A Cabbie's Case for Price Gouging

As we covered yesterday, gas shortages are becoming a serious problem for the New York City area. With oil refineries in New Jersey hit hard by Hurricane Sandy and distribution routes slowed by flooded roads and power outages at pipelines, lines of cars have stretched for blocks to get into gas stations across the five boroughs. The smart people have gotten portable tanks and just walked to the local gas station to fill up and walk back to their cars or generators. But still, reports are everywhere that pumps have dried up and it may be a few days or next week before they can get refreshed.

And yet, according to GasBuddy.com, the average price of gas in the New York City area remains below $4 a gallon.

Even the highest prices listed didn’t get past $5 a gallon. The primary reason is NY law prevents distributors from charging an “unconscionably excessive price” during “any abnormal disruption of the market for consumer goods.” In other words, if we regulators feel like that new price you’re charging is too much, we’re cracking down on you and your private business plan.

As ridiculous and vague as this law is written, I understand why many people see price gouging as in bad faith towards the community, and distastefully opportunistic. I fundamentally disagree with the spirit of entitlement that says we have any right to demand buying gas from any station at any time (disaster or not), but I understand the sentiment.

That said, the case for price gouging isn’t just an ideologue’s spiel for the wealthy elite. Allow prices to rise after a storm does not only help the "price-insensitive rich" as Felix Salmon suggested today in an otherwise well reasoned post. Lifting laws limiting the price of gas would help ration it to those who really need it at the prices they can afford, but these would not just be the rich. Plenty of paycheck-to-paycheck workers would gladly pay more for gas instead of sitting empty over the weekend missing out on work.

A cabbie told me today that he probably had three more rides left after dropping me off before he’d have to park his car and wait for service to return: “The lines are too long to wait for the gas. There are a hundred cars at every station with fuel left. And many of those people will just fill up their tanks and go home and not use the gas!”

He was clearly upset about the shortage because it meant he was going to lose work hours, which would lower his take home pay, and it was totally unnecessary because the gas he needed was going to sit idling in cars in parking garages along the Upper East Side. This was not a 1 percenter looking to fill his Maserati. Here was a lower- or middle-class guy needing to feed his family hurt because of the law preventing price gouging. If the price rose high enough, perhaps many of those filling up just to make sure they had it--because many people in the aftermath of a disaster gasoline rushes look like bank runs--then the people who really need the gas would consume the majority of it. 

I asked whether gas prices had risen in the wake of the storm.  “Nope. Normal prices,” he responded.

I suggested it might be better if prices rose to $10 a gallon and he cut me off with a classic, “No, there outta be a law to prevent that.”

Being the asshole libertarian that I am I pushed back and asked if gas went that high would he still buy it and be better off driving around to collect fares.

Apparently he’d not thought about that before because he sat silently, doing the math, and then ballparked a high price he’d be willing to pay for fuel that could still mean he'd make money driving his taxi. “Maybe the free market supply and demand would work it all out,” he offered. I smiled at yet another victory for libertarian rationalism and smuggly notched my mental headboard with another convert.

By this time we had gotten through the traffic jam created in Queens by NYPD checking every car to ensure there was a minimum of three people—a special rule put in place by New York City government to reduce traffic into the city following Sandy as a way of rationing the use of the roads. As we crossed over the East River and its still flooded subway tunnels, I remarked how great it was that the bridge was clear of traffic because of the high occupancy limits and how wonderfully fast we were getting into the City.

Not skipping a beat my cabbie quipped dryly, “Yeah. You see, sometimes the government can make smart decisions.”

Touché, Mr. Cabbie. Touché.

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  • IceTrey||

    “Yeah. You see, sometimes the government can make smart decisions.”

    Except how much MORE gas is being wasted sitting in a traffic jam?

  • Bam!||

    The helicopter shot I saw of the police check point showed ONE officer checking all four lanes of traffic, creating a bottleneck.

    If you're going to implement a dumb policy, can you at least be implemented competently?

  • Tulpa (LAOL-PA)||

    And there's probably no exception for motorcycles, which would make it even more stupid.

