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Black is White. Freedom is Slavery.

Price Gouging is Justice. Cheating the Desperate is the Will of God.

“Thus says the LORD: “For three transgressions of Israel, and for four, I will not revoke the punishment; because they sell the righteous for silver, and the needy for a pair of shoes– 7 they that trample the head of the poor into the dust of the earth, and turn aside the way of the afflicted.” Amos 2:6-7.

Fun fact: it turns out there are actually *four* sins that cry to heaven for vengeance.  One of them–sodomy–we hear a lot about.  We also hear about wilful murder when the victim is unborn (not so much when she is a Pakistani four year old).

But we almost never hear about the other two:

That stuff is typically relegated to the realm of “prudential judgement”, which (I am assured) is Latin for “feel free to ignore the Church if it seems to threaten your tribe’s views on economics”.  After that, we simply can dismiss it with a blithe assurance that ordination is not an economics degree and when the Church intrudes on the “science” of economics she is committing a silly Euroweenie overreach.  Bishops need to get back to telling liberals what they should do with their groins, not telling capitalists what they can’t do to the desperate.

  • Jeff

    I thin the argument for price gouging acting as a rationing effect can be made. Profiting on it may be immoral, but ratcheting up the price then donating that to charity might be sensible. It helps prevent hoarding.

    • ivan_the_mad

      I understand the concern about hoarding, but CotCC 2409 is clear. Price gouging is wrong, and, as is often repeated, let us not do evil that good may come of it. There are other mechanisms to prevent hoarding and to ensure as much as possible the equitable distribution of needed supplies.

      • Mark Shea

        The whole argument, “I have the right to commit the evil of price gouging because some guy I don’t know *might* hoard” is ridiculous on the face of it.

        • Jeff

          Mark,
          Is the price gouging itself evil or is it the profiteering from it?
          Would it be immoral to price gouge if the richest man in town walked in and tried to buy the store out of a particular item?
          These are honest questions I make in good faith, not snarky internet trolling.

          • ivan_the_mad

            Yes, the price gouging is itself evil and is by its nature profiteering from the hardships of others (CotCC 2409). You can refuse to sell to the richest man in town, or any man for that matter, any more than he needs.

  • Jared B.

    I read the entire “Price Gouging Saves Lives in a Hurricane” and much of it seems pretty sound to me. If it’s illegal for Shopowner to charge $15 for a bottle of water, but legal for Buyer to buy up ALL the $3 water bottles, thus preventing everyone in line behind him from buying any at all, then prohibitions on price gouging have not done anyone any justice. And yeah, might potentially cost lives. In situations of extreme scarcity & demand such as an emergency, buyers are just as capable of committing economic injustice as sellers are, but a mere ban on price gouging is a lopsided approach to protecting people against this. So David Brown is *at least* half right. I think that some happy medium could be reached with rationing in combination with or instead of price controls, but I’m no economist so I’m not going to try to guess what exactly that’d look like.

    • Nate

      This isn’t about finding an economic formula. It’s about the common good and virtue.
      Sellers: don’t overcharge.
      Buyers: don’t buy out everything.
      A buyer could simply make a sign that prevents a person from buying more than five waters (or some such thing) unless he could explain to the shopkeeper why he needs more (e.g., he has a big family).
      Could the buyer lie?
      Sure. But then he’d be a dick.

      We can’t create an economic policy that prevents people from beings dicks.

      Price gouging is a good way to explain the virtues of Catholic social thought and explain the folly of neo-liberal political economy. If we reduce people to input/output functional, mechanical units inside a calculus, and we assume that a certain material outcome (for x) is desired over others, we can justify amazing amounts of (what on face value *looks* like) vice–like price gouging.

      Like all atheistic materialist philosophies, economic philosophies that justify price gouging must make radical revisionist claims, and declare that what looks to be common sensically true is in fact not. So just as the atheist/materialist must say that the self, free will, mind, morality, etc., are all ‘illusions’ (http://www.amazon.com/Atheists-Guide-Reality-Enjoying-Illusions/dp/0393080234)
      the neo-liberal must deny that what common sense tells us is a total shitty thin to do (e.g., over-charging someone for a bag of ice when people most need ice) is in fact ‘good’.

      • Jamie R

        It depends on what point we’re looking at in the process. It’s immoral for the store owner to rip people off, and it’s immoral for the customer to hoard. I think most people, other than hard core Libertarians would agree with that.

        However, as a society with the rule of law, we also need a rule for price gouging and hoarding. If we’re talking about it at the level of “What should the legislature do prospectively about price-gouging in a disaster?”, (rather than “What should Bill do with the bottled water in his store?”) we should look for a rule that would most efficiently distribute bottled water.

        • Nate

          Positive law should reflect natural law. So there should be laws against things which are wicked. Price gouging is wicked, therefore price gouging should be illegal.

          The problem with positive law is that it cannot proscribe all instances of wickedness. While one might invoke ‘anti-hoarding’ laws, this might be an example of a small law that is needed because a big law has been rejected. But I’m not opposed to anti-hoarding laws.
          Regardless, a shopkeeper could hang a sign.

