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Please Exploit My Father (In Defense of Price Gouging)

I remember clearly the day after we evacuated following Hurricane Sandy. Holed up in his cousin’s basement, my dad was already developing a plan with his next-door neighbor: he was going to get a generator, and, with that and his police service weapon, they were going to go defend their homes from looters.

It was never clear why they felt this was necessary. They lived on a small barrier island, with only three bridges in and out. Those bridges were being guarded by state police, who were only allowing only residents in and out, and, moreover, the streets were being patrolled by National Guardsmen carrying M16 rifles. But, it seems, years in the NYPD had given my dad a strong distrust of the state, including the police. (This is, to be fair, normally a healthy instinct.) So my dad made some phone calls, found a guy who knew a guy and paid about three times the list price for a small generator.

Ask my dad, and, to this day, he stands by his decision. But as Hurricane Florence approaches, it seems that politicians here in North Carolina see it differently. To them, my dad was not voluntarily engaging in a transaction. Rather, he was being exploited. The state Attorney General, Josh Stein, says he plans to vigorously enforce North Carolina’s statute banning price gouging during the state of emergency surrounding the storm. He is encouraging the public to report any “business taking advantage of the storm” so that “we can hold them accountable.” Even the local media cannot contain its disdain for the practice. Will Doran, writing in Raleigh’s News and Observer, even starts his piece like this:

In the aftermath of a natural disaster, Good Samaritans often undertake selfless acts to help their neighbors or complete strangers.

Others try to take advantage of people’s desperation with high prices.

To a certain extent, I sympathize with people’s concerns about price gouging. Doran mentions a 1996 News & Observer account of an elderly woman being charged $18,000 for tree removal following Hurricane Fran. But anyone who has seen a Fox News commercial break knows that it doesn’t take a hurricane for bad people to rip off little old ladies. More importantly, price gouging does not address the problem it claims to solve; it simply exacerbates it.

Many people seem to be concerned that high prices during and following a storm prevent people from accessing needed goods and services. This is not true. The high prices reflect the condition of scarcity. In the absence of more being made available, items in short supply would still be rationed—however, they would almost inevitably be rationed in a less efficient manner. Raising prices around emergencies forces consumers to consider what’s truly necessary: Do I really need to fill twenty red gas canisters? How many twenty-four packs of bottled water will I really need? In these situations, higher prices help direct resources to more efficient uses. They discourage waste at a time when society can least afford such waste.

Inevitably, qualms will be raised about how higher prices inevitably hurt the poor disproportionately. These are not entirely without merit. However, while well-intentioned, they are misguided. Imposing a price ceiling is a blunt instrument. Even in theory, both the poor and the rich are offered the lower, state-sanctioned price. In reality, they help the wealthy far more than they help the destitute: if you’re poor, you are not going to buy twenty cases of water, even if it’s being offered at normal price. The end result is not that restricting the price results in more goods and services being made available for our least fortunate neighbours. What actually happens is that the same amount of goods and services are made available, but instead of being directed to where they’re needed most, they’re directed to well-off hoarders who have the time to track down the remaining supplies and the extra money to make unnecessary purchases.

Of course, it’s long been clear that many people have a poor understanding of how price signals balance supply and demand. Even in the aforementioned piece, Doran doesn’t quite seem to comprehend the mechanism, writing:

Opponents of price gouging laws argue that if businesses could charge higher prices there would not be shortages, since gas stations and grocery stores would be charging higher prices and thus less likely to run out of supplies. The theory is that people would buy only what they need instead of hoarding, and there would be more bread, gas, ice and other supplies to go around.

This is a misrepresentation of the case, and, moreover, it is a nonsensical one at that. The argument is not that higher prices prevent the shortages, as Doran claims. After all, if there were no shortage, why charge higher prices at all? Rather, raising prices is a way to manage the shortage. There would not be “more bread, gas, ice and other supplies to go around” (an absurd claim), but it would ensure that these items are used more efficiently than in a chaotic free-for-all of state-imposed price controls. (It is true, however, that higher prices will incentivize additional supplies and workers to be brought more quickly following a disaster.)

Doran does acknowledge that the hatred of price controls is not universal, adding:

However, while price gouging laws are politically popular, some economists and politicians oppose them as bad policy that actually makes shortages worse during emergencies.

Even here, however, he is not accurately describing the opinions of most economists on this matter. Saying that “some economists … oppose them” creates a misleading impression that the economics profession is somehow of mixed views. This is not the case. When the IGM Economics Experts Panel, an ongoing survey of leading economists conducted by Chicago Booth, asked about Connecticut’s proposed price gouging bill in 2012, it was not a close call. The surveyed economists were more than 6:1 against the proposal. (51% disagreed or strongly disagreed with the price gouging law, while 8% agreed or strongly agreed; the remained were uncertain or expressed no opinion.) Moreover, those who agreed were significantly less confident in their opinion than those who disagreed. When the experts opinions were weighted by their stated confidence, the panel was against the price gouging bill by a remarkable 11:1 ratio. Therefore, for Doran to say that “some economists” are against price gouging bills is unreasonably favorable to the supporters of such legislation.

Price gougers are not supremely moral beings responding to the highest call. But neither is any other merchant, and yet most people generally accept that generally allowing market prices for food is not only moral but has also led to more of it. Shortages of goods and services during and after disasters do indeed cause meaningful hardship, but laws against price gouging simply amplify the inevitable misfortune.


