{"items": [{"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315805971802642", "anchor": "fb-315805971802642", "service": "fb", "text": "I'm totally opposed to anti price-gouging laws; would ask lawmakers to vote against them; and would refuse to convict on them if I sat on a jury.", "timestamp": "1330447998"}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315806525135920", "anchor": "fb-315806525135920", "service": "fb", "text": "I do believe if a supplier incurs extra costs to increase supply during peak demand, they're permitted to pass these costs on legally, but it may not be worth the legal hassle.", "timestamp": "1330448066"}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315806965135876", "anchor": "fb-315806965135876", "service": "fb", "text": "If the gov't wants to fine any seller price gouging, then they should also fine any buyer who buys more than he needs in an emergency.", "timestamp": "1330448124"}, {"author": "Paul", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315809018469004", "anchor": "fb-315809018469004", "service": "fb", "text": "It's how supply and demand is supposed to operate, but it can seem unfair; as a descrimination in favor of the more affluent in a crisis situation. It can also seem callous and creepy, as in the price hikes for Whitney Houston albums as soon as she died.", "timestamp": "1330448395"}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315810295135543", "anchor": "fb-315810295135543", "service": "fb", "text": "It may seem creepy, but with no price response to increasing demand permitted, the affluent will just scoop up all the product.", "timestamp": "1330448565"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315831445133428", "anchor": "fb-315831445133428", "service": "fb", "text": "Personally I would be in favor of increasing the supply of Spark in the Dark dances beyond the two to three a year.", "timestamp": "1330451229"}, {"author": "Adam", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315832991799940", "anchor": "fb-315832991799940", "service": "fb", "text": "In reading your examples of pricing adjustments, it seems more like opportunistic pricing given market situations. There are two points that I'd like to make on this. With respect to oil companies, the cost of manufacture and transport of fuel is relatively fixed. As the price ascends, so do oil company profits, so the only logical assumption that one can make is that companies have decided that a percentage of each gallon is deemed as profit. For example, let's peg that at 25%. For each gallon at a dollar, that's $.25, at $4, the profit is a dollar, etc. So, while the production costs have remained relatively stable and predictable, (yes, they certainly do fluctuate, but it's simple to model any changes and factor than in to any price changes), the cost to the consumer rises. The kicker is when the oil companies make record profits, and it's also accompanied by tax breaks. For the most part, I don't care what the price is at the pump- I have to accept what is available and it's not worth getting bent out of shape about, but when companies make record profits off record prices and then don't pay a fair share of taxes or get enormous tax rebates- that sticks in my craw. Secondly, with respect to the definition of price gouging, I think of the blue tarps deployed during Katrina. These tarps are worthless BEFORE they are even unwrapped and yet contractors were charging as much as $5000 to install a $60 (worthless) tarp. To me, that's more like price gouging. Charging $2 for a bottle of water encourages conservation and it's a lot different than charging $30 for the same bottle.", "timestamp": "1330451427"}, {"author": "Jesse", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315842758465630", "anchor": "fb-315842758465630", "service": "fb", "text": "Neither free rein in pricing nor prohibition of price increases yields an optimal result. Scalping factors in too, buying low and instantly reselling high. To continue with the bottled water analogy:
- No price change means first-come-first-served, all will sell out (think Boston water crisis in May 2010). Best-informed and fastest-acting win. Scalping possible.
- Price increases make clean water less affordable for anyone living on a tight budget. Those with disposable income benefit, as do stores (same cost and higher price).
- Rationing at original price limits each purchaser to a certain quantity... which helps deter scalping and preserve supply. Hard to implement (because you can send multiple people in, or to different stores).
- More creative options might allow a certain % price increase contingent on the supplier actually using the additional profits to rush in additional water from another area. Diverting supply runs, taking stock from unaffected stores...", "timestamp": "1330452560"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315848778465028", "anchor": "fb-315848778465028", "service": "fb", "text": "Of course, one can decide that water is important and cheap and have a buffer (we always have extra water on hand, so we did not need to buy during that shortage).", "timestamp": "1330453269"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315858541797385", "anchor": "fb-315858541797385", "service": "fb", "text": "@Chloe, @Phillip: we have spark in the darks planned for 3/10 and 4/27 so far; the current plan is to do them maybe four times a year. In this case the question was what to do about a spark in the dark that's already planned and looks like it would easily exceed firecode capacity if we let it.", "timestamp": "1330454397"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315863988463507", "anchor": "fb-315863988463507", "service": "fb", "text": "@Jesse: all of these except price increases make it hard for people who can supply more at a high price (trucking in water from out of state, perhaps) to actually do so. (Well, except for your last one, but that sounds really hard to enforce. What if a company wants to pay a lot extra to drivers who will work on sunday or over night? Will that be within reasonable profits?)
