Hurricane Economics

Thread Starter

joeyd999

Joined Jun 6, 2011
4,477
There is nothing left down here to buy:

Plywoood
Concrete Screws
Water
Gas
Generators
Ice

Etc.

I blame this on our state's anti-gouging laws. There's an old adage -- I believe attributable to the great economist Walter Williams -- "If there is a shortage of something, the price is too low".

After this storm, I am going to make a proposal to our Governor. Keep your damn anti-gouging laws in place. But do this:

We have many huge open-space county parks here. When a storm looks imminent, open them up as "Free Market Gouging Zones" -- this way, no one will be surprised (or allowed to complain) about anyone's prices. Pay or don't. Allow anyone with a semi, box truck, or even U-Haul to sell anything they want at any price tax free (i.e. easy cash transactions) within one of these zones.

And watch the market perform its magic. Trucks filled with loot will come from everywhere, looking to make an "outrageous" profit.

Very quickly, there will be more goods available than people to buy them. They'll be giving stuff away for free.

Bank on it.
 

tcmtech

Joined Nov 4, 2013
2,867
I'm all for anti-gouging laws but then again I am for people planing ahead for known and likely happen emergencies for the region one lives in.

Around here our main thing is winter weather related and most everyone knows enough to always keep enough supplies and essential materials on hand to handle any typical weather event.
On top of that, the majority of us here are also part of cooperative social networks where those of us with excess resources and capacities are available to help those who are barely adequate at best if need be.
 
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wayneh

Joined Sep 9, 2010
17,153
I blame this on our state's anti-gouging laws.
Spot on. It should be called a "guaranteed shortage law", but I suppose that doesn't have the same ring to it.

People are funny critters. They resent the hardware store owner raising prices on his stock because that's like winning the lottery and for some reason they don't believe the guy with the stock (the ant, in Aesop's ant and grasshopper fable) should be allowed to "profit off the disaster". Maybe they don't want to see themselves as the grasshopper. But they would not resent a truckload of badly-needed supplies appearing in your proposed free-trade parking lot. They'd gladly pay the inflated price because they know that's what attracted the truckload of product. The truck driver would be a hero, even. The smart guy that plans ahead is despised and the opportunistic mercenary is a hero. Go figure.
 

strantor

Joined Oct 3, 2010
5,671
Spot on. It should be called a "guaranteed shortage law", but I suppose that doesn't have the same ring to it.
if you raise the price to the point that only a select few can afford it, then there's a still a shortage. There's a need in the community that can't be filled even with stocked shelves, same as would exist with bare shelves. Raising the price does not increase the amount of finite supply of goods. It only raises the profits of the vendor.

Here's something I saw on Facebook during Harvey:
1.png 2.png 3.png
He was selling a $399 generator for $800. I don't see how that benefited anyone but himself.

I'm all for the free market economy, supply & demand, capitalism, all the above. But I don't think that any singular simple concept can cover all the bases. In my mind, the supply and demand principle breaks down when the demand is infinite; like the example of price gouging on generators when people are losing all their earthly possessions because they can't power a fan to dry them off. Or even better, like the example of health care. When it's literally your life that's at stake, the health/insurance/pharma-conglomerated industry could, and seemingly does, inflate the cost of health care several times what it could or should be. And they do it a little (or a lot) more every year.
 

Thread Starter

joeyd999

Joined Jun 6, 2011
4,477
if you raise the price to the point that only a select few can afford it, then there's a still a shortage. There's a need in the community that can't be filled even with stocked shelves, same as would exist with bare shelves. Raising the price does not increase the amount of finite supply of goods. It only raises the profits of the vendor.
Wrong. The prices will encourage out-of-state privateers to bring supplies that would not have arrived otherwise. The pie grows.

High prices will create abundance. Abundance will force those prices down over time.

Yes, the well-off will have the means first -- then the lesser well off will benefit as the supply increases.

