Re: The Who Mailing List Digest V9 #67

[Alan McKendree <amck@thenetdr.com>]

>Date: Fri, 1 Mar 2002 12:39:29 EST
>From: Deliphus01@aol.com
>
>>  >What gives a person the right to buy all the bread in a store at 99cents,
>>  >and then turning around and selling it at $4 a loaf to a bunch of starving
>>  >people??
>>
>>  As before, economic freedom.  What PREVENTS this from happening is
>  > economic reality.
>
>It's really not that uncommon. After hurricane Hugo hit this area in 1989,
>ice was $20 a bag and home repairs cost about 5 times what they normally
>would. Finally they had to make a law about price gouging, but of course
>"gouging" is a relative term. So don't think it can't happen...it does all of
>the time.

I don't think (and wasn't saying) price spikes can't happen. Economic 
reality prevents the fanciful example of your local Robber Baron (tm) 
buying up all a store's stock and selling it to helpless consumers 
for whatever he likes.  Your example is of price spikes occurring in 
unusual circumstances, which of course happens frequently. Price is a 
measure of supply and demand and of course it will change if 
circumstances do.

The people who make ice, plywood, home repairs etc. available after a 
disaster are heroes, whether you like it or not and even whether they 
realize it or not. There is no better way of creating a steady stream 
of ice trucks, construction workers, and eveything else needed to a 
disaster site than the knowledge that ice can be sold for $20 a bag 
and home repairmen can get $200/hour. Of course, this price only 
holds for a very short time (days), during which the people most in 
need of the ice and repairs can get them by meeting the new, higher, 
market price.  Those who can afford to hold off and not purchase for 
a while will buy when the increased supplies start hitting the market 
and depress prices a bit.  The whole crisis is minimized if people 
are rewarded, and rewarded well, for supplying the disaster area with 
what it needs as soon as physically possible.

This is more efficient, thus faster than politicians creating 
emergency laws and enforcing rationing with police power, which is 
the alternative.  All THAT does is ensure that the crisis is 
prolonged while the government or suppliers dole out what few 
supplies are available at the pre-disaster prices at a trickle...or 
haul out the government supplies, if it happens to be something 
stocked up in reserves ("Have another grilled cheese, Mrs. Smith, 
sorry, no plywood, it's grilled cheese today.").  It's a classic 
example of government making the situation worse while posing as the 
solution. I'll never understand why people would rather walk away 
with 1/4 pound of ice rather than the 5 pounds they really wanted, as 
long as they are sure the merchant isn't making any more profit than 
he used to. Further, I'm not so naive as to believe that for those 
with connections, a few bucks under that table won't suffice to 
increase supplies to those who want them badly enough, thus creating 
the worst of both worlds...shortages for most and a free market based 
on a currency of political connections as well as money.  I recommend 
_Alas, Babylon_ as an excellent novel of living in a post-disaster 
scenario, including rebuilding an economy.


>Date: Fri, 1 Mar 2002 13:32:38 -0500
>From: "O'Neal, Kevin W." <Kevin.ONeal@vtmednet.org>
>
>They take away the ability for folk to purchase the best seats via the net
>which is an officially endorsed means of purchase.
>Someone please tell me what benefit brokers are providing????

They provided a hell of a lot of benefit to me, when I arrived in a 
strange city with no ticket and ended up seeing the show from the 
10th row or so. You may not like that answer but obviously the 
brokers provide a service (i.e., benefit) to every one of their 
customers or the transaction would never occur.  If brokers were 
somehow magically eliminated so that every single ticket were sold 
straight from the box office to the end consumer my life would 
literally not be the same, given the number of shows I've seen 
through their services.

>Ok, let me rephrase...
>There is a bread shortage in a particular town.

You're already starting with an out-of-context fantasy, detached from 
reality.  A shortage does not mean that the price level of bread is 
higher than you might like it to be, it means that there is no bread 
available to anyone even though they have the money and are willing 
to spend it -- supply and demand cannot meet.  How did that shortage 
occur?  It's impossible for an ongoing shortage to occur in a free 
market.  Are we to assume that this particular town has a Town 
Council or Bread Board that manages its bread supply?  That would 
have to be done through price controls and rationing, else why bother 
having a Board?  For such a thing to be legal this town would have to 
be outside the US, yet I doubt you had a town in an explicitly 
socialist country in mind for your example. And the  Bread Board 
would have had to fumble its job, thereby creating a shortage.  To 
take your example seriously, we already have to postulate government 
interference which has prevented the free market from operating.