The problem with the price increase is that both people with less need and people with less money get priced out. The former is good, but to fix the latter I think we should just give poor people more money: http://www.jefftk.com/news/2011-08-08.html", "timestamp": "1330455072"}, {"author": "Phillip", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315865001796739", "anchor": "fb-315865001796739", "service": "fb", "text": "@Jeff offline I would like to discuss a different venue for one in September if you would be willing (with much more capacity).", "timestamp": "1330455183"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315869895129583", "anchor": "fb-315869895129583", "service": "fb", "text": "@Phillip: sure; let me know!", "timestamp": "1330455727"}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330456484003", "service": "gp", "text": "Unfortunately, ability to pay doesn't always scale with need. When it comes to emergencies, those who have the least latitude to plan for contingencies are often the poorest. The rich have the option to drive to a different store, stockpile ahead of time, etc., while the poor may be constrained by buses or their feet and a smaller apartment with less storage. If I'm poor, I would rather line up early for water if I know I really need it, rather than get to the store and find I can't afford it, or discover that I have to choose water instead of two meals that week. Also keep in mind that, over short time frames, all supply curves are extremely inelastic -- there are only so many freight helicopters and only so much fuel for them, and a billion dollars won't build you a tanker truck in an hour.\n
\n
\nSold out shows also don't really play well with supply-demand curves. Good shows are often ticketed cheaply and sell out early, but this means that those who get to go are the biggest fans who follow the band most closely, not the fans with the most money. For a contra dance, you could imagine that the most dedicated participants would be the most likely to sign up early.\n
\n
\nLots of markets work better when lightly constrained, but I think you've picked on a few cases where an efficient market doesn't actually serve society's interests.", "timestamp": 1330456484}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1330456809053", "service": "gp", "text": "@Alex\n So because our goal is to distribute resources based on need, willingness to wait in lines can be a better proxy for that than willingness to pay high prices?", "timestamp": 1330456809}, {"author": "Jesse", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315888235127749", "anchor": "fb-315888235127749", "service": "fb", "text": "Jeff, original price or rationing do not make it hard to ship in additional supplies, they just don't make it easy. The company still makes some normal profit off sales, and benefits both in PR and secondary sales from keeping stock available during a crisis.
Raising the price makes shipping easy, but has no guarantee the company will incur those additional costs. They have the option of simply pocketing the profits and claiming nothing could be done.
Implementing the regulated price increase is fairly simple - tack it on to the price as an additional \"crisis supply fund\", direct those funds to a separate corporate account, and expenditures from that fund have to be justified for how it helps provide supply faster. Random audits or investigations into abuse keep them mostly honest. Any surplus remaining when crisis ends gets donated to either local or national crisis relief groups.
I'm intrigued by the guaranteed-minimum income approach, would need to give it more thought.", "timestamp": "1330457888"}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330458190928", "service": "gp", "text": "@Jeff Kaufman\n yeah, sort of. In the emergency scenario, I like to think of waiting in line more as a form of price discrimination: rich people's time (or more precisely, the time of those who earn more) is worth more money to society than poor people's time. So, a rich person will spend more money to avoid waiting in that line: by planning ahead (which takes time, opportunity costs, and resources), or by spending money in other ways (drive their car to the next town over to find water). The poor person has no other option -- so the good itself is more valuable to them in absolute terms -- but more importantly, their time is relatively cheap, so they will wait for hours if they have to.\n
\n
\nFor the event ticket, I think you're spot on: willingness to wait, or to go to ticketmaster and click reload repeatedly at 12:00 noon for tickets to be released, is a great proxy for interest in the event, one that's better than willingness to pay.", "timestamp": 1330458190}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315933661789873", "anchor": "fb-315933661789873", "service": "fb", "text": "@Chloe: always happy to hear about new possible venues!", "timestamp": "1330462757"}, {"author": "Karla", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315940955122477", "anchor": "fb-315940955122477", "service": "fb", "text": "I'm not sure how I feel about regulating this, but: The issue for me is encapsulated in your statement \"Wouldn't you rather go to the store and find that bottled water was available at a high price than that they were out?\" Your questions presumes that your audience can afford whatever the higher price is. There's an economic unfairness built in here. Waiting in line is equal-opportunity (or closer to it); ability to pay high prices is not.", "timestamp": "1330463601"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=315950658454840", "anchor": "fb-315950658454840", "service": "fb", "text": "@Karla: I'm not sure it presumes that: if I can't afford the high price (or am not willing to pay it) that's the same as if they're out, no? Though they do differ in what happens before they run out.", "timestamp": "1330464704"}, {"author": "Robert", "source_link": "https://plus.google.com/117732328885787456164", "anchor": "gp-1330466423666", "service": "gp", "text": "@Alex\n : Although a poor person's time may be \"cheap\", it's not necessarily at their disposal; the time they spend waiting on line may well be time that they would otherwise be working, so they're losing wages, or possibly risking losing their job.", "timestamp": 1330466423}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330467982039", "service": "gp", "text": "@Robert\n there's no question it would suck to risk losing your job, and it's worth recognizing that the poorest often have the most inflexible work arrangements. It's not clear that charging the emergency-market rate for the product makes things any better for them, though, since they still might not be able to afford it. In other words, that money is not necessarily at their disposal, either.\n
