Monday, September 01, 2008

Unconscionably Ridiculous: First It Was the Speculators, Now It's the Price Gougers

In Alabama, Attorney General Troy King is warning unscrupulous contractors and businesses that he will take action against those who seek to profit illegally at the expense of Alabamians who may suffer damage and others who seek refuge in the state from tropical storms and hurricanes.

The state law that prohibits "unconscionable pricing" of items for sale or rent comes into play when the governor has declared an official state of emergency. Gov. Riley declared a state of emergency Friday in anticipation of Hurricane Gustav.

An unconscionable price is defined as one that is 25% more than the average price charged in the same area within the last 30 days, unless the increase can be attributed to a reasonable cost. The penalty is a fine up to $1,000 per violation, and those determined to have willfully and continuously violated this law may be prohibited from doing business in Alabama.

In Louisiana, Attorney General Buddy Caldwell announced zero tolerance for price gouging at the gas pump before, during, or after Gustav. His office says it's logged over 300 complaints. In one case, a station was caught jacking up the price of gas from $3.50 a gallon to $4.10

MP: Hey wait a minute, that's only a 17% increase, that would be legal in Alabama.

Caldwell says when they busted these stations, employees told his investigators they didn't know they are not allowed to raise the prices. On Highway 415, west of Port Allen, gas prices are hovering around $3.65. People are warned that if they haven't gassed up, they should get to the pump soon. Some stations are running out of gas.

MP: Hey wait minute, officials are telling people to fill up, so demand for gas is rising sharply, and supply is declining, stations are running out, and prices aren't supposed to increase?

Update: Politicians seem to have a strong dislike for high oil and gas prices, and are willing to immediately blame, investigate and prosecute price gougers and speculators for "unconscionable pricing" when oil and gas prices increase. But it's often those same politicians who continually hold our own vast domestic energy resources off-limits to exploration and development, which contributes to higher prices. Isn't that "unconscionable logic?"

10 Comments:

At 9/02/2008 10:01 AM, Anonymous Jim Gannon said...

GMU economist Russ Roberts' new book, The Price of Everything, covers just this issue in a fictional form that is excellent for the non-economist

Chapter 1 is online here: http://press.princeton.edu/chapters/s8733.html

Chapter 2 here: http://press.princeton.edu/chapters/s2_8733.html

 
At 9/02/2008 11:05 AM, Anonymous rvturnage said...

I live in Jackson MS area, and a couple of days before the hurricane, everyone one was in a panic and buying generators. I was talking with a friend about the panic, telling him about a co-worker of my wife's went to get one with his oldest son. They only had the one left, so his son bought it. The father was told to leave his number and they'd call him when more came in. So he got a call the next day and went down to buy the generator, but it cost about $300 more than the day before...instead of buying it, he decided to just go to his sons house if the power failed.

My friend immediately went on about how it was wrong to "gouge" like that...Took me a while to explain to him the function of the higher price -- to limit usage and overstocking so that more supply is available to those that need it. I still don't think he got it.

 
At 9/02/2008 11:35 AM, Blogger Ironman said...

"Politicians seem to have a strong dislike for high oil and gas prices, and are willing to immediately blame, investigate and prosecute price gougers and speculators for "unconscionable pricing" when oil and gas prices increase. But it's often those same politicians who continually hold our own vast domestic energy resources off-limits to exploration and development, which contributes to higher prices. Isn't that "unconscionable logic?"

Sometimes, the Baptists and the Bootleggers are the same people.

 
At 9/02/2008 3:12 PM, Blogger spencer said...

I suggest you read the GMU Mercacus
study on the response to Katrina.

It is here:http://mercatus.org/uploadedFiles/Mercatus/Publications/PDF_20080319_MakingHurricaneReponseEffective.pdf

What it shows is that in the modern economy Wal Mart, Home Depot, CVS, Exxon, etc, etc, do a fantastic job of resuppplying stores and facilities after a disaster at their normal every day low prices.

The meme that higher prices are needed to attract supplies into a disaster area is a myth that has no relationship to reality in the modern world.

