The real-life effects of government-controlled pricing

6 Responses to “The real-life effects of government-controlled pricing”

  1. derek s Says:

    gouging is actually a good thing. despite what many people say.

    it means people will conserve more because of the higher prices. and there will be just enough gas for everyone.

    the gas price only rose by 20 cents, when it should have risen a dollar probably. now the gas supply (only because of the electric pumper not working – not overconsumption) is not enough for people to go joy rides without taking a financial penalty, except that price fixes were implemented.

  2. CodeSlinger Says:

    Derek:

    Joy rides are the farthest thing from those people’s minds.

    Gouging is a coercive price increase, not determined by the free operation of the law of supply and demand. In cases like this, it amounts to kicking people when they’re down.

    To use gouging as a way of controlling people’s behaviour is just one tiny baby step away from forcing them to do your bidding at gunpoint.

    Either way, it’s despicable.

    Xanthippa says:

    CodeSlinger – are you seriously suggesting that government-enforced fixed pricing of scarce commodities is superior to letting the free-market dictate the relative value of various commodities at any given place and time?

    Letting prices go through the proverbial roof does not make the situation any worse for the average person because in either case, they will have to do without. Or, they might have to do with much, much less.

    Without permitting the prices to rise – and perhaps reflect the increased cost of delivery (as the local NJ refineries were damaged) as well as increased profit for those who took the initiative and significantly greater risks to deliver the scarce commodity to a disaster area, the commodity (in this case, gasoline) simply runs out.

    The few lucky enough to get some will not be significantly impacted – at first.

    But, soon enough, everyone (including those lucky few who bought last of the reserves) will have to do without because there will simply be no incentive for people to ship the commodity in: increased cost, increased risk – same low price…

    This will only prolong the shortage while permitting a temporary spike in prices to reflect the increase in the relative worth of gasoline would have ensured the supply lines would have been rebuilt and prices would have soon returned to near normal, then normal levels.

    Government interference in the free exchange of goods and services only leads to increased suffering by all!

    • CodeSlinger Says:

      Just to be clear, I should add that raising the price of gas to cover the increased cost of trucking it in when regular supply lines are cut is not gouging.

      It’s just the law of supply and demand, functioning properly.

      Pretending otherwise is just plain leftard double talk.

      • Derek Says:

        1. you are purely debating semantics. i used gouging in the context of raising prices to what many people would be uncomfortable paying.

        2. you are inconsistent. opposing the left while supporting their policies

    • Derek Says:

      Codeslinger, maybe you misunderstand.

      Gouging is good. But not the government forcing companies to gouge, but when companies gouge by their own will (not by government force), it’s for a reason.

      This ensures that it’s a more fair priority system than first-come first-serve. The people who give up the most deserve to get it. This price of gas will also show people that they need to be conservative with their fuel or they will face a direct penalty.

      What is wrong is government price fixes or any government law to stop gouging.

      Yes, gouging does increase profits. And that’s a good thing (unless you are a socialist). It’s part of capitalism that demonstrates what is in demand, what services are to be rewarded, and it encourages more competition in the field so the price can eventually go down.

  3. CodeSlinger Says:

    Derek and Xanthippa:

    I admit I was unclear in my first post above, which made it seem inconsistent. So let me be a bit more precise.

    The market is only fair when it is free. That is, when competition between buyers provides a robust upward pressure on prices, and competition between sellers provides a robust downward pressure on prices, all in accordance with the law of supply and demand. This is called the price discovery mechanism, and in order for it to be robust, the numbers of buyers and sellers must be sufficiently large, and accurate information about changes in supply and demand must be readily available to all in a timely manner.

    As long as these conditions are met, no price can be considered gouging, no matter how high it is.

    Gouging can only happen when the number of sellers is small enough that they can collude to raise the price higher than the point set by the free market. Sometimes dramatically higher. Such activity is unfair and predatory by definition, and that’s why it’s quite rightly illegal.

    The gasoline market in the U.S. has, say, 250 million buyers. And less than 10 sellers. This cannot be a free market! It doesn’t even remotely resemble one. Under such conditions, gouging is not only possible, it is inevitable — especially when a disaster gives those sellers an excuse to huddle together and raise prices more than they would in the face of honest competition.

    That amounts to kicking people when they’re down. And that’s despicable.

    As the aftermath of hurricane Sandy demonstrates, once you let the market get that far away from being free, nothing you do can lead to fairness. The best you can do is shift some of the pain from some people to some other people. But this further distortion of the market can only cause even more pain overall.

    Yet the government claims its intervention is necessary to prevent predatory pricing. That is, gouging. What they hope we will forget is that gouging would be impossible if there were, say, hundreds (or, even better, thousands) of independent suppliers of gasoline. That is, if the government had done its job in the first place by enacting and enforcing effective anti-trust law.

    The only proper involvement of government in business is to protect the freedom of the market and the stability of the currency. Therefore the question of whether price controls are needed never comes up unless the government has already been delinquent in its duty for a long time — long enough to allow a cartel or oligopoly to form. Or, even worse, a monopoly.

    So you see, Derek, I’m not advocating any left wing policies here at all. But you sure seem to be, when you say that price gouging will “show people that they need to be conservative with their fuel.”

    If the price goes up due to the undistorted operation of the law of supply and demand, and people react by reducing consumption, that’s one thing. But if you use price gouging to force them to reduce consumption, that’s quite another.

    That’s just a step away from forcing them to do it at gunpoint. And that’s despicable too.

    What I’m advocating, then, is to let the free market determine prices and let people’s free will determine the allocation of the fruits of their own labours.

    A proper governemt would do both.

    Our government does neither.

    Xanthippa says:

    This is more like the CodeSlinger I have come to know and love!

    I agree 100% with what you have said above.


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