No, you don't. You're usually just limiting the supply even further by discouraging sales, and at the absolute best, shuffling around the people who get to buy the item. You can't help scarcity at all by fixing prices.
It's not like the anti-gouging laws lock in a price under profitablity; the stores wouldn't have the items even before the anti-gouging kicks in if that were the case.
In fact, a high enough price may even turn a hoarder into a vendor.
Yes, you definitely can.
The price which incurs maximum profits for producers has little to do with consumer surplus or the maximization thereof.
Price fixing alters the distribution of surpluses one way or the other, because we don't measure consumer surplus directly, we often think of 'reduced profits' to the producer, but fail to regard the increased surpluses to consumers.
The term 'scarcity' is a bit of canard, because very, very few things are actually truly 'scarce' like Gold, most things depend on labour inputs, materials, and especially opportunity cost.
Vaccines are an example. Phizer could probably make a lot more profit by charging $150-500/vaccine in the USA, which might leave 65% of Americans in the lurch.
But the surpluses to citizens arrived at through a 'not really market price' negotiated between the US Gov, and Phizer, are much more vast.
Especially the moment you consider longer term effects (i.e. limited deployment of vaccine hurts the economy badly and thus other lines of revenue) you see the systematic effects.
And that is how we ended up with the completely f'ed up allocation where in the beginning elder folks completely isolated from the virus had priority while active, exposed younger persons did not have access.
Central planners have failed over and over again to allocate resources as needed in the territory, while a market-based approach will simply and elegantly solve this problem while maximizing the incentives for producers.
Before all these price gouging laws, in natural disasters there used to be marginal producers (people with a pickup truck etc.) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is an incredible bargain if that way you can keep your insulin chilled:
https://www.econlib.org/library/Columns/y2007/Mungergouging....
In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of goods that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). (Or the potential for high profits will incentivize spending money to be more flexible in production in case demand increases for a short time.)
If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile - when the pandemic started we saw that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.
While politicians like 'price gouging' laws since everyone can see a higher price (but can't see the missing products that won't be available), a majority of economists are opposed to 'price gouging' laws. For example see:
Secondly, it's not clear that these resellers given up as examples are truly performing arbitrage, like is generally assumed in thought experiments by opponents of APG laws. These thought experiments also generally assume that the subsequent lack of additional incentive is enough to reduce supply. Let's take the example you gave of the ice sellers (and was given in your econlib citation). This example cites owners of a refrigeration truck with either direct access to the equipment that produces ice (a remarkably time and capital intensive venture), or business connections capable of obtaining large quantities of ice during a shortage. Either those hold true and for some reason these people who have invested heavily in ice distribution are for some reason deciding to stay home on a day of the highest demand because they can't increase the going rate more than 5%, or (more likely in my mind) they aren't actually increasing supply to the market in question, but instead bought locally before the the normal sellers thought to increase their prices (or the normal sellers had ethical issues with greatly increasing their prices in a a time of need).
Additionally, these examples all leave out the key to the idea, simultaneous rationing, which means that the supply isn't reduced by hoarding (at any price to the hoarder) by directly reducing the amount they can get. So in your example, there isn't an issue getting ice for your insulin because of rationing _and_ you didn't have to pay a premium for it.
Finally, as an aside, your first citation is from a far right think tank dedicated to the removal of government influence on all aspects of life, and the second is a polling of economists connected to a specifc branch of economics known to be rife with groupthink. It's unsurprising the conclusion they come to.
This is covered in the article:
>...But no such mass movement of resources to their highest valued use took place. North Carolina had an “anti-gouging law,” which made it illegal to sell anything useful at a price that was “unreasonably excessive under the circumstances.” This had been widely interpreted to limit price increases to around 5% or less. Each instance of violation of this law could result in a fine of up to $5,000. So, ice that happened in Charlotte, stayed in Charlotte. Why drive three hours to Raleigh when you can only charge the Charlotte price, plus just enough for gas money to break even?
