Thursday, September 07, 2006

NO SUCH THING AS PRICE GOUGING IN THE MARKETPLACE

If price gouging existed in the marketplace, then that means a business can force a person to pay for its goods or services. But setting a price never involves force, because the consumer always has the freedom not to buy. Price is never an ultimatum on the customer; it has always been an offer.

When we think about "price gouging", we think of monopoly prices like those for airline tickets offered by Hawaiian Airlines. Since no other airline exists then the people seem to have no choice but to pay HAL airfares. But that is still the wrong assumption because many people choose not to fly at current prices anyway. They just stay at home.

HAL understands this. There is limit to what people are willing to pay. This is called the law of demand. Raising the price any higher will reduce the current volume of traffic that now maximizes HAL profits. If HAL can supposedly gouge the consumer in the sense that they are using force to get their way, then the company wouldn't stop at a $1000 per ticket. They would increase fares to two or three thousands dollars if there were no limit to what consumers would pay.

It is with this same reasoning that environmentalists now demand that the government force gas prices up to $4 to $5 a gallon. You would think that gas station owners and Big Oil would join the environmental choir, but they choose not to. They understand that the current level of patronage relative to current costs of business maximize profits. Raising the price runs the risks of reducing their number of customers and thereby reducing their profits.

Perhaps they and the environmentalists realize that demand for gas is not as inelastic as presumed before. People start to conserve by running errands all in one trip, carpooling, buying smaller vehicles or taking other means of transportation. Prices to a point encourage people to conserve and buy less (what the environmentalists want), which translates to reduced profits (what businesses don't want).

In the end, price gouging doesn't exist for the simple fact that you and I have the right to our individual property. No one around says there should be a limit to the price we set for our own homes. You could "price gouge" your one bedroom house for a million dollars if you want to, but that doesn't mean someone is going to buy it. But what you think your property is worth is not only priceless; it's a fundamental and inalienable right.

However, there is only one real price gouger in the world. It is the government, which uses the political process to sanctify its thievery but calls it taxation and regulation instead.

It is with these logical conclusions that we should demand the Fono repeal the disastrous and unconstitutional price-gouging law. A better ASG policy would be to encourage high prices during an emergency as the best means of coordinating our limited resources and enticing entrepreneurs from abroad to assist us with a speedy recovery.

1 Comments:

At 1:51 AM , Blogger Stuart K. Hayashi said...

Hey Taliphone, I am very much impressed by your recent output! If the University of Hawaii's student newspaper published essays like your latest three posts, it would be a much better publication. :-)

At your request, I will now transform my mind into that of a socialist and play devil's advocate.

You say: "But setting a price never involves force, because the consumer always has the freedom not to buy. Price is never an ultimatum on the customer; it has always been an offer."

Your definitions of "force" and "freedom" are not only not necessarily my definitions of the term, but your definitions of those two words are not even consistent with that of mainstream American culture.

What do you mean "the consumer always has the freedom not to buy"? Does the consumer "always" have "the freedom not to buy" food?

No, you do not have that freedom. Your have no choice in having to buy food. What's the alternative to buying food? Starving? It would not be out of the mainstream to say that that is not freedom.

The laws of nature do force you to buy food; you are coerced.

Thus, if a famine struck the United States and grocery stores jacked up the price of food, consumers everywhere would be at their mercy. That would not be freedom.

You write that "...many people choose not to fly at current prices anyway. They just stay at home."

So . . . if American Samoans are being gouged by Hawaiian Airlines tickets, all you have to say to them is "just stay at home"?


"It is with this same reasoning that environmentalists now demand that the government force gas prices up to $4 to $5 a gallon."

Can you specifically name even ONE environmentalist who says that?

I know that pro-capitalist Stuart K. Hayashi says that any environmentalist wishing for Americans to reduce oil consumption should root for a long-term increase in petroleum prices, but I don't recall a specific incidence of hearing an official representative of the Sierra Club saying that.


You conclude, "However, there is only one real price gouger in the world. It is the government, which uses the political process to sanctify its thievery but calls it taxation and regulation instead."

What do you mean taxation is "price-gouging"? Taxation is the price the government charges you for the valuable services it renders. You, as a champion of commerce, should know that. And who are you to say that the government is overcharging?

If you have zero income, you pay zero income taxes. So people with no income are certainly not being overcharged by the IRS. And how can you say that Bill Gates is overcharged if he has to pay 40 percent of his income to the government? Even if you confiscated over 40 percent of his entire net worth, he would still have over a billion dollars left, which is more than he needs.

And how on Earth can you say that regulation is "price-gouging"? Aren't price controls the opposite of price-gouging?

Aren't rent controls the opposite of price-gouging? Rent control puts a limit to rent-gouging.

So that was my "devil's advocate" number. What say you?

Please note that those arguments are very tame compared to what can be said about you in the U.H. student newspaper.

 

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