Political Discussion - "on-topic & unmoderated"Rated PG13, unmoderated but threads must stay on topic - that means you can flame each other all you want as long as it's legal
I had a feeling that it might have just been local companies. In a way that makes it worse, because they are supposed to be more attuned to the needs of the local community.
This raises a question I was wondering about the libertarian model, who states that the ones who best know the pricing according to supply and demand are the 'merchants'.
But in today's age there are very few mom & pop stores left, most places are chain locations that manage things like supply and demand, pricing, sales, etc all from a central location, much of it being computer modeled. Generally the biggest thing a local store decides is when to put things on clearance due to stock reasons, but other than that I would think many store owners are as much 'HR Managers' as they are true 'Merchants'.
I would hazard a guess that in these Hurricane situations they don't actually know what the best price as per the laws of supply and demand are, it's more about knowing people are desperate so a less moral owner may opportunistically jack the prices up to see what sticks.
You literally made no point. Whether the consumer is being screwed on the open market or black market makes no difference to the consumer. The consumer is still being screwed.
It's really the only negative aspect of freezing prices, much like ticket scalpers you're open to *******s buying up stuff they don't need so they can sell it at a much higher price later. But generally in a typical disaster situation that North American experiences I don't think there's really enough time for a true black market to emerge, so it's kind of a moot point.
Fascist, no. Goods that are necessities have largely inelastic demand anyways. At a time like this when that is the case and the demand does largely outweigh the supply, you'd expect higher prices. You'll find plenty of people talking about the social ramifications and what not, but acts of God have always been a key determinant to commodities prices.
During the midwest drought in the summer corn and soy prices shot up to insane levels. During the Japanese tsunami the price of metals did the same. This is really nothing new.
Fascist, no. Goods that are necessities have largely inelastic demand anyways. At a time like this when that is the case and the demand does largely outweigh the supply, you'd expect higher prices. You'll find plenty of people talking about the social ramifications and what not, but acts of God have always been a key determinant to commodities prices.
During the midwest drought in the summer corn and soy prices shot up to insane levels. During the Japanese tsunami the price of metals did the same. This is really nothing new.
But in these examples it's the actual supply that is being hit by the disaster, or in the case of metals in Japan I'm guessing that happened more in the months after the disaster as they experienced shortages during the necessary rebuilding.
For the Hurricane Sandy thing we're more talking about essential goods in the immediate aftermath of the disaster. It's not so much a matter of the supply itself that's been harmed, but rather it's the supply chain that gets disrupted.
Semantics really. Take three merchants selling, say, bottles of water. They each have 100 bottles to sell because they can't get incoming shipments. Now there's more than 300 people that want water. Two can sell them for say 2.00 while one sells for 1.00. The lower priced merchant will sell out quicker, but then there will still be 200 bottles left to sell, and you better believe people will buy those bottles at just about any price. Stopping a merchant from maximizing his return is against the idea of capitalism.
Supply is affected because of the chain being broken as you've said. Permanent or temporary doesn't make a difference because future prices will eventually go back to an equilibrium. Demand has increased as well because these people have no alternatives. It's a double shock, and I can't see why people wouldn't expect to see temporarily inflated prices.
Stopping a merchant from maximizing his return is against the idea of capitalism.
Exactly. Cutthroat economic principles have no ****ing place in a disaster zone. The idea is to reduce suffering and return life to normalcy as fast as possible. Worrying about securing food and water is bad enough. Having said food and water dangled in front of your face for 500% markup just so some ******* merchant can make a little extra money is absurd. When people are provoked so obviously like that, they will turn to violence.
Quote:
Originally Posted by brtriad
Supply is affected because of the chain being broken as you've said. Permanent or temporary doesn't make a difference because future prices will eventually go back to an equilibrium. Demand has increased as well because these people have no alternatives. It's a double shock, and I can't see why people wouldn't expect to see temporarily inflated prices.
If the chain of supply has not been permanently broken or altered, there is no reason to raise prices except for sheer greed. And I say that as someone who adamantly believes in the power of the free market.
If these gouging laws are what's keeping our holy blameless rich from getting generators what's to stop them from paying the extra money to havr them shipped from out of state?
