The Economist has an article discussing the ride share industry. They pointed out that ride share companies engage in price gouging when demand for their services is high:
This digital twin, one of the most sophisticated of its kind, allows Uber to adjust its operations in real time. Annoyed passengers may think that this enables the firm’s “surge pricing”, when fares suddenly spike to balance ride demand and driver supply. This is partly true. But the more immediate and more positive effect is that the digital twin allows for up-to-the-minute route optimisations through ever-changing city traffic.
(Price gouging is generally defined as a situation where companies set the price above the customary level in order to prevent shortages from occurring.)
The taxi industry provides a nice test of the theory that consumers don’t like price gouging. Prior to the advent of ride sharing, the NYC taxi industry was regulated by the government, which set a standard price. As a result, it was extremely difficult to find a taxi during peak periods, when demand exceeded supply at the regulated price.
Ride share companies decided to adopt surge pricing during periods of high demand, in order to prevent shortages. As you can see, they’ve grown to dominate the NYC taxi market:
It would not surprise me if a poll showed that most Americans oppose price gouging. But economists typically put little weight on polls; we are more interested in how people behave, that is, their revealed preference. And at least in the NYC taxi market, it seems that consumers prefer price gouging to a stable regulated price.
One possible objection is that it is not the price gouging that they like, rather it’s the quick and reliable availability of the ride share cars. But those are merely two sides of the same coin. Flexible pricing is both a necessary and sufficient condition for assuring that quantity supplied equals quantity demanded. You cannot have one without the other. Thus regardless of what consumers might say, it seems to be the case that they actually do prefer a regime with price gouging over a regime with shortages.
PS. After beginning this post, I discovered a John Cochrane post that makes some of the same points.
READER COMMENTS
Matthias
Sep 11 2024 at 3:48am
There’s a bunch more differences, regulatory and otherwise, between the two ways to hail a ride. (Eg New York’s infamous medallion system.)
So I’m not sure we can reliably conclude that it’s the flexible pricing that is the main factor?
Dylan
Sep 11 2024 at 6:35am
As Matthias notes, there are a bunch of other differences between the services.
A couple that come to mind. 1) The ability to know when your car is showing up and track it, is far superior to the taxi experience of trying to hail a cab. Even as someone that’s been in NYC for two decades, I never got good at that skill. 2) The cars go to the boroughs, where it has always been harder to hail a cab. 3) For many years the price was subsidized by VC money, so even with surge pricing, the cost was lower than alternatives.
That said, I prefer the neighborhood car services for outbound trips still because their prices have been fixed for years, so I know how much it is going to cost me to get to the airport and those prices are usually significantly cheaper than Uber or Lyft. The drivers also tend to be better and know the city streets well. Uber drivers depend on their maps and Uber’s “digital twin” too much. Which, in my experience kind of sucks. Multiple times in the last year it steered us towards crazy routes that were longer in distance and much longer in time, doing things like putting us on the BQE to go 2 miles in heavy traffic. Not a mistake that a livery driver is likely to make.
The problem is, your neighborhood car service is great at picking you up in your neighborhood and will be super quick, but it isn’t great at taking you home from another neighborhood, and knowing all the hundreds of car services for each neighborhood and which ones are good and which ones are not, is not an easy task. Kind of like McDonald’s when you’re on a road trip, you know it won’t be great, but you at least know what you’re going to get (meaning a car will likely show up).
Jon Murphy
Sep 11 2024 at 9:02am
You make good points. But one thing I wish to point out is that the last time I was in NYC (circa 2018), the taxis were advertising their own version of a ride hailing app and other things to compete with Uber/Lyft. So, even as Yellow Cab moved more toward Uber along those margins, people still prefer to purchase Uber rides.
It does appear to be the case that, in general, people prefer having goods at a relatively high price as opposed to having no goods at a lower (and ultimately fictional) price. People will complain about the prices, but they do ultimately pay them.