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A citizen of many countries but loyal to none, Ryan is now a stranger in a strange land: a New York-raised ex-Montréaler trying to navigate North Carolina.

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64 thoughts on “Please Exploit My Father (In Defense of Price Gouging)

  1. Seems to me that if supply was the issue that could be handled by limiting quantities per person/household. Someone was selling 5 gallon water jugs for $50-60 in NC. Water, necessary for life, in the midst of a disaster. Impoverished people do not have the ability to pay that.

    Granted, this was a private individual, not a business, but the effect is the same. I just can’t get on board with this one, though I do appreciate this perspective, one I have not considered before.

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    • A state that sees enough natural disasters such that price gouging is a going concern has a number of tools at it’s disposal. Laws simply against the practice are the “Hulk Smash” response; easy to understand, easy to put in place, and lots of people enjoy the emotional impact of such laws (gonna get that greedy shop keeper!).

      Doesn’t mean it’s the best way to legislatively approach the problem.

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  2. During every storm I was in as an adult, it never occurred to me to stock up heavy on supplies. This includes Hurricane Sandy, a storm that ended up giving me an unexpected two week vacation. I just got extra food for a day or two and left it at that. I’ve always assumed people stocked up because they were using the weather as a reason to have an impromptu indulgence feast with their family, friends, or even indulge themselves if they lived alone.

    Surge pricing makes economic sense in theory. It does not make political or psychological sense though. Its just one of those things that will strike people as unfair even if it is the right thing to do. People see storms and blizzards as disasters. Charging more for goods and services during them seems exploitative because people feel more vulnerable. Em is right. People will accept quotas more than surge pricing even if surge pricing is more efficient.

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    • They stock up like that in New Orleans, because there are really only three long bridges connecting the city to the mainland, and they may become impassible. If you are going to stay, you need to plan on two weeks food supplies. If you are in a business that sells supplies, you probably don’t care about running out. You are not going to have workers at some point. And stocking-up for a worst conditions doesn’t work, because the goods will just be looted.

      I’m really not sure how quotas would work, particularly in places under evacuation orders. Some people start stocking up earlier than others, and some go and look for supplies earlier than others. Those that got there first took them. Maybe that’s a good sign to evacuate.

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      • I live in the mid atlantic in an area were all the utilities are buried and we rarely get outrages of any kind…..and i have a box of MREs and a case of bottled water….

        just
        in
        case.

        My state has similar anti gouging laws…that just means that when demand is very high…we have shortages.

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  3. I don’t know how the economics profession as a whole comes down on this, but I do know your characterization of the IGM Forum results is misleading. The participants were responding to a proposed Conn law containing the language ” for a price that is unconscionably excessive” not the general proposition it attempted to embody. 20% of those who disagreed did so on the basis that the language was too vague. 45% of those (about 22% of the total), disagreed explicitly with the economic idea, about equal to those who agreed.

    I think a reasonable interpretation of the low confidence score of those who agreed is that the lack of confidence concerned the vague language of the proposed law, not necessarily the general proposition behind it.

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    • I actually disagree with your characterization of the respondents’ answers.

      Of those who disagreed with the bill, only Judd and Greenstone explicitly said the “unconscionably excessive” language was the most egregious offence of the bill. Edlin and Udry mentioned the language but did so in conjunction with citing the distortionary effect as well. (Udry went so far as to say the “unconscionably vague” language was actually mitigating.) The others who disagreed (Auerbach, Autor, Baicker, Chevalier, Eichengreen, Fair, Hall, Hoxby, Kashyap, Klenow, Lazear, Maskin, Nordhaus, Schmalensee, Stokey and Thaler) all either provided no comment or did not mention the language. (Back of the envelope, of those who disagreed, 10% primarily cited the vague language, 10% simply mentioned it, including Udry who explicitly found it mitigating, and 80% either did not mention or left no comment at all.) Further, when I initially read the comments from those who were uncertain, I was left with the impression that many of them were uncertain at least in large part due to the phrasing and not the economic principle at work; rereading their comments now, I am still left with that impression.

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      • I think you underestimate the importance of the vagueness. When I read the proposition, I thought the language was so vague (” for a price that is unconscionably excessive”) that I would be against it even though I support the underlying principle. Vague law is bad law.

        In your article you left this out which I believe mislead the reader about what was at issue. I assumed that those who did not comment agreed or disagreed about the actual language of the proposition. Certainly I could be wrong, but you did not give the readers of your post the information to decide for themselves.

        I do think it is reasonable to suppose that the low confidence of those who agreed was due, in significant part, to the vagueness of the law, rather than weak support for the underlying principle. We don’t though have the information to be sure. However, how you treated the confidence factor did not give the reader the information needed to come to an informed judgement, and so was misleading.

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        • While I do appreciate that you repeatedly accuse me of being misleading, I don’t think, as I said, that examining the feedback from the panel supports the case you are making.

          Of the twenty who disagreed, only two of the panelists that disagreed mentioned the vague language as a primary reason for disagreeing. As for the panelists who disagreed and who did not mention the language or did not make a comment at all, they were aware that the core issue of the matter was price gouging. They are all part of the ongoing IGM panel and are familiar with how it uses current issues to frame larger economic debates. The absence of an explicit concern about the language is certainly not evidence of concern about the language; rather, given the context (i.e., an ongoing panel about policy questions in economics), it can be assumed that they are responding primarily to the economic issue presented unless otherwise stated.

