Price gouging is a major thing now the Dem candidate has issued a statement on what she will do to stop the situation….I like the thought but it will be a fart in a hurricane.
First people do not understand the practice of price gouging…..and this article tackles the practice and tries to explain it so we all can grasp what is going on.
Price gouging in the popular imagination has a “know it when you see it” quality, but it is actually a well-developed body of law. A typical price-gouging claim has four elements. First, a triggering event, sometimes called an “abnormal market disruption,” such as a natural disaster or power outage, must have occurred. Second, in most states, the claim must concern essential goods and services. (No one cares if you overcharge for Louis Vuitton handbags during a hurricane.) Third, a price increase must be “excessive” or “unconscionable,” which most states define as exceeding a certain percentage, typically 10 to 25 percent. Finally, the elevated price must be in excess of the seller’s increased cost. This is crucial: Even during emergencies, sellers are allowed to maintain their existing profit margins. They just can’t increase those margins excessively.
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Price-gouging bans are broadly popular—except among economists. The reason is that, in the perfect world of simple economic models, allowing sellers to charge whatever they want during periods of heightened demand is actually a good thing: It signals to the rest of the market that there’s money to be made on the product in question, which in turn leads to more supply. Accordingly, prohibiting gouging leads to less production of essential goods and services. Plus, letting prices rise helps ensure that the product will be sold to the people who value it the most.
Here, regular people seem to understand a few things that economists don’t. During an emergency, such as a natural disaster, short-term demand cannot be met by short-term supply, setting the stage for sellers to exploit their position by raising prices on goods already in their inventory. The idealized law of supply and demand predicts that new investors would rush in, but the real world doesn’t work like that. A short-term price spike won’t always trigger the long-term investments needed to increase supply, because everyone knows that the situation is, by definition, abnormal; they can’t count on a continued revenue boom. During a rare blizzard, sellers might jack up the prices of snowblowers. But investors aren’t going to set up a new snowblower-manufacturing hub based on a blizzard, because by the time they had any inventory to sell, the snow would long be melted. So after the disruption, all goes back to normal—except with a big wealth transfer from the public to the company that raised prices.
https://www.theatlantic.com/ideas/archive/2024/08/economists-kamala-harris-price-gouging/679547/
So is Harris pandering? I think so.
Vice President Kamala Harris called for a federal ban on “price gouging” on groceries. From a strictly economic standpoint, there are so many things wrong with this proposal that I don’t know where to begin.
But the worst of it isn’t in the policy analysis — it’s in what this pandering says about the chances of a serious discussion of difficult issues with the American voter.
Let’s start with the policy analysis. Even without referring to the current situation, there are three well-known problems with a ban on price gouging. First, grocery stores typically have extremely low profit-margins, on the order of 2 percent or less, reflecting their limited pricing power in a competitive industry. So this is not the right sector — if there ever is one — to target with price-controls.
Second, it is very difficult to define price gouging. How do you distinguish it from a rise in prices owing to shortfalls in supply or surges in demand?
Third, any controls on prices will constrain incentives for producers to bring additional goods and services to markets. This is why price-controls usually lead to shortages more injurious than the price increases they are designed to stop.
Harris’s call for price controls on groceries is more pandering than policy
I want to hear specifics….ideas are good but specifics will convince me.
Will this be just another promise that will be swept under the rug of the Oval Office?
You tell me.
I Read, I Write, You Know
“lego ergo scribo”
Georgia has a law against price gouging. It works very well. It was enforced about ten years ago against hotel owners who greatly increased prices in Atlanta during a hurricane in South George that forced evacuations. Received a lot news coverage. Local tv interviewed one of the hotel owners. He was not aware of the law, and was surprised when he had ti pay a heavy fine.
It does not apply during non-emergencies, such as in college towns during football homecoming weekends. I got hit with that a few years ago on a visit to a college town. Rate for my room was up for the weekend from $100 a night to $150.
Law has yo be properly drafted to specify emergencies, etc and how much prices have to be raised as a per cent to constitute violations, otherwise would be thrown out as vague.
As with all laws….the wording is everything….I would like more specifics from Harris before I climb on board. chuq
I doubt you can live in a capitalist system and make a law against private companies making excessive profits work. Those shareholders and directors of companies are the ones who make donations to the political parties and candidates, and they would soon be screaming about ‘restriction of trade’ and so on. As long as John Doe or Mrs Average on the street is the only one suffering from inflated profits, unreasonable price rises, and deliberate overcharging, those in the top 20% of our system are never going to care.
Best wishes, Pete.
Yeah that is the problem….no one cares. chuq
the price gouging isn’t taking place at the retail sales level, it’s going on with the middlemen. At one point trucking costs for fresh produce from California to New York almost tripled due to, the trucking companies claimed, covid. In actual fact, the actual real cost of shipping due to increased wages, fuel costs, etc. went up less than about 45% to 75%. The additional cost? It was profiteering pure and simple. Same happened with the meat packing industry. The grocery store chains weren’t responsible, it was the meat packing companies. They jacked up the wholesale cost to the grocers over and over again using covid as an excuse, claiming increased cost of production. That was completely false. The net profits of some of the big meat processors rose by over 100%.
Yes the middle man seems to always make out so much better than others. chuq
They’ve always had strict rules about price gouging in Miami due to hurricane season when attempts to raise prices in hurricane attacks on water, gas, plywood, generators and such blossom. I believe the alleged price gouging Kamooooola promises to curtail is not price gouging at all. Price gouging allegations are primarily manufactured as the scapegoat for actual price increases due to inflation. They’re manufacturing this big lie. Perhaps it is a positive thing as democrats promised to return the economy back to include “manufacturing”.
If one lives in the hurricane zone then there will be laws against the incidents…..since the Fed drives inflation I do not see a president can be very effective. chuq
Haven’t Biden/Harris policies driven inflation ? I’ve always wondered why both parties celebrate times of low inflation. Any inflation diminishes the purchasing power of consumers esp those on fixed income. My purchashing power has fallen by 30% last 3 1/2 years.
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The person gets the rap for inflation….in reality the Fed is the leading cause…..the official inflation equation does not use food or gas…..so any news on inflation is not accurate whether high or low. chuq
I’m getting tired of people blaming the executive branch of the government for financial problems and every other problem this country experiences.
The president is not a dictator. The president and the offices of the executive branch does not make the law. The president and the offices of the executive branch does not write the budget. The president and the offices of the executive branch have only the powers granted to them specifically by the Congress.
Put the blame where it belongs, the Congress.
Yes , not include food and gas so not accurate
The normal excuse is that the markets are too volatile…..chuq
American consumers are a pack of disengaged lemmings when it comes to laying down in front of the great retail f**k machine.
Laziness and social media have turned them thusly. chuq