Price-Gougers vs. Hoarders

I would make a terrible politician.

I have this awful tendency to say the right thing instead of what’s politically correct.

I lived in Calgary for eight terrific years. Most of my good friends still live there, as do many former colleagues and neighbours. My brother and his family are there, as is my wife’s sister and family, plus several aunts, uncles and cousins. I also loved my former neighbourhood, with its proximity to good restaurants, bars, shops, parks, downtown and the Stampede grounds. There were many reasons why we left town in 2008, but our family, friends and neighbourhood at the time were not any of them. I really love that town.

So it should not come to any surprise to you to learn that the recent massive flood in Calgary really shook me emotionally. My brother had to evacuate his house, as did a couple of my dearest friends. There were probably other friends and former colleagues forced out too. My old neighbourhood was devastated, as were the lovely parks and pathways along the Elbow through which I roamed regularly.

It should without saying that many people are volunteering their time, energy and other resources in response to this environmental disaster. That’s wonderful and commendable.

However, a disturbing but inevitable trend comes from the backlash against those who are perceived to be less generous with their resources, as seen here:

Gordy Marchant’s wife first informed him the Queensland Liquor Store in Calgary’s southeast was charging $10 for a bag of ice amid a rush by people to stock up on goods as floods ravaged Calgary Friday.

“I didn’t believe it, but was out having a smoke and figured, ‘What the heck, I’ll check it out,’ it’s only down the street from me,” he recalled.

Marchant got to the store shortly before noon and said he was shocked to find the sign on the front of the ice cooler now read $20 per bag. He snapped a photo and posted it to Facebook. That same image quickly made it to Twitter and had been retweeted by hundreds Friday afternoon.

“I couldn’t believe it,” Marchant said. “I went up and asked him (the store clerk) and he said, ‘Yep, $20.’ “

On his way out of the store Marchant said he told the clerk, “Just remember, karma’s a bitch.”

Note that the guy didn’t want or need the ice. He was just pissed off at the price. While he smoked from a $14/pack cigarette.

It prompted me to post on Facebook:

To those in Calgary who are bitching about price gougers, remember that increased prices helps to ensure a higher level of supply of essential goods in times of increased scarcity. Now’s not the time to bitch about the high cost of water; that price may have helped ensure the water was there for you to purchase.

The response to this was about what one could expect. No one wants to pay more for essential goods like water or ice in times of crisis, and no one wants to be taken advantage of.

Fair enough. I don’t want people to pay any more for a product as the next guy, and that wasn’t evident in my harsh post. But my point isn’t about what’s fair but instead about how to ensure essential goods are efficiently distributed to the public in times of need.

When asked how this statement was wrong or false, the responses were generally along the lines of “You’re wrong because SHUT UP, YOU UNCARING JERK.”

And don’t think that type of response doesn’t cross party lines:

Of course, there was very little price gouging going on in Calgary, especially once the panic wore off. Even though businesses ought to have the right to charge what they want, they still have to be concerned about their future business and the way they treat their customers.

Still, my empathy wasn’t so much with them as with the poor folk who went to stores only to find empty shelves because prices were kept below market value:

"Even if the water is shut off for a few days, at least I saved ten bucks. So it all worked out!"

“Even if the water is shut off for a few days, at least I saved ten bucks. So it all worked out!”

The shelves are empty because many people — fearful or speculative of being trapped without clean water — grabbed as much as they could before others did the same. Moreover, as prices are capped below market value, these consumers purchase more than they need.

In other words, these people hoarded the essential good, meaning others didn’t have a chance to purchase said product.

And the government not only encourages this behaviour, but demands it.

Don Boudreax speaketh thus:

Whenever government obstructs sellers’ abilities to raise prices at the pump, the method for allocating the few supplies among the many demanders is first-come, first-served.  Two inevitable results are long queues and the failure of many motorists to find gasoline to buy.  Each motorist who waits in line, therefore, raises the cost of gasoline to other motorists – both by increasing the amount of time that each motorist must spend waiting in line for a chance to buy gasoline, and by decreasing the chances that each motorist will actually find gasoline to buy.

So the logic that leads you to prosecute retailers for “unscrupulously” raising prices ought lead you also to prosecute motorists for “unscrupulously” queuing up.  Indeed, because queuing (unlike higher prices) creates no incentives for suppliers to bring more gasoline to market, queuing motorists, as you might describe their self-interested activities, rip each other off even worse than do price-hiking retailers.

Why is the self-interest of hoarders more morally ethical than the self-interest of price gougers?

Trick question: neither is more than the other.

This is because self-interest in the market even during times of scarcity — especially in times of scarcity — helps ensure people get what they need:

Allowing prices to rise at times of extreme demand discourages overconsumption. People consider their purchases more carefully. Instead of buying a dozen batteries (or bottles of water or gallons of gas), perhaps they buy half that. The result is that goods under extreme demand are available to more customers. The market process actually results in a more equitable distribution than the anti-gouging laws.

Once we understand this, it’s easy to see that merchants aren’t really profiting from disaster. They are profiting from managing their prices, which has the socially beneficial effect of broadening distribution and discouraging hoarding. In short, they are being justly rewarded for performing an important public service.

Like rent controls and minimum wage, anti-price-gouging legislation is just another example of where government intervention creates the very scarcity it seeks to prevent, also known as pathological altruism:

Good government is a foundation of large-scale societies; government programs are designed to minimize a variety of social problems. Although virtually every program has its critics, well designed programs can be effective in bettering people’s lives with few negative tradeoffs. From a scientifically-based perspective, however, some programs are deeply problematic, often as a result of superficial notions on the part of program designers or implementers about what is genuinely beneficial for others, coupled with a lack of accountability for ensuing programmatic failures. In these pathologically altruistic enterprises, confirmation bias, discounting, motivated reasoning, and egocentric certitude that our approach is the best—in short, the usual biases that underlie pathologies of altruism—appear to play important roles.

You see, dear reader, I defend price gouging, not because I like it, but because it works.

But unfortunately, the public doesn’t see it that way, which is why politicians would commit professional suicide if they said anything else.

Which is why I would make a terrible politician.

UPDATE: This says it better than I could. Read the whole thing.

  1. #1 by Clem on June 25, 2013 - 7:43 am

    Wow! I agree…

  2. #2 by Rob Huck on June 25, 2013 - 2:15 pm

    You’re a bastard like me, Clem.

  3. #3 by cjh137 on June 26, 2013 - 7:07 am

    Couldn’t agree more Rob. Well said.

  4. #4 by pyotr on July 6, 2013 - 11:48 pm

    Maybe they’d like it better if the products were rationed. One to a customer. Then the cops could be deployed to maintain order, rather than waste time on their own disater preps (offical or otherwise)

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