In article <7kepWhCNP4qd-pn2-kEReJH46x6FT@localhost>,
  kiyoinc@ibm.XOUT.net (cory hamasaki) wrote:
> On Mon, 3 May 1999 05:07:35, gunner@lightspeed.net (Gunner) wrote:
>
> > I ask you this..... if in Oregon, the price of infant formula goes up
> > 100%, what will stop some enterprising person from buying up all the
> > Infamil in Sacramento, and trucking it up to Salem?  Nice profit
> > margin, particularily when you return home and have doubled your
> > money, and can buy twice as much for the next trip north.
>
> It wouldn't be an individual, it would be the corporations.
>
> During the 1970's gas crisis, when the government was "whipping the ass
> of inflation", while lines lengthened through out the U.S., gas flowed
> freely in Texas.  The local stations were open around the clock and were
> giving away 'Oilers glasses as incentives.
>
> We heard rumors of wells being capped.  "Why should I sell today when I
> can get more for it tomorrow?  My oil in the ground earns more interest
> than money in the bank."
>



Precisely. There will be no more cans of beans produced. Why should I sell
mine now at a government mandated price. They will be worth a hundred times
what they are now after April 1st. I can wait.




> It's taken decades to recover from the idiocy of the government hysteria
> of "AHHHH! I think I saw gas prices go up!  I'm scared!"
>
> That California bill will guarentee shortages, a black market, buying
> trips to nearby states.




The states all say that they don't believe that there are going to be problems
and now they are doing everything that they can to prevent them, but that
prevention will only exacerbate the problems and show the public that these
measures are EXACTLY what one who EXPECTS problems would do.




Government Lip Service: "We don't expect banks to fail"
Government action: print billions



Government Lip Servivce: "We don't expect supply chain failures."
Government action: Pass 'Price gouging' legislation




Ever seen a heavy weight fight in slow motion. It looks like they are
telegraphing their punches. You watch it in slow motion and you think to
yourself. "How could that guy get hit? You could see it coming a mile away."



Y2k is unfolding in ULTRA-SLOW motion. So slow that most folks can not see
what is happening. Too bad. They are about to be clocked with that slow
motion knock out punch that any pea-brain could see coming a mile away.




> And why is it when an SUV overloaded with infant formula, racing back
> from Oregon, turns over and kills the occupants, that *no one* is
> responsible for this collateral damage?
>
> Note to Gunner, I don't expect there to be enough Infamil in Sacramento
> to buy.  I expect that the corporations will divert their production to
> more enlightened states.
>
> Local buying groups (or opportunists) will purchase product openly in
> Oregon, Arizona and will bring it back to California to distribute to
> members at cost or at a black market mark up.
>
> The losers are the merchants in California.  The lite-thinker (and
> legislators) might believe that the legislation will ban hyperinflation
> from California, in reality it will increase prices even more.
>
> I say this as someone who bought anti-freeze in the mid-1970s in DeeCee
> at $20/gallon.  There was none at $4.99/gallon; all you wanted at $20.00
> I had just come from Texas with a non-winterized car.
>
> cory hamasaki http://www.kiyoinc.com/current.html
> 
>



--
Paul Milne
If you live within five miles of a 7-11, you're toast.

-- a (a@a.a), May 04, 1999

Answers

Rationing and price controls are all too happily imposed by your rulers in response to actual or anticipated cries of "do something" when prices increase, by the average stupid schmuck peon sheep. Any excuse for more power grabbed by your rulers.

You can't have an intelligent honest government if the population is stupid and dishonest. And, since most people are zits on the breast of mother earth, don't look for things to change.

Humanity had one shot -- it lasted maybe five or ten years (the founding of this country [U.S.A.]) -- and this country has been going downhill since. Has reverted to type (regressed to the mean).

-- A (A@AisA.com), May 04, 1999.

There are many facets to this issue. I was having dinner with our state Senator's aide last night and asked about the diesel price escalation in California and the recent gas price hearings. The gas price rocketing has been attributed to several refinery fires and OPEC, coupled with the special CA CARB requirements that preclude purchasing from out of state. Apparently, this does not justify the commensurate deisel price hike.

She told me that when they posed that question in the hearing, the oil companies said they raised the price "because they could" and because they saw the opportunity to make a great profit.

