The price signal—that big neon sign—is no longer present. Suppose you own a chain of shovel stores throughout the midwest USA, and all you care about is getting shovels to people who need them. Several cities all got hit by the winter storm. Which one needs the most shovels? How many?
That’s the reason central allow cation fails in theory? Des it fail in practice? If you’re a government or an NGO you have statistics available about how many people live in an area and are affected by what.
And what’s the worst case of misdistributing supplies? The worst case is that some people die. What’s the worst case of price gouging ? The same .
A key issue seems to be inequality: Many poor people won’t be able to afford shovels
It’s not just inequality, it’s potentially fatal inequality.
The best argument I can think of against price gouging is that people are probably more irrational and manipulable during an emergency. I don’t think this overrides the other benefits of price gouging. I looked around for other counter-arguments and didn’t find any I thought were good.
You say “manipulative” like it’s a bad thing. During emergencies, people manipulate each other into being more altruistic, and altruism aids group survival.
It’s not just inequality, it’s potentially fatal inequality.
Agreed. And yet—what shall we do about the people who can’t buy shovels at all because there’s a shortage? Price gouging is blame-able (you can actually see someone having to pay a lot for a shovel), but people don’t see the counterfactual shovels that are not there due to bad policies.
When there is a shortage of shovels, we should employ rationing, which is a valid alternative to price gouging that many people seem to forget about. Yes, maybe one family would like to buy 20 shovels if they are $10 each. Tough. They get one, just like every other family. This especially applies if it is a short-term shortage which the market wouldn’t be able to re-equilibrate before the shortage was solved another way (by the storm going away and the roads getting fixed).
Unless absolutely ludicrous prices are charged for the shovels, the utility for each family having one snow shovel is much greater than the utility for half the families having no shovels and the other half having two.
The major shortage we have in many cities today is housing. Some cities pass laws saying nobody may charge more than $XXX/month in rent, and that doesn’t work. But smarter cities pass laws saying nobody may raise rent more than $XX/month/year, nobody may evict a tenant just to get higher rent, and for new buildings people can charge as much rent as they like. Then there is no supply disincentive!
That’s the reason central allow cation fails in theory? Des it fail in practice? If you’re a government or an NGO you have statistics available about how many people live in an area and are affected by what.
And what’s the worst case of misdistributing supplies? The worst case is that some people die. What’s the worst case of price gouging ? The same .
It’s not just inequality, it’s potentially fatal inequality.
You say “manipulative” like it’s a bad thing. During emergencies, people manipulate each other into being more altruistic, and altruism aids group survival.
Agreed. And yet—what shall we do about the people who can’t buy shovels at all because there’s a shortage? Price gouging is blame-able (you can actually see someone having to pay a lot for a shovel), but people don’t see the counterfactual shovels that are not there due to bad policies.
It’s not like no ever thought about this. Governments and NGOs can buy things and stockpile things and distribute things.
When there is a shortage of shovels, we should employ rationing, which is a valid alternative to price gouging that many people seem to forget about. Yes, maybe one family would like to buy 20 shovels if they are $10 each. Tough. They get one, just like every other family. This especially applies if it is a short-term shortage which the market wouldn’t be able to re-equilibrate before the shortage was solved another way (by the storm going away and the roads getting fixed).
Unless absolutely ludicrous prices are charged for the shovels, the utility for each family having one snow shovel is much greater than the utility for half the families having no shovels and the other half having two.
The major shortage we have in many cities today is housing. Some cities pass laws saying nobody may charge more than $XXX/month in rent, and that doesn’t work. But smarter cities pass laws saying nobody may raise rent more than $XX/month/year, nobody may evict a tenant just to get higher rent, and for new buildings people can charge as much rent as they like. Then there is no supply disincentive!