>Some selected few come in and purchase a large portion of bread,

But there is no bread.  You yourself said there's a shortage. I'm 
going to stop here and let you rethink your example.

>I guess (no, I know) I am more of a socialist.

Funny, and New England having that reputation for individualism, 
freedom and all that.

>I believe in capitalism and
>free market, but there is also a concept called responsible capitalism.

Capitalism is what it is, you either have it or you don't. (Sadly, 
every developed economy has a mixture of socialist and capitalist 
features.) Most anti-capitalists bash it by claiming that it means a 
society in which money can buy anything, but an economic system has 
as a prerequisite a political, ethical, and even metaphysical 
foundation, which pre-define where economic considerations are 
applicable and where they are not (e.g., murder for hire).  Within a 
properly defined context, all capitalism is "responsible" as a matter 
of course.  Capitalism itself isn't to blame for an improperly 
defined context (e;g, where slavery is legal).

>I, for one, am with the Democrats who believe that there are limits in
>certain situations.  Like in my splendid and realistic ;-) bread analogy.

Which I trust you are rethinking :-).

>Public interests must be protected.  There is also a thinking called fairness.

Of course, but those are ethical and political questions.  After 
they're answered, economics follows.  And individual rights (an 
ethical question) includes property rights (although not in the 
socialist scenario to which you are more inclined).  Once property 
rights are established, so is the right to ask any price one chooses 
for one's property.  It should go without saying that one may or may 
not find a buyer at that price, but this point is constantly 
overlooked in the last week's anti-scalping fulminations.


>You both have missed the point of that photo.
>We should be asking how they get the nipples of the one on the left to point
>straight up like that!

I can't even find her nipples, much less which way they're pointing. 
Maybe they changed the picture or something.


>Date: Sat, 02 Mar 2002 06:54:25 -0500
>From: "Jeff House" <whocasa@hotmail.com>
>
>Now, if I need a loaf of bread and am too lazy to drive the extra 15 minutes
>to the big grocery store, I will buy from Abu at a 50% markup.

That's why they're called CONVENIENCE stores.  You're literally 
paying for the convenience of getting a few items quick without 
having to fight the crowds at supermarkets.  Oddly enough, that's 
what you're paying a broker for, as well. Yet no one gets torqued off 
at the outrageous markup, customer gouging, etc. of Abu's place. 
Wonder why?


>Date: Sat, 02 Mar 2002 14:22:01 +0000
>From: "L. Bird" <pkeets@hotmail.com>
>
>The problem is when Abu and strikes a deal with the big store to buy most of
>their Pepperidge Farm Cinnamon Swirl bread every time it comes in.  Because
>I like that bread and it's sort of expensive, I get really pissed because
>Abu has got most of it and marked it up 50%.  I rant and rave about the
>price, but I buy it anyway, if I want the bread.  The other alternative is
>to drive to the big store on the day their bread comes in, so I can get some
>from them before it sells out.

Has your Abu really done that?  Because I find it hard to believe 
that a large supermarket would even consider selling a significant 
portion of their stock to a single convenience store or even a chain 
of them.  Are you joining KevVT in spinning fantastic scenarios?

>This kind of deal is often a signal that firms are willing to
>resort to other schemes which are illegal, such as price-fixing.

The whole edifice of government price supervision lost my allegiance 
when I realized that it is literally impossible for a business to 
comply with the anti-trust laws, if the government chooses to make an 
example of it.

Prices higher than your competitors?  Price-gouging the consumer! 
Call in the Feds!

Prices the same as your competitors? Obviously, collusion. 
Price-fixing!  Call in the Feds!

Prices lower than your competitors? Undercutting!  Unfair business 
practices to stifle competition.  Call in the Feds!

For anyone who would like to learn the logical and practical 
absurdity of anti-trust laws, I recommend _Antitrust policy : the 
case for repeal_, by Dominick T. Armentano.  Available at your local 
library or at half.com,
http://www.half.com/search/search.jsp?ad=null&meta_id=1&product=books&search_by=author&query=armentano

Cheers,
-- 
Alan
"That's unbelievable, if that's true."
    --Howard Stern, 5/25/00