RoR: Forum

You're right, Steven, but politics is all about perception.

Who cares if price-capping results in shortages, at least the bureauRATS are doing *something*. It's times like these when we see the real difference between freemarketeers and conservatives. It's also a pretty good opportunity for people like us to explain how the market promotes equilibrium in times of uncertainty.

Fox has it's charms but they can still pout their lips and tut-tut when the going gets tough. They're just conservatives after all.

Ross

Post 1

Saturday, September 3, 2005 - 6:15am

There is something unsavory about kicking someone when they are down. And that is precisely what you do when you make outrageous demands of another man when you have something he must have.

Why don't surgeons demand 20 million dollars per surgery when its a life threatening ailment in an emergency room, why dont they run a credit check on the sick person, and then gouge them so that they are penniless? Why not? The sick person has the demand for the surgery, the surgeon the supply.

What about an ambulance...why dont the drivers stop at an accident scene and haggle with the family of the 11 year old who just got run over by a car, life drifting away, second by second? They have the supply, the boy's family the demand. It's all okay, right?

Why dont I just charter a large helicopter and offer to rescue those New Orleaners who can come up with the most impressive array of cash, jewelry and loot? Or I could go down there with insulin for the legions of diabetics and open up shop. Only $10,000 per shot, I don't care where you get the money.

This article makes me ashamed to be a SOLOist.

Post 2

Saturday, September 3, 2005 - 7:10am

Scott,

There is something unsavory about kicking someone when they are down.

Sanction. Bonk.

There are Objectivists who see this. I do not speak for Solo policy, but I guarantee that blind callousness to the suffering of others is not one. That has nothing to do with Altruism either.

Michael

Post 3

Saturday, September 3, 2005 - 7:20am

"...blind callousness to the suffering of others is not one. That has nothing to do with Altruism either."

100% correct, Michael. For those who love their own lives, ending needless suffering of others is a strong value.

Post 4

Saturday, September 3, 2005 - 7:33am

Steven can speak for himself, Scott, but since I essentially agree with what he said, I'll make few comments.

Since when did recognising the central role the price system has in balancing supply and demand mean that you should throw compassion, benevolence and just plain old human decency out the window?

In other posts related to this very topic I've given examples like the guy who drove in from Florida to Alabama with water he had purchased and dispensed it to those in need and was going back to get more. I saw a story where people bought gas into Mississippi and where letting people have it at cost price so they could have some mobility. I am certain these same scenarios are being repeated in thousands of situations as you read this.

But that doesn't make the spike in gas prices cruel by comparison. But it is necessary. Particularly if you think it's a good thing that supplies *don't run out*.

I gave an example of a gas station near ground zero in Mississippi that was allowing people to buy only $20 gas. Now why would they do that? Why not just ramp up the price and sell it to anyone who wanted it in any amount? For whatever reason that gas station decided it was better for a lot of people to get a bit than to give it all to just a few. Maybe they thought it would help reduce tensions or the possibility of crime in their local community. Maybe it was another reason, I don't know, but it was a good example of rational people making smart decisions in extreme circumstances.

The type of argument you're making is *exactly* the line that the Left use to justify socialising health care or any other type of activity where you shouldn't kick "someone when they are down".

From what I've seen there's no lack of compassion and decency being shown towards the folks down south.

Post 5

Saturday, September 3, 2005 - 7:51am

Scott:

I have been thinking about writing such a letter to the editor of the local paper on this subject but when I hear this kind of criticism form an Objectivist, let alone the criticism I'd be subjected to by the preponderance of liberals in this place, I might be taking my life in my hands.

"Why don't surgeons demand 20 million dollars per surgery?"

Because if they did there would be millions more surgeons and their chances of having a customer would be miniscule. Most of them would starve. This is a far different situation than, for instance, a ship coming across a shipwrecked sailor on a raft in the middle of the ocean and the skipper demanding a million dollars to pick him up. IMO that would be immoral and an exhibition of 'depraved indifference' except in the case where he was in the business of searching for that occurrence thinking that it might be a valid enterprise and everyone knew before that it was a great gamble.

In the case of so-called price gouging of gasoline the high prices encourage extreme conservation early on so that there will be more supplies later than there would have been. Good luck to the gas station that wants to charge $100 per gallon � he'll make much less profit in total than he would at $6. If his prices don't reflect the actual, or perceived shortage, his profits will suffer.

"Or I could go down there with insulin for the legions of diabetics and open up shop. Only $10,000 per shot, I don't care where you get the money".

More power to you. You would be saving a life for every $10,000 you made and it would lessen the competition for the scarce insulin. This benefits the poorer people.Why do you think you would be the only opportunist to do so? You might be the first but there would be many others trying to find sources of insulin and getting it to the place of need. If you take away the motivation all those who have the moxie they just wouldn't bother. If you value human life you will support price gouging.

Post 6

Saturday, September 3, 2005 - 8:27am

A "price gouger" is not "kicking someone when they are down". He is offering them a benefit. He is offering to help them.

He didn't have to make the offer.