Economics always works this way. Once, only rich could afford to fly. They subsidized the initial build-outs of the airlines and infrastructures which eventually made airfare affordable for all of us.
 

wayneh

Joined Sep 9, 2010
17,153
I'm all for the free market economy, supply & demand, capitalism, all the above. But I don't think that any singular simple concept can cover all the bases.
That's why the simpletons passing laws should keep their paws off the market. It's far too complex to control with their pet good intentions, which inevitably are overwhelmed by The Law of Unintended Consequences. In this case, they had the ignoble idea of preventing the well-supplied person from profiting from circumstances. The unintended - but expected and easily predicted - consequence was a shortage of goods. There is no hope of resupply without a profit incentive.

How many shop owners would stock a couple extra generators if they thought they might have a chance to sell one at double price every few years? The answer is hard to predict, but that's what the market does better than any bureaucrat. How many extra will you stock if you're prevented from making that occasional windfall sale? Zero, that's how many. That much is easy to predict.
 

strantor

Joined Oct 3, 2010
5,671
Wrong. The prices will encourage out-of-state privateers to bring supplies that would not have arrived otherwise. The pie grows.

High prices will create abundance. Abundance will force those prices down over time.
Tell me more about this when Irma is on top of you. When every road into and out of your county is flooded or blocked with debris and no one can get in to sell you overpriced Goods. When the power is out and Home Depot couldn't sell you an overpriced generator if they wanted to, because their registers are off.

It's a temporary situation, I know, it's a weak point. But that's what I saw. At the time when things were needed the most, when people were frantically trying to save their possessions, and nobody could get to them to help (finite Supply) people were price gouging.

Anyway, for my other example, Healthcare: I wish I could make a point with this. I wish I could say "how does your theory apply to healthcare? Where are the people from the next state coming in to offer Discount Healthcare? " but I know what your answer would be. You would say that all the current regulations are what's driving up the cost of healthcare. And I couldn't really argue that. you would probably be right to an extent that neither of us would ever know. I don't know if there is an example of pure capitalism at work that we can look to to make a point for either side. But do you honestly think that if Healthcare professionals could charge whatever they wanted, anyone would be able to afford it?
 

tcmtech

Joined Nov 4, 2013
2,867
That's why the simpletons passing laws should keep their paws off the market. It's far too complex to control with their pet good intentions, which inevitably are overwhelmed by The Law of Unintended Consequences. In this case, they had the ignoble idea of preventing the well-supplied person from profiting from circumstances. The unintended - but expected and easily predicted - consequence was a shortage of goods. There is no hope of resupply without a profit incentive.

How many shop owners would stock a couple extra generators if they thought they might have a chance to sell one at double price every few years? The answer is hard to predict, but that's what the market does better than any bureaucrat. How many extra will you stock if you're prevented from making that occasional windfall sale? Zero, that's how many. That much is easy to predict.
Not necessarily. You only have to have a few or even one go against the price gouging trend of an emergency to ruin it for a lot of others.

A place I worked at some years ago did that when we had bad blizzard heading our way. The manager was a pretty clever guy and he pulled every available generator, heater and like item the region chain had on hand into our store and sold them at normal prices. I think we had several semi loads of portable generators and heaters unit show up within 24 hours and sold everything we had in stock within 2 days of that.

Huge sales boost for that store that month plus every other business in town who did the same and was carrying like equipment and that had pushed their prices up hoping to make easy money , got screwed over in the end by having loads of unsold surplus stock they had pulled in from their other stores in their chains after the storm passed. Stuff they either then had to sell at way discounted prices to move or ship back to whereever it all came from which cost them money.

Beyond that, the business I worked for then picked up a lot of longer term sales on service work plus a reputation for not being greedy crooks when it came out local emergency events on all that stuff too.

So, yea. Sure, someone can make a big profit off of a bad situation provided someone else doesn't set up camp to keep prices reasonable leaving the greedy people to either not make much profit beyond normal or even if played well actually lose money for their efforts.