          That’s what’s being done here in my New York City neighborhood. Virtuous citizens have honored the signs posted. Virtue isn’t an impossible ideal. My fellow neighbors here in NYC are showing this.

          • http://chicagoboyz.net TMLutas

            So how much extra should a shop owner be entitled to charge for his extra supply expenses? Do you know what’s the level of price rise that crosses over to gouging? Do you realize how often this gouging story line plays out and how often people get investigated for this without a finding of gouging?

      • http://chicagoboyz.net TMLutas

        Unless you’ve got a magic pricing wand, nobody really knows how to set prices right after a major shock to the physical environment. You’ve got to do a rare thing in an established free market, start from scratch and largely guess. The process of starting from scratch is essentially naming a high price and getting cursed or laughed at and haggling to completion of the bargain. Repeat until you have enough information to figure out what the right price is and then go back to fixed prices. But in a hurricane, you’ve got customers stacked deep and without a lot of patience. You could do an auction to get everybody’s input but that could turn into a violent mob scene very fast. And if you’re a local store manager in a chain, changing how things are sold is a quick way to get fired.

        Prices are emergent phenomena in capitalism. Re-establishing them is a proces no less complicated than getting the utilities back up.

    • Claire

      Retailers are always free to limit quantities. That would solve the potential problem of hoarders buying up necessary supplies. Keep prices for emergency supplies at their usual level, but limit quantities purchased.

  • SoCalGuy

    Probably not articulating this fully – but Church teaching on economics assumes the following: A Christian person acting in an economic capacity is expected to remain and act like a Christian. This leads to a well-ordered society because one can both profit from business dealings and at the same time, be a good, responsible actor towards ones fellow man, and still make a buck in the process.

    Unfortunately, America and the modern economic world has bifurcated into two camps: “It’s business so anything goes” or “Mankind is evil so the state needs to regulate business since folks are going to rip off the lowly.” Unfortunately, people have vindicated both arguments so here we are.

    • Nate

      SoCalGuy,
      Exactly. You articulate it well.
      Reading the von Mises Institute article from the link would lead you to believe that people aren’t capable of being virtuous–indeed, we aren’t capable of being irreducibly human!–but that we mere self-interested automatons, reducible to mechanical drives.
      It’s atheistic to the core.

      • Marthe Lépine

        Is not that very much like Ayn Rand’s “philosophy”? As well, are not some Protestant groups that teach exactly that humans are basically corrupt? I am asking because at the moment these are only my “impressions” and I have some pressing work to do that prevents me from taking the time to look it up. But it would probably be very informative to many people here if someone else had the time to answer my questions. And thanks, in advance, for doing it.

      • Marthe Lépine

        On the other hand, I remember reading in some other “far right” Catholic blogs that Mises and other economists from the Austrian school are actually Catholic…

  • Jamie R

    On the other hand, the store owner is going to lose a lot of profits due to not getting his inventory restored, and supply costs going up, and raising prices discourages hoarding. If the store owner doesn’t raise prices, he or she might not be able to support him- or herself, his or her family, the employees, and the employees’ families. If prices aren’t raised, the first customer has less reason not to hoard. I don’t think Catholic social teaching requires the store owner to starve his family or entitles the first customer to hoard.

    I wouldn’t go as far as the guy you linked, but necessary price increases and rationing are morally justifiable; avaricious gouging isn’t. The legal system is ill equipped to draw that line.

    • Nate

      “I don’t think Catholic social teaching requires the store owner to starve his family or entitles the first customer to hoard.”

      The mind boggles.

      • Jamie R

        Sorry, perhaps I was opaque. Catholic social teaching of course doesn’t require the store owner to starve his family, and of course the first customer isn’t entitled to hoard.

        • Nate

          Catholic moral teaching doesn’t not require one to move one’s family into harm’s way. For example, there is no requirement on the part of a Catholic educator to move his family to a danger inner city neighborhood to teach under privileged kids.

          But this isn’t an example of moving into harm’s way. It is instead an example of having to *choose wickedness* in order to avoid harm. We cannot choose wickedness if this brings safety, etc.

          • Nate

            Sorry–I wrote “doesn’t not…”
            I meant doesn’t.

            A single negative. Not a double. Heh.

          • Jamie R

            What wickedness are we talking about here? Raising your prices when your expenses go up isn’t wickedness. It’s business. Of course, there’s a line between that and gouging / highway robbery, but raising your prices to meet your expenses is morally just. In fact, not raising your prices to meet expenses might be morally unjust, if you have a family or employees you’re taking care of. If the bottled water truck isn’t bring Bill more bottled water, I don’t know how it’s wicked for him to raise prices, reasonably, in proportion to increased expenses in order to support his family and employees.

            • Ted Seeber

              Raising your prices to meet your expenses IS morally just, but that isn’t what price gouging is. Price gouging is raising your prices to exceed your expenses many times over because you have an artificial scarcity.

              We’re not talking “proportional to increased expenses” here. We’re talking about an outright 500% increase in prices because a disaster happened.