Dylan
Sep 11 2024 at 1:14pm
I don’t disagree with this, but I’m not sure if we can come to that conclusion from the Uber data in Manhattan at least. I’m not a regular user of taxis, car services, or Uber/Lyft. But, my general sense is that the normal order for pricing is car service -> Uber/Lyft -> taxi. With taxis being the most expensive in “normal” circumstances. That’s the case when I’m coming from the airport at least. During surge situations, that can reverse, but the last time I can remember being in a yellow cab was when I was out with friends and they tried Uber, thought the price was ridiculous and then had no problem hailing a cab which was something like $30 cheaper for a short couple mile ride.
I met with a couple of founders who were trying to provide the tech for that back in the day. Don’t know if they were the ones who ultimately won, but yeah, I get the idea it isn’t very popular. I’m curious though, my assumption is with their ride hailing app, you’re still paying the fixed taxi rate (combo of time and distance) since that is set by law? I think one of the other major advancements for Uber was being able to know your price ahead of time. Maybe I’m unusual, but there are few things more stressful to me than watching a taxi meter creep up continuously.
Jon Murphy
Sep 11 2024 at 1:25pm
That’s my understanding, although I’ve never used it. Curb is the name of the app, I think.
Oh sure. And others were willing to pay the surge pricing. The price mechanism at work!
I’m the same. One of the nice things about regulated cabs in New Orleans is that they have posted fixed prices for certain areas (eg airport to French Quarter, airport to Warehouse District, airport to Poydras St)
Craig
Sep 11 2024 at 10:07am
Having been previously ensconced in Manhattan I can say that there are very, very, very few circumstances where I would ever CONSIDER a car, my car, a taxi, an uber, just a car at ALL. Its bus/subway/walking.
Quick google telling me subway/bus is 4.6mn daily ridership.
I could see tourists coming in being unfamiliar with NYC’s mass transit, discouraged by its reputation and obviously quite dirty decor, not really wanting to hail a cab on the street just resorting to their ‘easy’ button and not worrying about the price. I’d suggest the transportation preference is ‘one fare/one city’
Worked at 4 NY Plaza if you worked beyond 8pm they’d offer you fare to any point in Manhattan so if you lived in Manhattan you could get a cab home or if elsewhere to a transit center like PABT or Grand Central, Penn Station, etc. So I figured why not and took a cab to PABT it was $25 and took longer. You’re not helping me here, that’s not even surge pricing, just ‘regular’ pricing I’m just avoiding it.
For sure if you get out of a Yankees game and you call an Uber that Uber driver has to fight the traffic maelstrom to come and get you. Sure, he should charge a surge price, but the only reason you’re doing that is because you’re either an idiot or, more understandably, perhaps suffering from a disability. You could just walk 5 blocks out of the surge zone or just take the 4, 5, 6 train to Grand Central.
Going to NJ and taking my son to NYC on Sept 28 to see Pirates at Yankees. Doing a ferry because my boy will enjoy the boat ride, but if it were just me it’d be NJ Transit to PABT, I’d walk to Midtown, grab a slice from my favorite pizzeria, this trip doing a touristy thing with him and going to top of 30 Rock and then its the B,D to the Bronx. There’s no ‘car’ in this plan once I’m in NYC.
My Uber app telling me ride from Bryant Park to Yankee Stadium is $42-$49. Or you could just take the B or D train and get there quicker for a couple of bucks.
I am curious what Mr. Glass thinks of this as well.
Jon Murphy
Sep 11 2024 at 12:47pm
One shouldn’t attribute to idiocy what can be explained by ignorance. Nor resort to ignorance what can be explained by preferences.
You are apparently familar with NYC and the Bronx. But not everyone else. If one was unfamilar, if one did not know which 5 or 6 blocks to walk, what trains to take, etc., it’s easy to see why they might prefer to spend a little extra to get an Uber with surge pricing. When I am in an unfamilar place, I am more than happy to pay a little more for safety and security.
Craig
Sep 11 2024 at 5:49pm
To be fair, you are correct, after all any time I see a Red Sox fan in Midtown I advise him to take an uber to the game. 😉
Jon Murphy
Sep 11 2024 at 5:52pm
Fair enough
Jim Glass
Sep 11 2024 at 8:26pm
During my decades in Manhattan, as a life-long Mets fan, whenever I saw a Red Sox fan looking for the game at Yankee Stadium, I sent him to New Jersey.
