Wow. This is kind of impressive. So you're advocating using tax dollars to allow price gougers to get rich. You'd be happy to pay extra tax would you or do you have magic way of increasing govt revenue without raising your own taxes to pay for this use of our taxes?
I find it interesting that someone (and I'm guessing here) who opposes taxes increases and approves of tax cuts (for sound economic reasons of course) advocates spending tax dollars on simply making some greedy (yes that's the word I would use) people richer.
Fine. The other way, as Crampton suggests, is to leave prices where they are but have the government add a $2 surcharge to petrol, and spend the money raised on earthquake relief. This will produce at least some of the benefits of a price closer to a market clearing price (which means less hoarding, less queuing, less likelihood of a shortage, and a less serious shortage even if one does still occur) without the problem of oil companies making money out of the crisis.
The perfect rationality/perfect information arguments being bandied around is a straw man that has been endlessly rebutted by the profession. It is simply not the case that markets require perfect rationality or perfect information to outperform other allocation mechanisms. Human imperfections also impair government decision making. The question is, given the mistakes and foibles of real people in the real world, which of the many possible approaches to resource allocation perform best, and in which situations. As any economist will tell you, there is no one method that does best in every case.
It is apparent that nobody on this thread understands how prices are formed in markets or their function in resource allocation, or the role profits can play. Just a bunch of folks who can't tell economics from a caricature and think every economist on the planet has missed a clever sound bite on rationality or knowledge.
My observations of the real world is that the perfect information flow required to make you model work... general only the rich have full access to information to enable such "perfect pricing" decision making.
Again the caricature. No economist believes that. No economist would, to my knowledge, advocate a solution whose result depended on perfect anything, unless it was clear that the model could produce a result that was a good approximation to reality in spite of that simplifying though obviously wrong assumption.
No economist I know has any interest in defending the rich. Most, however, will defend property rights and advise against expropriation, and the main beneficiaries of this respect for the law is not the rich and powerful, who have access to the resources they need to defend themselves without the law, but the poor, who do not.
I'm surprised that the commenters here seem to think that if they cannot personally imagine how petrol can be shipped an hour down the road at short notice, then it cannot happen.
I wonder if it's a case of deny any goodness whatsoever to dirty filthy higher prices, no matter what.
I’m glad you came along Ben, for the sake of argument. But your argument seems to exist solely on a Hayekian fantasy plane
Russell, this is not difficult stuff. As you are no doubt aware another key resource in a disaster is ice. A couple of years ago a hurricane hit the east coast of the US, some kids bought 500 bags of ice in disaster-free Goldsboro and drive an hour to Raleigh, and sold it for a hefty mark up.
(They were duly arrested and charged with gouging).
Now petrol is more difficult than ice. But, really, can nobody anywhere solve the necessary problems at short notice? I wouldn't bet on it. Even if in this particular case they can't, the general proposition that higher prices encourage supply, in and outside a crisis, really shouldn't be that hard to see.
Keir there are something like 700,000 people in the South Island. The proposition that <i>none</i> of them have the means to move supplies of petrol an hour down the road at short notice is self evidently ludicrous.
I can assure you there is no religion that has as an article the ability of people to move large quantities of flammable liquid at short notice.
Seriously, you are suggesting that people would use their battery power on finding out where the cheapest petrol is?
You being disingenuous.
No I'm not suggesting that. As I said, gasoline coming from Kaikoura to Christchurch, not Merivale to Dallington, or whatever. If prices spike, no phone calls are required - doubtless the media will report $4 petrol. But if it takes a phone call or two to arrange hundreds or thousands of litres of new supply of the precious stuff, it is a good deal.
This is not complicated.
I prefer a can-do attitude. Maybe you are right but I reject the general proposition that there is no way supply can be arranged at short notice by the enterprising. An argument for decentralised decisionmaking is that new ideas can unexpectedly emerge. The example works for 1000 litre loads. Or 100 litre loads as well.
Why is it so hard to believe people can get gasoline from where it is cheap to where it is expensive at short notice?
I don't know what the regs are. Other regs seem to be suspended under crisis, Orion got its resource consent for a new line in 30 minutes. I am not denying regs and safety are important but it doesn't change the underlying proposition that higher prices will encourage people to work out ways to solve a shortage. If the regs really turn out to be insurmountable, then - fine - only the demand side argument is left for the benefit of higher prices.
Sacha I actually specifically addressed the point about people in genuine need - far better to target assistance to them so that they can get the resource they need, than to misprice the resource and produce a shortage. Surely you can understand the possibility that those in genuine need may be more, not less, likely to go without when supplies have completely run out?
You really don’t have the faintest idea do you of the difference between want and need; of can and must. Maybe come back when you’ve done some living beyond a textbook or an Act party branch meeting.
Oh I see. You're the type to get personal and call names.
Practically speaking, how is that information going to be disseminated? There are no phone lines/limited mobile coverage, no power, no internet access.
Mobile phones worked throughout the crisis in many parts of Christchurch, if spottily.
And just exactly how are going to arbitrage? You can’t arbitrage between petrol stations unless you own a minitanker and the station owner trusts your dodgy scrawled note that this is the real mccoy.
What is so hard to believe about people who have mobile tankers using them in a crisis to buy petrol in Kaikoura or Ashburton or Dunedin and driving them into Christchurch? I don't personally own one, but they exist. Is it really so hard to believe willing buyer cannot find willing seller in those places?
If you need to get across town to check on your family, you will do it, whatever the cost.
I agree - but you might not do it in a car if petrol is very costly - you might be more inclined to hitch a ride, or borrow a bike, or walk an hour. But you wouldn't walk 2 hours. The advantage of using price is that people will self-select in their withdrawal from the market up to the point where demand and supply meet.
The alternative is that this withdrawal is via willingness to queue or by top down government fiat - and the essential argument here is basically Hayekian: that the pricing system will do a better job on average of selecting the more from the less needy because it uses information about time and place better than queues and charity or government officials can. This process is, to me, the core of the argument, but it is lost in arguments that use words like gouging. When petrol is scarce we want people who can walk or hitch a ride to walk or hitch a ride, so that people in need get the key resource. Pricing helps find them.