              • TMLutas

                Please share the economic formula you use to judge how much to raise prices when you do not have a phone, electricity, or any knowledge of how your supply chain is functioning. I want to watch how you actually justify that 500% is price gouging with something more than bluster and outrage. You are the one accusing so it is your burden to prove.

                • Ted Seeber

                  I don’t justify price gouging at all. And neither do the price gougers. It’s about PROFIT, not morality. It’s about getting whatever you can for what you’ve got, simply because you’ve got it and can make a profit off of it.

                  • http://chicagoboyz.net TMLutas

                    When you make accusations and are indifferent to the truth of them, that is bearing false witness. Actual Catholicism is not economically illiterate and not hostile to the concept that prices are emergent. You seem to be uninterested in exploring that sort of Catholicism, preferring to call names without accountability.

                    Sad.

            • Nate

              Hi Jamie,
              Good points!
              Though–whether there is nothing morally wrong with raising prices very high on necessary items (e.g., water) even when this is merely to make up for increased expenses–I don’t think this is cut and dry. Even here, we should make sure that those who cannot afford such necessities are able to get them, even if this means that you as the vendor (and your family) personally suffer. Perhaps this shows the moral wisdom of those restaurants (there are a couple of Jewish-run ones in my neighborhood) that tell customers to pay what they feel like. It is the expectation among those in the Jewish community that those who have more will pay more, and those who have less will not have to pay as much.
              This sort of communal arrangement, with its assumption of the common good and personal virtue, doesn’t work well (or at all) in our atheistic, atomically individualistic society (the same one that the von Mises Institute counts on to make all of their draconian economic theories).
              You cannot legislate a ‘pay what you think is just’ policy among those who do not see themselves as part of a religious/moral community.

              Or–your could, but it would require many small laws, since a big one is no longer operating.

              Regardless, one cannot raise prices to prevent hoarding. This turns our moral decision making into a series of hypotheses.

              Cheers,

              Nate

              • Jamie R

                Again, if the buyer and seller are both saints, then we don’t even need to set prices at all. Let’s just sing kumbaya by the campfire. After all, the loaves and the fishes wasn’t an actual miracle, it was just about what happens when people share.

                However, Catholic teaching acknowledges we live in a postlapsarian world. Economics is about how to efficiently allocate scarce postlapsarian resources. The theological virtue of hope doesn’t require you to be a pollyanna. The loaves and fishes, despite the ravings of some priests, was a miracle demonstrating the abundance of the coming kingdom of God, and not a demonstration of what happens when everyone shares.

                If there was enough for everyone to just have whatever they wanted, you wouldn’t need prices at all. That’s not the case. In an emergency, people need what they need. If a buyer’s willing to pay $10/bottle for water, and the seller’s not permitted to price to the market demand, the buyer WILL hoard. That’s going to happen. If you legislate against raising prices, without banning hoarding, you’re going to get hoarding.

                If the seller incorporates extra costs by opening during / immediately after an emergency, and he can’t raise prices, he’s just not gonna open the store open. No one’s going to use their resources in order to waste their resources. If I’m a seller, and my choice is between selling water at a loss, or staying home and hoarding that water for myself, I’m going to stay at home. Legislating against price gouging will create disincentives against selling goods at any price.

                An even stronger moral argument could be made. I’m not an idiot or a small child. Following a natural disaster, there’s a good chance that supplies (food, clean water, etc.) will be hard to come by. If I choose not to evacuate, I know that the cost of goods is going to go up. If I walk into a store, and water is $10 instead of $1, I’m not gonna be shocked, on account of not being an idiot. By not evacuating, I CHOSE to pay more for goods. The risk of not being able to get supplies is something I took or should have taken into account when I decided not to evacuate. If sellers can’t raise their prices to meet increased costs and lost profits, then buyers are going to have less disincentive to not evacuate the storm. Encouraging people to ride out the storm encourages people to suffer in the storm. It encourages people to stay in disaster areas, exacerbating the shortage, driving prices further up for people who are stuck. The common good is better served by rising prices than by effectively subsidizing non-evacuees.

          • Ted Seeber

            Why “having to”?
            Wouldn’t a limit of “one per customer” avoid the hoarding just as much as raising the price would?

            This is why good Catholics should not take economic advice from atheists.

          • Marthe Lépine

            Besides, would a sense of Christian charity allow the store owner to raise his prices in order to protect his family first? Instead, would it not be the really Christian thing to do to show solidarity with his neighbours by not necessarily putting his family first when everybody is in the same “boat”?

          • http://chicagoboyz.net TMLutas

            Not all price increases are wicked. Conditions post hurricane are drastically different, and worse, than pre-storm. You would expect a sudden change in the just price of something if there is a sudden change in conditions. So what is the just method of calculating that?

  • Jeff

    An admonishment for citizens to avoid hoarding would be the other side of the coin needed if price controls are established.

    • merkn

      What should such an admonisment say?

      • Ted Seeber

        The same as my local Fry’s ad does “One per customer at this price”.

