What's wrong with PRICE-GOUGING? during a DISASTER or any other time?

[Crazy Eddie]

We're trying to get people to change that morality believe Crazy Eddie.

You have three situations with a disaster

1) out of the goodness of your heart you bring supplies to the area and don't charge anything. We all say that's moral
2) You have or bring supplies to the area but charge higher prices for that Considered immoral
3) What most people do. Say I'll pray to Jeebus Morally neutral, socially acceptable


however 1 and 2 actually do something to improve the lives of people there while 3 does nothing. But it's #2 that's considered immoral

Those three options ultimately boil down to:
1) Help the people in need
2) Prey on the people in need
3) Do nothing

The third, as you correctly point out, is morally neutral, but only because it's everyone's default stance anyway. The first is the action of someone who seeks to help and the second is the action of someone who seeks to harm.

To be absolutely clear: he DOES intend to harm, not to help. He doesn't intend ALOT of harm, but his goal is to separate the victims of the disaster from as much of their money as he can while they're still desperate enough -- or while supplies are scarce enough -- for you to get away with it. Morally, the fact that your victims are under duress means that their consent to be victimized doesn't absolve you. They cannot choose freely, but you CAN. You chose to exploit them, and they are in no position to stop you.

 

[coloradoatheist]

We're trying to get people to change that morality believe Crazy Eddie.

You have three situations with a disaster

1) out of the goodness of your heart you bring supplies to the area and don't charge anything. We all say that's moral
2) You have or bring supplies to the area but charge higher prices for that Considered immoral
3) What most people do. Say I'll pray to Jeebus Morally neutral, socially acceptable


however 1 and 2 actually do something to improve the lives of people there while 3 does nothing. But it's #2 that's considered immoral

Those three options ultimately boil down to:
1) Help the people in need
2) Prey on the people in need
3) Do nothing

The third, as you correctly point out, is morally neutral, but only because it's everyone's default stance anyway. The first is the action of someone who seeks to help and the second is the action of someone who seeks to harm.

To be absolutely clear: he DOES intend to harm, not to help. He doesn't intend ALOT of harm, but his goal is to separate the victims of the disaster from as much of their money as he can while they're still desperate enough -- or while supplies are scarce enough -- for you to get away with it. Morally, the fact that your victims are under duress means that their consent to be victimized doesn't absolve you. They cannot choose freely, but you CAN. You chose to exploit them, and they are in no position to stop you.

A lot of professions are like that. A doctor takes advantage that you are sick. A lawyer is taking advantage that you are going to jail. A plumber is taking advantage of your pipes breaking, especially if they charge an after hour rates. A mechanic is taking advntage that your car is breaking. So if we get rid of jobs where there is some advantage, then we get a lot of jobs. But raising prices helps people get those resources if they need it.

 

[Bronzeage]

In Cultural Anthropology, there is a concept labeled "Reciprocity." Reciprocity is a transaction of goods or services, in which payment is deferred until a later time. The idea is, the person who takes the stuff is obligated to reciprocate at a later date.

This is a sort of insurance. I have a good crop and have a surplus on my hands. I invite my neighbor over for a feast, and besides feeding him for an evening, I send him home, loaded down with leftovers. When my crops are thin, he'll invite me over for dinner. Or, at least I hope he does.

Reciprocity is the basis for our charitable largess after a natural disaster. It's ingrained in our social fabric. When a bunch of Texas Lawmakers voted against the Hurricane Sandy Relief bill, there was no satisfactory explanation. They had violated reciprocity, which is a strange thing for a Gulf Coast state to do. New Jersey gets a hurricane about once in 50 years. For Texas, it's more like one in five.

For all the altruistic trappings of natural disaster relief, the basic motivation is selfishness. We do it because we want it done for us, when the time comes. Just like we remember those who helped us, we also remember those who didn't. Being on the receiving end of reciprocity is not always a good thing.

 

[skepticalbip]

We're trying to get people to change that morality believe Crazy Eddie.