Dylan
Sep 11 2024 at 1:19pm
With the exception of swapping out a bike for the bus (seriously, my last trip on the bus I watched a guy in a walker pass us. Multiple times!) I agree with everything you say. One of the perverse things about New York City is that sure, you can drive some place and there could be good reasons for doing it. But, it will take longer and be more expensive than pretty much any other mode of transportation. Pretty sure we’re the only city in the U.S. that can make that claim.
Jon Murphy
Sep 11 2024 at 1:27pm
Reminds me of the old joke: “Nobody drives in New York City. There’s too much traffic”
Jim Glass
Sep 12 2024 at 2:24am
Call me Jim! We’re all friends here, even amid the fisticuffs. 🙂
After graduating law school I moved to Manhattan (from the Bronx) in 1978. Lived in Chelsea, 16th St., by 7th Avenue, *back then* a run-down industrial area an un-monied fellow like me could afford. I got a duplex apartment via an ex-roommate’s girlfriend who worked for the managing agent. By “duplex” I mean, in a pretty much original-condition 1890 tenement building, two rooms and a bathroom on the first floor and matching space in the cellar. The apartment had 5 doors into it because each room originally held a family (I’ve no idea how) and the bathroom had served the whole floor. (Life really had changed a lot since 1890.) While sitting on the pot one faced a working door opening out to the building’s hallway. Fun during parties!
Transport: That was a great place to live for young me because I could walk everywhere in the lower half of Manhattan for both fun and business: the Village, SoHo, Wall Street, Midtown, Grand Central, Theater District, the lot. And 14th street was the central hub of the entire subway system, so I could subway anywhere in the city at all, from Coney Island, Brooklyn, to Shea Stadium (yea!), Queens, to Yankee Stadium (hiss!), the Bronx. No Ubers back then. Taxis, sometimes. Going diagonally across Manhattan is difficult on public transport, it mostly goes straight up-down. Carrying stuff one may just need a car. At night sometimes you want to get somewhere as fast as possible without being stuck in the subway. During the day, with traffic, a taxi might be slower. Also, money, over 34 years there my level of prosperity changed.
I always had a car. I had family and friends outside the city to visit, later a wife and kids and *really* needed a car then, mini-van. Parking evolved. Parked on the street to begin with, “alternate side of the street parking” and all. Had to move the car to the other side of the street daily. Crime was very bad, drug dealers operated openly through the public phones on 16th at 8th. Cars parked on the street were sure to get broken into until the druggies realized who you were and knew you left nothing in them. Cars with out-of-state plates were 100% certain to get hit the first night there. Days of my youth! The cops picked low-hanging fruit and ignored real crime. When I brought my first son home from the hospital I double-parked in front of my apartment for literally maybe 60 seconds, to hand him off at the front door — when I turned around cops had swooped up to my car to give me a ticket. I said to them “Infant delivery, guys, but look there” pointing to the drug dealers at the end of the block. They said, “Sorry, but we can’t change a ticket once we start to write it.” Which was a lie. I told them the form to use. (My law school roommate then represented the police union.) They were surprised. (Giuliani reversed all this, for real. He was always a nasty S.O.B, but back then he was sane and effective.)
Later, as I got some income, I parked semi-securely on a pier, then really securely in what is now the Google Building, a *monster* with more volume than the Empire State Building, an elevated railroad running into it, and street-level elevators to lift 16-wheeler trucks up to meet the railroad and drive around inside the building. It was built ~1930 to connect the piers to the trucking and railroad networks. Bad timing, with the Depression and deindustrialization of Manhattan. Now it is all high-tech. I tell you, walking on office floors designed to carry the weight of 16-wheelers is a new feeling under your feet. That railroad was still carrying trains when I arrived, then was an abandoned neighborhood elevated wreck for years, now is the High Line park, one of the top tourist attractions in the city.
