Different River

”You can never step in the same river twice.” –Heraclitus

November 18, 2005

Modern “Economics” and Price Gouging

Filed under: — Different River @ 4:08 pm

OK, so I’ve been following the news, and the (mostly) liberal commentators, and so on, and the radio, and I’ve yet again noticed that to be right-thinking (or should that be “left-thinking”) these days, you need to believe two completely contradictory things:

  1. When the price of oil goes up and Exxon/Mobil charges more for gasoline, this is “price-gouging.” In other words, Exxon/Mobil is evil because they charge high prices.
  2. When Wal-Mart uses its volume-buying power and a super-efficient distribution system to charge low prices, this is bad because it runs “mom and pop” stores out of business. In other words, Wal-Mart is evil because they charge low prices.

I wonder — if a huge oil company like Exxon/Mobil charged low prices at a time like this, would they be excoriated for running “mom and pop” gas stations out of business? Because it would have that effect. In fact, it is precisely for this reason that the state of Wisconsin has a law mandating minimum gas prices. In Wisconsin, price-gouging is manadatory! (If it’s illegal too, that really puts the gas stations in a bind!)

And if Wal-Mart charged higher prices to avoid running runs “mom and pop” stores out of business, would they be excoriated for “price-gouging”? After all, they’d still have lower costs, so they’d be making huge per-unit profits. (Probably less profit total, since they’d sell fewer items, but they’d make more per item on those fewer items.)

2 Responses to “Modern “Economics” and Price Gouging”

  1. ollie Says:

    Actually, you know better than this. It isn’t the gas station owners that are being blamed; it
    is the big oil companies that supply the gas to the owners.

    So these are two different things: people are complaining about the supplier to the retailer
    doing price gouging, and then people are complaining about the large retailers temporarily lowering
    prices so as to drive the mom and pops out of business.

    I am not saying that I agree with the complainers, but I’ll give you a local story of how
    a mom and pop competed: what they did was to get certain deli meats that the other stores in
    the area just didn’t carry. So, fans of these meats come to the mom and pop, and while they
    are there, decide to buy other things.

    Where does local government come into this? Well, one of the reasons that I often shop there
    is that there is a nice sidewalk from my house to that place; hence I save time and get some
    exercise by going there.

  2. Dave Schuler Says:

    My gripe on the oil companies is rent-seeking. When you get as much in the way of subsidies as they have it’s a bit much to complain about excess profits taxes as an interference with the workings of the market.

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