  • Suki||

    Circus acts would get an unfair priority?

  • Heroic Mulatto||

    A cabbie told me today...

    Unless that conversation was entirely in Urdu, I call bullshit on the whole article.

  • Ted S.||

    How do you know Anthony Randazzo doesn't speak Urdu?

  • ||

    Sounds like your wop ass got PWND, Big Tony.

  • Mencken Sense||

    Of course if gas were $8 a gallon, there would be an increased incentive to spread the cost by carpooling.

    It's unintended consequences all the way down...

  • anon||

    Forseeable consequences are not unintended.

  • Tulpa (LAOL-PA)||

    Apparently RC Dean is the L Ron Hubbard of H+R.

    Foresight and intent are two. entirely. different. concepts.

  • ||

    Green is not a lovely shade for you.

  • anon||

    Intent requires foresight. I think you were being sarcastic, but also realize that you're Tulpa.

  • ||

    But foresight doesn't require intent, which is his point. That they knew something could happen doesn't meant they intended for it to happen. Just as Cytotoxic doesn't INTEND for wars or certain tactics to kill innocent people, but he sure as hell knows they will.

  • robc||

    But the point of the Iron Law isnt to make a logical point. They are valid arguments that dont meet strict logical standards*.

    And the point is, yes, they did intend it.

    They had the foresight, and they said, yeah, we are fine with that.

    *If Im debating the Challenger accident, "because Feynman said so" is a winning argument, even though it is technically an appeal to authority.

  • ||

    They had the foresight, and they said, yeah, we are fine with that.

    Being "okay" with it, if they were, ISN'T the same as trying to make it happen, which is EXACTLY what "intent" speaks to.

  • anon||

    Not sure I understand the semantic argument you're trying to make here; forcing gas stations to sell gas at a below market value is obviously going to create a supply shortage of gasoline. Are you trying to argue that officials should be excused of this ignorance simply because their intent was "good?"

  • ||

    They're unintended consequences if the legislators that voted for the law were ignorant of their obvious consequences, or chose not to believe the furious objections from the minority party who outlined in great detail what would happen.

  • robc||

    The furious objections preclude the ignorance argument.

    "chose not to believe"

    If you choose not to decide, you still have made a choice. Or something.

    As you said "obvious consequences". They decided to go ahead anyway, they intended those obvious consequences, even while denying it publicly (and to themselves).

  • guitargeek||

    "If you choose not to decide, you still have made a choice. "

    Yeah! Rush!!

  • sarcasmic||

    They're unintended consequences if the legislators that voted for the law were ignorant of their obvious consequences

    Intentions are all that matter. They did not intend for there to be shortages.

    They intended to eliminate hurt feelings when people saw the jacked prices and had to decide if they really needed the gas that badly.

    To point out the results is to criticize their good intentions, and that's just mean.

    Why are you so mean?

  • ||

    "Not sure I understand the semantic argument you're trying to make here; forcing gas stations to sell gas at a below market value is obviously going to create a supply shortage of gasoline."

    Forseeable does not necessitate that it was foreseen. It's obvious to us that forcing sale below market value will create shortages. You're presupposing that it's obvious to the lawmakers as well. I don't give them that much credit.

  • robc||

    You're presupposing that it's obvious to the lawmakers as well.

    Considering is is basic fucking econ 101, yeah, I think its obvious to lawmakers as well.

  • Cytotoxic||

    Indeed. The Iron Law doesn't make sense to me for this very reason.

  • Dr. Frankenstein||

    Think liability rather than foreseeing. But yeah not my favorite iron law either.

    You're liable for unintended consequences.

  • ||

    You're liable for unintended consequences.

    Absolutely. Whether they were trying to make it happen or not, while not irrelevant, is not as important as what ACTUALLY happens, and politicians should always be taken to task for side-effects of what they pass.

  • pmains||

    Apparently RC Dean is the L Ron Hubbard of H+R.

    Foresight and intent are two. entirely. different. concepts.