        • merkn

          Is that a policy arrived at by the storeowner of his own free choice or a law imposed by some authority? If the storeowner sees someone in need who needs more than 1 can he give 2 0r 10? Could he limit others to 1 at the original price but ofer more than 1 at $5 dollars per each extra. His intention with the windfall on the extra is to make a charitable donation to those that can’t afford even the $1 price. Couldn’t we just let each storeowner use his own judgment to charge what he wants and trust that if he is a good Catholic, he will act in accordance with the teachings of the Church?

          • Ted Seeber

            If there is no communication with the outside world, why should there be any outside authority?

            Having said that, the original justification for price gouging was to *PREVENT* the guy who needs more than one, from obtaining it because it’s too expensive. Why are you going back on that argument now?

          • Ted Seeber

            Also, if you’re price gouging, then isn’t it obvious you aren’t a good Catholic?

  • ivan_the_mad

    As is usual with that group, solidarity goes out the window.

    • TMLutas

      Solidarity does not mean you preclude price rationing. Solidarity means you share at whatever the price when there is real need and a lack of purchasing power.

  • Josh

    As a vendor, selling bottles of water that cost you $1 to needy people for $10, would be price gouging, definitely. But what happens after you sell for $1.25 your entire stock of water bottles with a $1 wholesale price, and can only acquire additional stock for $9 (from people willing to incur the $8.50 fuel and labor costs associated with relocating water from far away to the area where it’s needed)? Do you pay $9 for that water, and sell it at a loss for $1.25? Do you not buy that stock of water, and refuse to participate in the supply chain to the needy region? Do you accuse the vendor of price gouging for charging $9 to you, even though he spent $8.50 in acquiring and urgently transporting the water?

    • Ted Seeber

      Or do you sell that stock at $1.25 with a “one bottle per customer” limit, then contract on credit for the $9/bottle water and raise the price to $9.25 with a “one bottle per customer limit” with a clause in the contract stating that unsold bottles will be returned to the manufacturer?

    • http://coalitionforclarity.blogspot.com/ Robert King

      This is a different situation: when the cost of a resource rises, the price naturally rises with it. The problem comes when the price is disconnected from the cost.

      Moreover, there are times, such as a community-wide emergency, where the cost is not the primary factor in distributing goods. Those who cannot afford $9 bottles of water still need water to live, and still have a right to water, simply because their dignity as a human person requires it. Anyone who denies available water to someone dying of thirst is guilty of theft and perhaps even of murder.

      But what if the dying person can’t pay for it?

      Repeat after me: Universal Destination of Goods.

      Our rights of ownership are not absolute. In fact, the very reason individuals have rights of ownership is because each of us individually bears responsibility for the common good. Any other foundation of economics leads directly to the mortal sin of avarice, which is the golden gate of hell.

      • http://chicagoboyz.net TMLutas

        Historically, the vast majority of gouging investigations conclude that the price was not disconnected from the cost. Given that history, it would be normal to conclude that the same thing holds true this time and that the prices are justified. And if you think this is going to happen, I hear the Brooklyn bridge is up for sale. I can get you in on the investment group for a great price…

        Here’s the funny thing, You can last a couple of days without water. The only reason that people are without water days later after a hurricane is that price gouging is disallowed. If you can sell water for $10 a bottle, even your lazy cousin Jethro will hit the Costco in Illinois and truck water in to Staten Island before a question of life comes into play. Your lazy cousin Jethro is, in economic terms, a very non-traditional supplier. $2/bottle water in a city that usually charges $1.50/bottle is not going to get him away from the Xbox. $10/bottle water is and will provoke an amazing transformation as visions of the big payday dance in his head.

        So where do you want your lazy cousin Jethro to be? On the couch in Normal, IL or driving a rented truck with a load full of bottled water with his gaming buddy riding shotgun and chainsaw duty? How does the Universal Destination of Goods play into his decision to get into this very temporary business or not?

  • Ted Seeber

    VonMises was an atheist. Good Catholics don’t take economic advice from atheists.

    • Mark Shea

      Sure they do. They just shouldn’t take it when the advice obviously trumps the teaching of the Church.

      • Ted Seeber

        The teaching of the Church in Rerum Novarum should be all the economic advice any small business owner needs. I know it’s all the advice my wife and I need to run her daycare.

      • Ted Seeber

        And BTW, a few years ago when the “big blizard” came through and dumped 6″of snow and it took me 4 hours just to get home, I found kids in the daycare that, when they were finally picked up, we did NOT charge the standard late fees for.

        We have those standard late fees in the contract for exactly this sort of situation- because despite posted 7am-6pm hours on the daycare, we were routinely having parents pick their kids up at 8 or 9 pm at night. 12 hours is far too long to leave your 3 year old in a daycare.

        We do have parents that we have a standard agreement with that if they call, we waive the late fee.

        Not to do so would be price gouging indeed- often from parents that can barely afford to work to begin with.

        • Nate

          Ted,
          Some really great examples here. Nice.
          Of course, both the liberal and neo-liberal will say: ‘But what you are doing isn’t FAIR You charge some people but you don’t charge others? Who made you judge?! You have to use a FORMULA!’
          But justice, as Leo VIII points out is about giving people their due and what is good for someone’s immortal soul.
          It’s not about fairness or a formula.