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        • Unconscionability of contract is common law defense, see here and here. I assume that the panel probably had various levels of experience with the concept, but I don’t know if its fair to ask economists a legal opinion. I think the only way an economists can address this type of question is to address the intent of the law.

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  4. Is it better to not having something in the first place than for someone else to profit over your desperate need for this same something?

    There is the dispassionate nigh-robotic “actually, according to this excel worksheet” answer.
    There is the lizard brain that depends heavily on social cohesion answer.

    These answers don’t agree with each other.

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    • I’ve never gotten a good supply chain answer to why the price needs to increase… like,

      Ordinarily a can of corn costs $1 and we sell it for $1.5 and ordinarily buy 100 cans and sell 75 cans per weekly shipment.

      During the EVENT… all 100 cans sell-out immediately and the price to get 1000 cans TOMORROW is $4/can and we then sell it for $6/can (ordinary 50% mark-up). That’s the premium for getting Cans of Corn onsite tomorrow in advance of the EVENT.

      I could even see increasing the, say, remaining 25 cans of corn to $6 in advance of the next shipment because that’s a cashflow issue where the last 25 cans provide the capital advance for the next 1000.

      Instead, it seems we just get the argument that the existing stocks should be sold at a premium… stocks are *not* replenished until after the EVENT – we assume at the ordinary $1/can price, and as such, the lizard brain wonders why the spreadsheet brain never shows us the spreadsheet.

      So, like this article, I’m willing to believe there’s a spreadsheet… and I’m pretty good with spreadsheets… but I’ve never actually seen the spreadsheet. Let’s look at the spreadsheet.

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      • the lizard brain wonders why the spreadsheet brain never shows us the spreadsheet.

        I think the spreadsheet is something like “if I buy all of this corn, me and mine will not need corn until spring… and we can sell/trade the surplus if we need during the period of time that cash money is but so much dross…”

        And the speech ends with “the only goods worth having are positional”.

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        • But that’s the Consumer brain isn’t it? I want the Logistics Brain to show his/her work.

          Somethings that might look like gouging aren’t gouging at all… say, Tree Services… we have about half a dozen tree services out here… after a giant storm you can either wait or pay more to get to the top of the line because your problem is more acute; and that pulls in other Tree services such that now we have more than a dozen crews which either shortens the wait or lowers the premium. But those other tree services have added costs to get here and do work, so the price threshold is still higher than non-Acute tree services.

          I’m not saying that prices can never or ought never rise, I’m just trying to zero in on what is a mechanism of price/service and what is just opportunism… which is to say if selling 100 cans of corn is 25 more than usual and is therefore a happy event, how do the Logistics require the increase in goods previously purchased? I can imagine several scenarios where it makes perfect sense… but I’m not sure how often those scenarios apply; so I’m left with theoretical justifications that come down to, because I can.

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          • If I am understanding your question correctly, the Logistics Brain is overcoming the Lizard Brain. Lizard brain panics, and grabs all it can as it is now a scarce resource. Logistics brain sees the price has been raised 5x (for example) and balks at something as unnecessary.

            But, as someone who was in logistics for a long time, the scarcity comes more from getting the correct materials into the area than anything else. Somethings are easy, such as water, basic foods, etc. But diverting existing supply lines, finding out what exactly is needed, correct sizing, etc, are the hard parts. It is like a market* on speed. And “opportunists” who are local to the afflicted area are going to be the best judge of this. They are the ones who realize that you need Depends and not newborn Pampers due to the old folks home, or vice-versa.

            *Market in the economic sense, not WalMart sense.

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          • Part of it might be opportunity cost being worked into the price.

            Say I own a hardware store. Weather channel says a storm is coming, so I know there will be a need for generators. Hence I contact my supplier and get a triple order of generators coming my way soonest. Soonest means I pay extra for the shipping. Cost goes up.

            Generators are big things, take up a lot of space in the store. So I need to clear out some space in the store, so the entire stock of, say, ACs has to go. Perhaps I have a fire sale on the ACs, or I wholesale them to someone else, whatever. Either way, in order to make room for the generators, I have to eat some loss on the ACs. Cost of the generators goes up some more.

            Is that enough to double the price of the generators, or triple it? Maybe, maybe not.

            Could be that a storm is coming, I’ve gone through considerable effort and cost to have a greater than normal supply of generators on hand, and people are bitching at me about how I am price gouging, so an asshole tax is now in effect as well.

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  5. We could just extend this thinking to how we provide emergency services themselves.

    We could let looting begin, then have the National Guard negotiate a fee with the business owners to determine just how badly they want protection.

    The point here is to highlight the agency and interests of the collective body of citizenry itself. In the engagement between a buyer and seller, the state is an interested party, the adjudicator and enforcer of the contract.

    Arguments in favor of gouging usually present a false dilemma, between rationing by price, or nothing at all. We created FEMA and emergency services precisely to provide essential services and goods in an emergency, regardless of efficiency.
    When the National Guard stands watch 24/7, or county crews clear debris from roads in pelting rain, when utility crews repair power lines at 3 AM, that isn’t an efficient usage of labor and goods, and it isn’t intended to be.

    Price gouging laws aren’t intended to facilitate an efficient transfer of market transactions. They are intended to preserve the cooperative nature of society itself.

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    • Basically this.

      Price gouging is what happens when you decide, “Let’s let the market handle this.” The market deals with scarcity, even short term scarcity, by raising prices.

      If you don’t like price gouging, then you need to come up with a non-market solution, you can’t just decide to tell the market to not do it’s thing.