When I left the neighborhood in 2012, Harrison Ford had an apartment across the street, Susan Sarandon was right next door, everybody from all the Law & Order shows was around all the time because they filmed in a studio on 16th by the river, my building had been renovated and gone co-op, the area was Celebrity City. Ford had a reputation as a regular guy who in the deli waited in line for coffee with everyone else, but I only saw him once.
One night, walking up 7th, I saw this guy coming at me, height only up to my chin (I’m 6’3″) so I didn’t recognize him at first, wearing an open tuxedo jacket, shirt part open, tie askew, looking pissed. That was odd. Then I saw, walking parallel with him but about 3 feet away, in a gown and accessories similarly askew, his wife Calista Flockhart, looking equally pissed. Ha! They’d been to some formal event, had a fight, and were walking home angry at each other. I love the misery of the rich and famous! Happy memory…
Even having to pay plenty to park a car only occasionally used, Manhattan was fun, in its time. But enough of that. Too much. Sorry, Craig, but you asked.
Craig
Sep 12 2024 at 11:03am
Thank, Jim, enjoyed your short life story.
Indeed that building G! occupies is the largest building nobody ever heard of, its something like the third largest by square footage? Something where when you look at the building it surprises you.
Also of note: for people unfamiliar with NYC note how Jim discusses cars in the context of parking woes. As an aside, Jim, my grandparents lived up on 1550 York which was a rent controlled Mitchell-Lama (they had lived in the railroad apartments prior to their demolition, briefly lived in Queens and then had priority when the building was built), but that included one car space for $80/month
Tristan Sinha
Sep 11 2024 at 11:47am
There’s this beach town that I go to in the summer. For some reason, I’ve never seen the price of Ubers rise above $60, despite the town always being flooded with people trying to go home late at night when the bars close. It is literally impossible to find an Uber home. People will walk miles away from the main area towards the highway hoping to find one. Next thing you know it’s 3am and you’re thinking to yourself how you would literally pay someone $200 to take you home (which is not even that much if ur splitting the cost with other people), but you can’t. Once you encounter this enough over the years you figure out ways around it, like working with a driver outside the app so you can pay higher than $60; often times the drivers will give you their cards during the day (non peak time) to contact them at night to do just this. You might be asking where the taxis are during all this, well I’m still asking that myself. Contrast this with the beach town 30 minutes away across the state line, surge pricing is allowed and you’re always able to get an Uber quickly at peak times. You realize surge pricing is so obviously helpful if you’ve experienced the counterfactual, but I suspect not many do, and so many people frustratingly view it as being “gouged”.
steve
Sep 11 2024 at 12:02pm
I guess by some pedantic economic definition surge pricing is the same as price gouging but I dont think that is what people really think about. People have long accepted higher prices at hotels and other venues during vacation seasons. Some foods cost more out of season. What people object to, I believe, is rationing by price during emergencies and, as we saw with covid, using shortages or times of greatly increased demand to increase prices well above the costs of increased input costs ie into profits. AS Ryan at CATO noted about 1/3 of the increase in prices during our period of high inflation went to profits.
Steve
Jon Murphy
Sep 11 2024 at 12:20pm
Except, as the article here shows, people do not object to such pricing. Sure, they may complain, but they don’t object (in the sense that they refuse to pay).
Indeed, it goes to my point earlier: people would rather have goods at a relatively high price than no goods at a low price.
As an aisde, I recently demonstrated this point to my students. As I write this, Hurricane Francine has us in her sights. I, being single, had an excess of water for the storm, having steadily increased my reserves over the past few months. I informed my students I would be offering the excess water to anyone who wanted it; they just had to name their own price. All of them who took me up on the offer offered me of their own free will prices multiple times higher than Wal-Mart (who had sold out).
People don’t object. The complain, but at the end of the day, having the goods is more important than having none.
As an aside, you write:
Surge pricing is, by definition, price gouging, which itself just means an increase in demand. It surges even during emergencies (a quick check of my phone has Uber rides in New Orleans right now well over $100). It’s no more pedantic than calling, say, a scapel a knife. Sure, “knife” is a broader term, but a scapel is still a knife.
steve
Sep 11 2024 at 2:16pm
It should be noted that it’s people who can afford to pay more who do not object. When you ration by price some people who would value the product in question or need it more than others wont be able to afford it at increased prices. What you are advocating for is a system where the people with the most money will always get the product in short supply.
