Saturday, September 10, 2005

More Price Gouging

Isaac has a good post on price gouging. In particular it's very important to note that Dave Hoffman's "...the regulations - when publicized appropriately - have the same information forcing effect as higher prices themselves..." is just plain wrong. It relies on a very optimistic view of human nature. A more realistic view of human nature would argue that if people don't have any incentive to reduce gas consumption, it won't happen. Isaac mentions Talcott Parsons, but Hayek is the expositor of this idea that comes to my mind. I must nitpick Isaac a little bit:
Letting prices rise will prevent some people from getting supplies of that good (and it will be poor people who are screwed)...
I wouldn't say that anyone is *prevented* from getting supplies of the good. Even if gas or water is $20 per gallon you can still get some amount of gas or water. What does happen is that people *choose* to purchase less because the cost of gas or water has risen and there are better alternative uses for their income.

Many people also point out, as Isaac does, that the it is the poor who get screwed in these situations. Well yes, but the poor *always* get screwed. Being poor is equivalent to having fewer choices available to you. You may not be able to get out of New Orleans, for example. Higher gas prices is just one of many ways in which the poor get screwed every single day. But if we really care about poverty (and I hope we do) there are far better and less wasteful ways of helping poor people than price gouging laws.

1 Comments:

Blogger Isaac said...

The point about Parsons is that for a social system to hold together where people are motivated solely by the satisfaction of their own wants, their wants have to include the long-term stability and reproducibility of the social order. Otherwise people will resort to more immediate means of satisfying ends like theft and etc.

I wasn't invoking Parsons to explain that market incentives are all that matter.

So true about "prevent" vs. "reduce choice." I think the Dave Hoffman position would be that because the poor get screwed in such an obvious way, there would be a tendency to undermine peoples desire to reproduce the social order, but...

12:46 PM  

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