    Legally, that's not necessarily true. If a reasonable person can foresee that action A will lead to consequence B, then it is typically assumed that a person engaging in action A intends consequence B. It's one of the ways we have created objective standards to identify (not infallibly, of course) subjective states, such as Mens Rea.

  • ||

    Forseeable consequences are not unintended.

    Foreseeable to who? If a legislator is too ignorant of economics to understand what an awful idea price "gouging" laws are, and thinks the minority party opponents pointing out those flaws are The Stupid And Evul, then the consequences are, in fact, unintended -- for them.

  • nicole||

    Just heard on NPR that if only we were further ahead on electric vehicles, no one would be having these problems because they wouldn't need gas.

    Seriously.

  • R C Dean||

    Mrs. Dean (a gearhead) and I were talking about how utterly fucked you would be in the hurricane zone if your only vehicle was electric.

    I'm about 99% sure that emergency generators can't juice an electric car, since they have crazy power requirements.

    So, you're totally at the mercy of the power grid. People are still getting gas, but we are a long, long way from big chunks of the zone getting their power back.

  • anon||

    Depends on the power your generator produces. Smaller generator = longer charging time; however, the vehicle would still charge.

    Of course, blowing $50 on gasoline to power your generator for the 24 hours it'll take to charge your hybrid to go 50 miles... well, yeah. Have fun with that.

  • R C Dean||

    I had to check: yes, you can charge a volt from a standard 120v outlet, but it takes 10 - 12 hours. Theoretically, you could plug it into an emergency generator, BUT, I'm not sure what kind of amperage it takes, but your smaller generators might not be able to push it.

    The special charging stations are 240v, and would have to be hooked up to your house electic, and you would have to have a very impressive emergency generator indeed to manage that.

    And lets face it: the urban greenies who have these things are not going to have any kind of emergency generator.

  • anon||

    Exactly; the problem lies in the voltage. Higher voltage produce higher amperage with higher efficiency.

    Also, most "cheap" generators produce enough amperage to keep a fridge, house fan (furnace motor) and a few lights going. Rule of thumb would be if your generator can power a refrigerator, it could "theoretically" charge your vehicle. I say theoretically because the charge time for the vehicle would take so long that it'd probably be just as good as useless.

    But yeah, if you had one of those industrial grade generators, it wouldn't be an issue at all. Depends on how much money you spent on emergency preparedness.

  • NoVAHockey||

    "have any kind of emergency generator."

    speaking of. a natural gas standby w/ transfer switch has been on the shopping list. any recommendations?

  • Ptah-Hotep||

    We have one of these:

    Diesel w/auto transfer switch.

  • Paul.||

    I had to check: yes, you can charge a volt from a standard 120v outlet, but it takes 10 - 12 hours.

    What's the current draw and does the standard small, Honda generator supply that? IF not, you toast your generator. Getting 120v is only half your solution. I can produce a 350 watt 120v outlet from my cigarette lighter in my car. But can you charge a Chevy Volt off of it? I strongly doubt it.

  • ||

    And you neeed gas to power your generator anyway!!!

    Does anyone actually think it's more efficient to use gasoline ro run a generator to charge an electric car than to just put the fucking gas in the fucking car?

  • Paul.||

    Heehee. Hazel, I hope you're well paid for whatever you do, because nothin' is slippin' past you.

    Exactly correct. Otherwise smart people forget that when you burn gas to generate electricity to charge a battery to give you power, you have efficiency issues at every juncture, and it helps to remember that hey, if I'm going to burn gas to spin a motor to generate electricity which will later spin a motor, why don't I just burn gas to spin the damned motor?

    I remember someone suggesting selling a trailer with a big gas generator on it which you would tow behind your electric vehicle. The generator would charge the battery as you went and... yeah...

  • Suki||

    Solution: Go to the bar, tell them you need to plug in your iPad and run the extension cord out to the car. Then run your extra long iPad car cord from the car back into the bar.

    Bonus: Cops too busy to pull you over after 12 hrs of drinking.

