A Question for the Defenders of Anti-Gouging Laws

By On November 1, 2012 · 22 Comments · In Uncategorized

If you believe that it is a good thing to pass laws that prevent sellers of water or ice or generators from raising their prices after a natural disaster, are you willing to pass a similar law that prevents roofers, carpenters, cleaners, electricians, and plumbers from asking for a higher hourly wage in that situation?  We know that after natural disasters people in these professions command higher wages.

If not, what’s different about the cases?  Doesn’t the prospect of higher wages for such work attract more individuals to the stricken area, speeding the process of recovery (which explains why the Hispanic population of New Orleans and other places hit by Katrina is higher than it used to be)?  Are we better off paying less but waiting much longer to have homes and businesses repaired?   If not, isn’t this a reason to oppose anti-gouging laws on firms?

If you can’t look working class immigrant carpenters in the eye and tell them they cannot take advantage of higher pay for their valuable skills, on what grounds is it okay to tell small business owners that they cannot take advantage of higher prices for their more valuable goods?

There is no logical difference between markets for labor and markets for goods and services.  If we think it’s okay for sellers of labor to profit from a disaster, and we understand the positive unintended consequences of doing so, then I cannot see what the argument is for not allowing sellers of goods and services to do the same.

 

 
  • Gradivus

    Similarly, the prospect of higher prices for scarce goods attracts more of those needed goods to be sold in the stricken area.

    • http://www.facebook.com/people/Russ-Mitchell/655927513 Russ Mitchell

      THIS. If I’ve goods to sell, it’s because I’m running a business. I can donate a certain amount of stuff, but past whatever point that is, anything else goes to putting me out of business. Allow prices to climb, and I can afford to sell in markets (beat-to-hell areas) that normally I couldn’t *touch.*

  • http://www.facebook.com/people/Michael-Giberson/100000176233472 Michael Giberson

    FWIW, some anti-price gouging state laws encompass the charges of companies offering tree removal, home repair, and similar services (though not, strictly speaking, the wages those companies pay to employees and sub-contractors). If the market wage rate increased, in theory a tree removal contractor could raise his price to pass along the higher cost.

    However, when the market prices are not set in a transparent fashion-and the results of decentralized negotiation of labor markets are not particularly transparent-the contractor would risk the state deciding the higher costs are not a sufficient defense. (I.e., if I recall correctly, a retail store claimed overtime expenses and repair costs justified higher prices, but the state attorney general’s office deemed those added costs not sufficiently out of the control of the store management and hence not permitted as a justification for raising prices during an emergency.)

  • http://www.facebook.com/profile.php?id=734905386 Chris Burkhardt

    I’m not a defender of anti-gouging laws. However, there may be no *logical* difference between markets for goods and markets for people, but there ought to be an ethical distinction. That’s what socialists have been on about for the past 160 years.

    • Sean II

      Nein. Socialists don’t tolerate prices/markets in goods any more than they tolerate prices/markets in labor.

      • http://www.facebook.com/profile.php?id=734905386 Chris Burkhardt

        That’s usually one of the distinctions made between communism and the broader definitions of socialism. See for example the “free-market anti-capitalism” of Mutualists, individual anarchists, and some collectivists, most of whom would consider themselves socialists.

        • Sean II

          I was referring to every kind of socialist I could think of, from the classic (those who want collective control of the means of production) to the new style (those who want large scale public provision of non-public goods) to the broad (those who, having been shown the stainless steel fork of subjective marginal utility, are nevertheless stubbornly clinging to the splintery chopsticks of the labor theory of value).

          You yourself spoke of socialists who’ve been “on about” something for 160 years, so I’m just honoring the set as you defined it. The sweep of that century-and-a-half should certainly include many different types of socialist, and any common elements between them.

          The fact is, they’re all alike in rejecting some types or prices and some categories of ownership, and they don’t necessarily do it along a bright clear line that divides “things” and “people”. In fact, they are often quite arbitrary in accepting some prices while they reject others with evident disgust.

          If you polled self-identified socialists today, nearly all of them would say that penicillin (clearly a thing and not a person) should not be allocated by market price. Some would say it’s not okay to have ownership in MRI machines, because no one should be allowed to own capital equipment. Some would say it is okay to own an MRI machine, but not okay to price the service it provides. And so on.

          I’m not denying the existence of diverse opinions within socialism. But I am denying the existence of opinions which cannot logically exist. And there can be no such principle as “it’s okay to sell things but not people”, IF the latter is taken to preclude any price in labor.

          Goods are made by people, and for people. If you try to draw a line between the goods and the people, well…then you’ve missed the whole point of economic activity.

          Frankly, the non-idea of “let there be no markets in people” is not a fair characterization of any school of socialism. That’s just the sort of vacant slogan that ends up on a piece of poster board, having been scribbled there by a confused sophomore who failed to pay attention when her professors were explaining what socialism is.

          • http://www.facebook.com/profile.php?id=734905386 Chris Burkhardt

            You make a good point, that there is no clear distinction between a price in labour and a price in the product of labour. That is, again, one of the major points of contention between communists and market
            socialists: communists hold that commodifying products, even when the worker receives the full value of their labour, is alienating and tantamount to a labour market.

            However, there ARE important differences between trading directly in labour and trading in what labour produces. The most obvious is that in a labour market the worker receives (as a wage) less than the value of what their labour produces. Exploitation of that sort has been a concern for almost all socialists (your “classic socialists”) since at least Proudhon.