As I noted people have long accepted, those with money and without, stuff like vacations or out of season foods. There is time to adapt and there are substitutes or its stuff they can just live without. However, when to comes to essentials and especially when there is not time to adapt then I think there is a substantial population that is not happy about price rationing as its just another way of saying they will have to go without those essentials.
Steve
Kevin Corcoran
Sep 11 2024 at 2:58pm
This just isn’t true. You may recall that both Jon and I have, fairly recently, told you about how we’ve both been in emergency situations where we could not afford to pay higher prices, but nonetheless we did not object and still preferred that prices be allowed to sharply rise. And plenty of people who can in fact afford higher prices still object.
Jon Murphy
Sep 11 2024 at 3:18pm
Why doesn’t that happen, then? Why is it we see more inequality when there is price gouging legislation in place than not?
Jon Murphy
Sep 11 2024 at 4:55pm
Steve-
Let me tell you this as someone whose apartment is currently getting bombarded by 90 MPH winds:
The rich people aren’t here. The rich people left Thibodaux days ago. They are not the ones buying up water and gas because they’re at their lake house in Mississippi or wherever.
Us commoners, on the other hand, are here. Granted, Francine is just a 1, which the locals inform me is no big deal. The question of “how is water allocated” does not go away.
If the price is kept too low, there is not enough water; it goes into a shortage and people hoard, even when they do not need it. Or worse, they have to go store to store looking, which is dangerous in a hurricane when they should be sheltering in place.*
If prices rise, then hoarding is discouraged (it becomes costly) and alternatives are sought. For example, I knew the price of water was going to rise. I did sell much of my excess water to my students because 1) I had more than enough and 2) I am not above drinking bathtub water in a hurricane. Even though I make way more than my students (or the general area), I did not hoard the water but rather sought alternatives (bathtub water) to free up bottled for who demanded it more.
A final point: last time we discussed this, you poo-poo’d charity as a viable alternative. But charity is a viable and valuable alternative. It needn’t be the only one: nothing says the Feds or other agencies cannot also bring water to the market and sell at prices of their choosing. Nothing about the market system says people must sell at those prices. All that is determined is that at that price, the quantity demanded is equal to the quantity supplied. In fact, there is a great book you may enjoy called Community Revival in the Wake of Disaster by Virgil Storr, Stefanie Haeffele-Balch, and Laura E Grube. It’s about how communties and local entrepreneures arose to help rebuild New Orleans after Hurricane Katrina. It’s a fascinating story.**
When price gouging legislation is imposed, it effectively prohibits alternatives from arising. When the market runs dry (pun intended), that’s it. No charity can exist. No Federal or State alternatives can exist. People are made worse off. It seems to me counterproductive, not to mention immoral, to eliminate alternative sources of valuable and needed goods in an emergency.
*A related point: during the pandemic, there were price controls on masks and other PPE to prevent gouging and hoarding behavior. The resulting shortages caused people to go from store to store looking for required equipment. This, in turn, contributed to the spread of COVID-19 in the US.
**And now I live down with these people. I’ll tell you first hand, when problems arise, people band together.
john hare
Sep 11 2024 at 7:16pm
Some people band together. But there are some that will take whatever they can. I’ve witnessed it both ways. Banding together works well with most, but certain types must be excluded. I doubt that I need to give examples.
Craig
Sep 12 2024 at 12:12pm
“Surge pricing is, by definition, price gouging, which itself just means an increase in demand.”
