pull down to refresh
154 sats \ 1 reply \ @kepford 10h \ on: What do you think of anti price gouging laws in times of crisis? Politics_And_Law
Anti price gouging laws do more harm but sound noble.
- They cause shortages as the natural price system that regulates supply based on demand is destroyed
- They destroy market forces for more suppliers to enter the market. Higher prices are a market signal for new entries into a market.
- They distort time preference. If costs spike and I need a good more than you and I can afford it I buy it and those that don't really have to have it now will wait for prices to come down.
Once you see the issues with "price gouging" you can't unsee them. One problem though is that in the case of housing the state already manipulates the market to such an extent that it makes it VERY hard for the market to correct the imbalances.
Start thinking and stop being emotional. Start being rational and think about the second and third order consequences of action.
I often say the biggest failure in fighting socialism/communism/marxism is the failure to attack price controls and understand the price system. It is an amazing thing to watch how millions of humans set the prices for goods spontaneously. People get all excited about AI doing things yet do not even understand how the world around them works.
Let me add an example.
Lets say there is a natural disaster in a region. Lumber is needed by those affected.
Lets assume a society of heartless greedy people and no charity. The stores raise their prices on lumber by double or triple. Joe Dirt who hasn't really suffered from the disaster planned to build a fence but since prices sky rocketed decides he should wait. Maybe he just can't afford the prices.
John Doe is affected and he needs lumber to prevent looters from getting into his house and stealing his valuables. While the price for this lumber is high it is worth the price to him. Since the prices are high the store hasn't run out of the lumber he needs. He fixes up his property and protects his valuables.
Now, Sam a lumber supplier 100 miles away hears about the price hikes. He thinks. Hmm, I can make some cash quick. I will drive over there and start selling. He undercuts the price of the local business and still makes a massive profit.
Now the local business owner is pissed off. He is getting no business so he lowers his prices and offers delivery, something this new market entrant isn't able to do.
Now you have competition driving the price back down.
Ok, lets look at what happens in a society filled with well meaning people that support price controls.
Joe Dirt is planning to build his fence and goes to the store and buys his lumber. Prices haven't really changed. Because of price controls there is no signal for people to postpone their spending on lumber.
John Doe goes to get his lumber to protect his house and finds that lumber is sold out. Others needed it and bought it all up. Now no one has lumber that wasn't fast enough to get to the store.
Sam, the lumber supplier sees what is going on but because it would cost him more money to move to this town there is little market incentive to move into the new market and add supply. He's not allowed to increase the price due to the laws.
Because there are well meaning people, some charities come in and help but this is only charity. The greedy capitalists have little incentive to enter the market.
Now, this might seem a bit contrived as an example I hope that helps. Incentives are key to how the world works. If you don't understand incentives you don't understand bitcoin. If you don't understand price controls I'd argue you don't understand bitcoin.
Price controls are a socialist idea. Price controls are very fiat. Fiat is a form of price control on money.
reply