>...So in your example, there isn't an issue getting ice for your insulin because of rationing _and_ you didn't have to pay a premium for it.
In the particular example I gave, it wouldn't help if people are limited to the amount they can buy - in an emergency situation like that, when there is no electricity, the demand for ice will be far higher than the local supply. The goal should be that the limited supply goes to the most valuable uses and that there is an incentive to increase the supply from other areas. In the long run, it would be even better if the local supplies of goods was more resilient to a natural disaster.
As I wrote:
>...In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of goods that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). (Or the potential for high profits will incentivize spending money to be more flexible in production in case demand increases for a short time.) If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile - when the pandemic started we saw that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.
>...your first citation is from a far right think tank dedicated to the removal of government influence on all aspects of life, and the second is a polling of economists connected to a specifc branch of economics known to be rife with groupthink.
You don't need to stoop to trying to poison the well with ridiculous comments like the above. If you have a point to make, then make it. Shallow dismissals are against the guidelines of this site.
Anti-gouging laws always leave people without critical supplies.
Remember the Great Toilet Paper Shortage a couple years ago?
Additionally, jurisdictions without APG laws also empirically faced widespread shortages during the pandemic, that's not a unique feature of APG laws.
With price-gouging laws, it means they run out just like everyone else, and then there's no supply available for anyone, regardless of how bad the need.[0]
But it also makes the problem much worse, because when price is fixed, the sole determining factor of who gets it becomes who can get there first.
[0]Or they hoard it themselves and only sell it to friends and family, or as a favor, or in a quasi black market in exchange for other price controlled items. Eg, negotiating how much they'll sell you at the capped price. "I'll sell you $500 of price-capped gas if you sell me a $500 price-capped generator."
They'd take a trailer with them when evacuating, and load it up with everything they could find locally in stock before returning home.
Now, they might do it as a favor for friends, but they make sure they've got each one claimed before purchasing. Whereas before, a profit margin made speculative buying worthwhile, and would cover expenses without worrying about having to sell 100%.
With 'price gouging laws' you also include 'rationing' which can and does often generated considerably better outcomes.
> does often generated considerably better outcomes.
Nope. Usually, it generates criminal redistribution activity, hoarding, a greatly reduced supply, etc. All the miserable characteristics of a centrally planned economy.
During the gas crisis of the 1970s, gas stations could not sell gas until they were allocated (rationed) gas by the D.O.E. The allocation was based on the previous year's usage pattern. Of course, nothing stays the same, and one year Florida was overflowing with gas while there were loooong lines on the west coast. Also there were lovely instances of one gas station appealing to the DOE to get the allocation of the gas station across the street cut off as being "unneeded".
All these problems disappeared literally overnight when Reagan, as his first act as President, signed an Executive Order eliminating all oil & gas price controls and allocation.
I know it was overnight, because I remember the gas lines evaporating the very next day and never returning in the 40 years since.
Additionally there have empirically been gas lines in the US in the 40 years since 1980.
The US suffered much more in 1979 from the disruption of the oil from Iran than other countries that also relied on this oil. It would be wrong to ignore the role the government played in making this oil disruption significantly worse.
From "TheU.S. Petroleum Crisis of 1979", PHILIP K. VERLEGER, JR.
>...On February 28, 1979, DOE published the following notice in the Federal Register: "It is essential that refiners enter the spring driving season with adequate gasoline stocks to meet seasonal demand requirements. We recognize that gasoline stocks are currently at adequate levels for this time of year, which is usually a period of low demand. Recent industry data indicate that total stocks are now in excess of 265 million barrels, which is less than last year's record high levels during the same period but above the average levels of previous years. Our concern is that these stocks not be drawn down precipitously as soon as the impacts of the Iranian shortfall are felt by refiners. Refiners are urged to keep stocks high enough to meet expected demand during the 1979 summer driving season, even if it is necessary to restrict somewhat the amount of surplus gasoline that is made available to purchasers currently"
>The implementation of these instructions had the effect of restricting the volume of gasoline available to service stations to between 80 and 90 percent of 1978 levels. This reduction was greater than the reduction in total gasoline supplies.