The major corporation and other suppliers view it to their long run interest as an establish business to resupply disaster areas at or below their everyday
low prices as quickly as they caqn. Moreover, as the report shows they do a fantastic job of it.

The concept that some guy in a pickup truck is doing people a favor by charging high prices is a myth that has no place in the modern capitalist system.

By definitions markets mean multiple sellers. But what the mythical guy in the pick up truck is really doing is taking advantage of the absence of competition to collect monopoly profits from victims of disaster.

How any one can view this absence of markets as a great example of how markets really works is beyond me.

Wal Mart, Home Depot, Lowes, etc., etc., makes this simple model that some economist teach in their introductory economic course a farce and/or a parody of how the real economy works.

 
At 9/02/2008 9:43 PM, Blogger OBloodyHell said...

rvt: I recall one or more of Walter Williams' columns in the aftermath of Katrina (perhaps as much as a year or more, mind you) on the purpose of "gouging".

I recommend you hunt it down over on Town Hall.

The gist of it related to raising prices at motels, etc., for people fleeing a hurricane, and how it essentially encouraged people to economize in a way they might not, and how this WAS better for all people as a whole. The examples therein may help you explain to your friend in a much better way than you were able.

Williams seems likely to be an excellent teacher from his writing. Perhaps Dr. Perry can tell us from first-hand experience if I'm correct.

 
At 9/02/2008 9:44 PM, Anonymous LoneSnark said...

If walmart and home depot do such a great job of restocking disaster areas, when why are you upset that some-guy in a pickup truck is delirious enough to think he can charge people $5 for a bag of ice? Afterall, the people can go to walmart and get ice for $1.

Would you be equally outraged if the guy in a pickup truck showed up in non-disaster areas to sell ice for $5?

That he can charge $5 for ice strongly implies that ice is not available for $1 for whatever reason.

 
At 9/02/2008 9:45 PM, Blogger OBloodyHell said...

P.S. why was your friend waiting until the last friggin' minute to buy a generator? If you can afford one, and think you can justify it, why not get it in June before there's a need for it? That way someone who might actually not have been able to afford one will find one available. Ridiculous.

 
At 9/02/2008 9:55 PM, Blogger OBloodyHell said...

> The meme that higher prices are needed to attract supplies into a disaster area is a myth that has no relationship to reality in the modern world. ... (snip) ... The concept that some guy in a pickup truck is doing people a favor by charging high prices is a myth that has no place in the modern capitalist system.

Really?

Then why is the guy in the pickup truck able to sell at the inflated price in the first place?

Are these people too stupid to be able to go to Wal-Mart themselves?

Your "meme" makes no sense at all.

It's a voluntary transaction. If you don't like it at that price, then don't #$%^#$^$&$% buy it.

If I have property, and I want to sell it, then I can sell it at whatever damned price *I* want to sell it at.

Maybe I'd rather have it sitting on my shelves collecting dust, or maybe you'd rather pay me what I want.

"Ohhhh, disaster!"

Gimme a break. Hurricanes in particular do not just drop on your heads out of nowhere. You know they are coming days ahead of time, and, if you live in Florida or a coastal area, you know there is a notable chance of one coming in the hurricane season -- so you should not be making a last-minute scramble for flashlights, generators, batteries, non-refrigerated foods, or water.

And it's particularly not the government's job to protect you from the fact that you're so stupid and unable to anticipate a HURRICANE's approach that you HAVE to pay inflated prices. You're an IDIOT. You SHOULD pay more for failing to think ahead. Maybe if you DO pay more, then you WILL think ahead next time.



Too Much Tiger Food.
Not Enough Tigers.

 
At 9/03/2008 9:19 AM, Blogger spencer said...

I challenge you to show me an actual example of the guy in the pick up truck selling ice.

That is why Russ Roberts had to write a fantasy book about it because it does not exist in real life.

 
At 9/04/2008 11:20 PM, Anonymous PhillySteve said...

Walter Williams column on the importance of prices:


http://townhall.com/columnists/WalterEWilliams/2005/09/14/the_role_of_prices

 

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