Thought I’d respond to, rather than fisk nessessarly, this NRT post.
Over in Public Address, Keith Ng attacks the idea that suppliers in Canterbury should price gouge to ensure a “more efficient” allocation of resources. As he points out, this isn’t just pointless – people wanting to flee town, or thinking they might need to will buy petrol no matter what the cost – but also deeply corrosive of social solidarity. And that solidarity has made a real difference in this disaster:
I’m just shaking my head at that logic. Because the “problem” is actually the point – people leaving town don’t care about the cost, they just need to leave. So they have to purchase petrol. So if they want to leave enough, they’ll have the money. However, people who aren’t using petrol and just want the “security” are going to look at the price and realise that their emotions just aren’t worth $5/L. And they walk away, leaving people who really need the fuel to purchase just enough to get to the next town where petrol is not under threat.
Incidentally, that’s what I did last time I filled up in Kaikura, 12 years ago. It’s not that I haven’t driven through Kaikura since, I just made sure I didn’t have to fill up there.
The reality of petrol is that people wanting to purchase it are a)Car owners and b) presumably have enough money to pay normal prices. So we’re not actually talking about people hard up here.
I mention Kaikura though, because one of the stations there was fingered as a “culprit” in the price gouging hysteria. I actually suspect myself that they were making less money than usual on a per litre bases since a) the price quoted wasn’t much above their normal markup on city prices and b) they were also probably having to source their fuel from Wellington, meaning that it would include the price of crossing Cook Straight. So quite often “gouging” is simply a reflection of the actual, abnormal-at-the-time cost of delivery.
The real problem with not raising prices in response to a spike in demand is that no one gets what he needs. Forget the poor, the first guy coming through the door has the ability to get goods at normal prices, he’s going to. In Christchurch, a boy racer filling up would pay the same as a family moving out of their destroyed house. At normal prices, the boy racer would think nothing of filling up and leaving less for the family, but at higher prices he’s going to think twice – assuming he has more common sense than money. Even the richest man is going to start questioning whether he’s really prepared to pay 3x the normal price on anything.
We see this all the time in ticketing – the first few people get piles of tickets, and the rest have to purchase from scalpers. Why not raise prices to match supply with demand? “Oh, we don’t want our fans to miss out.” The fans don’t miss out either way, but the event ends efficiently writing a big fat cheque to scalpers – money for nothing. I have supported price “gouging” on twitter for this reason – because in the not unlikely event that I travelled to Christchurch I wanted to be sure fuel was available to get me out of the city should I have problems. If the fuel’s all gone, I would be stuck, but if it’s $5/L I can buy enough to get me to Timaru where prices are normal.
Yes, it’s nice to keep prices at a low level. I suspect that much of the supply problem in Christchurch would have been to raise the price on the board (driving away the emotional buyers) and charging the normal price anyway.
But to continue.
The most remarked upon fact after the earthquake is the way in which people have been helping each other. Many people have acted in complete defiance of economic self-interest, and as a result, housing, labour, transport, equipment, all kinds of goods have been given to people who most need it.Somebody can probably wrangle an explanation out of this that’s consistent with classical economics. Perhaps helping the community is in their own long-term self-interest, and perhaps helping others means that they get helped in return.
But the bottom line is that a whole lot of people told the rational economic agent to take a hike*, and as a result, they did a much better job of efficiently allocating resources (that’s Economistspeak for “helping people and getting shit done”) than the market ever could.
Its a powerful reminder that at the end of the day, we live in a society, not just an economy, and that there’s more to resource allocation than just economist’s “efficiency”. But it should also cause us to ask some hard questions about our wider society. In Christchurch at the moment, there are people without homes who are being sheltered, and without food who are being fed. This response is a Good Thing, and its a sign of our fundamental decency and recognition that we can’t just leave our neighbours to starve. But there are people outside Christchurch with these problems as well, victims not of a natural disaster but a man-made economic one (but still every bit as blameless). Shouldn’t they be receiving the same help? Shouldn’t the government be acknowledging that basic duty of care to every New Zealander in need, not just to those in Christchurch?
Ok, let’s go through this.
Yes, people are receiving a lot of help, and this is indeed a good thing. I’ve offered help, my church has offered help. No one has asked us, we have seen the need and offered. Huge chunks of New Zealand have had a simmiliar response.
Outside of Christchurch, there are indeed people who have no house to live in. There are people who have nothing. There are very few however who have to wait months for working sewage, who’ve had their house destroyed for the second time in 6 months, or can’t get electricity because the lines are down.
It’s that large combination of issues, and the widespread scale that’s driving the charity right now. Welfare can’t help everyone. One single organisation would find it difficult to organise all the wide variety of needs as quickly as private citizens operating on their own or in groups can.
But the needs outside Christchurch are much more simple, and on a smaller scale. This family needs a house. This family needs income while someone is out of work. These things can be delivered by the welfare system, and are.
But the post is really weird about this difference.
Shouldn’t they be receiving the same help? Shouldn’t the government be acknowledging that basic duty of care to every New Zealander in need, not just to those in Christchurch?
That makes no sense at all in the context of the actual situation. The government is not the one providing the student army, or the farmers, or trucks of water, or offers of accommodation for those in need. The government can’t acknowledge that it owes everyone something that it’s offering no one.
We’ve had a situation in our street of the government “helping” someone. But before that happened I had to help the person concerned deal with the situation that had happened. I, and many others (actually, too many others) have helped with this situation to complement the services that the government clumsy provides.
The reality is that I’ve usually tried to help those I come into contact with. So does my wife. We don’t go out and volunteer at soup kitchens, but we pass on clothing to others in the community, offer help when someone is ill, and various other things. The government can’t sort those things out and I wouldn’t want them to. In fact I’d be horrified if they tried.
I’m trying to think of a way to tie this off, but I just noticed the sun is out and I have to go mow someone’s lawn. Seriously. There’s an act of charity – but excuse me if I baulk at the government providing a mown lawn for every able-bodied person on the dole.