Real Need

Come on... we've all seen it at some point. Disaster strikes and prices for some commodity rises dramatically. We all think the same thing... profiteer. Asshole. Greedy SOB. Governors enact laws because of the outcry, and everyone complains and shames.

Right now, if you are in much of the eastern part of the US, you are living it. I am. I drive by the gas lines. I've watched the hoarders filling their spare gas tanks and loading up their cars to make sure that THEY have gas.

I've seen a few stations bump their prices as much as they dare. Flirting with the anti-gouging laws... hoping they aren't reported. Their lines are short, and their patrons are few. But for the rest, those that kept their prices low, the lines grow and the desires of the many are fulfilled.

But what happens when the tanks run dry?

There are some that NEED gas. Their needs are as varied as the people that have them. Some have to have gas to get to medical appointments. Others, work is needed... either by society or by their own economic necessity. Others have trips that must be taken.

They would pay for their gas. If it is $5 or $7 a gallon, they would grimace, but they would pay it.

For others, they want the security of having a full tank. They might flirt with paying inflated rates, or they might decide to sit home and ride it out.

But then there are the hoarders. They crawled from their holes last year and bought 1000 rolls of toilet paper. Had society broken down, by God they were going to be able to wipe their butts in comfort for a decade. Some filled their carts once, then went back and did it again, just to be sure, smirking at others and basking at their brilliance.

Now they have cleaned out the gas can supply from their local big box and loaded their cars and trucks with their excess... in some cases even foregoing the gas can and filling all sorts of makeshift containers. Why not? Fuel is still cheap, and they want to make sure they have enough to carry themselves for months.

But what if the market price rose from $3/gallon to $7/gallon. It sure would hurt... My $60/week in fuel would rise to $140/week... unless I modified my lifestyle.

But for the hoarder, picking up an extra couple hundred gallons would go from a $600 insurance policy to a $1400 insurance policy. Now, the risk of prices returning to normal in a couple of weeks is no longer acceptable.

There is often a simple choice.

Would you rather have to pay three times the cost of a good, or not be able to get it no matter the cost?

THAT is the choice when we deal with "gouging." Expensive supply (price gouging) or NO supply (price controls).

Hurricane generators.

I live close enough to Florida that I can drive to south Florida in a day... a long day. And I, along with others I know have donated more than once to relief efforts when one part or another of Florida has been slammed by a storm.

But often, there are others that have seen opportunity.

Power is to be out for weeks. There hasn't been a generator on the shelves since shortly before the storm. And some people just didn't plan for the inevitable. Now... they are screwed.

They would be willing to pay three or four times the pre-storm cost of a generator... IF they could find one. But there isn't one to be found for any price.

What if some enterprising folks from unaffected states were to clear the shelves of generators, rent a trailer and ship those beasts of burden to the storm ravaged area... and then sell them at a healthy markup?

Putting aside the price gouging laws, what would happen is that there would be hundreds of generators brought into the state with the hope of big profits. The first people to buy... the ones with the greatest need, would pay massively inflated rates. Then, as more flooded into the market, the price would drop.

Remember supply and demand?

Regardless of anything ruled by any court, the Law of Supply and Demand can't be repealed. The result, prices would actually likely drop quickly as the undersupply turned to oversupply.

Those with the greatest and soonest need are willing to pay the most. Those that seek out of convenience are willing to pay the least. Laws against price gouging pit those with needs and those seeking convenience against each other.

the only reasonable and efficient mechanism to separate need from want is through price.

In the case of longer term problems, the same dynamic is at play. If there isn't enough bread, the demand is high. If price is allowed to rise with demand, the SAME number of people will initially get bread, but it will go to those that want or need it the most. But then, some entrepreneur will see that there is an imbalance in supply and demand for bread, and seek to fill that imbalance.

Papa may drive to somewhere that has an abundance of bread and bring it back to sell at a profit. Mama may decide it is worth it to bake night and day to sell her bread at a profit. But someone WILL choose to increase the supply for their personal profit.

Conversely...

If the government steps in and controls the price, there is no reason for Papa to drive to get more bread supplies. There is no reason for Mama to bake night and day. There is no reason for suppliers to seek to balance the supply and demand for bread, and the imbalance will remain.

Sure, we can take solace in the fact that it isn't those with means that "win" the bread by paying the higher price. The bread will be distributed by luck, or who has the time to wait in line.

But the problem won't be fixed.

This particular gasoline problem is not going to be fixed by individuals rushing to market with gasoline supplies. The solution (in the short term) is to users to dial back their lifestyles for a few days as disruptions are worked out.

But, there is still the case of those with NEEDS for fuel versus those with WANTS. And price is still the best mechanism to separate the needs from the wants.

The solution is certainly NOT what was uttered by the Energy Secretary, that if you have an electric car, this wouldn't be an issue. If you think that stations charging $7/gallon for gas is out of reach for those without means, buying an electric car which may not meet all of their transportation needs is several levels beyond that. And tone deaf.

The solution is to let the market handle it. The market has a much better track record of picking winners and losers than ANY government.