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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (322325)	1/22/2007 9:56:21 PM
From: TimF	Read Replies (2) \| Respond to of 1574854

Price Gouging in Florida Thomas Sowell argues against 'price gouging' laws in Florida. Florida actually has a hotline for residents to call if they believe that they have been overcharged. (I'd love to see data on the number of calls received and the complaints put forth.) Sowell puts forth the valid argument most commonly made against price controls: that the price increase simply reflects increasing scarcity of goods and services as a consequence of a hurricane, tornado, earthquake or even war, which requires even more rationing than what was required before the disaster. Price controls simply distort this allocation. But there is another compelling argument against enacting price controls that is too often overlooked and that is that price controls waste our most precious resource of all--our time. Standing in line for hours waiting for some limited ration of water or ice or plywood simply expends time that could have been spent doing other important things. Water and ice and plywood still have to be rationed—we still experience the scarcity condition of our human existence—we now just ration it waiting in line rather than by paying higher prices. The former results in a waste of a resource (my time), while the latter is simply a transfer of a resource (my money) from me to the supplier of the water or ice or plywood. It is amazing to me how little this argument is understood. The National Gallery of Art in Washington, D.C. had a Van Gogh exhibit in 1998. Rather than sell tickets for admission to the exhibit the NGA offered only a limited number of tickets each day on a first-come, first-served basis. (Of course politicians and other VIPs were afforded private viewing times. Rationing obviously doesn’t apply to them.) Yes, people waited in line for up to four hours for a maximum of four tickets. An outrage ensued after it became known that some people, many of them homeless, would wait in line for the four hours and then sell their allotment of tickets for $40 (or some price close to that). This, of course, amounts to ten dollars per hour for four tickets, or $2.50 per ticket per hour. Those irritated by this event could not conceive that the opportunity cost of their time (or at least the opportunity costs of others’ time) was more valuable than $2.50 per hour. A few years ago a radio station in Maryland, in conjunction with a local gas station, offered to sell gas “at 1970s prices,” which was 75¢, or about 50¢ less than the existing local price of $1.25 per gallon. People waited for up to two hours to fill their tanks. If the average car held twenty gallons, which is a high estimate in my opinion, then they implicitly valued their time at $5 per hour. Until people learn the value of time—their time—and that time spent waiting in line is a pure waste of a resource—their most precious resource—we will continue witnessing this irrational outrage over "price gouging." And by the way, it is not uncommon to hear politicians bemoan the fact that businesses that raise their prices are simply "profiteering" off of others’ misery. They make these claims, of course, as they pander to the population in the devastated area, profiteering politically off of others’ misery. Update: I am not certain about the distinction Trent is trying to make, so let me make my point clear. Waiting in line is a waste of resources because it is time I spend doing nothing but waiting, whereas paying a higher price for something (greater than its normal price) is just a transfer of wealth from me to the supplier. In order to get money I did indeed have to expend some of my time, but that was time producing value to society in order to obtain money income. If I am a carpenter, then I essentially produced some house in order to obtain the scarce good as opposed to just standing in line doing nothing in order to obtain some of the scarce good. Posted at 02:05 PM in Economics liberalorder.typepad.com