          • Imrahil

            Yes, justice is about fairness. If anything else were the case, either the concept of fairness or the concept of justice is problematic.

            No, fairness is not about a formula.

            No liberal that deserves the name, neo or otherwise (I’m here of course using the European usage of the word “liberal” which is about the contrary of the English one), would besides deny a man the liberty to waive what would be due to him… nor does Our Lord, viz. in the parable of the workers in the vinyard.

      • http://chicagoboyz.net TMLutas

        The question is whether this advice actually is attempting to trump that of the Church. That’s to be proven, not assumed. Price gouging, especially after the decades long history of after the fact justification for price rises post-disaster, is an accusation where the usual rules of innocent until proven guilty should apply.

    • Jamie R

      Aristotle was a pagan. Good Catholics don’t take philosophical advice from pagans.

      • merkn

        This is sarcasm, right?

        • Jamie R

          It was sarcasm. An atheist economist’s economics should be judged as economics, just like a pagan’s philosophy should be judged as a philosophy. The Von Mises comment above was not a sound statement of how Catholics should approach non-Catholic thinkers.

      • http://hezekiahgarrett.wordpress.com Hezekiah Garrett

        Aye, but he was a monotheistic pagan, due to his philosophical inquiry. Some people, sheesh…

  • http://coalitionforclarity.blogspot.com/ Robert King

    Here’s where the problem lies:

    If we expect customers to be able to get what they need in an emergency, when demand zooms vendors must be allowed and encouraged to increase their prices. Supplies are then more likely to be sustained, and the people who most urgently need a particular good will more likely be able to get it. That is especially important during an emergency. Price gouging saves lives.

    1) Supplies will NOT be more likely to be sustained by raising prices in an emergency, because the prices are not the cause of the limit on supply. The break-down in supply chain is the cause of the limit on supply. No amount of raising prices will increase (or even stabilize) the supply because the problem is not with prices.

    2) Those who more urgently need a resource are NOT more likely to get it when prices are raised, because raising prices has nothing to do with the urgency of someone’s need. It only regards tradable resources. How much cash I have is not in any way connected to how much I need a particular resource.

    Moreover, in an emergency, everybody’s needs are elevated beyond normal. Everyone’s needs are urgent to the point of life and death. This leads to the third problem:

    3) The article assumes that money retains a fixed value. Now,in an emergency, money practically loses all value because it is not a commodity that can preserve life and health. Cash is, on the micro level, worthless. Debt is of small account compared to survival. Sure, on a global level, the dollar has not been significantly devalued – but that global value is not what applies practically in the places struck by the hurricane.

    4) Finally, as others have pointed out, the article assumes that economics is a science independent of all others, rather than a science at the service of justice and the common good. A market is one tool for economic prosperity, and in normal circumstances it seems to work admirably well. But an emergency is (by definition) not a normal circumstance. Other tools are needed, such as rationing and redistribution and uncompensated labor and so on – tools that we normally associate with charity or with socialism, but which become simple duties of justice in extreme circumstances like a hurricane.

    • Marthe Lépine

      Robert, that is a very good summary.

    • SecretAgentMan

      I disagree.

      1). You’re looking at the wrong end of the problem. Limits in supply are imposed by the costs of supplying. A business that can spend $20,000 to provide 100 units of Brand X per month at $250.00 each and still clear a $5,000 profit will do so, and will continue to do so, providing 100 units of Brand X per month at that price until demand drops. The same business, however, may have to spend $60,000 to provide 200 units of Brand X per month at $250.00 each, incurring a $10,000 loss each week, for the same reason FedEx charges you more for guaranteed next-morning delivery than it does for guaranteed next-day delivery. The business will not do so, because it will lose money.
      This applies not only to the end-supplier (retailer) who sells direct to the consumer. It also applies to the intermediate-supplier (wholesaler) who sells to the retailers, and the first supplier (producer) who sells to wholesalers. Not all price increases serve the purpose of allowing each such supplier to bid for resources when demand for suddenly increases, raising the costs to obtain and deliver the item. But some price increases serve that need. Similarly, not all laws that attempt to suppress prices increases are unjust, but some of them are, because they impose unreimbursed costs of increased supply onto suppliers, effectively *taxing* suppliers who try to respond to a disaster. Sure, this phenomenon can be used as a cloak for evil, and it is difficult to accurately gauge and justify the needed increases. But that doesn’t change reality itself.
      What is the best available way to realistically check “unecessary” or “illegitimate” price increases? It’s competition, not state intervention. Charlie may deeply want to charge $30 for a hammer in an emergency because he’ll get $29 in profit. But that’s just an incentive for Beth to charge $29 for the hammer because she’ll get $28 instead of Charlie. And so on. Beth, Charlie, and all the other suppliers will closely watch their own costs and the community’s resources and quickly find the lowest price at which they can still be paid and supply what the community needs. Politicians, on the other hand, closely watch their own news coverage and quickly find the best line of bullsh*t that sells with the largest number of people. I’d stake my family’s ability to survive on Beth and Charlie over Chris Christie any day of the week.