You have three situations with a disaster

1) out of the goodness of your heart you bring supplies to the area and don't charge anything. We all say that's moral
2) You have or bring supplies to the area but charge higher prices for that Considered immoral
3) What most people do. Say I'll pray to Jeebus Morally neutral, socially acceptable


however 1 and 2 actually do something to improve the lives of people there while 3 does nothing. But it's #2 that's considered immoral

You missed the majority:

4) Do absolutely nothing to help, not even praying to Jeebus, but value signal by condemning those who do help but make a profit while helping.

 

[bilby]

Those three options ultimately boil down to:
1) Help the people in need
2) Prey on the people in need
3) Do nothing

The third, as you correctly point out, is morally neutral, but only because it's everyone's default stance anyway. The first is the action of someone who seeks to help and the second is the action of someone who seeks to harm.

To be absolutely clear: he DOES intend to harm, not to help. He doesn't intend ALOT of harm, but his goal is to separate the victims of the disaster from as much of their money as he can while they're still desperate enough -- or while supplies are scarce enough -- for you to get away with it. Morally, the fact that your victims are under duress means that their consent to be victimized doesn't absolve you. They cannot choose freely, but you CAN. You chose to exploit them, and they are in no position to stop you.

A lot of professions are like that. A doctor takes advantage that you are sick. A lawyer is taking advantage that you are going to jail. A plumber is taking advantage of your pipes breaking, especially if they charge an after hour rates. A mechanic is taking advntage that your car is breaking. So if we get rid of jobs where there is some advantage, then we get a lot of jobs. But raising prices helps people get those resources if they need it.

The difference is in the freedom of the customer to shop elsewhere.

Capitalism without real and effective competition does more harm than good; and that's what price-gouging amounts to.

(BTW that's also one of the reasons why market driven healthcare doesn't work very well - if you are in the throes of a myocardial infarction, you are not in a position to pick a cheaper ER than the one closest to you).

 

[coloradoatheist]

A lot of professions are like that. A doctor takes advantage that you are sick. A lawyer is taking advantage that you are going to jail. A plumber is taking advantage of your pipes breaking, especially if they charge an after hour rates. A mechanic is taking advntage that your car is breaking. So if we get rid of jobs where there is some advantage, then we get a lot of jobs. But raising prices helps people get those resources if they need it.

The difference is in the freedom of the customer to shop elsewhere.

Capitalism without real and effective competition does more harm than good; and that's what price-gouging amounts to.

(BTW that's also one of the reasons why market driven healthcare doesn't work very well - if you are in the throes of a myocardial infarction, you are not in a position to pick a cheaper ER than the one closest to you).

No system works well with no competition. But in the very short time there is no access to the products. Consumers are better off when they have at least some access to the product compared to none, which higher prices allows. You also talk about lack of competition. The high price sends signals to competition to enter the market too.

For health care, we've been accustomed not to have to worry about shopping much for it. But there is no reason that if we had to, we could shop health care needs just like any other good.

 

[skepticalbip]

The difference is in the freedom of the customer to shop elsewhere.

Capitalism without real and effective competition does more harm than good; and that's what price-gouging amounts to.

(BTW that's also one of the reasons why market driven healthcare doesn't work very well - if you are in the throes of a myocardial infarction, you are not in a position to pick a cheaper ER than the one closest to you).

No system works well with no competition. But in the very short time there is no access to the products. Consumers are better off when they have at least some access to the product compared to none, which higher prices allows. You also talk about lack of competition. The high price sends signals to competition to enter the market too.

For health care, we've been accustomed not to have to worry about shopping much for it. But there is no reason that if we had to, we could shop health care needs just like any other good.

Actually, anyone with any sense does shop for healthcare, not so much by price but by quality. Most people do know of doctors and hospitals to avoid. Unfortunately, with the way our healthcare system is regulated and run, we have little opportunity to shop for and negotiate cost.

 

[Malintent]

What's wrong with increasing the price of something when the demand for it increases or the supply decreases? even if this is just a short-term change in demand/supply?

Doesn't the real value of something increase at a time when the demand for it increases or the supply decreases? Shouldn't the price and the real value go up and down together?

What's wrong with profiteers taking advantage of an increased need as a way to make more money, if what they're doing is meeting that need? Isn't it good to satisfy people's needs? even if it's a greedy profiteer who is satisfying the need? If someone is making people better off, why does it matter if they're motivated by greed?