The recipient of the offer does not have to accept it.

How you can possibly refer to that as "kicking someone when they are down" is utterly beyond me. Such a statement indicates a severe lack of understanding of the English language.

Post 7

Saturday, September 3, 2005 - 8:43am

I just had a debate with a co-worker on this subject. What do you all have to say about the Standard Oil Company?

I've searched google and Wikipedia a little... Wikipedia says:

Standard Oil's share of the market had been steadily declining from 1900 to 1910 (Standard's share of oil refining was 64% at the time of the trial, in competition with over a hundred other refiners). The Court's decision required Standard Oil to be broken into 34 companies, each with their own board of directors. Standard Oil�s founder retired shortly thereafter."

I a... still don't see how its good for me to allow the government to force people to sell their products/services at some price. Seems to me that it's their property, and their services... they made it not us. They have created something positive, how can we tell them what to do with what they have created? Why would anyone want to do their best if the result is that the government will destroy their work?

Post 8

Saturday, September 3, 2005 - 8:48am

Scott,

To destroy your argument with price gouging at the Hospital.... The hospital is making a deal with the customers as soon as they offer to help. To offer to help, and then at the last moment pull a "oh yea, and you'll have to agree to pay one million dollars for me to finish the job"... is a form of fraud. If not fraud, a deception of some sort. Given the context is may very well be a criminal act.
(Edited by Dean Michael Gores
on 9/03, 8:53am)

Post 9

Saturday, September 3, 2005 - 9:29am

This whole misunderstanding is a perfect example of Joseph Rowland's brilliant All or Nothing article.

Michael

Post 10

Saturday, September 3, 2005 - 9:54am

Ross:

"Since when did recognising the central role the price system has in balancing supply and demand mean that you should throw compassion, benevolence and just plain old human decency out the window?"

You make my point. When people "throw compassion, benevolence and just plain old human decency out the window," that is price gouging. So it not some fantasy that has never happened in the hsitory of the world, cooked up in some liberal think tank. It can and does and has happened. Granted, the media call a $6.00 gallon of gas a travesty of price gouging, which it clearly is not, in light of the hurricane. But to stand for the prosposition that it doesn't exist and is a fallacious concept is not accurate.

Post 11

Saturday, September 3, 2005 - 10:04am

Almost to man man (except Rich Pasotto), everyone here who has criticized my analysis has stated that someone would be doing something immoral in my hypotheticals. Yes, that is exactly my point. They are 'price gouging'. Price gouging CAN exist and is has. Whether any particular price gouging has been going on in wake of the hurricane, I dont know.

Many Objectivists like to pretend that every exchange is held in some comfortable board room after reasoned and polite discourse. That's not real life.

If it pleases, Courts will not uphold unconscionable contracts where one side holds all the bargaining power and the other must live with it, take it or leave it.

Now, I'm not saying the buyer has any right to your goods or property. But if you accede that benevolence is a virtue, then how could anyone defend any of those hypos I proposed? It is telling that no one has--because anyone can see the immorality of the conduct.

Pasotto: I want to call you a bad name for your post, but I will forebear.
(Edited by Scott DeSalvo
on 9/03, 10:05am)

Post 12

Saturday, September 3, 2005 - 10:51am

Scott:

I don't know how I'm avoiding your wrath.

When the government puts a cap on the price of gasoline, as they have done in Hawaii, they are helping the population avoid reality. They are preventing them from having to make a decision to conserve. Nobody knows how severe the situation could get. Perhaps another hurricane, perhaps an Al Qaeda attack. If supplies are depleted there will be no gasoline available at any price no matter how dire the circumstances.

Price gouging allows reality to be made visible to the population.

Sam

Post 13

Saturday, September 3, 2005 - 11:13am

Scott,

In making comments following an article, one should adhere to the context of that article. Wasn�t the failure to do so precisely the source of the problem we had with some here on Steven�s last article?

You ask about the ethics of charging for $20 million surgeries, ambulance drivers negotiating with patients, helicopter rescues for a price, and $10,000 insulin doses. Are any of these happening in New Orleans? Are any of these things mentioned in Steven�s article? You correctly depict these (imaginary, *in this context*) acts as �kicking a man while he�s down.� Well, sleeping with his wife while he�s in the hospital being gauged for that $20 million surgery would be kicking him inappropriately, also. And it would have no less connection to Steven�s article than the other �kickings� you list.

Jon

Post 14

Saturday, September 3, 2005 - 12:01pm

Anyone, and I mean anyone, including SOLO posters, who expects or demands that the oil companies not raise their prices (or moderate their price raises) during a crisis is operating not on the basis of compassion and benevolence, but on the same evil premise as the looters in New Orleans who took not just food and medicine (which is forgiveable, as long as an effort is made to repay it), but also appliances and the like.

I can't tell you how incensed I was at Bill O'Reilley who reamed out the CATO Institute guy for suggesting that the inevitable rationing of gasoline should be done by letting the price mechanism do it, rather than by government edict or guilt-mongering "voluntary" price cuts "for the good of the country." Arrrrrgh!