I for one am all too happy to make a minimal profit on my work if it means screwing some crook over in the process!
 

tcmtech

Joined Nov 4, 2013
2,867
Tell me more about this when Irma is on top of you. When every road into and out of your county is flooded or blocked with debris and no one can get in to sell you overpriced Goods. When the power is out and Home Depot couldn't sell you an overpriced generator if they wanted to, because their registers are off.
That's the real reality of things. Once the disaster actually hits it's too late to go on major profiteering run.
Those who plan ahead get out a live and with minimal investment and those who didn't plan ahead pay for and suffer for their own actions or lack thereof. Same rules apply to business.

You don't go out and try and by a fire extinguisher at any cost after your house starts on fire just the same as no business refuses to sell you fire extinguisher until your house is already on fire because they can make more profit on fire extinguishers if they do it that way.

(unless your healthcare related and even that's likely to start collapsing big time in the next number of years for obvious economic process reasons)
 

Glenn Holland

Joined Dec 26, 2014
705
There is nothing left down here to buy:

Plywoood
Concrete Screws
Water
Gas
Generators
Ice

Etc.

I blame this on our state's anti-gouging laws. There's an old adage -- I believe attributable to the great economist Walter Williams -- "If there is a shortage of something, the price is too low".

After this storm, I am going to make a proposal to our Governor. Keep your damn anti-gouging laws in place. But do this:

We have many huge open-space county parks here. When a storm looks imminent, open them up as "Free Market Gouging Zones" -- this way, no one will be surprised (or allowed to complain) about anyone's prices. Pay or don't. Allow anyone with a semi, box truck, or even U-Haul to sell anything they want at any price tax free (i.e. easy cash transactions) within one of these zones.

And watch the market perform its magic. Trucks filled with loot will come from everywhere, looking to make an "outrageous" profit.

Very quickly, there will be more goods available than people to buy them. They'll be giving stuff away for free.

Bank on it.
The shortage of materials in the damage zone has nothing to do with anti-gouging laws or supply and demand. There's plenty of those materials available on the national market (in the central/southern U.S north of Texas) and anyone with sufficient transportation can bring them into the disaster area for sale. If their prices are lower than the gougers, they will take over the share of the market.

Furthermore, you assume that people will pay whatever the market will bare no matter what the gougers are asking. However in a huge disaster area like Houston, most people don't have the $$$ to pay for the materials even at normal market prices so gouging won't work. It's an example of "Not being able to get blood out of a turnip".

Also,most of the rebuilding/remediation work is being paid by the homeowner's insurance company who will secure a general contractor and negotiate the total price including materials and labor.

In fact, I believe the current high volume of construction in the San Francisco Bay Area has created a larger market for building materials than all the hurricane damage in Houston, but the prices here are not going through the roof and no one's gouging. As a former elevator contractor, I know the high cost of building housing or offices is mostly due to the high cost of labor (which is mostly unionized) and not the cost of materials.
 
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Thread Starter

joeyd999

Joined Jun 6, 2011
4,477
The shortage of materials in the damage zone has nothing to do with anti-gouging laws or supply and demand. There's plenty of those materials available on the national market (in the central/southern U.S north of Texas) and anyone with sufficient transportation can bring them into the disaster area for sale. If their prices are lower than the gougers, they will take over the share of the market.

Furthermore, you assume that people will pay whatever the market will bare no matter what the gougers are asking. However in a huge disaster area like Houston, most people don't have the $$$ to pay for the materials even at normal market prices so gouging won't work. It's an example of "Not being able to get blood out of a turnip".

Also,most of the rebuilding/remediation work is being paid by the homeowner's insurance company who will secure a general contractor and negotiate the total price including materials and labor.

In fact, I believe the current high volume of construction in the San Francisco Bay Area has created a larger market for building materials than all the hurricane damage in Houston, but the prices here are not going through the roof and no one's gouging. As a former elevator contractor, I know the high cost of building housing or offices is mostly due to the high cost of labor (which is mostly unionized) and not the cost of materials.
Nearly every point you made could be convincingly refuted.