("Price-gouging" here is not to be confused with PRICE-FIXING, where sellers engage in collusion to agree to drive prices higher than the competitive price.)

Why is "price-fixing" bad but "price-gouging" ok, in your estimation (from what I gather from your post)? The result of either is artificially inflated commodity prices. The cause of either is greed. How are they different?

 

[SimpleDon]

No one believes that deflation is good! Who do you think you are arguing with?

Currency was invented precisely because this small scale trust based gifting economy doesn't work at large scales. I mentioned that I don't really care about what 'primitive' societies did; only commerce ready economies, because they were the ones to create currency. I have no idea what sort of hobby horse you are on to think that just because we differ on whether the chicken came before the egg I must be some libertarian goldbug.

I am sorry that I so offended you. The discussion had morphed to the origin of money. My point was that barter wasn't the origin of money as in the Adam Smith fable that was brought up, but it was gifting, a primitive form of our debt money system that we have today.

Yes, you are correct that gifting is not suitable for large scale economies, which I tried to say and, at least in your case, apparently failed to convey.

I certainly didn't say that you are a libertarian. I don't really know you well enough to insult you so forcefully.

I was reacting to a question about bitcoins as a viable alternative for our current currency. I don't know who asked the question, I apologize if you thought that I was directing it to you. I wasn't being argumentative toward anyone, so I didn't feel any need to direct the post to anyone, except obviously toward libertarians, of which I have repeatedly been told don't believe what I say that they believe. It is almost as if they don't believe anything, because everything I bring up I am assured that no true™ libertarian believes that.

I was just stating a fact that about bitcoin that it is designed to produce deflation, which as you pointed out and that I admit that didn't, almost no one believes that deflation is good. I would also have said no one believes that deflation is good as you did but I just read colorado's post #217 immediately below yours in which he says that he believes that deflation is better than inflation.

My hobby horse is my long interest in economics, and the degree to which the academic economics as taught has failed us, in large part because it seems to ignore the realities of the economy that we have today. One of those many failures concerns the origins of money and the fact that until 2007 and the financial crisis our mainstream economics ignored the impact of money, banking and debt on the economy.

You would have to ask the person who interjected the question of the origin of money into the discussion why they think that it is pertinent to the discussion. I was just going with the flow.

 

[SimpleDon]

No one believes that deflation is good! Who do you think you are arguing with?

Currency was invented precisely because this small scale trust based gifting economy doesn't work at large scales. I mentioned that I don't really care about what 'primitive' societies did; only commerce ready economies, because they were the ones to create currency. I have no idea what sort of hobby horse you are on to think that just because we differ on whether the chicken came before the egg I must be some libertarian goldbug.

Except we do love deflation. Do you go to the store and say, hey I hope I pay the highest price for whatever item I am trying to get. Do you try and find deals, sales, giveaways? The internet wouldn't exist today if there wasn't deflation with computers. Most of us wouldn't be on this board if it wasn't free.


We're come to expect the inflation cycle. You want a 3% raise to cover the cost of living increase but it's because people get that 3% raise that causes that 3% raise in cost of living. Things would be better with deflation and salaries staying the same.

I don't think that you are taking into account the full impact of deflation on the economy. It doesn't keep the salaries' values constant, it increases them. To keep the value of the salary constant the dollar amount of the salary has to be reduced. It is human nature to react poorly to this.

It doesn't keep the money value of prices the same, it increases them. Inflation decreases the value of debt, deflation increases the value of debt. The debtors have to pay back loans with money that is worth more than the value of the money that they received from the loan. The money value of investments decreases, the investor has a harder time in deflation deciding to invest his money because the money itself will gain value if he holds it. The investment has to pay back more than the deflation. In an economy in inflation the investment is pushed to invest his money or it will decrease in value.

 

[Elixir]

The investment has to pay back more than the deflation.

I ain't no dam 'conomist, but... what am I missing? In a deflationary environment, ANY percentage - even 0.001%/yr - is an incremental increase in return over holding cash... right?