  • Tulpa (LAOL-PA)||

    That person needs to go to NYC right away, because their stupidity is so pure it could probably be harnessed as a power source.

  • nicole||

    Dude, it was Science Friday. They're there.

  • Tulpa (LAOL-PA)||

    In all seriousness though, the perfect disaster/bugout vehicle IMHO is a bicycle.

  • ||

    Again, fiction predicts reality. I thank all those apocalypse stories for warning us about the efficiency of bike travel in the post-apocalyptic world.

  • Paul.||

    Negative, it's a horse.

  • anon||

    Fuck that, it's a loaded .45.

  • Paul.||

    On horseback. Yes, very true.

    I have a friend that would argue that it's two 1847 Colt Walkers, but I think we're on the same page.

  • ||

    It's a horse, with a loaded .45, IN SPACE. That'll get you going, if I understand my science-fisics right.

  • ||

    Paul is correct.

    All a horse needs is grass.

  • robc||

    A motorcycle is probably better, in most cases.

    With the gas mileage on a motorcycle, you can bugout until gas in available.

    Of course, if we are talking Revolution, yeah, the bicycle wins.

  • Restoras||

    Not the horse? I think I'd rather have the horse. You look more impressive sitting on a horse, and you can eat it if you need to. Plus the horse does all the work.

  • robc||

    Horse outranks bicycle, I guess. But if the bicycle breaks down, I can fix it.

  • Heroic Mulatto||

    True, but can your bicycle make more bicycles?

  • robc||

    I have a Von Neumann bicycle.

  • robc||

    Also, it takes two horses to make a new horse.

  • Heroic Mulatto||

    Also, it takes two horses to make a new horse.

    Well, of course.I have a household greater than one person...so I would have more than 1 horse.

  • Cytotoxic||

    Also, the horse is a companion.

  • ¿Ex Nihilo?||

    Also, the horse is a companion.

    And you can eat it if things really become desperate.

  • robc||

  • ¿Ex Nihilo?||

    Well sure, but how well did his body convert it to energy?

  • robc||

    My guess is "not at all".

  • Tulpa (LAOL-PA)||

    Horses require food and water and are much more expensive to maintain before they're needed. Also much harder to lock up.

    If you have to go somewhere fast, maybe.

  • ||

    The horse can be trained to crush zombie heads with it's hoofs.

  • NoVAHockey||

    no, they just burst into flames when wet.

    http://updates.jalopnik.com/po.....t-fire-and

  • The Original Jason||

    If your car didn't catch fire when it got wet...

  • anon||

    Quite hilarious design oversight.

  • ||

    Just heard on NPR that if only we were further ahead on electric vehicles, no one would be having these problems because they wouldn't need gas.

    This kind of thing makes me want to cry.
    Yes, the people who control our media ourgans, our universities, and our government, really are that stupid. Or maybe it's that their idealism makes them blind.

    I weep for our children's future when people like this are in control.

  • nicole||

    I know. And, like I said, it was Science Friday! It was a good thing the guy said this just as I was pulling into my parking space because I literally banged my head on the steering wheel when I heard it.

  • Suki||

    I just saw Jay Leno on a PBS show yesterday showing off one of his antique electric cars that used to prowl the streets of Manhattan in the early 1900's. He even had the old charging station that he said were all over Manhattan back then.

    Who would think that NPR's vision of the future is really 110 years in the past?

  • Paul.||

    Uhm, regulators (legislators) will learn nothing from this. Price gouging should be illegal. The shortages are just a biproduct of the tragedy that was Sandy.

  • sarcasmic||

    Shortages during price controls are a failure of the free market.

  • Paul.||

    Exactly. This is why we need more controls.

  • anon||

    Control! YOU MUST LEARN CONTROL!

  • R C Dean||

    Of course, talking market economics with someone who is a professional rentseeker will always be . . . interesting.

  • anon||

    Kinda like slamming my dick in a hot oven is "interesting."

  • Paul.||

    More like describing color to a blind man, interesting.

  • robc||

    Foreseeable consequences are intended.