Unfortunately, trucking firms under contract and agricultural operations have to "eat the costs" and can't pass them on because of contractual or system restraints. Those operations who can pass them on have to consider a competitive market not under such burdens.

On the other hand, local people here regularly go over the border for cigs. and large purchases because Oregon doesn't have the ame restraints as CA or sales tax.

-- marsh (armstrng@sisqtel.net), May 04, 1999.

There's Some Good in Gouging ) 1998 Karen Selick

The great ice storm of January, 1998 left millions of residents of Quebec and eastern Ontario without electrical power, some for several weeks. The storm itself was unprecedented, but it brought with it a phenomenon thats all too familiar in emergency situations: complaints of price "gouging" by merchants. Candles, formerly $1 a box, were marked up as high as $4, reports say. Prices temporarily skyrocketed for batteries, firewood, propane, gasoline, bottled water and a host of other items.

"No one should be permitted to profit from the misery of others," people raged. Canadas Industry Minister John Manley even suggested that oil companies should be giving away gasoline to customers instead of charging more for it. The Quebec Consumers Association threatened to publish a "Roster of Shame" naming businesses that had been reported as gougers.

The truth is, the sudden, exorbitant price increases that occur in times of crisis serve a useful purpose. Instead of vilifying the so- called gougers for their greed, we should accept them as important and necessary players in the price systemthe system which keeps the economy of a distressed region operating as smoothly and impartially as possible under the circumstances.

Take candles, for example. Ordinarily, most people have little use for them. During a power failure, everybody suddenly needs them. Storekeepers are as much taken by surprise as consumers. They have only enough candles in stock to satisfy their normal low demand. Faced with a sudden surge in demand, they have two choices: continue to sell candles at their normal price, or raise the price.

If they continue selling at the normal price, they will quickly sell out. There will be no candles left for those shoppers who are slower than their neighbours in reaching the decision to buy candles. It won't matter how desperately the latecomers need candles--there won't be any available.

Suppose instead that merchants decide to quadruple the price of candles. Would-be purchasers will be shocked at the new stickers. Among those shoppers will be some who already have a supply of candles or some other alternative, such as kerosene lamps, and were merely intending to stock up just for good measure.

"Four dollars for a box of candles?" they'll say. "Phooey on that! I'll just use what I've got first and buy candles later when prices have returned to normal."

Others will say, "I was planning to buy three boxes, but at that ridiculous price I'll just take one."

The result? More candles will be left for latecomers to buy. Those who didn't already have a supply, and therefore needed them quite desperately, will be able to find some, even though the price may be steep. As well, all shoppers (both those who decide to buy and those who decide not to) will have been alerted to the fact that candles are in short supplysomething they might not have realized if they had been able to purchase them at the normal price. They will become more sparing in their use of candles, knowing how expensive and difficult they'll be to replace during the immediate crisis. Spontaneous candle conservation will occur. The severity of the candle shortage will be alleviated.

Besides encouraging conservation, price increases play another beneficial role: they induce a rapid increase in supply. Storekeepers who suddenly find themselves able to make a huge profit on candles will do their utmost to get in a new supply. People outside the stricken region who hear about huge profits to be made on candles will rush to the area with a stock of candles.

This will further assist in alleviating the severity of the shortage. As truckloads of candles flow into the area, competition among vendors will soon reduce the price down to its former level just as it did before the crisis began.

Price increases are simply one method of rationing scarce goods among competing users. Its not perfect, but the alternatives are even worse. Suppose the government had quickly passed a law making it illegal to sell candles at more than $1 per box. Knowing that they will immediately sell out at that price, storekeepers would be able to pick and choose which customers they wish to favour. This would present an opportunity to curry favour with local politicians, bureaucrats or other people of influence. A system that allocates goods by "pull" is surely no more fair than one which allocates goods by price. In normal times, we call this corruption.

Or suppose ration coupons had been issued for candles, so that everyone became entitled to buy an equal but restricted number at $1 per box. This system would allocate candles to people who don't really need them (those with an emergency supply or other alternatives) and deny an adequate supply to people who need them most urgently (those with absolutely none). A black market in ration coupons would soon develop. Those who need more candles than their ration coupons permit would end up paying inflated prices for them anyhowbecause they would first have to buy black-market ration coupons, then the candles. The only difference is that the windfall profit would go to those who sell their unneeded ration coupons, rather than to storekeepers. There is nothing to commend such an outcome as more fair than simply allowing candle prices to rise. And there is a major disadvantage to this rationing scheme: it eliminates the incentive for vendors and outsiders to rush in with increased supplies.