 

[Crazy Eddie]

Those three options ultimately boil down to:
1) Help the people in need
2) Prey on the people in need
3) Do nothing

The third, as you correctly point out, is morally neutral, but only because it's everyone's default stance anyway. The first is the action of someone who seeks to help and the second is the action of someone who seeks to harm.

To be absolutely clear: he DOES intend to harm, not to help. He doesn't intend ALOT of harm, but his goal is to separate the victims of the disaster from as much of their money as he can while they're still desperate enough -- or while supplies are scarce enough -- for you to get away with it. Morally, the fact that your victims are under duress means that their consent to be victimized doesn't absolve you. They cannot choose freely, but you CAN. You chose to exploit them, and they are in no position to stop you.

A lot of professions are like that. A doctor takes advantage that you are sick...

No, a doctor does not "take advantage" of you being sick. A doctor uses his knowledge of modern medicine to help heal you and then charges you a fee sufficient to cover his expenses, equivalent to the approximate value of his services. Doctors charge money because they have to make a living, and because their skill set is highly valuable and takes a long time to cultivate -- not to mention the truly ridiculous hours they often wind up working -- they expect their living to be pretty comfortable.

And yet the relationship between doctors and patients is NOT exploitative on either part. You go to a doctor with a medical problem, you have a reasonable assumption that the doctor is going to give you the best treatment possible for the fairest price he can reasonably/legally manage. The cost of your treatment will have little or nothing to do with the severity of your illness and will depend instead on the cost of treatment required.

A lawyer is taking advantage that you are going to jail...

Nope. A lawyer is providing a service to a person in need. Again, this isn't an exploitative relationship between a lawyer and a client. In fact, the act of a lawyer taking advantage of a vulnerable client would probably result in him being disbarred eventually.

And same with all your other examples. These are services provided by willing parties in a standard market situation. NONE of them are examples of one party taking advantage of another.

But raising prices helps people get those resources if they need it.

No, raising prices does not help people get those resources. Raising prices -- or even charging anything at all -- serves no purpose whatsoever in the distribution of resources in a crisis situation. That one would even bother to maintain previous prices is somewhat exploitative and morally questionable; RAISING those prices is unconscionable by any measure.

 

[ksen]

The investment has to pay back more than the deflation.

I ain't no dam 'conomist, but... what am I missing? In a deflationary environment, ANY percentage - even 0.001%/yr - is an incremental increase in return over holding cash... right?

No.

In a deflationary period cash grows in value if you just hold on to it.

If deflation is running at 2% you'd need a return of at least more than 2% to offset the risk you take on for investing that cash rather than simply holding on to it.

 

[Malintent]

folks... you are all talking about healthcare as if it was not evil to be categorized as a commodity... fine.. if it is ok to profit on the sick, then it is ok to ask whatever price the market will bare.

you can't have it both ways... either healthcare is a commodity that only goes to those that can afford it, or it is not a commodity and instead a piece of civilized infrastructure.. a right. an entitlement... one that is regulated to the point of being available in the highest quality for all.

OR, happily pay the $750 for that pill that cost $0.75 last year, because you didn't make it yourself and that is just what it costs now for someone else to provide it for you... because communism bad!

 

[Elixir]

I ain't no dam 'conomist, but... what am I missing? In a deflationary environment, ANY percentage - even 0.001%/yr - is an incremental increase in return over holding cash... right?

No.

In a deflationary period cash grows in value if you just hold on to it.

If deflation is running at 2% you'd need a return of at least more than 2% to offset the risk you take on for investing that cash rather than simply holding on to it.

Huh? If you hold $100,000 for a year under 2% deflation, your $100,000 cash is now worth $102,000 in previous year dollars, right?
If you had invested it at a 1% return rate for a year and cashed it out, you'd have $101,000 in cash, worth $103,020 in previous year dollars.

$103,020 > $102,000

Tell me again - what am I missing?

 

[ksen]

Oh, I see what you're saying now. You didn't miss anything, I did.

 

[Horatio Parker]

No.

In a deflationary period cash grows in value if you just hold on to it.

If deflation is running at 2% you'd need a return of at least more than 2% to offset the risk you take on for investing that cash rather than simply holding on to it.