            Being treated as a provider of service, rather than as a commodity, also removes a layer of alienation. Removing the capitalist control over the means of production also removes the the capitalist’s control over the life of the worker, etc.

            Frankly, the non-idea of “let there be no markets in people” is not a fair characterization of any school of socialism.

            Well, I don’t know what to say to that. I see abolishing markets in people as a defining tenet of socialism. Although I am sympathetic to the communist (and your) argument that that is only completely possible by abolishing markets in products as well.

          • Sean II

            You’re deeply mistaken in paragraph 2: A voluntary worker’s wage can never be less than the value of what he produces. The whole reason why that worker is a worker, is because he values the wage MORE than whatever he produced in exchange for it.

            From that single error, so many theoretical mistakes have been born.

            The only real “market in people” would be slavery, and those markets were abolished by liberalism, not socialism. In fact, liberalism did such a good job abolishing them that no one today can distinguish himself politically by saying “I oppose the buying and selling of slaves.” That, which would have been a courageous stand to take for 40,000 years of human history, is now simply obvious.

  • wofford

    Perhaps the sellers of hotel rooms, food, and sex in North Dakota are gougers too.

    • martinbrock

      Everyone charging me for sex is gouging me, but is there anything wrong with that?

  • Adam Ricketson

    “There is no logical difference…”

    I think that the logical difference here is between short term and long term market responses to the disaster. If the price hikes are due to a sustained mismatch between supply and demand (as with repair services), then price hikes are legit and they can increase the quantity supplied. However, in the short run, there’s no reason to think that price hikes will increase supply — the supply will increase because the roads are cleared, not because some entrepreneur finds a way to deliver supplies despite the flooding. Furthermore, in the short term, consumers may lack information due to disruption of transportation and communication, so the increased price would essentially be a monopoly price, not the price that would be expected in a competitive market.

    FWIW: I’m not saying that I support these regulations.

    • martinbrock

      Increased supply is not the issue. Allocating the goods to their most valuable use during the emergency is the issue.

      Selling goods at the pre-emergency price only changes who holds the goods. Are the new holders wrong to hold the same goods rather than reselling them at the pre-emergency price? Is only the first seller wrong to refuse to sell at this price?

      • Adam Ricketson

        So, the “most valuable use” occurs when a rich guy buys all the food at an inflated price and throws a big party for his friends, while leaving the poor guy starve?

        More abstractly, I don’t think that the notion that prices “allocate goods to their most valuable use” means much when markets have been disrupted so severely. Actually, I think that idea is BS in general because there is no way to legitimately compare the utility function between individuals. If there is a way (e.g. by saying it’s important for each person to get the minimum needed to survive), then it favors rationing by quantity, not price.

        • Matt Lewis

          The rich guy couldn’t buy up all the goods under the “first come first served” market with no price increase? The allocation of goods won’t be perfect under a price rise scenario, but the goods will go to those who are willing to pay the most for them, which is often those whom need them the most. Are you more comfortable with the allocation of goods under an first come first served economy with anti-gouging laws?

        • square

          But a rich guy wouldn’t be able to deplete the supply. High prices ensure that the supply is replenished, since there is a profit motive. The warehouse will be more motivated to ship more goods to the stores, and the store owners will be more motivated to stay open. “most valuable use” doesn’t just mean one individual over another, it means one market over another. High prices signal to producers “hey, we’re in a crisis here, we need a greater supply of food/gas/etc,” AND it encourages people who don’t really need a rationed good to go without it instead of hoarding.

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  • Joseph R. Stromberg

    Damn! Ricketson beat me to it.

    I’ll just add a few things. If some S.O.B. tries to get $300 out of me for a sheet of plywood or $80 for a gallon of gas *during* the emergency, I’ll remember that, because he is literally taking advantage of others’ needs. He’s a bad neighbor and an over-elaborated argument that he is greasing the allocational wheels of some abstract system does not improve him. Here, our moral intuitions, which were reliable/unreliable (I forget which), when it came to running people over with trolley cars, are spot on. (Yes, and there may be ways to get back at Mr. $300 Plywood/$80 a Gallon, without ever uttering the word ‘statute.’)

    Later on, when life is less threatened and things are mostly just inconvenient, we can deal with that mob of “working-class, immigrant” carpenters, etc., as circumstances suggest. There seems to be a bit of light demagoguery at work in the original formulation. 1) The politicians and media abolished the working class in the ’90s (we’re all Middle Class now, if we have a pulse); so it is odd to see it resurrected here. 2) Someone from two states away is not an “immigrant” (here we have an appeal to libertarian sentimentality). All that aside, people doing useful work would probably be welcome, provided they aren’t too ambitious price-wise. And the two moments of voluntary price-formation (emergency and post-emergency) are not quite the same. Some of us, however, won’t hire them, because we retain our working-class skills, acquired before we tried to take up a life of pure abstraction.

    Finally, it might be nice for everything to be repaired as soon as possible, but shortening the recovery through jacked-up prices does not seem an absolute necessity, any more than shortening a war by using any-old criminal device you might invent is a necessity.

    I apologize if I sound rude, but I’ve heard the same arguments from economists for several decades. It was always hard to repeat them in good faith, and now I don’t see the need. Why so many libertarians do repeat them would make an interesting study.

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