Friday, January 10, 2014

Hard to Make Folks Better Off by Denying Them Alternatives

The logic of "price-gouging" opponents is sometimes hard to follow.

People have very few choices, and they are in trouble.

Therefore, we will take away one or more of the choices they do have, because...wait, why?

Dr. Laband has a nice piece in the WSJ today about the AEA meetings, and transport.  Check it out. (Gated)

The highlights:  Airport, snow, big convention.  No airport hotel shuttle, and no taxis.  Really need to get to hotel, because have big presentation at 8 am.  It's nearly midnight now.

Guy comes through baggage claim, offers to take people downtown for $25 per person.  Packs six people into van, drops them all off.  That's probably double what he was allowed to charge, and of course he wasn't really allowed to do it at all.

The state would have prevented this transaction from taking place, if it could have.  Were the six people "exploited"?  If you mean, did they have to pay more because they did not have good alternatives, yes they were.  The exchange was NOT euvoluntary. 

But prohibiting the transaction would have violated the non-worseness principle.  They were all bad off.  They would have been EVEN WORSE off without recourse to the market. 

The driver was not doing this for fun, or out of charity.  He was trying to make money.  He was THERE because the (implied, shadow, black market) price had risen in the face of transport scarcity.  The market told him to help those people who needed help.

1 comment:

  1. Well the derivatives are providing the platform for investors to bet on certain outcomes, either for the sake of hedging against potential risks or speculating aiming to earn higher profits.


Do you have suggestions on where we could find more examples of this phenomenon?