But the yellow cabs do this as well when they charge you for time. Taxis are really distance and/or time so too is this surge pricing. Sure it very well could be related to additional demand in that area but that demand is what is making it take longer for the driver to come in and get you, it doesn’t have to be demand, it could be general traffic or construction or whatever. So if I want to go 5 miles and you want to go 5 miles but your trip will take an hour and mine will take 20 minutes, you might pay more, is that gouging if my trip’s price simply includes some (I don’t know the norm of course) presumed quantity of time that is considered ‘normal’
Henry
Sep 11 2024 at 12:31pm
“Price gouging”, is that the appropriate term? Busses are the fair Medium for prices and routine schedules. If you demand a ride from point x to point y and are willing to pay for jt then why is it gouging? Are auctions a price gouging event? Services sell to the highest bidder and customers can opt for the lowest offer. There are numerous ways to get around the city, your way is what you can or want to afford. If the service charges too much they lose business, too little, they lose revenue, price fluctuations always happen in uncertainty and prices rise with demand. It is a phenomenon that you cannot control.
Scott Sumner
Sep 11 2024 at 2:41pm
Everyone, Again, people may say they don’t like price gouging, but revealed preference suggests they do. It’s a mistake to ask people what they think about various economic policies, as most people simply do not understand the relevant trade-offs. Thus the same person might say they favor rent control, and then complain they can’t find an apartment, or that their landlord is a jerk—not seeing any connection between the two facts. So in frustration they move to a sunbelt city with no rent control. But they’ll still defend rent controls.
And it’s a myth that price gouging favors the rich. The goods do not go to those who can “afford” them, they go to those with the highest demand—a very different concept.
It’s perfectly understandable (even rational) that the public is ignorant of economics, but that ignorance should not be treated as some sort of folk wisdom. They are simply wrong about price gouging.
And it’s beside the point if the public doesn’t view surge pricing as price gouging. It is. It’s no different than a store selling bottled water at a high price after a hurricane.
Dylan
Sep 11 2024 at 6:12pm
I love rent control! Not only has it kept my personal rent insanely low, to the point where moving to a sunbelt city would be a step back in affordability, but it also hinders development and helps keep people out of my neighborhood And, the fact that my landlord stays away and doesn’t much care what we do in the building is another plus for a bunch of DIYers. From the POV of an incumbent*, it’s hard to even imagine a policy more personally beneficial.**
*Yes, I still have some neighbors with an insanely good deal that nevertheless complain about the landlords and try to get even more. Human nature I suppose.
** Sure, not great for the people who want to move here and can’t afford to, or the people that moved in later and have to pay the inflated market rates. But eh, they weren’t around to vote when politicians decided they needed to start handing out favors to the hipster contingent.
steve
Sep 11 2024 at 7:45pm
“they go to those with the highest demand”
Yes, if you define demand solely as the willingness to pay. If you include the ability to pay then it’s clearly not true. I am honestly surprised that economists, aside from the ideologically driven, dont understand or maybe its accept the idea that some people may be very willing to pay more but cant. That’s just part of day to day life, but it gets worse when the prices suddenly go up.
I think you make a case that rating by price is better than known options but I dont think you can pretend that here are negatives to that choice. It’s about tradeoffs.
Steve
Jon Murphy
Sep 11 2024 at 8:16pm
No. Economists define demand as the willingness and ability to pay. Both matter. It’s not just one or the other.
Which is why your claim that resources go to those who can afford them is incorrect
Jon Murphy
Sep 11 2024 at 8:19pm
That’s unreasonable. So much discussion here and elsewhere is precisely about those negatives.
Scott Sumner
Sep 12 2024 at 1:05pm
I would say that 99% of the time when someone says they can’t afford to pay a price gouger, they mean they don’t wish to because it doesn’t pass a cost/benefit test.. But there are a few times when they really cannot afford to.
I think people mix up two different issues. One is that rich people are able to buy more goods than poor people, even if there is no price gouging. That’s true. The other is the claim that price gouging makes this situation worse. That’s false.
David Seltzer
Sep 12 2024 at 4:16pm
Scott: The economist pointed out that ride share companies engage in price gouging when demand for their services is high: No commenter has mentioned toll lanes on some major interstates near large cities. We live 40 miles north of Atlanta. During peak rush hours into and out of the city, the toll to our exit on I85 is $15. During rush hours the lanes are heavily occupied. (revealed preference). During non-rush hours, the cost is about two bucks. I seldom hear people complain. I’ve heard others say more lanes would might reduce tolls. Others have said the time they save is worth the money.