If an oil company wants to give away gasoline or sell it more cheaply, rather than make a cash donation, that is their business and their privilege, but it is not their DUTY. But by trying to keep the profit mechanism and supply-and-demand in operation during the crisis, they are NOT :"gouging." Anyone who does not understand this needs to take Economics 101 and should shut up until they do.

REB

P.S. -- This is probably as livid (by far) as you will ever see me get on SOLO. But then we're talking about altruism married to ignorance, which is something that totally turns my stomach and raises my hackles, whenever I see it.

Post 15

Saturday, September 3, 2005 - 12:33pm

Price gouging is usually about a situation where someone is in a position to do so without having to worry about a healthy competitive market that would likely self-correct the situation. If you attempt consistent price gouging in a competitive market, it is likely (but not guaranteed) that the action, since it is short-sighted, will indeed produce short-term windfalls, but in the end compromise your business. Even if you price gouge short term, and then correct your pricing to be more competitive, you will probably experience some business losses anyway related to customer fall-off. You know, a variation on the old 1 person will tell ten people about the bad thing, only this time you've got way more than one person possible to spread the news of your gouging. Customers find out about gouging, one way or another.

Price gouging is not a mythological concept; it is bad business practice. Price gouging is different than having to raise prices to keep your margins where they need to be.

If you are in a one horse (or one gas station) town with a price gouger, there are only so many things that you can do about it outside of going somewhere else. If you can't go somewhere else, you are fucked.

Price gouging can work off of fixed prices (everybody gets gouged), or in sales where each transaction can be negotiated. If it occurs in one-on-one negotiating, it is less likely to be true price gouging, but poor negotiating skills at fault. If negotiating is available (real negotiating), it could be the result of just poor negotiating skills on the customer side, or the customer having to negotiate from a compromised position. The latter is a what-the market-will-bear negotiation: you know that you're going to get your ass shot up more than usual, it's just a matter of doing your best to minimize the damage.

There are situations in sales where you can gouge a very susceptible person (as in hit him for 200 more points on the deal than the guy that just walked out). Smart salespeople do not do this. Predatory-style selling does indeed teach "gouging." Predatory selling is shortsighted and stupid, and while it will never go away, it is fairly easy to beat. It also doesn't fair well in the sunlight. It's main fault is that it focuses on a single transaction, and is not mindful of the fact that the customer is exposed to the market in between purchases. Single-transaction high-margin selling is appropriate for very specific types of deals. Most businesses tend to rely more on customer retention, while trying to maintain healthy yet competitive margins.

(Edited by Rich Engle on 9/03, 12:41pm)

(Edited by Rich Engle on 9/03, 12:47pm)

(Edited by Rich Engle on 9/03, 12:53pm)

Post 16

Saturday, September 3, 2005 - 12:43pm

MSK, I suggest that you are confusing identification with evaluation.

Scott, Perhaps you should read more carefully exactly what I wrote and explain what you think is my error. (BTW, the fact that you didn't get my name right is evidence that you didn't read what I wrote very carefully.)

Post 17

Saturday, September 3, 2005 - 12:56pm

I live in Georgia and we recently had an unfounded panic occur due to some internet/phone rumors about gas stations shutting down and running out of gas. There were lines backed out into the streets at every gas station you passed. If at this time prices had gone up to "gouge" levels, it would have put an end to these morons acting on unverified rumors and filling every vessel and vehicle that they owned with gas. Though we had nothing near a shortage, we did according to one estimate have temporary outages at about 25% of the stations.

Another point that I have not heard made pertains to the livelihood of station managers. If I owned a station and my major source of income was from the sale of gas and I were facing the prospect of being out of my product for days(weeks the rumors even said) I would be fully justified by raising my prices to whatever rate the market would support. Facing the prospect of losing my major source of income for a period of time, I would need to amass extra money in order to make it through. This is a purely rational action and not vile in any way.

Post 18

Saturday, September 3, 2005 - 1:11pm

Another point that I have not heard made pertains to the livelihood of station managers. If I owned a station and my major source of income was from the sale of gas and I were facing the prospect of being out of my product for days(weeks the rumors even said) I would be fully justified by raising my prices to whatever rate the market would support. Facing the prospect of losing my major source of income for a period of time, I would need to amass extra money in order to make it through. This is a purely rational action and not vile in any way.

It is a time where you have to have as much information as possible, and know what to do with it. In the end, it is a judgment call- you know that your supply line is compromised, but you may not know exactly how compromised, for how long, pricing, etc. And, that data is not only usually less than fully reliable, but shifting.

Some owners in this particular situation will choose to self-impose rationing (10 gallons per customer, say), accompanied with a price increase, but the increase will not likely be the biggest one in town. Their idea is to serve more customers for longer, and generally help to keep things running along so people can work, and come back for more gas. Others will choose to heavily increase the margin, because they are afraid that the supply will completely terminate for an indefinite period of time, so, as you say, they have to build up profits in order to weather a time when they might have nothing to sell.

Post 19

Saturday, September 3, 2005 - 1:23pm