But not by me. Not tonight. I am too damn tired.

No matter how prepared you are, there are always things to do before a storm (especially one of this magnitude). I've been busting my ass for two days. I don't have a debate left in me.
 

Glenn Holland

Joined Dec 26, 2014
705
Nearly every point you made could be convincingly refuted.

But not by me. Not tonight. I am too damn tired.

No matter how prepared you are, there are always things to do before a storm (especially one of this magnitude). I've been busting my ass for two days. I don't have a debate left in me.
Actually, all of my points could NOT be convincingly refuted and I can convincingly support all of them. However, there are more important (and more volatile) topics to debate so let's "Call it a draw" on this one.
 

Thread Starter

joeyd999

Joined Jun 6, 2011
4,477
Oh, I should point out that the track of this storm has us all trapped. Evacuation is no longer an option for most. Can't go north, east, or west without an equal chance of the storm following right behind you, and there's not enough gas along the route to get you out of the way.

This is gonna be a tough one for a lot of people.
 

Glenn Holland

Joined Dec 26, 2014
705
Oh, I should point out that the track of this storm has us all trapped. Evacuation is no longer an option for most. Can't go north, east, or west without an equal chance of the storm following right behind you, and there's not enough gas along the route to get you out of the way.

This is gonna be a tough one for a lot of people.
You've got my sympathy.

I live in the S.F. Bay Area which is due for a moderate to severe earthquake and S.F. is on the north end of a 40 mile peninsula. The only other way out is over the Golden Gate and Bay Bridges which may be closed for days or weeks. So I'm virtually trapped in a 300 square mile cage with millions of rats who will going after each other (including me) tooth and claw.
 
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WBahn

Joined Mar 31, 2012
26,398
Tell me more about this when Irma is on top of you. When every road into and out of your county is flooded or blocked with debris and no one can get in to sell you overpriced Goods. When the power is out and Home Depot couldn't sell you an overpriced generator if they wanted to, because their registers are off.
But it does still work.

Before the storm hits, many more people from outside the area are willing to incur the added cost, inconvenience, and risk in order to bring additional supplies that are going to be needed into the area beforehand, thus raising the supply and dampening the upward price pressure.

After the storm hits, many more people from outside the area are willing to incur the added cost, inconvenience, and risk in order to bring additional supplies that are now needed into the area afterwards, thus raising the supply and dampening the upward price pressure.

During the window when nothing can get into the area, you not only have the increased supplies because they came in beforehand due to the higher demand and, thus, prices, but you also have more efficient use of supplies and the utilization of latent supplies. If prices of water, plywood, gasoline, food -- you name it -- are forced to stay where they were, then people are not motivated to go to great lengths to conserve things, which only hastens the exhaustion of supplies. If plywood sheets had been $20 each many people will buy a certain amount in order to board up everything they can think of and will buy enough to be sure that they have more than they need. But if plywood sheets go up to $50 each, then a lot of those same people are going to buy a lot fewer because they are going to give a lot more thought to what really needs to be boarded up and what their other options are. That means that a lot more of that existing supply will be available to others so it will actually get spread around to more people. Furthermore, people that have extra plywood tucked away in a barn and would otherwise not even think about it are more likely to dig it out and put it up for sale, thus increasing the supply.

We've seen both sides happen many times in areas that get hit by blizzards. If the storm is bad enough, more people get stranded than the local hotels and motels can handle, especially in more remote areas. There are always some people that will take in stranded motorists into their home, but that is very finite. In areas where anti-price gouging laws are in place, that's where things end up and a lot of people get left out in the cold (literally) huddled up in their cars. But areas that have no such laws the hotels and motels raise their prices significantly. They still only have so many beds and so the same number of people get rooms there, but now lots of other folks start offering up rooms or businesses or barns because they can charge enough to make provide enough incentive to put up with the hassle and the risk of doing so.