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      • Emergency services are the non-market solution.

        We the citizens empower agencies like FEMA to buy up massive quantities of tents, generators, medical supplies and so on, before a disaster strikes, then flood the affected area with them during the disaster.

        Its not efficient at all, but isn’t meant to be.

        If there are shortages of supplies during a disaster, its a symptom that something is broken in FEMA.

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        • Exactly.

          And if something is broken at FEMA, or any equivalent state agency, or city agency, then the market will respond to perceived demand.

          Again, making laws telling the market to not be the market is like passing laws declaring Pi to be exactly equal to 3.

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    • Chip Daniels:
      Arguments in favor of gouging usually present a false dilemma, between rationing by price, or nothing at all. We created FEMA and emergency services precisely to provide essential services and goods in an emergency, regardless of efficiency. When the National Guard stands watch 24/7, or county crews clear debris from roads in pelting rain, when utility crews repair power lines at 3 AM, that isn’t an efficient usage of labor and goods, and it isn’t intended to be.

      Price gouging laws aren’t intended to facilitate an efficient transfer of market transactions. They are intended to preserve the cooperative nature of society itself.

      I know some arguments in favour of price gouging say it’s rationing by price or nothing at all, but this isn’t quite my view, which is why I didn’t present it in that framing. I’d even say that having the government allocate goods and services directly during an emergency is better than having them distributed in a semi-arbitrary fashion by artificially low prices.

      I do have to say, however, I’m extremely skeptical that anti-price gouging laws are intended to “preserve the cooperative nature of society itself”. While I could see such an argument being colourable (though I don’t actually agree), I don’t find that it’s the argument usually presented by defenders of such laws, nor do I believe it is the actual intention of those who write and pass such laws; rather, almost all writers and proponents of these ordinances seem to be driven not by a rational basis but by a sense of moral outrage.

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      • What larger principle underlies this moral outrage?

        Isn’t it the idea that we as a society work cooperatively, especially during times of emergency?

        Imagine if the National Guardsmen were to go on strike, unless they got a massive bounty for performing their vital services.
        Would we all nod and commend them for such clever entrepreneurial behavior?
        Or condemn them for their lack of patriotism and civic duty?

        Where does patriotism and civic duty originate? How do we inculcate it, nurture it and prevent it from faltering?

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        • All your points here are excellent arguments for making sure FEMA, etc. are well funded and competently run. They are not arguments that rationally support anti-price gouging laws.

          You don’t want people to price gouge on critical supplies and equipment, then don’t allow those things to become scarce enough during an emergency such that gouging becomes attractive or necessary.

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          • …then don’t allow those things to become scarce enough during an emergency such that gouging becomes attractive or necessary.

            I know we’ve got professional logistics folks here, perhaps they have ideas about how to do this short of massive government warehouses everywhere, full of plywood and generators and water and freeze-dried food and… I’m semi-serious about the everywhere. Hurricane forecasting is greatly improved — amazing what you can do with a few supercomputers, a bunch of satellite-mounted sensors, and a bazillion ground-based sensors of increasing sophistication — but there’s not going to be a sufficient convoy of trucks to accommodate a 300-mile late miss.

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            • This is instructive.

              FEMA is supposed to do something similar, on a much wider scale.

              In short, you identify suppliers before hand, and shippers. When you know disaster is coming, you purchase and pre-stage supplies. When it hits unexpectedly, you pull from unaffected areas and get the supplies into the area.

              The other thing FEMA does, as do states and cities, are things like CERT, which is getting people to get prepared together. This is especially critical in urban areas, where people are less likely to have the personal storage for each home to be an island unto itself. For example, my neighborhood in WA, we have a couple of people with generators, a couple with chainsaws and other power tools, etc; so all you need to really worry about is food and water for your family. If everyone is allowed to run an extension cord from one of the generators to the fridge every 6 hours for 30 minutes, no one is likely to loose that source of food right away. FEMA, etc. can do more to encourage such resource sharing within each community (they do a little bit, but IMHO it could be better).

              If you live in an area prone to wide scale disasters, gouging is effectively a tax on the unprepared.

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              • As a registered architect in California, I am signed up to be a property inspector after a major event.
                So like if there is a massive earthquake, I am on a list to be tapped to go and tour neighborhoods noting the condition of buildings.

                I’m still undecided if I will hold out for the right to loot said buildings, though.

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      • I’d even say that having the government allocate goods and services directly during an emergency is better than having them distributed in a semi-arbitrary fashion by artificially low prices.

        This, ten times over.

        Here’s an interesting question. To be clear, I’m not actually proposing this, but it’s an interesting question never the less: How much would it cost to give every house in the US a propane/gasoline generator (large enough to alternately run the fridge, space heater/fan, microwave, or toaster oven, but not one of the whole-house ones) and one of those 30 pound propane tanks? (Propane, unlike gas, doesn’t go bad.) Let’s go with about $500, that’s the current commercial cost.

        There are about 122 million households in the US, and let’s pretend for a second all of them are individual houses. That means, for about $61 billion dollars, we could give people several days buffer on power outages. The current FEMA budget is about $16 billion a year, so just four times the yearly budget, _once_. (Or, expressed in F-35s, 2/3 of an F-35.)

        And that’s with the worse estimates. For example, apartments should have larger systems that would be cheaper to cover the entire thing, and the government could actually order _millions_ of generators at a bit of a discount. OTOH, you’d have to actually get them to people, so who knows the actual cost.

