits right now since gas stations don't normally make much money selling gas. Since it's a competitive market for an undifferentiated product, you get razor-thin margins on fuel and try to use it as a lever to get people in the door to buy snacks and sodas. A gasoline supply crisis just brings out lots of people who genuinely only want gasoline.
Long story short, you can see here in the real world that misguided laws about commerce in the wake of an emergency create real problems for real people.

11 comments:

  1. Did someone hack his blog account?

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  2. I hope this is the undoing of Chris Christie. However, knowing the Republican voters' craving for power over principle, this will probably make Christie an even bigger "conservative" hero.

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  3. No, it's just that Christie is a Republican. It's okay to make sense sometimes, as long as you're talking about the other team.

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  4. I personally can never really accept the combined stupidity and dishonesty of the MMTers (Modern Monetary Theory). Today, Princeling MMTer Mike Norman actually wrote this:

    Federal Gov't delivering millions of gallons of gasoline to NY. WTF...das Frei MarKet didn't do it????

    The Department of Defense is trucking 12 million gallons of gasoline (that's a lot of gas) to New York. Until now there has been no gas. In other words, the Federal Gov't is supplying gas.

    Where was the "invisible hand" of the free market? Where were the suppliers anticipating conditions as a result of listening to the perfect information supplied by the perfect, all-knowing market?

    I just had to post this hysterical comment that Rob Parenteau put on my Facebook page. It's hilarious.

    Wait, Mike, you mean das Frei MarKet, with its illustrious and ever innovating Invisible Hand, didn't deliver the goods already? WTF? Must be price controls or sumpin inhibiting all those entrepreneurs from buying and selling and bartering and trucking all that fuel from transnational oligopolistic oil companies into place in near perfect anticipation or at least nearly complete knowledge of future demand schedules. And now, back to Atlas Slouched.
    I'm sure Libertards and conservatives will be all over this with lame excuses like it was gov't regulation or some other crap that blocked the ability of businesses and entrepreneurs to supply gas.


    These are our opponents.

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    1. Yes, these are our opponents. Mental midgets, all.

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    2. JayZsus!

      How these people can ignore the multiple barriers to "das Frei MARKT" in place, and then BLAME it on "market failure" is beyond my comprehension.

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  5. And what is even more creepy, a few posts below Norman's query about what happened to the free market in gas, there's a post attacking John Carney's attack on anti-gouging laws and arguing, "But what makes 'efficiency' the criterion rather than, say, fairness?"

    If you made this stuff up, no one would believe you.

    http://mikenormaneconomics.blogspot.com/2012/11/john-carney-how-to-fix-gas-shortage-let.html

    These are our opponents.

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  6. I inadvertently omitted the link to the Mike Norman quote:

    http://mikenormaneconomics.blogspot.com/2012/11/federal-govt-delivering-millions-of.html

    Mike Norman said...
    Bob, you're hilarious. You just make shit up.

    November 3, 2012 1:12 PM

    Mike Norman said...

    Bob, don't you have anything else better to do with your time than troll this site? Why don't you just jerk off like you usually do?

    November 3, 2012 1:14 PM

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    Replies
    1. Great examples psychological projection by Mr Norman.

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  7. It's not price gouging if the infrastructure for getting the supply of the needed good or service is so decimated that retailers can’t get the product to market. It's the FREE MARKET at work... When you come out of Wal-Mart with the last TV and there is a fellow outside who offers to pay you twice what you paid.... Go look in the mirror and tell yourself that you won't sell it. This is because the TV or in the instance of Gasoline the item will belong to the individual who values it more by offering more dollars for it. ~~~ Except for the government... They just take what they want !!!!!

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  8. It is actually worse than you think. Many mom and pop gasoline stations sell gas at a loss because they cannot buy in sufficient volumes. This would make the loss unsustainable and put them under.

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