  • Tulpa (LAOL-PA)||

    Selling $4 a gallon gas in this mess means someone in the delivery chain is getting seriously screwed, either the gas stations or the fuel deliverers or someone else.

    Which might explain why gas stations are closed and few delivery companies are working to get gas in right now.

  • anon||

    Just a side note; it's awesome how all these green-loving peacenik democrats are fiending for teh oilz, and still want it to be cheap too. Fuckers. Let em starve.

  • ||

    Barack Obama doesn't care about white people.

  • anon||

    Barack Obama doesn't care about white people.

    fixed

  • The Late P Brooks||

    Is it price gouging if you hold an auction to set the price?

    You could do it in a tiered way; establish a price, and then sell at that price until nobody pulls up to the pump; repeat.

    Those who value their time highly will pay up and GTFO, leaving the bargain hunters to while away the hours in line.

    It would be an entertaining and educational experiment.

  • Paul.||

    I always felt that the entertaining and educational experiment was watching all the failures during Big Government's response to, you know, the actual disasters. Unfortunately, no one seems to avail themselves of the lesson.

  • sarcasmic||

    If someone has an emotional reaction to the price, then it is considered gouging.
    It doesn't matter what the price is or how it was determined. That's like logical and stuff. We're dealing with emotion here. Logic need not apply.

  • anon||

    We're dealing with emotion here. Logic need not apply.

    It's unfair how you've described both major party platforms with such brevity.

  • nicole||

  • pmains||

    Did he mention that price gouging laws are for the children?

  • sarcasmic||

    I managed to offend an uberlib coworker today by criticizing laws against price gouging.

    She described it as "It's unconscionable to profit off basic needs! I mean, you've got a daughter! What if people were charging ten bucks for gas and you needed to go to the hospital?!?"

    I said "That'd be cool because at ten bucks a gallon only people who really needed it would be buying it, so there wouldn't be any lines or shortages."

    Her head exploded.

  • The Late P Brooks||

    There would be tremendous entertainment value in watching teevee "economists" explain why allowing people to explicitly define their willingness to pay for scarce resources.

  • ||

    You're missing a verb, at a minimum.

  • Silly ol' Bear||

    Apparently you have very little concept of what price gouging is. Yes, we need to follow the law of supply and demand, but certainly within limits.

    What if you were in the middle of the desert, parched, dying of thirst, and I told you sure! No big, I have plenty of water! One 16 ounce drink will cost you a $1000, how many ounces do you need?

    Unfortunately, there are people on this planet that will always use any situation to screw other people. I don't know how old you are, but you must not remember the shortages in the '70's. Those shortages and those exuberant prices made many of these laws. Supply and demand is one thing, but even free market needs to be restrained on occasion.

  • robc||

    You learned the wrong lesson.

    The proper one is "If you are traveling thru the desert with assholes, bring enough water."

  • Heroic Mulatto||

    Those shortages and those exuberant prices made many of these laws. Supply and demand is one thing, but even free market needs to be restrained on occasion.

    i.e. When the market is disadvantageous to Silly ol' Bear.

  • Spoonman.||

    Those shortages were due to quota laws already in place.

  • MJGreen||

    OK, within limits. Filling up your car with gas is not the same thing as dying from thirst in the middle of the desert. So consider the desert scenario an offense (as it is under common law, I believe), but consider the gas station scenario legitimate commerce without the same limits.

    Of course, when people talk about being 'moderate' or 'practical,' recognizing the multitude of scenarios and making the proper concessions, etc., they're not really serious. They're just trying to sound rational as they hold fast to government meddling in situations that rub them the wrong way. They're often as rigidly ideological as the 'free market zealots.'

  • nobody||

    Well Silly ol' Bear, I'm sure that if some enterprising person learned that they could go to the desert and sell 16 ounces of water for $1,000 then they would go to the desert and sell that same amount of water for a bit less. Then, when the original seller is no longer able to sell the water at the original price they would probably lower the price to remain competitive. Over time, the prices would drop to a much lower rate. The only way the price could remain at $1,000 per 16 oz. drink would be if the original seller was granted a monopoly on water that was backed by the force of law.