Jim Glass
Sep 13 2024 at 4:03am
You seem maybe a bit ideological yourself, fantasizing injustice without thinking through, and looking at, real cases and data. “some people may be very willing to pay more but cant. ” “May”? Also, you aren’t considering whether the alternatives for these people is worse. Let’s see. Some examples from personal experience…
Superstorm Sandy hit the New York area in October 2012, where I was, when it was really cold, leaving the area without electricity for a week. No electricity meant no working gasoline stations because pumps were electric. BUT THERE WAS PLENTY OF GAS IN THE TANKS IN THE GROUND. To pump the gasoline up station owners wanted to do things like order generators from out of state (none available locally) via “special fast delivery” through a disaster area, which cost money! They also had to pay double wages (or more) to get people to work at the gas stations — labor sure doesn’t go at the “normal” rate during on ongoing disaster. (No anti-gouging laws for labor!) So prices had to go up. But New York, New Jersey, and Connecticut all had anti-gouging laws and acted to block all “gougers”, heavily fining many they caught, and convincing other station owners to just keep their gas down in the ground. I’m verifying my memory by Googling news reports of the time now…
Remember, there were “massive lines of drivers seeking gas waiting for hours” when there was **plenty in the ground**…
[] New Jersey’s law banned price increases over 10%. A few months earlier during Hurricane Irene it fined a station $50,000 for increasing its gas price by 16%. During Sandy it punished 65 stations for violating the 10% rule. How many drivers do you think really can’t afford a 10% (or 16%) increase in the price of gasoline to get it in a crisis?? Gas prices go up and down by more than that all the time in day-to-day business!
[] New York’s anti-gouging law had no formal measure of it — local officials decided for themselves. (Yea!) At the time of the article I’m looking at …
The case the AG bragged about was a state gas importer firm that raised its price 70 cents per gallon for the gas it brought in from elsewhere. Now, consider a low-income person who really needs gas to get to his job and *make money*. Can he really not afford 70 cents per, say $2 to $5 for a few gallons? Is he better off not paying the 70 cents, *not* getting any gas, and losing his income?? (I’m not going to bother with Connecticut)
Here’s another example I have personal experience with. Motels always have a variety of casual guests not there with any great urgency — vacationers, business people going through, kids on party trips, whatever. OK, now a big storm is predicted to come through. People on the coast may be forced from their homes. So local motels decide to “gouge” by doubling their room rates, which casual travelers won’t pay, saving room for refugees. If you are a refugee, you can’t afford to pay for a premium price motel room? Are you better off not getting a room, homeless in the storm, because the motel couldn’t raise its price, so it sold out to the party kids?
Another story. When I was a kid myself I had a nifty model railroad set up on a big plywood sheet. Now let’s imagine that when my dad was buying that plywood a big hurricane was approaching North Carolina or wherever. People really needed plywood to board up their homes for the storm, so the price of plywood there doubled. Market prices direct where goods flow, so plywood rushed to the North Carolina coast from all around. So there was much more plywood there to save homes — but since it came from where I was, no plywood for me and my train set up! I’m a victim of price gouging! For a couple weeks, until after the storm passes.
Do you really imagine that people who own homes can’t afford the doubled price of some sheets of plywood that may save their homes? Should that “gouging” have been stopped so I got my trains set up, and they lost their homes? They’d be better off that way?
Note well, in this case the price of plywood would have gone up much more in the hurricane zone, because there would have been less of it, supply-demand still operates, desperate homeowners would have bid up the price much higher. But with the “legal” price of plywood kept far lower, the sales would be black-market, trade for favors corruption, etc. Not good. But I’d have gotten my train table!
Warning: When real market price goes up due to a storm, emergency, whatever reason, but the *regulated price* is set far lower “to help the poor”, black markets and corruption always result. As a NYC lawyer who’s dealt with regulated prices for decades, especially with real estate, I tell you this as a hard fact. And this is equally true: It Is NOT Good For The Poor.
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