Comments on: The Price Mechanism

By: News Wire | Hurricane Sandy’s Lesson on Preserving Capitalism

News Wire | Hurricane Sandy’s Lesson on Preserving Capitalism — Mon, 12 Nov 2012 10:57:30 +0000

[...] of Hurricane Sandy, the usual post-disaster debate over the economics and ethics of price-gouging is underway. However, while the question of whether it is okay, even desirable, for businesses to raise [...]

By: Hurricane Sandy’s Lesson on Preserving Capitalism | FavStocks

Hurricane Sandy’s Lesson on Preserving Capitalism | FavStocks — Sat, 10 Nov 2012 09:30:27 +0000

By: Price Gouging « azmytheconomics

Price Gouging « azmytheconomics — Thu, 08 Nov 2012 17:46:56 +0000

[...] Supply? Some have argued that in a disaster, the supply is inelastic and so the price mechanism does not increase supply to [...]

By: Hurricane Sandy’s Lesson on Preserving Capitalism « Nuance news

Hurricane Sandy’s Lesson on Preserving Capitalism « Nuance news — Thu, 08 Nov 2012 16:42:09 +0000

[...] in the wake of Hurricane Sandy, the usual post-disaster debate over the economics and ethics of price-gouging is underway. However, while the question of whether it is okay, even desirable, for businesses to raise prices [...]

By: News Wire | Links for 10-31-2012

News Wire | Links for 10-31-2012 — Thu, 08 Nov 2012 10:20:36 +0000

[...] The Price Mechanism – Cheap Talk [...]

By: jeff

jeff — Tue, 06 Nov 2012 16:10:52 +0000

Gappy, your snark-dar is good, but could use a little calibration. My snarky point was that the second welfare theorem indeed brings back the second dimension but I doubt that you want to use this as an argument in favor of price gouging.

Because in this little economy, redistributing endowments basically means confiscating the water bottles and handing them out to people who want them. I.e. rationing.

The SWT also assumes that the planner already knows who wants them the most. In that world we don’t need a price system. We have a perfectly efficient command economy.

By: gappy

gappy — Tue, 06 Nov 2012 14:19:15 +0000

I see that Jeff answered with a snarky comment to the inquiry about the second th. of welfare Economics. Snarky, because it implies that the Social Planner cannot redistribute endowments. And why not? It happens all the time in the form of rebates, subsidies and tax deductions. It’s not impractical.

By: Fmb

Fmb — Thu, 01 Nov 2012 01:03:44 +0000

2 thoughts:

1. Sometimes there is no well-defined clearing price. What does a prompt Heimlich maneuver go for when only one person is available to perform it?

2. In any given moment, a consumer can be somewhat close to that kind of situation (flat tire, funeral, very thirsty) and a lot of surplus is lost if they take defensive measures against possible gouging. Essentially there is elasticity of repeat demand.

Sure, roadside repair and funeral parlors solves this with posted prices (the latter by law), but repeat business and reputation have their limits in extreme scenarios.

I’m not saying politicians balance this ideally, but they are appealing to an intuition that is not meritless.

By: Kaleberg

Kaleberg — Wed, 31 Oct 2012 23:16:19 +0000

The goal of the producer is to maximize their power over the consumer. At least that’s what you see if you watch actual producers. This power can then be converted to economic advantage, so the producer should set the price high enough so that only some consumers will be able to buy water and the rest die of thirst as an example to the others. This means that on the next round, the consumers will pay even higher prices, and if there are fewer consumers, that is of no concern to the producer.

By: Patrick R. Sullivan

Patrick R. Sullivan — Wed, 31 Oct 2012 22:53:59 +0000

‘There is a stockpile of bottled water over here….’

You’ve assumed a can opener.