      2) As noted, legitimate increases to business’s supply-cost-reimbursement needs will allow the business to supply what is needed. It just can’t be argued that this phenomenon will not result in more needs being satisfied. Look, suppose we immediately gave every single Sandy victim $1,000,000 to pay for emergency needs. You’re arguing that this would not affect the supply of resources at all because it does nothing to lessen the “urgency” of each victim’s needs. Nothing works that way, because God created a world with physical limits. One doctor can’t cure 5,000 trauma victims in a day simply because their needs are urgent. Demanding that the doctor “work harder” and “be more like Christ” is a useless, perhaps worse than useless, contribution to the problem.

      3) I think the article is saying that money has a commodity value, i.e., it’s worth what people think they can use it for. Saying that this value disappears in an emergency is incorrect. Money doesn’t lose its commodity value in an emergency. Its present and future utility is re-judged according to new priorities. I might have been saving for a new car, but now that my roof’s been torn off I find that the money should pay for the roof instead. My money may have “lost all value” in terms of what I was saving it for, but that’s not the same thing as saying money ceases to exist in an emergency.

      4) Like all sciences, economics will tell you how things work. Biochemists will say that we can’t cure cancer simply by demanding that it be cured in the name of justice and the common good, but that doesn’t make biochemists evil people who hate God. A surgeon will say that he or she can’t operate for 178 hours straight no matter how urgent the cases are; call for laws “redistributing” the surgeon’s sleep by deferring it for a month will not produce more health care.

      • http://chicagoboyz.net TMLutas

        Bravo. I believe that there’s been academic research done on how fast prices drop when you allow the market to find its own level. In a very well developed market economy like the US’, the time to adjust down is very little.

  • Tim in Cleveland

    I think we can all agree that price gouging is better than eye gouging.

    • ivan_the_mad

      Your optimism is endearing, Tim.

  • Imrahil

    True is that we hear a lot, etc.

    We do not hear that oppression or defrauding are in the realm of prudential judgment. When somebody goes along and say “hey! let’s oppress!”, then he is rejected by the Church, rejected also by any sound Conservatism (perhaps not by Ayn Rand, though). If somebody says “hey! let’s defraud!”, then the same; and that is even a clearer issue since the characterizing sort of defrauding seems to be not paying what has been agreed in contract to pay.

    True is that we do hear that much of economics is within the real of prudential judgment. But the reason for this is that it is the case.

    Personally, I’d say that whoever does not intend to oppress does not break just law is no oppressor. Personally I’d say that whoever says and means that the welfare of the poor is simply not his business is no oppressor (which does not say he fulfilled all moral obligations), while someone who means (though generally does not say) that the welfare of the poor is his business in a negative sense, viz. that he holds it down to prevent their getting more power, or to make more profit *by in the strict sense means of* their destitution (as opposed to having success they do not have), or from sheer malice, would be an oppressor.

    How shall our just law look like? That’s, putting aside the clear forms of defraudung and what I called “intention to oppress”, a difficult and, yes, prudential matter, especially if such things just price, just wage, the distinction of capital (=means of production, which may breed an interest) and money plain and simple (which must not breed an usury), etc. are concerned.

    We sometimes hear in the Church (as said, e. g., C. S. Lewis, who was Anglican of course) that this is the vocation of the laity. Maybe. But if the laity does not do it then the clergy must jump into, as it in the past did jump into (in theory, I have, e. g., the works of Fr Messner in mind). These topics have a proximate connection with moral theology; and they are very important for everyday life.

    • Imrahil

      who does not intend to oppress and does not break just law.

    • http://chicagoboyz.net TMLutas

      In a natural disaster, you have a bunch of people who are drafted in to working at unaccustomed tasks because the job has gotten bigger or the normal people doing the job are unavailable. The whole idea of a free market is that nobody knows what a just price is straight off the bat. All you can determine is the market clearing price where the sellers and buyers are able to come to an agreement the is, on net, the best possible. The more information available, the better the calculations will be and the more reliable the pricing will be. Among other things, hurricanes create holes in our information systems at the same time they are creating new realities in our physical landscape.

      You might be bargaining to sell your stock and think you have more in that warehouse you rent 5 miles down the road. But that warehouse is gone, and so is your backup stock and you don’t know it yet. Or your stock might be fine and the phones are just down and you can’t get in touch with anybody. So what is the just effect on prices, right then before you can resolve the question, when you have customers sufficient to buy out your entire stock on hand twice over lined up at the front door? You answer one way and you’ve pocketed a nice profit or you’re just getting by given your own losses. You answer another way and you’re just getting buy, or you’ve disastrously underpriced and you will have to take the difference out of your own kids’ college funds.

      Prudentially, you price high. Congratulations, you’re a gouger in the eyes of Gov. Christie and Gov. Cuomo. I hope you put aside enough for a legal defense fund.

