Price Gouging

I note Pro's proposition is very much in vogue these days amongst the free market pontifices in the temples of Wall St. Or at least was in vogue until Harvey hit Houston 2 weeks ago. Forbes magazine published one of its usual paeans to laissez faire disaster response before the flooding peaked on Aug 27th, [1] but axed the article on Mon when the body count began. Forbes ran another one this morning, [3] we can watch whether this article endures Irma over Miami this weekend. The free market is a perfect circle: a useful abstract with no analog in nature. We can use the notion as a tool, a theory in balance against the inefficiencies & oppressions of over-regulation but when the real world makes landfall, the free market must always defer to nature's demands, human or otherwise. Price gouging is a legal term used in the context of an emergency to seperate the ordinary price increases from the criminal or extortionate: "The practice of raising prices on certain types of goods and services to an unfair level, especially during a state of emergency. .. In most states with price gouging laws, the act is defined by the presence of three criteria: Emergency or Crisis Situation- applies to abrupt price increases during a time of disaster or other emergency Essential Items or Services- applies exclusively to items or services that are essential to survival Price Limit- sets a limit on the price that can be charged for essential goods or services" [4] The terms of price gouging vary from state. Connecticut may have the most severe restriction: forbidding any price increase in the precinct of a Federal or State disaster area. California prevents a greater than 10% increase on consumer goods & services. [4] Florida's statute states "that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer for lease essential commodities, dwelling units, or self-storage facilities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas, and lumber. " [5] For the purposes of lending this debate a quantified value for fair price increase vs. unfair, let's agree that US citizens generally accept a 10% markup on essentials above any and all increases in overhead. So if a bottle of water sold for a dollar last week and the retailer's emergency related expenditures added another dollar per bottle, legal norms seem define fair price at around $2.20. Let's call essentials food, water, energy, transportation, shelter, and access to emergency services. I doubt the public sense of fairness is much perturbed if the price of liquor and video games skyrockets. Pro's argument is that our collective sense of fairness ought to be irrelevant to the laws of supply and demand. If that vendor can charge $5 or $10 for a bottle of water based on the scarcity of that essential and the desperation of the afflicted, so be it. A suppressed price point has the disadvantage of encouraging overbuying, increasing shortages. A latecomer might find an essential commodity unavailable at any price. Pro's argument is essentially that having some bottled water available for the latecomer is the more ethical outcome, even at a price that latecomer might resent. Pro (so far) sets no ceiling on the ethics of this outcome: a vendor might charge $1000 for a bottle of water to a mother desperate to save her dying child without moral concern, the price is appropriate to demand. Indeed, economists argue that such an outcome is advantageous. Such a transaction generates valuable information for suppliers and responsible authorities: places where mothers are paying $1000 to save their child can be prioritized over regions where mothers are only paying $100 to save their child because the higher price must indicate more desperate straights. Logical enough, as far as it goes. But we ought to agree the theory doesn't go very far. Applied in the real world of a hurricane emergency, common sense tells us that the free market fails to consider a host of factors. In a free market, vendors everywhere would be wise to stock up on essential commodities in anticipation of increased prices. If the hurricane doesn't strike their region they might still resale to the victims at substantial markups. We can see that such a dynamic is likely to strain the capacity for production and delivery generally at a time when focused production and delivery might save lives. The free market assumes that production & delivery are virtually limitless given the right price point but if the means of production are destroyed by a hurricane, if the avenues of delivery are blocked by flood & fallen trees, the free market consistently defers to the state for salvation. Consider too, that evacuation is often the most appropriate response to an impending hurricane or in response to subsequent damage that makes regions unviable & extra population a burden to emergency response. The potential for extraordinary profiteering increases a vendor's motivation to continue business in an evacuation zone, requiring additional labor to remain, even creating new vendors who bet their safety against opportunity for substantial gain. Taken to extremes, unrestrained price gouging actually has the potential to increase the impact of emergencies, even create new emergencies. Mass evacuations by themselves represent large scale opportunities for profiteering. An unscrupulous mayor might be bribed by bottled water lobbies, for example, to increase an evacuation order beyond the emergency's demand. Or a poor county might be tempted to forego a timely evacuation, hoping that fleeing neighbors will fill their hotels & buy that county's bottled water. An unlimited price point can tempt the greedy to extraordinary results. Naomi Klein, in her 2007 book "The Shock Doctrine: the Rise of Disaster Capitalism," argues that neoliberal establishments have already learned to deploy unpopular legislation in response to crisis (Trump"s unprecedented pardon of Sheriff Arpaio being one recent example) and to consciously encourage crisis (Klein cites the fabricated casus belli resulting in the Iraq War but the overhyping of the Zika outbreak to weaken Brazil's leftist Rousseff administration is a more recent possible example). The free market lacks the capacity to quantify certain fundamental human values. Communities in extreme circumstances have the potential to fall apart (New Orleans after Katrina) or come together (New York after 9/11), but the free market has no stake in the preservation of communities ( or humans that matter: coffins are just another commodity in demand). Consider how price gouging can damage the Samaritan spirit that defines and coheres a community in extremis. A neighbor handing out bottled water to the unfortunate for free might be more tempted to charge learning that $10/bottle was the going rate. A mother who cannot afford the higher rate might feel justified in stealing water or looting wrecked stores in search of water. A vendor whose rates were considered exploitative might suffer long-term ill will in the community. I look forward to Pro's reply. [1] . https://www.google.com... [2] . http://www.latimes.com... [3] . https://www.google.com... [4] . https://legaldictionary.net... [5] . http://myfloridalegal.com...