I have three generators in my garage. While I would be more than willing to loan two to neighbors that needed them, it is likely that all of my neighbors already have generators. The notion of hauling them out and dragging them down into town is probably not even going to come to mind, though it might if I learned of a shelter or something similar that needed them. But if I knew that I could get $500 or more from them if I haul them down into town to the city park, then there's a good likelihood that I will do so once my immediate situation is safe and stable. The result, instant increase in supply and two more people that need a generator have one. Hell, if the prices got high enough I might well sell the third because we can get by without electricity for quite some time, particularly if we've planned ahead and stocked up on water from the well. At the same time I haul the generators down there, I'm probably going to scour the house for anything else that I might be able to sell at a high price. The result is a lot of items that are now available to others that otherwise would not be.

All "price gouging" is is an auction. If someone has something for sale, why shouldn't they be allowed to sell it to the highest bidder.

People that cry "price gouging" always seem to be under the illusion that if the person only charged $400 for the $400 generator instead of $800, that everyone that couldn't afford the $800 would have gotten a generator. Wrong! If there are ten people that want a generator and there's only one generator, then nine people aren't going to get generators whether the person charges $4000 or gives it away. But if five people pull out generators from the backs of their sheds and sell them for $600, now only five people don't have generators and four that otherwise wouldn't do.
 

WBahn

Joined Mar 31, 2012
26,398
Not necessarily. You only have to have a few or even one go against the price gouging trend of an emergency to ruin it for a lot of others.

A place I worked at some years ago did that when we had bad blizzard heading our way. The manager was a pretty clever guy and he pulled every available generator, heater and like item the region chain had on hand into our store and sold them at normal prices. I think we had several semi loads of portable generators and heaters unit show up within 24 hours and sold everything we had in stock within 2 days of that.
In other words, the free market dealt with the situation without the need for anti-gouging laws.

Imagine that.
 

Glenn Holland

Joined Dec 26, 2014
705
People who live in hurricane areas already have (or should have) stuff like plywood to board up and prepare their property for severe wind and a source of emergency power (a generator with a large gas tank). Flooding is the main problem in Houston and it doesn't matter what the price is if your home has been totaled by water damage.

If an area is severely overpopulated like Houston, the disaster may be virtually unmitigated and large parts of the city may have to be abandoned (like New Orleans) and the residents relocated for an indefinite time. in fact, a lot of the people in Houston were permanent evacuees from New Orleans.
 

tcmtech

Joined Nov 4, 2013
2,867
In other words, the free market dealt with the situation without the need for anti-gouging laws.

Imagine that.
Yes, In areas where not everyone in business or otherwise is unconsciously greedy free market keeps things in check or more to the point gives a greater chance of someone turning the table on the greedy and leaving them at a loose even. :rolleyes:

Whereas if you are in an area where there is little moral conscience in business anti gouging laws are necessary to create saem effect of putting the hurt on the greedy. I don't see either as being too difficult to understand.
If anything I dare say the only people who are ever against anti gouging laws are the one who tend to follow greedy and crooked actions to gain an advantage over and off of the less fortunate.

As someone who does not subscribe to such a moral ambiguity I have no issue with whether local self governing free market or legal action prevents people in need from being ripped off by the greedy. I'm not in that greed camp so either way has zero bearing on my actions.

It's also why if placed in your position with having spare generators and supplies I would be loaning them out for free just to make sure people like you have less chance of screwing someone over for exorbitant amounts of money for used gear. It's what I do to keep a free market system honest! Same with ratting out the greedy I do come across so that others can avoid them later. :D
 

MrChips

Joined Oct 2, 2009
24,408
Hurricane Economics

In 2006, Sir Nicholas Stern, a British economist released the Stern Review Report on Climate Change and made the argument that the cost of mitigating climate change would be far less than the losses arising from the consequences if no action were taken.
 
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