        Now, this is a _really bad_ idea for all sorts of reasons. Don’t anyone try to take that as a serious proposal. But stuff like this should actually be considered…except it won’t be, because somehow helping people _prepare_ for disasters is socialism if we have to give them anything…whereas after a disaster the exact same people will say ‘Oh, sure, we should help them’. (Usually. Unless they’re mostly not-white.)

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        • Or you could offer rebates for those kinds of generators, or a tax credit. You don’t have to buy everybody a generator, just incentivize them to get one (or other qualifying emergency power system – southern CA could encourage people to get a battery pack and collapsible PV array, etc.).

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          • There’s are several reasons that doesn’t make sense.

            Let’s start with assuming tax credits:

            For the most obvious reason, it doesn’t work well at all with renters. Someone owns three houses, rents them out, they get…to buy one generator? Or are their renters supposed to buy one?

            I mean, the renter could just take it with them, I supposed. Everyone privately owns their own, takes it to their current residence. It almost sounds like it would work, except at that point you start realizing you’ve accidentally now bought every _adult_ a generator instead of every household, so bought almost twice as many generators.

            Likewise, you’ve now bought everyone in an apartment complex a generator they…can’t really use. You’re not supposed to use them inside. And…people will, and die of CO2 poisoning. (Which is really why these things should be _installed_ outside, and not portable.)

            Or can everyone get _as many_ generators as they want? Either via unlimited tax credits or via rebates? That has more obvious problems.

            Or is the plan to not making them essentially free, and just, say, cutting the cost in half? That seems…somewhat regressive. You’ve just assured that the poor don’t buy them, which not only means the people who need them the most don’t have them, but now power outages are less inconvenient to the middle class,, so there will inevitably be more of them.

            Here’s a serious question: If we want every house to have a generator, how on earth is any of this better than the government looking at property tax records and just showing up at every residence with a generator and installing it?

            (There actually are some problems with the entire idea, and we might not actually _want_ every house to have a generator…but having a scheme where the public buys the generator and gets reimbursed doesn’t solve any of the problems.)

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            • …or other qualifying emergency power system…

              You don’t need to incentivize everyone to buy a generator that is powered with a combustion motor. And tax credits are trackable, and can be limited to once every 5 years or so.

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              • That…didn’t really address any of my points, in that the actual goal is to have a generator system of some sort installed at every house, and attempting to do that via all people buying them is extremely complicated vs. just the government _buying and installing them_ at all residences.

                How exactly are you proposing to handle people who own multiple houses? Or, heck, corporations who own houses? Or apartment complexes? Or who buy generators for _businesses_ and try to get rebates?

                This is exactly the sort of ‘How dare we have socialism’ nonsense making things that are extremely simple be both more complicated _and_ more expensive.

                If we want all residences to have an emergency thing and the government to pay for it, the obvious solution is for the government to buy that thing for all residences. It might be wise to be able to vary ‘that thing’ based on location. It might even be possible to let people buy and install their own thing per residence that will provide the same functionality, and the pre-install crew shows up and the house already has that thing so the owners get paid the price of the thing instead.

                Setting up a system where maybe people will do it on their own by offering rebates and tax credits, which then have to be restricted in complicated ways, and will end up in a patchwork of only about half the people even bothering, and the poor being left out is…well, really American, but really really pointless and wasteful.

                For example, WRT tax rebates…a lot of Americans do not file taxes. Like, literally do not make enough to have to file taxes. They’re statistically unlikely to go for any tax rebates, even refundable ones, because they’re unlikely to understand how that works.

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                • How did ‘Cash for Cars’ keep track of everything? Or how does the IRS track whether or not I am still eligible for tuition credits? The IRS seems to find ways to do these things.

                  Also, we don’t need generators for every household, just for households in affected areas. But sure, say it’s overly complicated to do rebates or tax credits or what have you.

                  Now what would be smart, is every handful of houses, you install something like this, and wire it to only one or two circuits in each house (like the red outlets in hospitals), so the homes can keep the fridge running and a few lights on, or the internet router going, or keep phones charged, etc. Obviously you install bigger units for apartment buildings.

                  Or, if you are somewhere sunny (like southern CA), you help get more rooftop solar installed with some kind of battery system. Maybe in cases like that, the battery is more communal (each residential block shares a central battery bank). If you are doing something communal like that, you can pass some of the cost onto the owners (kind of like how a lot of places handle sidewalk replacements, each homeowner chips in $X per foot of sidewalk and the whole street gets done at once; or how the cost of running water and sewer to my neighborhood in WA resulted in an annual charge of $195 for the next 15 years (I just paid it off last year)). Then adjust the $X to fit the ability of the neighborhood to pay.

                  Probably wouldn’t work everywhere (I wouldn’t want to invest that kind of money in a neighborhood that gets covered with two feet of water during every hurricane, unless there was a way to locate the unit up high…), but in places where the generator will probably survive the storm, but the grid will get knocked out, it could be worth it.

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                  • Before you folks go nuts buying generators, you’re going to need to wire very expensive transfer switches into the existing wiring of each house, which requires a seperate panel fed from both the generator and the main circuit breaker panel. By code, you must have a transfer switch so that your generator’s voltage cannot possible get back on the line and kill somebody on a repair crew, or cause electrical havoc because it’s not in phase with what’s coming from the power company.

