$5000 per violation of price-gouging in CA • Hacker News Board

Re: $5000 per violation of price-gouging in CA

#111

Post by daenz » Sat, Mar 14, 2020, 4:12 PM UTC

ardit33 wrote: post #33

anikan_vader wrote: post #16

From an economics stand point, I don't understand why the government should ban price-gouging. Doesn't this place an artificial price ceiling that will ensure a shortage of goods? I would personally rather stores have items such as food/water at marked-up prices than not at all.

Because a lot of the short term price gouging is artificial/predatory: "Vancouver couple exploits pandemic by hoarding Lysol wipes and charging double to resell them." https://www.thestar.com/news/canada/2020/03/12/were-hustlers... They are not raising prices to produce more, but just hoarding and then reselling it at higher prices. "Price Gouger Unable to Sell 17,700 Bottles of Hand Sanitizer after Amazon Crackdown"…

I would argue that the supply/demand pricing isn't responding fast enough to the hoarders. If the price was fully elastic, as people began to hoard lysol wipes, prices would rise on the hoarders and make it much less profitable for them. But prices aren't rising correctly, much like an artificial price ceiling would do, making it possible and profitable for hoarders to create a shortage.

Re: $5000 per violation of price-gouging in CA

#112

Post by SECProto » Sat, Mar 14, 2020, 4:12 PM UTC

sxyuan wrote: post #88

I see some commenters saying that preventing price gouging will take away the incentive to produce more of a certain good when the demand increases. This doesn't make sense to me. If, under normal market conditions, producers already make X amount (of , say, toilet paper) due to Y demand at price Z, when the demand spikes to 2Y, if you can produce and sell 2X goods at the same unit cost, you can double your profit wi…

> If, under normal market conditions, producers already make X amount (of , say, toilet paper) due to Y demand at price Z, when the demand spikes to 2Y, if you can produce and sell 2X goods at the same unit cost, you can double your profit without raising the price at all.

This doesn't accurately reflect how the cost would scale. X isn't easily adjustable - it reflects annualized wages, depreciation of production line that is sized for production amount X, etc. Equipment sitting idle is wasted money, so production lines operate close to maximum production already (or at least nowhere near half capacity, that would allow 2X production)

Re: $5000 per violation of price-gouging in CA

#113

Post by ComputerGuru » Sat, Mar 14, 2020, 4:13 PM UTC

jka wrote: post #73

whatshisface wrote: post #4

Price isn't just the cost of buying something, it's the reward for producing it. If we see too many price gouging laws, then you can expect shortages as companies find themselves unable to justify extreme measures that would otherwise increase production (at great expense). Secondly, I would expect that localities with price gouging laws will discover that their goods are being re-routed to other places without those…

Here is a link to the relevant section of the California penal code: https://leginfo.legislature.ca.gov/faces/codes_displaySectio... "While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency or local emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increas…

And only in a state of emergency. If you’re in Egypt, that can be thirty years or more. In California, probably not.

Re: $5000 per violation of price-gouging in CA

#114

Post by logicchains » Sat, Mar 14, 2020, 4:13 PM UTC

XorNot wrote: post #55

logicchains wrote: post #11

Earlier quoted context omitted.

You'll find a similar argument in any basic econ textbook. Put a cap on prices, then when demand rises for something (which normally leads to an increase in price, all other things being equal), the lack of an accompanying rise in price means there is no incentive to produce more of the good (no incentive for more producers to enter the market), so there isn't a corresponding increase in supply. Might work okay in Ch…

And like most things, basic econ is not the be all and end all of how the world works otherwise we wouldn't have those all-important second year econ classes. Price gouging is not an efficient market result for anyone - the goods aren't actually, in real terms, worth the temporary price (the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're to…

>the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up

This is not necessarily true, especially if we consider that the pandemic may continue for a few months, and people will be using orders of magnitude more hand sanitizer and masks than before.

> the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty.

He distributes supply over time. Instead of everyone panicking and buying up all the supply at time T, the scalper buys up some, and then gradually sells it at times T+1, T+2, T+3... Scalping is arbitrage between current demand and future demand, and ensures more supply is available when people need it in future.

>But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market.

This is comparing apples to oranges. A circuit breaker is not a price floor except in a very limited sense; the price is free to fall further the next day. I don't think many people would object to a rule like "the price of masks can only rise 10% per day".

Re: $5000 per violation of price-gouging in CA

#115

Post by robomartin » Sat, Mar 14, 2020, 4:13 PM UTC

From the law:

“However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency.”

I am glad they included this language, even though it is a bit sloppy. What I am referring to is that yes, costs can increase dramatically during an emergency, however, the “markup customarily applied” could also change in dramatic ways.