      • Marthe Lépine

        “Prudentially, you price high.” Sure… But in the case of an emergency, and where there is great need, “prudentially” in the sense of the world may not be what is expected of Christians. What ever happened to being helpful and generous while relying on Providence? Things like having to “take the difference out of your own kids’ college funds” have much less value than helping your neighbour in a time a crisis. Beides, maybe your own kids will not even survive that crisis long enough to make it to college… You have to trust the Lord to protect the lives of your loved ones, first, and to think of helping others around you who are in great need because of the storm.

        • http://chicagoboyz.net TMLutas

          Price high and judge. When somebody’s too poor, take them aside and give it for free on condition that they keep their mouth shut and enforce that.

          Nobody is saying that charity goes by the boards in an emergency. It’s more necessary than ever when things are tough.

          What this battle is concerns whether we suspend the regular rules of the market that high prices lead to supply increases and enter socialism land where high prices are just injustice and empty shelves are the fault of hoarders and economic saboteurs.

      • Ted Seeber

        Thus, equally Prudentially- you price low. Take that hit. That’s what insurance is for.

        • http://chicagoboyz.net TMLutas

          Insurance won’t give you the money in time to restock which is likely to involve a large wad of cash with one non-traditional supplier after another because your regular guys are dead, evacuated, have their infrastructure fouled up, or are diverting some of their goods to emergencies and don’t have your normal quantities available while you need *more* than your normal quantities.

          Cash flow is king in an emergency. None of these temporary suppliers are going to survive after things settle down. They have courage and initiative but don’t have the ability to consistently shave the $0.001 on a deal that is the difference between making it and going broke in the supply chain business. But they get pulled in specifically because there’s big money to be made if you have the stuff now, not later.

          It is not prudence to run out of goods and leave your customers in a lurch.

  • Alexander Anderson

    Yeah, this problem can be easily solved just by limiting how many things people can buy in your store. No invisible hand needed for that.

  • http://chicagoboyz.net TMLutas

    This is, yet again, a sad commentary on the economic education of too many Catholics. First you have to define the problem.

    Prior to the storm, an unexpected wave of demand comes in and clears out a lot of shelves. This is the first abnormal economic condition. It’s kicking in a day or three prior to the storm hitting. Everybody’s gambling here. If you overstock in prospect of the storm hitting and it doesn’t (these storms are fickle), you lose a lot of money and may go entirely broke. You can count on your normal supply runs a bit but everybody is already leaning on their suppliers to send them some extra because of this abnormal pre-storm demand. Whatever slack is in the system is already pre-committed to make up for this abnormal change in demand.

    The storm hits and several bad effects happen to supply. First, local retailers, warehouses, distribution points are simply consumed by the disaster, increasing both the supply deficit directly and reducing the robustness of the distribution chain. Second, the transportation grid takes a beating, increasing the chances that supply trucks simply can’t reach you. Third, law and order breaks down so the security risk of sending a truck into an area spikes. Fourth, the trucks have to not only get to the destination but also have to get out and there’s no guarantee that they can gas up as they are accustomed to or get normal maintenance if they are scheduled for it while inside the affected zone. This means trucks don’t get to carry their full loads because they may just be carrying supplies to ensure they can get back home for their next run.

    All four of these effects would have the normal response of increasing charges for resupply and thus increasing prices for whatever is left in stock to be sold to pay for the next round. But then there is the fifth and sixth negative factor. Fifth is that there are politicians looking for a scapegoat and they’ve got their eye on you. That’s a political risk that is normally not present in US society but *is* present in post hurricane US politics. This also increases the price that people should be charging because they have to set aside some money for legal defense. The sixth is that depending on how much all the other factors justly add to the price of whatever the merchant is selling he will be viewed by the public as a gouger and that will reduce his good will value of his business. And for that last bit, this is the collective fault of everybody on the anti-gouging crusade including every single person taking that position on this forum.

    So we have 6 different sources of increased prices in post-hurricane zones. None of this is particularly aligned to any political or economic theory. This is all standard analysis. So what is to be done in christian justice?

    On the supply side, non-traditional suppliers are not the cheapest suppliers in the best of circumstances. If they were cheap, they would be traditional suppliers. But the traditional guys are either fully booked or knocked out of service themselves. So you have people who are not necessarily adept at calculating fine profit margins but anybody can calculate buy ice for $1 here and delver it for $3 there. So how do you convince the non-traditional suppliers to come out of the woodwork? The economic answer is to increase the incentives that these non-traditional suppliers get. Mostly that translates into money but you could hold them in high esteem and honor instead of wringing your hands and trying to figure out the proper jail terms and fines for their efforts. Oops, I guess we’re left with money.

    So who’s qualified to make pricing decisions? Why are alternate systems somehow lousy compared to the market in normal times but better in natural disasters? Nobody seems to want to be bothered to actually prove that. They just don’t like the prices and strike out against market prices because it’s a nasty shock to find out what things cost when our finely honed economic machine is not present to make things cheap.

    • Ted Seeber

      All six of those issues can be solved by accepting Just Price and Fair Wage pricing instead of Supply-Demand pricing. And insisting on the same from your entire supply chain, whether there is a hurricane or not.

