Comments on: Aiyar, Boudreaux and Price Gouging http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/ Tue, 02 Dec 2008 15:04:18 +0000 http://wordpress.org/?v=2.0.1 by: seven_times_six http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2677 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2677 <i>But a lot of the aid comes in as inkind assistance...</i> Yazad, but how much aid comes in finished-goods form? Food, Clothing, Medicine, very basic necessities. You're right that supply of these increases and price drops etc. But most non-cash aid is for stuff like rebuilding infrastructure, which creates a lot of local demand for cement etc. So the initial cost estimates of the AID agencies end up as under-estimates. Another insightful thing Aiyar talked about is the distress sales of assets due to lack of credit. And the consequent inability to buy them back later at ultra-high demand-fueled prices. This is very sad but very important to look at. Are any AID agencies looking into this? But a lot of the aid comes in as inkind assistance…

Yazad, but how much aid comes in finished-goods form? Food, Clothing, Medicine, very basic necessities. You’re right that supply of these increases and price drops etc.

But most non-cash aid is for stuff like rebuilding infrastructure, which creates a lot of local demand for cement etc. So the initial cost estimates of the AID agencies end up as under-estimates.

Another insightful thing Aiyar talked about is the distress sales of assets due to lack of credit. And the consequent inability to buy them back later at ultra-high demand-fueled prices. This is very sad but very important to look at. Are any AID agencies looking into this?

]]> by: Ck http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2678 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2678 As usual Yazad you are pushing the market too hard. Lucily for the rest of us the world is a lot more compassionate than you will ever be. I suspect you would be singing a different tune if your house and life posessions had been washed away and you were left bankrupt and then you were informed that everything was know 10 times more expensive because it was just a 'market'reality'. Like I have saud before it is easy to pontificate from a comfortable armchair. Occassionaly step into the real world and see what its like there - then perhaps people would actually take your suggestions seriously instead of dismissing them as yet more theoretical BS from an armchair pundit. As usual Yazad you are pushing the market too hard. Lucily for the rest of us the world is a lot more compassionate than you will ever be. I suspect you would be singing a different tune if your house and life posessions had been washed away and you were left bankrupt and then you were informed that everything was know 10 times more expensive because it was just a ‘market’reality’.

Like I have saud before it is easy to pontificate from a comfortable armchair. Occassionaly step into the real world and see what its like there - then perhaps people would actually take your suggestions seriously instead of dismissing them as yet more theoretical BS from an armchair pundit.

]]> by: Mr. Econotarian http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2679 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2679 Aiyar states the very point that makes price increases matter. He speaks of fishermen have their boats destroyed, but fish prices are rising. He claims it doesn't help the fisherman. But with price rises, now a fisherman could get a loan for a new boat, and pay it back with interest. Even in a primative economy, he could probably find family or friends to raise a loan from. Or he could make a deal with another fisherman to purchase a new boat together that they could not have afforded by themselves, then make enough money fishing together for one of them to buy out that boat and the other to buy a new boat. With emergency price fixing, the fisherman have no chance to purchase a new boat... So disaster price rises <b>help</b> by encouraging additional production (as well as additional distribution to the disaster area). Aiyar states the very point that makes price increases matter. He speaks of fishermen have their boats destroyed, but fish prices are rising. He claims it doesn’t help the fisherman.

But with price rises, now a fisherman could get a loan for a new boat, and pay it back with interest. Even in a primative economy, he could probably find family or friends to raise a loan from.

Or he could make a deal with another fisherman to purchase a new boat
together that they could not have afforded by themselves, then make
enough money fishing together for one of them to buy out that boat and
the other to buy a new boat.

With emergency price fixing, the fisherman have no chance to purchase
a new boat…

So disaster price rises help by encouraging additional production (as well as additional distribution to the disaster area).