Huh? If you hold $100,000 for a year under 2% deflation, your $100,000 cash is now worth $102,000 in previous year dollars, right?
If you had invested it at a 1% return rate for a year and cashed it out, you'd have $101,000 in cash, worth $103,020 in previous year dollars.

$103,020 > $102,000

Tell me again - what am I missing?

Risk

Sure, investing in safe assets earns a return, but why take chances when your wealth grows by itself?

Inflation, OTOH, incentivizes risk.

 

[Loren Pechtel]

No.

In a deflationary period cash grows in value if you just hold on to it.

If deflation is running at 2% you'd need a return of at least more than 2% to offset the risk you take on for investing that cash rather than simply holding on to it.

Huh? If you hold $100,000 for a year under 2% deflation, your $100,000 cash is now worth $102,000 in previous year dollars, right?
If you had invested it at a 1% return rate for a year and cashed it out, you'd have $101,000 in cash, worth $103,020 in previous year dollars.

$103,020 > $102,000

Tell me again - what am I missing?

The true meaning of the word "invest".

We commonly refer to interest-bearing things as "investment" but true investment is when you spend the money on making means of producing value. When you "invest" in interest-bearing things someone else is going to be actually turning that money into means of making value.

You invest that $100k. It produces a real return of 1% but deflation is 2%. You have ($100k-$2k (deflation))*1.01 = $98,980. You would have been better off sticking it under your mattress.

Deflation acts as a floor on investment, the more deflation there is the more investment is considered not worth doing.

 

[Canard DuJour]

Huh? If you hold $100,000 for a year under 2% deflation, your $100,000 cash is now worth $102,000 in previous year dollars, right?
If you had invested it at a 1% return rate for a year and cashed it out, you'd have $101,000 in cash, worth $103,020 in previous year dollars.

$103,020 > $102,000

Tell me again - what am I missing?

The true meaning of the word "invest".

We commonly refer to interest-bearing things as "investment" but true investment is when you spend the money on making means of producing value. When you "invest" in interest-bearing things someone else is going to be actually turning that money into means of making value.

You invest that $100k. It produces a real return of 1% but deflation is 2%. You have ($100k-$2k (deflation))*1.01 = $98,980. You would have been better off sticking it under your mattress.

Nah. 2% deflation means the same money having 2% more purchasing power, not 2% of your money mysteriously disappearing. If you can get 1% more money as well, you should go for it.

Deflation acts as a floor on investment, the more deflation there is the more investment is considered not worth doing.

Right, but not because any money mysteriously disappears. Deflation is persistent drop in general price levels. It means you're less and less likely to get a positive return on investment in actual production since stuff is selling for less and less, eating away the difference between production cost and revenue. Profitable investments become marginal and marginal investments become unprofitable. Meanwhile consumers defer discretionary spending (because it'll be cheaper later), exacerbating the problem. Safer to sit on money which is increasing in value. Vice versa with inflation. What Horatio Parker said.

 

[Loren Pechtel]

The true meaning of the word "invest".

We commonly refer to interest-bearing things as "investment" but true investment is when you spend the money on making means of producing value. When you "invest" in interest-bearing things someone else is going to be actually turning that money into means of making value.

You invest that $100k. It produces a real return of 1% but deflation is 2%. You have ($100k-$2k (deflation))*1.01 = $98,980. You would have been better off sticking it under your mattress.

Nah. 2% deflation means the same money having 2% more purchasing power, not 2% of your money mysteriously disappearing. If you can get 1% more money as well, you should go for it.

Deflation acts as a floor on investment, the more deflation there is the more investment is considered not worth doing.

Right, but not because any money mysteriously disappears. Deflation is persistent drop in general price levels. It means you're less and less likely to get a positive return on investment in actual production since stuff is selling for less and less, eating away the difference between production cost and revenue. Profitable investments become marginal and marginal investments become unprofitable. Meanwhile consumers defer discretionary spending (because it'll be cheaper later), exacerbating the problem. Safer to sit on money which is increasing in value. Vice versa with inflation. What Horatio Parker said.

Since you are talking about 2% disappearing you still don't get the distinction. In true investment all your money disappears--it's replaced with the profit from whatever that money bought. That's at the new value of money.