I'm wondering if we can come up with a scenario in which the unfettered capitalist crowd says "yeah a completely free market isn't the way to go here" or "the government should get involved."
Wait, many benefits if price gouging? Please teach me these rudimentary economics.
This is the classical theory that supports the notion that in crises, price increases should happen (Attached is a graph to refer to):
In the event of a crisis (i.e. Sandy), the demand for essential goods (food, water, etc) increases because of increased necessity for said goods as well as reduced access to alternatives. (Demand1 to Demand2)
This increase in demand increases the quantity of such goods demanded in the market. However, if prices are not allowed to adjust, then suppliers of such goods will not increase the quantity of goods they supply to the market due to an inability to profit from doing so. This results in a shortage (Space between first green line on the x axis and the purple line, indicated by the twin headed arrow).
If prices are allowed to adjust however, then suppliers will increase their prices to combat the shortage, which in turn gives supplier more incentive to supply goods to the market, simultaneously increasing the quantity of goods in the market and increasing prices and bringing the market to its new equilibrium (Black arrows).
It fits perfectly during events like a hurricane. During a disaster, the demand for essential goods increases, thus prices rise. Increasing the price of something ensures that those goods go to the people who need them most (the people most willing to pay a higher price). If not you end up with shortages which during a natural disaster is a millions times worse than having to pay an "unfair" or "excessive" price.
The law is stupid, plan and simple.
Just wrong on so many levels...usually the people that need it most are the ones that can afford it least.
All I have to say in this case is that Micro 101 doesn't apply to every single situation in the real world. Sometimes the model needs to be eschewed for common sense policy such as not letting merchants gouge their patrons during temporary crises.
If this was a long-term problem I would have much less of a problem with the resultant price inflation.
Semantics really. Take three merchants selling, say, bottles of water. They each have 100 bottles to sell because they can't get incoming shipments. Now there's more than 300 people that want water. Two can sell them for say 2.00 while one sells for 1.00. The lower priced merchant will sell out quicker, but then there will still be 200 bottles left to sell, and you better believe people will buy those bottles at just about any price. Stopping a merchant from maximizing his return is against the idea of capitalism.
Supply is affected because of the chain being broken as you've said. Permanent or temporary doesn't make a difference because future prices will eventually go back to an equilibrium. Demand has increased as well because these people have no alternatives. It's a double shock, and I can't see why people wouldn't expect to see temporarily inflated prices.
So how come we're only seeing this capitalism in action during something like a crisis, and not when things are normal?
For example, as is usual this time of the year I'm just getting over a cold. And when I'm sick I take to the Buckley's cough syrup like a hobo does a mickey of booze. Yet I go to the drug store and there's no regular Buckley's. I go to another and same thing, apparently there was a screw up at the factory somewhere and everyone is short stocked. So a few days later when I'm desperate for some of the good stuff and finally the drug store got a small shipment in, do they jack up the price to reflect supply and demand?
Same thing when you have a hot new electronics sales like an iPhone or a new console, even though though people are lining up overnight and they're going to sell out, the merchants don't get to adjust the price according to supply and demand. Things are a little different with produce as a poor harvest can see prices on things go up, but again that's determined before the goods hit the shelf.
So basically what I'm getting at is the libertarian model says the local merchants will know best how to price things according to supply and demand which will best distribute the goods, but I'm challenging that notion by saying the system doesn't actually work like that anymore because supply and demand pricing decisions are determined at a higher level from a central location. It's just as likely you're getting store owners using a disaster for opportunistic profiteering as you are any actual 'supply and demand according to an economic model' benefit.
Price control measures end up creating shortages, suppliers simply refuse to bring goods to the market. Basic free market economics.
I got this far, and stopped - One thing that would clear up a tremendous amount of confusion is remembering a basic, important caveat of the US market.economic system: We are not a free market.
Now, before people crucify me, we're by definition a mixed economy, not a full free market. A full free market would remove agencies like the SEC & FDIC, and neuter an institution like the Fed.