                    So do you need a manual or an automatic transfer switch? How many circuits should it feed? How many amps do you need? On average, you’re looking at about $4K for the generator and installation costs, (you need a licensed electrician for quite a few hours to put one in) so for all the homes in the US, the cost would run about $500 billion. But that’s not including the cost of adding a concrete pad and a weather housing for your generator.

                    You’ll also want a housing that locks down so your generator doesn’t end up in Mexico or Guatemala, providing power for some small village, which is a common ending for US generators, especially large industrial ones. I’ve worked at a plant where they had to buy a new one about once a month because they kept getting stolen and shipped south of the border. They finally hid GPS trackers in them.

                    And of course after every major flood, the government would have to replace everyone’s generator because they’d all go under water, rendering them useless in the aftermath of the flood. That’s why you go out and buy a generator after the flood.

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                    • Before you folks go nuts buying generators, you’re going to need to wire very expensive transfer switches into the existing wiring of each house, which requires a seperate panel fed from both the generator and the main circuit breaker panel. By code, you must have a transfer switch so that your generator’s voltage cannot possible get back on the line and kill somebody on a repair crew, or cause electrical havoc because it’s not in phase with what’s coming from the power company.

                      You need a transfer switch if the generator is wired into the house. I was not proposing that. I was proposing something that merely has a long cord you run into the house that has electrical outlets on the end that you plug a few specific devices into. Like I said, something that is equivalent of the $500 diesel/gas generators you can buy from Home Depot, not the ‘whole house’ ones.

                      But that’s not including the cost of adding a concrete pad and a weather housing for your generator.

                      Or the government could just specify a waterproof housing in the purchase order.

                      And of course after every major flood, the government would have to replace everyone’s generator because they’d all go under water, rendering them useless in the aftermath of the flood. That’s why you go out and buy a generator after the flood.

                      And that, of course, is one of the actual reason this should not be done. Along with the fact they would present too large a target for theft. Or ‘theft’, considering it would often be done with the property owner’s help. And you didn’t even mention maintenance, or what’s going to happen when the property owner wants the bolted-down generator moved.

                      My point was not that ‘everyone gets a small generator’ was a good idea. It’s not. It’s really not, for all sorts of reasons.

                      My point was that, if the government _did_ decide it was good policy to provide small generators to every household, it’s almost inconceivable we’d do it the sanest way and just _give them all generators_. We simply are unable, politically, to accept the idea that sometimes we should just _hand_ people things if we want everyone to have them, even if we’re willing to pay for that! We have to invent complicated rebates and tax refunds and whatnot whatnot…which Oscar then did, and I honestly don’t know if he was just playing along or what.

                      This becomes somehow even sillier for disaster relief, because one of the few times we seem okay with directly giving people stuff is after a disaster ‘Here is some water and food and a place to sleep’…but we can’t still can’t give them stuff help them get through disasters in advance, even if it would save us money.

                      There actually are emergency things we should probably give everyone. Like a weather radio with battery backup and hand crank, for example. And USB port to charge a phone off the cranking. Just people being generally informed and having working cell phones during a disaster is well worth the $25 or so those things would cost.

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                      • Well, the most important thing the government should give everybody for disaster preparedness is an AR-15 with a low-cost night vision scope. Or at least everyone who can pass a background check and who owns property.

                        In Kentucky, our laws for emergency response give the government the power to commandeer your vehicles and take your food (for delivery of essentials to a disaster zone), but they are forbidden from touching your supply of weapons and ammunition, as you might need those really badly, possibly to stop looters.

                        As an aside, I think it’s quite possible that looting is an evolutionary innate response to disasters. For hundreds of thousands of years we used to raid each other’s villages all the time. When that happens, grabbing up everything that’s grabbable, regardless of who owns it, greatly increases the chances of survival for those whose fleeing a village that is about to get sacked. And for those raiding the village, well it’s all free stuff, so don’t miss out!

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    • Prices are a signal – their function is to provide information about the state of supply and demand in a market. A spike in prices is like a smoke alarm – it’s annoying, but that’s the point, it tells you there’s a fire and you need to deal with it.

      But how to deal with it? If you’re one of the politicians who passes anti-gouging laws then you solve the problem by breaking the smoke alarm and then loudly telling everyone you’ve solved the problem. And if anyone tries to point out that you haven’t solved a thing then there’ll always be a chorus of people who should know better saying “didn’t you hear how annoying that sound was? You libertarians have no compassion you just want people to have to listen to loud piercing noises all day.”

      Contrast that with having an agency like FEMA deliver supplies. That approach prevents prices from spiking by increasing supply – it silences the alarm by putting out the fire.

      I’m not adverse to governments helping people who are suffering from a natural disaster. I just want the government’s solution to actually help, not just hide some of the symptoms of the problem while pandering to people’s prejudices.

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  6. This is one of the few issues where Neal Boortz educated me. There was a hurricane that hit Florida and people were complaining because hotels in nearby states were “gouging”. But he pointed out you have two options:

    1) Hotels don’t gouge. Evacuating families than take two or three rooms for the entire family. Result: lots of people don’t have rooms.

    2) Hotels gouge. Families squeeze into one room. Results: rooms available, albeit at a high price.

    He also used the example of a man who bought generators, loaded up his truck and drove into the hurricane zone. He was fined for price gouging. But he had to make it worth his while. You don’t let him jack up the price, the result is .. no generators.