Is it unfair that some people get to use old $1 candles while others end up using new $4 candles? Not really. Everyone knows that candles (or candle alternatives) are a useful thing to have on hand in case of an emergency. Those who maintained a supply were actually tying up a small portion of their capital, perhaps for years, to give themselves this extra security. They made the decision to forego the purchase of some other commodity, or interest on their capital, in order to keep a supply of emergency goods on hand. Compared with those who didn't stockpile any candles, they had already made a financial sacrifice. While this outlay may be negligible in the case of candles, it could be significant in the case of generators. Those who chose instead to be unprepared merely took their financial lumps later, in a more obvious and painful way.

Of course, there will always be some people who will complain bitterly about price increases no matter what arguments you present them with. Canadian newspapers were filled with stories about and letters from ice storm victims who pledged they would boycott merchants who had tried to gouge them. Consumer anger is as predictable as the so-called gouging itself, and is a factor that wise business people have to keep in mind when deciding what to do during a crisis. Many customers find it easier to accept being told that the store has sold out of an item than to accept a price increase. A shortage can be blamed on other consumers, while a price increase is clearly the "fault" of the merchant.

If merchants alienate regular customers by appearing to take advantage of their temporary misfortune, they might well lose more profits in the long run than what they will make in the short run. This is why some businesses choose not to increase prices, preferring instead to simply sell out.

On the other hand, stores that increase prices and thereby manage to keep scarce items in stock might actually gain new customers as shoppers stray from their normal haunts seeking a place that hasnt sold out. Like most other business decisions, its a judgment call.

Whats important to remember is that just as customers are under no obligation to patronize a particular store, businesses are under no obligation to fulfill the needs of any particular customer. Each party exists to serve his own ends, not as the means to the ends of others. When a transaction takes place, it is only because each side attaches greater value to what he gets than to what he gives up. Customers certainly seem to understand that they have full ownership and control of their money and can choose not to part with it, but they often seem to forget that business people have equally valid rights of ownership in their candles and should be equally entitled to decide when to part with them.

-- Prometheus (fire@for.man), May 04, 1999.

Well spoken, Prometheus.

-- A. Hambley (a.hambley@usa.net), May 04, 1999.

PROMETHEUS: Your essay was delicious! Contained within its many paragraphs is to be found the essence of morality, freedom, and the wonderful mechanisms of our irreplaceable market system.

Those that would decry its "distasteful" aspects can only offer alternatives that have repeatedly been attempted throughout our histoical record - with repeatedly disastrous results. Human misery and carnage of unimaginable proportions.

No where on Earth is there now or has there ever been in the past, a more prosperous and secure civilization, that as one of its most noble consequences, enables each of us to pursue our respective values, free from the tyranny of the rest of us.

It saddens me when I think that the only thing that was/is required of each of us in order to preserve it, was/is that we rationally and consistently grant to all of its individual members, those Rights that we demand for ourself. Said in another manner, the political equivalent of "The Golden Rule."

Keep posting! The pearls to be found on this forum are worth the cracking open of all of the clams!

-- Dave Walden (wprop@concentric.net), May 04, 1999.

Dave, A. Hambley & all others,

Mea culpa. I didn't mean to mislead people and claim that essay as my own work. I did not write it. Karen Selick wrote it. She published the essay at this URL:

http://www.nextcity.com/go/KarenSelick/GM980124.html

I am reproducing it here under the fair use doctrine of international copyright law, since we are all reading it here only for non- commercial purposes of study, discussion and comment. I posted it because it seemed so pertinent to the preceeding discussion.

-- Prometheus (fire@for.man), May 04, 1999.

>She told me that when they posed that question in the hearing, the oil companies said they raised the price "because they could" and because they saw the opportunity to make a great profit.

As a former oil company employee, I sincerely hope there is not a double standard for candles versus diesel fuel.

The year that Sen. "Scoop" Jackson popularized the phrase "obscene profits" in the context of the oil industry, the average office furniture supply company had a 50% higher return on investment than the average oil company did.

-- No Spam Please (No_Spam_Please@anon_ymous.com), May 05, 1999.