\n
\nRegarding losing wages, my point is exactly that their lost wages for missing a few hours won't be a huge sum. It would suck to lose three hours to waiting in line, but perhaps it would suck less than spending ten hours' worth of wages on the product.", "timestamp": 1330467982}, {"author": "b", "source_link": "https://plus.google.com/109680641548243670506", "anchor": "gp-1330472399267", "service": "gp", "text": "Jeff - how do you see the view you're articulating playing out in conversations about the possibility of relaxing net neutrality to allow various kinds of price discrimination? (I don't have a particular answer in mind here - I'm just curious to hear what you think.)", "timestamp": 1330472399}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1330483281107", "service": "gp", "text": "Some people presumably can't afford water at its base market price. I don't think the question is whether pricing can suddenly become unfair during an emergency, but whether market pricing is fair in general (or some other word if you don't like 'fair'). \n@Jeff Kaufman\n you mentioned this on Facebook, and I think I agree with it- if there is some kind of problem or unfairness in the pricing system, it would be better to give money to the poor so they can afford the water then to muck with the pricing structure.", "timestamp": 1330483281}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1330487192241", "service": "gp", "text": "@Alex\n As a matter of public policy, people should have to waste time sitting in lines to prove how much they want something? Man, that's dead-weight loss to the max. I also don't think you can manage the unintended consequences. The poor people in your narrative could just as easily be bored stay-at-home parents, or high-school kids whose neighbors paid them to do it, or organized scalpers.", "timestamp": 1330487192}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1330487691311", "service": "gp", "text": "Moreover, anti-price-gouging laws mean that no business bothers to build the capacity to deliver lots of product or service in the time of disaster. The capital investment required is useless most of the time, and at the rare moments it's useful, you can't cash in.", "timestamp": 1330487691}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1330487847845", "service": "gp", "text": "@David German\n Exactly, you don't muck with the pricing structure because you don't want to muck with the incentives. If you want to increase the relative purchasing power of a particular group, give them vouchers (not necessarily literally).", "timestamp": 1330487847}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330493039788", "service": "gp", "text": "Ahh, nothing's more fun than poking libertarian hornets' nests... :)\n
\n
\n@David German\n \n@Todd\n it doesn't matter that anti-price-gouging laws disincentivize building out capacity. The best case in my book is where the rich plan ahead because they can, while the poor get what they need when they must. Vouchers could do this, or perhaps even some sort of explicit price discrimination (only gouge the rich), but an emergency-responding market won't.", "timestamp": 1330493039}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330493145667", "service": "gp", "text": "For the record, I also sort of like \n@Jeff Kaufman\n's unconditional cash transfer scheme, and though I think it can't solve everything, what we have today is certainly worse.", "timestamp": 1330493145}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1330493364978", "service": "gp", "text": "@Alex\n \"the rich plan ahead because they can\"\n
\n
\nThat is enforced how?\n
\n
\n\"it doesn't matter that anti-price-gouging laws disincentivize building out capacity\"\n
\n
\nYou're certainly not going to get what you want if we don't have the capacity to meet demand during an emergency, even if you wouldn't get it anyway, for other reasons, if we did have the capacity.\n
\n
\nA cash transfer makes more sense than price restrictions, certainly. Which is not to say I necessarily think it would be effective.", "timestamp": 1330493364}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1330520383988", "service": "gp", "text": "@David German\n In places without pricing gouging laws, do we see that businesses do build high capacity for emergencies?", "timestamp": 1330520383}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=316275165089056", "anchor": "fb-316275165089056", "service": "fb", "text": "@Jesse: what if in advance of a crisis a company wants to build emergency capacity? They would keep their normal prices the same, with the plan that when an emergency came they would be able to have sufficient supply that with raised prices they could make back their capacity investment? This seems a hard match to your crisis supply fund: because they can't make a profit in a crisis over documented costs then when a crisis is smaller than they expected they lose money while when a crisis is larger they don't make enough to compensate. So I would expect companies not to build extra capacity for emergencies.", "timestamp": "1330521923"}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1330522118521", "service": "gp", "text": "@benjamin\n my default view tends to be kind of libertarian: I don't see why the owners of the communications lines shouldn't be able to charge for, prioritize, or otherwise choose what goes over their lines however they want. There's only so much bandwidth and if they want to allocate it by ability to pay that seems fine. If in practice this means more stupidity like charging less for voice than texting when the carrier's costs are the opposite, I don't know.", "timestamp": 1330522118}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1330525788702", "service": "gp", "text": "@Jeff Kaufman\n \nhttp://jcle.oxfordjournals.org/content/3/3/357.short\n looks relevant, although the full text is unfortunately paywalled.", "timestamp": 1330525788}, {"author": "David German", "source_link": "https://plus.google.com/111229345142780712481", "anchor": "gp-1330526087572", "service": "gp", "text": "We'd have a much better world if there were a way to do A/B experiments in economics.", "timestamp": 1330526087}, {"author": "Jesse", "source_link": "https://www.facebook.com/jefftk/posts/315803948469511?comment_id=316311221752117", "anchor": "fb-316311221752117", "service": "fb", "text": "Jeff, good question. As a business decision they will only invest in excess capacity if the expected return on investment exceeds that of their next best option. This will only be the case for predictable emergencies (Gulf Coast hurricanes, Tornado Alley), not sudden ones like the Boston water main breaking.