    It’s crazy that it’s 2018 and we’re still making policy like the Law of Supply and Demand doesn’t exist. PJ O’Rourke described it best. If you artificially set a price too high, people will learn to live without it (as OPEC discovered with oil). If you artificially set a price too low, you will find that the thing is no longer available (as the Soviet found out with everything).

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    • A few people with trucks, and who can take off work for a few days, will haul some food in. Not many people will haul in a generator to sell at no more profit than they would otherwise get. If you want a massive amount of supplies to flow in from the private market, where 99% of supplies are, you need to have a bunch of people thinking they’re going to make a whole lot of money so that they round up the required supplies, take off work, and hack their way through downed trees to get to the hardest hit area (where prices should be highest) to score those sales.

      If you don’t, 99% of people just sit back and watch the disaster on the Weather Channel.

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    • I don’t know that families taking two or three rooms seems very plausible to me. They don’t seem to do that in non-emergencies, so I’m not sure why they would otherwise do it.

      As I see it, people evacuating a hurricane face the same sets of trade-offs as they would have in any event, price vs. location vs. amenities vs. reservation flexibility. Hurricanes are not unannounced occurrences; as information comes in, some people will make a reservation sooner than others even start to think about what they want to do.

      I know of some marines stationed near New Orleans who were instructed to leave the area as Katrina came near, but be ready to return immediately to provide emergency services. They were given hotel vouchers of some sort, but as they headed North from the City, later than most, all they found were “No Vacancy” signs and when they got to Southern Illinois they just stopped looking and continued to a parent’s home in Central Illinois. Now, I’m not sure how the vouchers worked, but the problem wasn’t gouging, and perhaps if there was gouging, there would have been space for emergency response personnel to stay closer to the City.

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      • I’m not sure that turning everyone into an ultra-rational Vulcan/Homo Economicus is a good solution here. Maybe for this limited problem but it could and would have negative side effects that would make human life less richer, possibly more stressful and cruel.

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            • Read JamesK’s comment here, and the discussion it accompanies. We can dream up analogies all day, but in the end, in this case, laws against gouging are politicians taking the easy path to satisfy people’s idealistic concepts (superstitions) of fairness, rather than accepting the responsibility of dealing with projected shortages politically.

              It’s passing the buck to private actors for their failures to do their damn jobs.

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            • @saul_degraw

              Three points
              1) As I note above, I’m not saying the government should do anything to help, I’m saying they shouldn’t do this because it won’t help.
              2) Reason and emotion are not opposed – this is something Star Trek Vulcans are flatly incorrect about. Rationality is about taking actions that will achieve one’s desires – reason acts in concert with emotion, not against it. Fully rational humans would want exactly what they want now, they’d just be better at getting it.
              3) You are being really selective in your application of this “emotion beats reason” rule. You could argue that Trump’s immigration policy is justified by exactly the same line of reasoning you are using here, or for that matter the religious right’s desire to ban gay marriage, or even homosexuality itself.

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  7. Expanding on my view from above, I think that economics has been too focused on what they can quantify but people are not mathematical creatures. Not wholly at least. Maybe life would be easier if we all just became Homo Economicus but I don’t think we would find that life very pleasant or enjoyable. I think we would find it kind of robotic.

    One of the things that people seem to intrinsically rebel against as immoral and unfair is when people take advantage of acts of nature like Hurricane Florence. So maybe price gouging does work but it also goes against some deeply rooted aspects of human nature.

    I suppose we can educate to change this but I don’t think most people would find that kind of social engineering pleasant.

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    • I think it makes no sense, even on its own logic.

      The marketplace itself is a collectivist enterprise where we collectively construct a coercive, monopolistic entity which records property claims, and a police and court system which enforces those claims.

      The collective body itself has agency, and quite literally, is a party to every single contract that is made. When people talk about free actors making voluntary exchanges, they forget that the third party enforcer is also a free actor.

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      • The enforcer is there to stop cheating in the marketplace, which both makes the marketplace inefficient or non-existent and really pisses people off.

        What gouging does is allow more efficient allocation of resources based on needs. Also note that not gouging is not illegal under any circumstances. People are free to drive into a disaster area and give away anything they want. So if someone wants to drive a generator into a disaster area and try to sell if for a $5,000 profit, more power to them. They’ll have to compete with people selling generators for less.

        So suppose you have someone like Mike Dyer who hunts a lot and fills freezers with game. A hurricane hits, power is projected to be out for two weeks, and he’s facing the loss of three years worth of meat and fish. This kind of thing happens. My housemate’s mother just lost over a thousand dollars worth of organic, locally sourced meat when her freezer door was left open while she was on vacation. We had to toss all the meat in a dumpster. So anyway, our hypothetical hurricane victim, let’s call him “Mike”, is looking at the loss of perhaps $15,000 worth of meat unless he can come up with a generator, and come up with it quickly.

        Now without price gouging, a tiny handful of generators get delivered to the disaster area, where they are sold for the list price of $1,000 to $2,000, depending on model. Those get snapped up by a line of people who want the generators so they can keep some lights on, surf the web, and keep their freezer pops cold. They get a generator for list price, so they’re not losing anything on the deal. Poor Mike is at the end of the line and doesn’t manage to get one.

        What Mike needs is some price gouger who demands $3,000 for a $1,000 generator, a price none of the other folks is willing to pay. That keeps the gouger’s generator available on the market until Mike comes along. Mike would’ve lost $15,000 but, thanks to the gouger, he’s only going to lose $2,000 (the over-charge on the sale) because the over-priced generator will save his frozen meat. There’s no way that transaction happens unless someone is down there trying to make a bunch of money off other people’s misfortune. By trying to prevent someone from doing that, you’re making the misfortune worse. Instead of losing $2,000, Mike will lose $15,000.