      • http://chicagoboyz.net TMLutas

        And when your supplier says good luck and breaks your supply contract claiming act of God, you can take your “Just Price” and “Fair Wage” and with $5 get a cup of coffee because your shelves will be empty.

        Supply and demand, over time, provide low prices. In disruptive circumstances, the provide powerful incentives to mobilize new suppliers to enter the market in a shorter time than any other system that has been discovered. Your solution is a recipe for extending misery unnecessarily.

  • Marthe Lépine

    Thinking about non-traditional suppliers: Could it also be that some people could get the idea that it would be a work of mercy to go and get additional quantities of water (for example) just because there is an additional need following the storm, but without factoring in any of the additional costs, or the additional profit that could be made, e.g. bring in additional supplies and just re-sell them at cost? Or even at a price lower than cost if there is an urgent need (for example a life and death situation)?
    In Eastern Canada about 12 years ago we had such an emergency situation with our “Ice storm”. Freezing rain fell in such quantities and for so many hours that infrastructure such as power lines began failing. Well, I have heard of people who had little religious instruction if any and had sexual relationships outside of what we consider moral, but, guess what? They did not need to spend time discussing cost and profit matters. The live-in boyfriend of a friend of mine had a good job and could afford to just go and purchase an electric generator. When power was restored in his area, he would not have considered for one minute making a profit on that generator; he passed it on to a colleague who needed it and only asked to be reimbursed for the original purchase price. And that generator went from family to family. Without any thought about it and any discussion of economics, it was obviously immoral to any of those people to make money on the generator, although their neighbours’ needs were so big that they could have gotten away with it.
    And it never occurred to me to charge room and board to the colleague and his wife who moved with me for a month because my small town never lost power (since it produced most of it) and they could not afford to lose 3 or 4 weeks of income because there was no electricity in their area. And I also heard of dairy farmers who were making the rounds of the farms in their areas, practically 24/7, carrying their generators with them, in order to allow their neighbours to continue to milk their cows, and none of them ever asked for payment. It was just a matter of solidarity.
    Maybe all kind of economic arguments can be used to increase prices, profits, etc. in cases of emergencies. But I think that reducing all of life to a matter of buying and selling, of market “laws” and of profits, is in itself contrary to living a Christian life.
    BTW, I am an economist too.

    • http://chicagoboyz.net TMLutas

      I don’t think anybody has an objection to charity or solidarity. What’s the problem is when you depend on it and it doesn’t show up and people end up hungry, cold, and without supplies. I have no issue with people streaming in to the damage zone and oversupplying. That’s part of the profit and loss system too. What I have a problem with is people using the force of the state to interfere with price signals and ordinary people ending up being miserable because their supplies aren’t showing up in sufficient quantities because the state miscalculated the just price.

    • SecretAgentMan

      That’s a wonderful description of how people live out the reciprocal obligations of solidarity. You and your neighbors know that when unexpected costs arrive in your lives, others will recall your own response to their need and assist you in turn. Of course this type of exchange isn’t expressed in contracts or laws — but then, the (repaid) cost of a generator or the costs of a few weeks’ lodging (with, no doubt, some help with household chores and grocery bills to defray the overhead) hardly requires that kind of formality. Besides, recourse to law by people so closely associated with each other would make the mutual obligations and exchanges of value you’ve described so cumbersome as to be impossible to begin with.

      If only there were some way for these reciprocal exchanges of value to occur between people who will never meet, indeed, between people who will never even know of each others’ existence. Some kind of mechanism that would communicate, almost instantly, messages about needs and resources that would enable those with resources to give, and those without resources to receive, whatever is needed. Since needs are so widely distributed, among so many different people, with no way to effectively keep track of each other or communicate the details of their lives on a regular basis, it would be wonderful if this means of communication could also carry with it a reciprocal value, a way of repaying the labor and effort of those hundreds, even thousands, of anonymous people who worked hard and well to ensure that disaster needs were met.

      But then, I’m not an economist.

      • Marthe Lépine

        This can be, and sometimes is, done by the media, and particularly through the social medias. Once in a while, I have read in the cbc news of some cases, for example the recent case of a 4 year old girl in Eastern Canada who needed a wheelchair but whose recently widowed father had run into bureaucratic problems; quite rapidly, funds and pledges began arriving from as far away as Australia. And the outpouring of support after the earthquake in Haiti was another good example, although with disasters of this size it is often difficult to organize effectively and to spend the money in the best way possible. It is easier at the local, or neighborhood level, and that seems to me to be what “subsidiarity” means.

    • Ted Seeber

      I knew a guy who did that last August- except for he didn’t sell. He just got 12 cases of bottled water, 3 coolers, some ice, and drove around Downtown Portland handing out water to anybody who needed it on what turned out to be the hottest day of the year.

  • Marthe Lépine

    And, by the way, the month that my colleague and his wife spent with me was one of the happiest months in my life – I have always lived alone, and it felt as if I had found a brother and a sister. That was a benefit of well over 100%!


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