4.9.16

PRICES FUNCTION TO ALLOCATE DEMAND.

Yesterday, we had occasion to note a Donald Trump operative stepping into it on the matter of taco trucks.  Yesterday, Mr Trump continued his outreach, visiting a church in Detroit.  Where a taco truck had opportunity to do business.  Good business.  "The truck did brisk business this morning — so much so that a form of surge pricing kicked in, raising the price for a steak, pork, or chicken taco from $1.50 to $2.50, [Michigan Public Radio correspondent Rick] Pluta reports."  Surge pricing happens to be a valid term of art in price theory, as is peak load pricing.  But there's another term of art describing the same phenomenon, and when the hurricane surge approaches, you hear it.  "With a hurricane comes the reality of price-gouging for essentials. State Attorney General Pam Bondi activated Florida's emergency anti-price-gouging regulations, barring retailers from raising prices on gasoline, water, lumber and other necessities."  Ms Bondi, who has appeared as a talking head on behalf of Mr Trump, is a long-time crusader against surge pricing.
As Hurricane Hermine exits Florida and life begins to return to normal, Floridians should still remain vigilant about price gouging and storm related scams. Unfortunately, unscrupulous individuals will use any threat as an opportunity to take advantage of those in distress — and that is why Wednesday, immediately following the state of emergency declaration, I activated Florida’s Price Gouging Hotline.

Floridians need to know it is illegal for businesses to grossly inflate the price of any essential items just because a disaster has occurred. My Price Gouging Hotline will continue to operate for all affected counties throughout the emergency declaration to assist any consumers who have concerns.
And she'd likely be scornful of any flack for a big-box store describing the higher price of plywood or nails as surge pricing.  But it's unlikely she, or any of the other Guardians of Public Morals who support my right, far from the hurricane zone, to pay the normal price for 3/4" CA plywood to keep on working on my railroad, to have a coherent defense to that claim.  Michael Giberson at The Knowledge Problem speaks truth to power.  " If you’re looking for substance on price gouging, you won’t find it in this interview."  He provides the substance in a later post.

Over the years, I've had occasion to analyze the phenomenon of surge pricing, as have others -- and yes, dear reader, Thanksgiving approaches, and Wisconsin continues to protect retailers against the Black Friday dumping of frozen turkeys, just wait and see!

There are carefully controlled circumstances under which limitations on surge pricing increase economic welfare, but those, yet another Michael Giberson post notes, do not include protecting my right to buy plywood at the customary price during hurricane season, or a Trump protestor's right to virtue-signal with a taco-truck taco at the non-surge price.

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