If they maintain documented costs for their emergency capacity, and only deploy it for emergencies, they enjoy the benefit of providing what people need (PR+secondary purchases) purchased at normal cost (may have additional costs to deploy).
Scale of the emergency determines size of their response. Any capacity they have built is durable (or why hold it) and any new costs (transport, overtime) are mostly known. Thus the company chooses how much to send to a given emergency site based on what it knows about the need/demand. Yes they will sometimes make mistakes, or multiple competing companies will overprovide supplies... that is business. They are not always guaranteed a profit, even for doing the right thing.
This is also a regulatory policy we're talking about, written down in some detail. First, allowance could be made for prior preparations - if documented dedicated emergency supplies, and response quick, keep a few percent of the markup as a bonus. Second, the crisis supply fund markup itself could be set based on expected shortfall on specific items (and might get adjusted during a crisis as needs become clear). This could help companies target their response to the items needed.", "timestamp": "1330526457"}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330527084214", "service": "gp", "text": "@Todd\n \"That is enforced how?\"\n
\n
\nIt's about incentives. If you make it tremendously expensive for the rich to wait until crisis, they will be much more likely to stockpile instead.\n
\n
\n\"You're certainly not going to get what you want if we don't have the capacity to meet demand during an emergency\"\n
\n
\nWhat I want is for at least some poor to be able to have access to the same necessity that the rich do: their ability to get it should not be determined based on whether they are poor or not. I recognize that this may mean that a smaller quantity of the necessity gets supplied \nduring the crisis\n -- because the other bit about getting those who are able to plan ahead, or go farther afield, means that people end up with as much or more of the necessity overall.", "timestamp": 1330527084}, {"author": "Jeff Kaufman", "source_link": "https://plus.google.com/103013777355236494008", "anchor": "gp-1330550309999", "service": "gp", "text": "@David German\n A search on the title gives: \nhttp://www.accf.org/media/dynamic/3/media_36.pdf", "timestamp": 1330550309}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1330559224357", "service": "gp", "text": "@Alex\n \"It's about incentives. If you make it tremendously expensive for the rich to wait until crisis, they will be much more likely to stockpile instead.\"\n
\n
\nThat's easy to say, but how do you set that up? That's what I mean by enforcement. Do you want to have people submit tax returns in order to buy water during an emergency, so that you can charge the rich more? Or have their tax bracket printed on their IDs like their age, so that it's like purchasing alcohol? I can't see anything like this being remotely feasible, but maybe you have an idea.", "timestamp": 1330559224}, {"author": "Alex", "source_link": "https://plus.google.com/100936518160252317727", "anchor": "gp-1330565496703", "service": "gp", "text": "@Todd\n It can be like food stamps -- an opt-in thing where you have to demonstrate hardship in order to get discounted or subsidized water. And while it would probably be infeasible to do this sort of thing in the US, they do manage to make traffic ticket fines slide with income in some Scandinavian countries, so it's not totally unimaginable.", "timestamp": 1330565496}, {"author": "Todd", "source_link": "https://plus.google.com/112947709146257842066", "anchor": "gp-1330566174667", "service": "gp", "text": "@Alex\n There's a lot more room for the bureaucratic overhead involved in income-adjustment when it comes to government fines. The government is already involved in the process of identifying the guilty party, contacting them, scheduling a court date, etc. Fines are a very different sort of transaction from purchasing water (or any other basic necessity).\n
\n
\nAs for food stamps, the idea of emergency food stamps on top of existing food stamps seems redundant. To the extent that food stamps are a useful solution to lack of purchasing power (I plead ignorance on this point), they should already be taking care of the problem. Timing-specific food stamps don't seem likely to make a significant difference over and above that.", "timestamp": 1330566174}]}