]]> by: Matt T http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2680 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2680 Ck, If I were in a disaster, I would prefer high prices to price controls. I would welcome both the opportunity to outbid people who don't have as much need as I for the goods in short supply, as well as the quicker rate of replenishment that comes from high prices and is so critical in a crisis. Ck,

If I were in a disaster, I would prefer high prices to price controls. I would welcome both the opportunity to outbid people who don’t have as much need as I for the goods in short supply, as well as the quicker rate of replenishment that comes from high prices and is so critical in a crisis.

]]> by: Nilu http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2681 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2681 <i>Lucily for the rest of us the world is a lot more compassionate than you will ever be. I suspect you would be singing a different tune if your house and life posessions had been washed away and you were left bankrupt and then you were informed that everything was know 10 times more expensive because it was just a 'market'reality'</i>. Luckily Ck, I will find "good samaritans" like yourself who will pay twice the real value to washed out assets - just to prove that they/you are "making a difference". Be careful denying this ;) Lucily for the rest of us the world is a lot more compassionate than you will ever be. I suspect you would be singing a different tune if your house and life posessions had been washed away and you were left bankrupt and then you were informed that everything was know 10 times more expensive because it was just a ‘market’reality’.

Luckily Ck, I will find “good samaritans” like yourself who will pay twice the real value to washed out assets - just to prove that they/you are “making a difference”. Be careful denying this ;)

]]> by: RKB http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2682 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2682 CK, compassion is irrelevant. Those with compassion will give whether or not government imposes price controls on suppliers. The question is whether or not suppliers will supply in sufficient quantities to meet the need. CK, compassion is irrelevant. Those with compassion will give whether or not government imposes price controls on suppliers. The question is whether or not suppliers will supply in sufficient quantities to meet the need.

]]> by: Ck http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2683 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2683 Right. YOur house has been destroyed, everything you own is gone and you have no money and are out on the street - and you beleive that you should have to pay 10 times the market price?? It is not an ebay bidding competition when you have to sit on the wrekage of your life and try and outbid others. I think all of you will be singing a very different tune if it was your house and life that was destroyed. I beleive that 'market forces' will be the last thing on your mind. Yes there is such a thing as compassion and such a thing as responsibility to fellow human beings and only those who have experienced a loss like this will know what it is. Right. YOur house has been destroyed, everything you own is gone and you have no money and are out on the street - and you beleive that you should have to pay 10 times the market price?? It is not an ebay bidding competition when you have to sit on the wrekage of your life and try and outbid others. I think all of you will be singing a very different tune if it was your house and life that was destroyed. I beleive that ‘market forces’ will be the last thing on your mind.

Yes there is such a thing as compassion and such a thing as responsibility to fellow human beings and only those who have experienced a loss like this will know what it is.

]]> by: Nilu http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2684 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2684 Ck, Just wondering - does the assumed moral high ground result in socialistic thought or is it vece versa?.....am really curious. Ck,
Just wondering - does the assumed moral high ground result in socialistic thought or is it vece versa?…..am really curious.

]]> by: Ck http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2685 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2685 Dear Nilu - I appreciate the honesty you display on your blog saying <blockquote> Statement of Audience : ..... I realize that nothing I say matters to anyone else on the entire planet. My opinions are useless and unfocused. I am an expert in nothing. I know nothing. I am confused about almost everything. I cannot, as an individual, ever possibly know everything, or even enough to make editorial commentary on the vast vast majority of things that exist in my world. This is a stupid document; it is meaningless drivel that I do not expect any of the several billion people on my planet to actually read. People who do read my rambling, incoherent dumbfuckery are probably just as confused as I am, if not moreso, as they are looking to my sorry ass for an opinion when they should be outside playing Frisbee with their dog or screwing their life partner or getting a dog or getting a life partner. Anyone who actually takes the time to read my bullshit probably deserves to ingest my fucked up and obviously mistaken opinions on whatever it is that I have written about.. Signed :Nilu. </blockquote> So I am going to read your 'bullshit' but refuse to ingest it and will politely puke it up all over your 'useless' , 'confused' 'stupid' posts. I love it when I don't have to be original. Nil kantan has done all the work for me. But why such a low opinion of yourself. I actually like reading some of the posts on your blog despite you yourself finding it so incoherent ;) Dear Nilu - I appreciate the honesty you display on your blog saying

