If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all.
It would also mean that smart entrepreneurs would pre-stage needed supplies in anticipation of the price increase. With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
Price 'gouging' contains the seed of its own destruction because it encourages over-supply and subsequently lower prices.
> If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all.
In natural disaster scenarios, this is likely impossible as delivery infrastructure usually goes down for some period of time. This is why price gouging is successful for the businesses raising prices in first place.
> It would also mean that smart entrepreneurs would pre-stage needed supplies in anticipation of the price increase.
Businesses do not do a good job of stockpiling resources for exceptional events that happen once in many years and many businesses view this as a cost that is not worth paying.
> With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
There is no incentive in general since there is an very low probability that work on on delivery and supply channels will actually pay off as it is a low probability that a disaster scenario will happen in the first place.
> With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
Most historical examples of price gouging never worked out this way. On a logic basis, this doesn't make sense as the point of price gouging is to maximize revenue from sale during a short window of time while new supplies and materials cannot make it to the area where you are selling the now highly priced goods.
The utility of 'price' (whether it involves "gouging" or not) is to signal the entire marketplace regarding the current state of supply vs. demand. The market is dynamic and responds to the signal.
If you attempt to legislate the rules regarding price you are making it illegal to respond to the signal. This just leads to oversupply and legally enforced profit (the price is too high) or shortages and legislative enforced queues and delays (the price is too low).
> The market is dynamic and responds to the signal.
W.r.t to price gouging, this is the thing that doesn't happen or doesn't happen quickly enough and means people who can't afford the new high price go without. For essentials like food, water, batteries in a no power situation, etc. that is a huge problem.
How 'quickly' is not quick enough for you? Companies like Walmart and Home Depot are getting pretty darn good at responding to disasters, especially for things like hurricanes where there is considerable lead time.
Smaller events like tornados are much easier to respond to because they are localized.
Price gouging laws negate any sort of systemic planning to take advantage of short-term price spikes. Eliminate the laws and you open up opportunities for creative businesses to plan and respond to these short-term opportunities.
If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all
In post hurricane road conditions? You don't live in New York, do you?
If the price of water tripled, a decent section of the population would struggle to afford it. That is the start and end of that debate, as far as I am concerned. I believe in the free market up until it starts starving people.
You are viewing this as a static situation (i.e. the price will stay high) and ignoring other ways for people in need to be assisted. Ensuring a shortage (by limiting price) isn't helpful.
Let the price float as needed and if you feel like some people are being priced out of the market, give them cash for them to spend as needed. Some people will need water. Other people will need food. Some folks will have both and instead will spend the money on gas for their generator.
Emergency cash assistance is a much better way to assist those in need and ensure that the market will rapidly adjust to provide resources in the right quantity and right location (due the the pricing signals).
> If every store tripled the price of bottled water you would have truckloads of water arriving within 24 hours with absolutely no government intervention at all
You mean "According to my preferred economic ideology if every store tripled the price of bottled water you should have ...", because it's fairly easy to check the historical records and see that this is definitely not what actually happens.
But by all means, don't let facts get in the way of your faith.
I know it was 4 hours ago but did you forget that we're talking about "price gouging" during disasters or some other event that disrupts normal supply lines?
Disrupted supply lines mean higher cost to deliver materials (longer routes, special equipment, etc). Higher prices encourages suppliers to expend the extra $$$ to deliver the goods. Or even new suppliers to enter the market (for example think about construction workers or tree removal companies in the wake of a large storm traveling to where the work is).
If the price can't change (legally) then suppliers will simply ignore the problem until conditions return to 'normal' thus ensuring shortages.
You: Really? There is no historical record of the market responding to increased prices?
Me: we're talking about "price gouging" during disasters or some other event that disrupts normal supply lines
Seems pretty clear what I was talking about. Your hypothesis about price gouging during emergencies doesn't have historical evidence.
I understand perfectly why you think it should work that way according to your ideology. I was pointing out that, in these circumstances, it doesn't match up with the data.
Plenty of other commenters, with knowledge of inventory logistics, have explained why.
It would also mean that smart entrepreneurs would pre-stage needed supplies in anticipation of the price increase. With strong 'gouging' laws, there is no incentive to spend money on preparing the supply chain or in spending more money to overcome supply difficulties (i.e diverting supplies from elsewhere, rushing delivery, etc)
Price 'gouging' contains the seed of its own destruction because it encourages over-supply and subsequently lower prices.