What CC is doing is enforcing a rule, fully within the bound of our mixed economy, that prevents exploitation of crucial goods in time of emergency or severe and permanent shortage.
Semantics really. Take three merchants selling, say, bottles of water. They each have 100 bottles to sell because they can't get incoming shipments. Now there's more than 300 people that want water. Two can sell them for say 2.00 while one sells for 1.00. The lower priced merchant will sell out quicker, but then there will still be 200 bottles left to sell, and you better believe people will buy those bottles at just about any price. Stopping a merchant from maximizing his return is against the idea of capitalism.
Supply is affected because of the chain being broken as you've said. Permanent or temporary doesn't make a difference because future prices will eventually go back to an equilibrium. Demand has increased as well because these people have no alternatives. It's a double shock, and I can't see why people wouldn't expect to see temporarily inflated prices.
I like the fact you use water in your example, because that's in a basket of goods we can all consider essential. Governing bodies and regulatory institutions prevent (at least try to) that very thing from happening in extreme, unusual circumstances where the safety of the public comes directly into question.
I assure you, should K-Mart jack up the price of water on Staten Island, they would be buried in litigations.
The economics speak of one tail, but lest we forget, economics is a theory, that gets applied to real life situations. Economics theory doesn't recognize things like federal/state level laws that will change expected outcomes and E(v) of goods.
If prices are allowed to adjust however, then suppliers will increase their prices to combat the shortage, which in turn gives supplier more incentive to supply goods to the market, simultaneously increasing the quantity of goods in the market and increasing prices and bringing the market to its new equilibrium (Black arrows).
That does not apply in a time of emergency. This is an artificial shortage. Its not like there is an incentive to withhold goods from the market right now. The reason there is a shortage is because transportation has been hindered. If the supplier was able to bring more to the market they would. Its not a case of they're not making money so there is no point in stocking the market.
This is the classical theory that supports the notion that in crises, price increases should happen (Attached is a graph to refer to):
In the event of a crisis (i.e. Sandy), the demand for essential goods (food, water, etc) increases because of increased necessity for said goods as well as reduced access to alternatives. (Demand1 to Demand2)
This increase in demand increases the quantity of such goods demanded in the market. However, if prices are not allowed to adjust, then suppliers of such goods will not increase the quantity of goods they supply to the market due to an inability to profit from doing so. This results in a shortage (Space between first green line on the x axis and the purple line, indicated by the twin headed arrow).
If prices are allowed to adjust however, then suppliers will increase their prices to combat the shortage, which in turn gives supplier more incentive to supply goods to the market, simultaneously increasing the quantity of goods in the market and increasing prices and bringing the market to its new equilibrium (Black arrows).
Quote:
Originally Posted by Rangerboy030
This is the classical theory that supports the notion that in crises, price increases should happen (Attached is a graph to refer to):
In the event of a crisis (i.e. Sandy), the demand for essential goods (food, water, etc) increases because of increased necessity for said goods as well as reduced access to alternatives. (Demand1 to Demand2)
This increase in demand increases the quantity of such goods demanded in the market. However, if prices are not allowed to adjust, then suppliers of such goods will not increase the quantity of goods they supply to the market due to an inability to profit from doing so. This results in a shortage (Space between first green line on the x axis and the purple line, indicated by the twin headed arrow).
If prices are allowed to adjust however, then suppliers will increase their prices to combat the shortage, which in turn gives supplier more incentive to supply goods to the market, simultaneously increasing the quantity of goods in the market and increasing prices and bringing the market to its new equilibrium (Black arrows).
Teehee, thanks for taking the time to explain classical
Economic theory that doesn't really apply in this case. The problem isn't that it's not economically feasible for supply to be upped, the problem is that the supply chain has been cut off. The assumptions that classical economic theory is based on are not present in these cases (well, really, they aren't ever completely present in any market, but much more in this case, and the market is ripe for distortion (which in the world of equity, can result in 'unfairness' and economics 'deadweight loss')
Not talking about you specifically, but unusually just end up laughing hysterically at most people who talk economic theory when it becomes apparent they've just gotten out of Econ 101.
Last edited by PensFanSince1989: 11-09-2012 at 11:37 AM.
