Thursday, February 13, 2014

This is your scarcity on price-gouging....

I did like the old "this is your brain on drugs" commercials.  Made me stop drinking coffee, and taking aspirin, out of fear.  OK, no it didn't.

Now, a lot of folks are showing how important it is to have thought about economics for more than 30 seconds before commenting on public policy.


1.  This guy is mad that prices at hotels and resorts are higher when school is not in session.  Wow.  It seems he would prefer a price of infinity (all the rooms sold out, years in advance) to being able to rent a room at the beach.  The reason that hotels raise their rates is to ration the scarce resource.  There are not enough rooms when school is out, and there are too many rooms when school is in session.  You can't change that by regulating the price.  And if you try to force the price to be "fair," you will make the problem much worse.

2.  Had lunch with my friend and Duke colleague Timur Kuran yesterday.  He pointed out this little gem of a story.  There is a housing shortage in the area.  There are rent controls, or the prices would be much higher.  The solution to shortage is therefore...even tighter rent controls!

3.  Most remarkably of all, it appears that some people want to apply anti-gouging laws to ice.  No, not the cold stuff I wrote about, which is at least necessary after a hurricane.  I mean "ice" in the colloquial sense, like when J-Lo said, "You think you gotta keep me iced; you don't!"  Jewelry price-gouging!  Thanks to Tofe for pointing out this "gem."  (See what I did there?  I may charge extra now...)

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