Statement of Audience : ….. I realize that nothing I say matters to anyone else on the entire planet. My opinions are useless and unfocused. I am an expert in nothing. I know nothing. I am confused about almost everything. I cannot, as an individual, ever possibly know everything, or even enough to make editorial commentary on the vast vast majority of things that exist in my world. This is a stupid document; it is meaningless drivel that I do not expect any of the several billion people on my planet to actually read. People who do read my rambling, incoherent dumbfuckery are probably just as confused as I am, if not moreso, as they are looking to my sorry ass for an opinion when they should be outside playing Frisbee with their dog or screwing their life partner or getting a dog or getting a life partner. Anyone who actually takes the time to read my bullshit probably deserves to ingest my fucked up and obviously mistaken opinions on whatever it is that I have written about.. Signed :Nilu.

So I am going to read your ‘bullshit’ but refuse to ingest it and will politely puke it up all over your ‘useless’ , ‘confused’ ’stupid’ posts.

I love it when I don’t have to be original. Nil kantan has done all the work for me. But why such a low opinion of yourself. I actually like reading some of the posts on your blog despite you yourself finding it so incoherent ;)

]]> by: Mark http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2686 Tue, 30 Nov 1999 00:00:00 +0000 http://www.yazadjal.com/2005/01/10/aiyar-boudreaux-and-price-gouging/#comment-2686 Many people lost most or all of their valuable property and I would imagine that some even lost all of the cash that they had. I can't imagine that too many of the (mostly poor) people affected by the tsunami had bank accounts. Prices serve two purposes in the market: there is the price as incentive to produce and the price as a way to ration scarce goods. There is nothing particularly fair about rationing goods with high prices when many simply cannot come up with the money to pay for them due to circumstances completely outside their control. That being said, I still think that high prices offer a very important incentive to produce and transport goods after a disaster, especially considering that the destruction of infrastucture in coastal areas will make getting goods to market that much more difficult. And CK is right, compassion does still exist in the world and especially in the immediate aftermath of a disaster. But psychology dictates that once some time passes after the tsunami, companies and individuals that were previously willing to take losses (or miss out on profit opportunities to less scrupulous competitors) to not appear greedy will start to lose patience and raise prices. So I would say that government-imposed price controls are still a bad idea in this case, especially because they can have such unpredictable consequences. Aid agencies can help relieve the burden of higher prices for poor people, especially once the immediate task of feeding and sheltering victims gives way to the more long-term reconstruction and rebuilding effort when markets need to be allowed to function. Many people lost most or all of their valuable property and I would imagine that some even lost all of the cash that they had. I can’t imagine that too many of the (mostly poor) people affected by the tsunami had bank accounts. Prices serve two purposes in the market: there is the price as incentive to produce and the price as a way to ration scarce goods. There is nothing particularly fair about rationing goods with high prices when many simply cannot come up with the money to pay for them due to circumstances completely outside their control.
That being said, I still think that high prices offer a very important incentive to produce and transport goods after a disaster, especially considering that the destruction of infrastucture in coastal areas will make getting goods to market that much more difficult.
And CK is right, compassion does still exist in the world and especially in the immediate aftermath of a disaster. But psychology dictates that once some time passes after the tsunami, companies and individuals that were previously willing to take losses (or miss out on profit opportunities to less scrupulous competitors) to not appear greedy will start to lose patience and raise prices.
So I would say that government-imposed price controls are still a bad idea in this case, especially because they can have such unpredictable consequences. Aid agencies can help relieve the burden of higher prices for poor people, especially once the immediate task of feeding and sheltering victims gives way to the more long-term reconstruction and rebuilding effort when markets need to be allowed to function.

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