        And again, allowing people to price gouge does not prevent people from not price gouging. What the gougers are doing is maintaining supply and letting the market work by providing a range of price options, just like every other market, so that critical needs are met. The alternative is a very limited supply, doled out first-come, first-serve instead of by economic desperation, so that people who have an urgent need for something can’t get it unless they’re lucky enough to be first in line at the give-away tables, tables which probably won’t even show up for several days.

        Nor does the ban on gouging allow Mike to offer a ton of extra cash to someone who was lucky enough to be first in line for a dealer-cost generator, because then that lucky person in line would be guilty of price-gouging if they turned around sold the generator to Mike at a horrendous profit. They’re certainly not going to sell Mike the generator for no profit or they wouldn’t have been standing in line all morning to get it. That means Mike is out of luck and loses all his frozen meat, all because of the public’s impulse to “protect” Mike from getting ripped off or exploited, as if Oprah is going to show up and give a million disaster victims a free generator.

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          • No, it’s efficient regardless of purchasing power. The people with more capital have more capital at risk, and thus have more to lose and more ability to pay to avoid those losses. The laws of economics don’t go out the window just because it rained.

            A similar example to the above would be a company that’s running a very important and profitable server farm. Do you think Twitter or Facebook should be able to get massively overcharged if they need a new set of diesel generators delivered in two hours due to some power outage, when the normal delivery time for such items might be weeks?

            To cut through all the tape and get big guys loading trucks at 1:30 AM requires waving around a lot of extra money. If you make those overcharges illegal, then the company looses hundreds of millions, and possibly billions on their stock price.

            The same logic applies all the way down the food chain.

            The alternative is to rely on the Generator Fairy.

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  8. Seems simple enough. Price gouging laws make things worse because people can horde, exacerbating the shortage. Got it. Just couple it with a law restricting number of purchases per person. In fact, lots of stores voluntarily maintain such a policy in these kinds of circumstances.

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    • Well, hording is the worst of it, but my father didn’t pay three times the MSRP for a generator because people were sitting on six generators out of fear.

      To institute purchase limits may help with some products, but there are clear problems that will arise:
      1. It would be hard to say what a reasonable limit is, and it would be hard, if not cruel, to apply the same limit to different circumstances. Perhaps everyone can agree that a single person shouldn’t be buying six cases of water, but what about a family of eight? Are cashiers going to interrogate each purchaser?
      2. Some items will be in short supply no matter what. There were not enough chainsaws in the area after Sandy for everyone who wanted to use one. A price signal would have allowed people to prioritize the most urgent uses.
      3. People with means will find a way around purchase limits. They’ll visit multiple retailers, send someone on their behalf or both.

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    • In principle, stores should be allowed to set whatever price they want. What I’m curious about is how they maintain good will with the local community after the event. Messing with people’s loyalty/sacredness components of their morality will cost them business. Up until the age of 11, my father and I used to patronise one barbershop who used to be located at the old seletar market. The barber refused to cut my hair for my sacred thread ceremony (sort of like a bar mitzvah in terms of significance) and since then we went to another one slightly further away. This other barber was the one who cut my hair during the ceremony. And then seletar market burned to the ground and has been replaced by greenwich village

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  9. This entire problem is something that is made much worse because of inequality.

    In any situation with possible shortages, there are going to be random hoarders. It’s just that inequality allows some people to be _much_ better hoarders than others. Basically, infinitely better. Often they’re so rich and wasteful they literally don’t realize they’re hoarding.

    We actually have this sort of inequality-caused problem in all sorts of places. Like water. There are places running out of water, and they can’t actually jack the cost up too high or normal people can’t afford it…but if they leave it cheap rich people blithely waste it. (Hell, often middle-class people too!)

    Or during a gas shortage…you get some temporary gas shortage of a week or so, wealthy people with a lot of money fill up their tank without noticing, when they could have done with half that amount. Hell, the entire history of cars in the US is ‘Us being unwilling to jack gasoline taxes up so high that the poor can’t afford it, so the middle class just keep buying SUVs until prices go up by themselves.’

    Of course, anti-price gouging laws do absolutely nothing to help this sort of thing, and in fact makes it worse. The wasting water thing, notable, tends to be fought with rationing, either absolute or by vastly increasing the cost over a certain amount.

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  10. It’s incorrect to describe any instance of “raising prices in response to increased demand” as “gouging”.

    More properly, gouging describes vendors raising prices in response to an event which requires use of those resources in a time frame that prevents seeking alternate sources of supply or waiting for increased prices to cause an increase in supply. It’s not a perfect market, and parroting perfect-market-orthodoxy statements isn’t a meaningful answer.

    Like, if the hurricane is coming, you can’t say “well I’ll just wait a bit and the prices will go back down”; you can’t say “I’m sure that more gas stations will open in response to higher prices”; you can’t say “I’ll go get gas somewhere else and then leave town”.

    This doesn’t mean that you have to accept empty gas stations when there’s a panic; the market-orthodoxists are correct when they say that consumers often rank “I’M SCARED” very highly in decisions about utility, and tend to overconsume to assuage their feelings. But that doesn’t mean that permitting gouging is the only solution; if you pair anti-gouging laws with permitting rationing when those laws are in effect, that’s also a solution.

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