  • Tulpa (LAOL-PA)||

    Holy contrived example, Batman.

    If you're in the middle of the desert, who's enforcing the price gouging law?

    And of course, do recall that the water possessor always has the option of refusing to give his water away at any price, in which case the parched person is screwed anyway.

  • ||

    People are only allowed to travel through the desert if they bring a minder along with them.

    Note that you're required to give 30% of your water to said minder to distribute as he sees fit.

    Consequently, nobody travels through the desert.

  • ||

    Unfortunately, there are people on this planet that will always use any situation to screw other people.

    So those people will just buy up the supllies at the controlled price, and then proceed to "gouge" on the lback market.

  • Brendan||

    Look, if I'm carrying bottles of water in the burning hot desert on the off chance that I might be able to make a sake,I expect to be compensated very nicely or I'm not fucking doing it anymore.

    If it's so important to you to travel in the desert without water and you find yourself in need of water, you can either pay what I want OR you can keep moving as if wasn't there.

  • Brendan||

    sale, not sake.

  • OldMexican||

    Re: Silly ol' Bear,

    Apparently you have very little concept of what price gouging is.

    This statement immediately conveys to me the idea that all this is satire.

    I mean, has to be. Nobody can be this dumb: "Yes, we need to follow the law of supply and demand, but certainly within limits."

    It's like saying "Yes, we need to follow the law of gravity, but certainly within limits!" Because, you see, he wishes to be a flying batman.

  • Brendan||

    Holden: You're in a desert, walking along in the sand, when all of a sudden you look down...
    Leon: What one?
    Holden: What?
    Leon: What desert?
    Holden: It doesn't make any difference what desert, it's completely hypothetical.
    Leon: But, how come I'd be there?
    Holden: Maybe you're fed up. Maybe you want to be by yourself. Who knows? You look down and see a man parched, dying of thirst Leon. He wants a bottle of water that costs too much
    Leon: Too Much? How much is that?
    Holden: [irritated by Leon's interruptions] You know what one thousand dollars is?
    Leon: Of course!
    Holden: That's how much.
    Leon: I've never seen demanded a thousand dollars for anything... But I understand what you mean.
    Holden: You reach down and you pull out a bottle of water and say "$1000 or no water"
    Leon: Do you make up these questions, Mr. Holden? Or do they write 'em down for you?
    Holden: The man stands in the desert, parche and dying of thirst, trying to get water, but he can't. Not without $1000. But you're not budging.
    Leon: [angry at the suggestion] What do you mean, I'm not budging?
    Holden: I mean: you're not budging! Why is that, Leon?

  • The Late P Brooks||

    You're missing a verb, at a minimum.

    THERE'S NO TIME FOR VERBS

  • The Late P Brooks||

    What if you were in the middle of the desert, parched, dying of thirst, and I told you sure! No big, I have plenty of water! One 16 ounce drink will cost you a $1000, how many ounces do you need?

    Is that you, MNG?

  • ||

    There are several other arguments for price gouging, including the ones Matt Yglesias has pointed out.

    1) The potential for windfall profits would encourage retailers to stock up on inventory items that only sell in emergency conditions. That might include gas dealers who might find it worthwhile suddenly to have a generator on hand to run the pumps for the gas tanks, so they can open. Or oil companies might fid it worthwhile to have emergency generators to run the fuel depots the tankers use. You can probably compute, based on the probability of an emergency happening in the next X weeks, how much extra inventory it might be worth keeping around. This would ultimately mean that more retailers would have more supplies available which would ultimately LIMIT the price shocks to consumers.

    2) Even if you ban price gouging, you will ecourage black market dealings. People who can afford to wait in line will buy up all the gas and then go to the back of the line and sell it for $10 a gallon to people waiting in line who are willing to pay that much. Same thing for all other emergency supplies. Do you really want the cops wasting their time policing a waiting line and going after black market gas dealers when they are urgently needed in an emergency?

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