>...In April 1979, DOE ordered the fifteen largest refiners to sell 7.8 million barrels of crude oil to smaller firms that were unable to obtain supplies on the world market at competitive prices. …These transfers probably reduced the volume of gasoline produced in the second quarter because the refineries that purchased the crude oil had only a limited capacity to produce gasoline, while the refineries that sold it could have produced more. ...In addition to reducing the supply of gasoline, the buy/sell program appears to have affected the geographic distribution of crude oil and gasoline. This is because the primary recipients of the crude oil were refineries in the Midwest and the gulf coast areas, while the sellers were companies that were marketing throughout the nation.
>...…In April, DOE turned its attention to the low stock of distillate fuel oil … Two impacts were observed on domestic markets. First, excessive stocks of heating oil were accumulated. Second, companies may have been influenced to increase gasoline stocks in anticipation of the mandator yield controls that DOE threatened to impose. These controls specified the percent of refiner output that had to be heating oil. Such controls were designed to curtail the output of gasoline. By building higher gasoline inventories, refiners could smooth out the month-to-month distribution of gasoline despite the controls.
>...Price controls on gasoline may have also created an incentive to withhold gasoline from the market when the prices of crude oil were rising rapidly. …In summary, the refiners had the capacity and the knowledge to take advantage of this opportunity. Ironically, the instructions from DOE to the companies were to do precisely what was most profitable.
>...In addition to encouraging the buildup of stocks, DOE may have added to the shortages by creating an incentive to reduce the output of crude oil. Although it is difficult to estimate what domestic supplies of crude oil might have been in the absence of any restriction, a DOE announcement in November that control levels of the base period were to be reviewed may have constrained production in the first half of 1979.
The same goes for rent controls which are ubiquitous in most of Canada and Europe.
And where is the 'black market' for these vast economies?
These ridiculous references to 'communism' are an intellectual canard.
There is no such thing as a 'free market' - a market is a dynamic equilibrium of the balance of power. This becomes a problem when power is asymetrical, i.e. in monopoly, or monopoly-like situations such as 'sole provider of a drug' in which case there is always regulation.
If the 'free market' were fully effective, Phizer would be selling vaccines at Wallgreens instead of via the US Gov.. But it's not, and so we're not, because it wouldn't work as the 'profit maximizing' price point for the vaccine is way above what most people would be willing to pay.
For me, they are references to actual events in my past. Unable to provide the bare necessities, in the 80's, the Communist State's central planners had rationed bread, sugar, flour and vegetable oil. A black market has promptly sprung up. Its vendors ranged from regular folks who did not use their entire ration to illegal "entrepreneurs" who had other means of getting stuff.
This market could easily tell you the actual price of these goods. But you had to be careful because some of the participants where actual Secret Service laying traps. It was illegal after all...
Unless a rationing scheme was simultaneously instituted.
Inevitably, criminal gangs arose to redistribute the rationed gas, complete with drive-by shootings.
The result was a month of people needing tests, but couldn't find them. While the feds prepared to mail them out 4 at a time to people who, if symptomatic, were likely to be either fully recovered by the time they arrive, or for severe cases, already under medical care.
Delivery time of a week means you have to order them before you know you might need them. Being "free", there's a rational reason to order speculatively, even if you don't currently need them. And no cost to reduce momentary demand so that people who do currently need them (enough to go to the trouble to pay for them and get reimbursed by insurance) can get them, as happens with store distribution.
Perfect example of a market operating efficiently, where un-needed "do-something" govt intervention creates artifical shortages, distributes irrelevant to current need, while reducing efficiency in both availability (same day vs week+) and quantity (delivered 4 at a time vs getting 1 at the store).
So if people want to buy a Mona Lisa all they have to do is wait until the price is high enough and Leonardo da Vinci will paint another?
Socialism, however, works worse and worse the closer things get to ideal socialism.