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The Unintended Consequences of Good Intentions, or: Price Gouging Laws are Stupid

DaveNH

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If you are late to heed the warnings and find yourself in a panic along with all the other dumbasses who didn’t take the warnings seriously you will pay what ever you need to to get some gas and that’s where the gouging can occur.
Right, that's the point.

We're taking issue with the prohibitions against "gouging." To the extent that "gouging" prohibitions work, they reduce supply and result in less equitable rationing.

While jacking the price in the face of a crisis seems unfair, it actually provides a valuable economic function.

At $2.50/gallon, I have little incentive not to get as much fuel as I can, irrespective of how that impacts others. But at $10/gallon, I have to weigh the benefit of any additional gallon, against other necessities like food and water.

I'm in New England. Here comes a Nor'easter, so gouging laws go into effect. At $2.50, maybe I load up on fuel to run my whole house gennie constantly. And because of the gouging laws, water is still running $3/case at Wally World. I load that up too. Better hope you don't get there after me.

But at $10/gal, maybe I decide that I don't need to run the gennie constantly. It's not worth it at that price. Maybe I decide I only really need to run the furnace every so often, and the fridge/ freezer every few hours so my food doesn't spoil. I can get buy with oil and battery lanterns for limited dark hours I'll be awake.

Similarly, maybe I don't need 5 cases of water if it doubled in price. A little bit for drinking and I'll fill the bathtub for tasks like flushing the brown down (lotta septic systems up here over sewer).

Yes, if I think I absolutely need every drop of fuel and water I can get, maybe I'll still pay whatever the cost. But for most people, higher prices will put into perspective what they actually need to get by.
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smlobx

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Thanks for dropping this down here..
Once again i’ll respectfully disagree... I grew up in NH and can remember those big Nor’easters (at least they were big for me!) we would burn wood when the power went out and we sure didn’t want to be without any. Fortunately my Dad always made sure we had plenty but if we were to ever run our I’m sure he would have paid whatever it took to make sure we were kept warm (or my Mom would have got on his case!)

One of the funniest memories of Nor’easters and my family is shortly after we moved to NH when I was 4 my Dad did a lot of international travel and was gone for weeks at a time. This left the snow shoveling to my Mom and me. I’m sure my Mom complained and my Dad sort of blew her off....Then he was home for a big snowstorm and my Mom said now it’s your turn as she watched my Dad shovel the driveway through the living room window....

After a couple of hours he finished..only to have the snowplow dump a bunch of snow back onto the driveway...he shoveled it again...He got in the station wagon, drove down to the local hardware store and came back with a gas snowblower sticking out the back of the car. We used that for years!!

What part of NH are you in?
 
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DaveNH

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Near Concord. I grew up in Sandown. We had the wood stove too and I did more than my fair share of shoveling. Still doing it at 40...f'ing snowblower died, lol. A few years ago there was a storm and major power outages the day before Thanksgiving. In what dovetails with my view above, my parents ran the gennie long enough to get Thanksgiving dinner on the table (we held the big, family dinner), then shut down anything not essential. Luckily the power came back early afternoon, so still got to watch the football games. :like:
 

Ole Cowboy

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Right, that's the point.

We're taking issue with the prohibitions against "gouging." To the extent that "gouging" prohibitions work, they reduce supply and result in less equitable rationing.

While jacking the price in the face of a crisis seems unfair, it actually provides a valuable economic function.

At $2.50/gallon, I have little incentive not to get as much fuel as I can, irrespective of how that impacts others. But at $10/gallon, I have to weigh the benefit of any additional gallon, against other necessities like food and water.

I'm in New England. Here comes a Nor'easter, so gouging laws go into effect. At $2.50, maybe I load up on fuel to run my whole house gennie constantly. And because of the gouging laws, water is still running $3/case at Wally World. I load that up too. Better hope you don't get there after me.

But at $10/gal, maybe I decide that I don't need to run the gennie constantly. It's not worth it at that price. Maybe I decide I only really need to run the furnace every so often, and the fridge/ freezer every few hours so my food doesn't spoil. I can get buy with oil and battery lanterns for limited dark hours I'll be awake.

Similarly, maybe I don't need 5 cases of water if it doubled in price. A little bit for drinking and I'll fill the bathtub for tasks like flushing the brown down (lotta septic systems up here over sewer).

Yes, if I think I absolutely need every drop of fuel and water I can get, maybe I'll still pay whatever the cost. But for most people, higher prices will put into perspective what they actually need to get by.
Dave I am going to disagree on this.

First of all gouging is exactly that its gouging and it is also theft. In addition, it preys upon the people that are gullible and often times are intimidated by the whole process this especially happens when a woman walks into an auto dealer.

That said, don't get me wrong I DO NOT believe in price controls at all, we tried it I think under Nixon and it was a failure, always is. I am a hard liner capitalist!

Sadly all too often gouging laws become price control laws.

In addition, they are hard to administer. Most gouging takes place at the point of sale. In the case of gasoline, it is usually the station owner, which are independents that can sell at any price they chose. Most gouging takes place at the local level, your next door neighbor who owns a business is the one doing it.
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