One of the aspects of the theory of pricing is to include in the equation variables to address support, business continuity, expansion, disruptions and other “nonlinear” factors.

In an emergency what might have been simple could become complex. This means it might be impossible for a vendor to maintain an ongoing supply or continue to offer services. And, given the current reality, if the consequence of providing the goods or services could be loosing your entire staff to a quarantine, your ability to maintain a supply might require a very different approach to pricing.

Given the severe consequences, this language could cause vendors to avoid exposure for fear of being destroyed by an uninformed claim. Which means supply would contract and prices would explode.

That said, the guy buying water at Walmart for $1 to then sell it for $5 should get nailed to the wall with rusty nails.

Re: $5000 per violation of price-gouging in CA

#116

Post by bjourne » Sat, Mar 14, 2020, 4:13 PM UTC

It's amazing that it takes a pandemic for people to realize that "free market" isn't the solution to every problem in the world.

Re: $5000 per violation of price-gouging in CA

#117

Post by nfjfo9nnd » Sat, Mar 14, 2020, 4:14 PM UTC

jka wrote: post #73

whatshisface wrote: post #4

Price isn't just the cost of buying something, it's the reward for producing it. If we see too many price gouging laws, then you can expect shortages as companies find themselves unable to justify extreme measures that would otherwise increase production (at great expense). Secondly, I would expect that localities with price gouging laws will discover that their goods are being re-routed to other places without those…

Here is a link to the relevant section of the California penal code: https://leginfo.legislature.ca.gov/faces/codes_displaySectio... "While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency or local emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increas…

“While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions...”

They forget to mention that the marketplace is highly optimized at the foundation to make this bullshit.

There’s no open marketplace. The government protects concepts like inflation which is the deflation of buying power of the masses to prop up the power of aristocrats.

I have zero qualms with government stepping in to actually create some pricing competition.

Financial “value” is not a property of an objection reality. It’s a human ideology. No one in economics disputes this.

And somehow we’re convinced old gits dumber than us, outnumbered us have sold us on truth of markets.

They pray on confusing and controlling our innate behavior to model our future. “Oh guess my model will be these cube walls forever.”

And I’m talking specifically about the bulk producers of basic human needs, food, material supplies, medicine.

How shallow and self aggrandizing America as a culture is is on display right now.

A weak ass people who coddle old gits because they can’t source local TP, and toothpaste?

The people are so incapable of absorbing a true calamity in this nation is frightening.

Re: $5000 per violation of price-gouging in CA

#118

Post by AsyncAwait » Sat, Mar 14, 2020, 4:16 PM UTC

maxerickson wrote: post #105

AsyncAwait wrote: post #92

Earlier quoted context omitted.

The problem, from what I saw, is hoarders having stock piled 17,000 hand sanitizers and the like, not official stores selling them for too high a price.

In a country of 300 million people, a few semi trucks worth of hoarding isn't doing much of anything to availability of any particular product. It's the just-in-time nature of distribution. Demand doubles from "normal" and all of the sudden nothing is sitting on the shelf.

Which would be the case even without a sales tax?

However, while no sales tax on hand sanitizers is hardly going to be of a measurable impact for an individual, when you're hoarding to squeeze people in crisis, no sales tax makes for a nice 'bulk discount'.

Re: $5000 per violation of price-gouging in CA

#119

Post by geofft » Sat, Mar 14, 2020, 4:16 PM UTC

hirundo wrote: post #109

I think that setting a price on something is best considered as a form of speech, even if it isn't exactly the same thing. A price is a statement of the value you believe that a thing has. As a free speech advocate I believe people should be able to express such value judgments freely with few constraints. A price signal is similar to other signals we can make with speech, in that it has the potential to change behav…

Setting a price on something is absolutely a form of speech, yes, in the sense that the whole point of free markets is communication / price discovery.

It's specifically a form of speech in which richer people can speak things that poorer people can't.

Re: $5000 per violation of price-gouging in CA

#120

Post by logicchains » Sat, Mar 14, 2020, 4:16 PM UTC

hodgesrm wrote: post #45

logicchains wrote: post #13

Earlier quoted context omitted.

>solipsistic pseudo-liberation reasoning Basic economics is solipsistic pseudo-liberation reasoning now?

The argument that the threat of gouging increases the motivation to hoard is basic economics. For analogous reasons there is FDIC insurance on bank accounts because the alternative is runs on banks that can lead to system collapse. Not every point on the supply/demand curve is a good place to be.

>The argument that the threat of gouging increases the motivation to hoard is basic economics.

But the ability to increase price freely also decreases actual hoarding, because when stores see a massive increase in demand, they'll be incentivised to increase prices, which will deter unnecessary purchases.