Monday, November 05, 2012

Price "Gouging"

Further the gas line discussion earlier, I have seen a few people saying that restrictions on "price gouging" are part of the problem in Jersey.  The best pro-gouging (overall) piece I've seen is probably Yglesias', the only sort of detailed anti- bit I've seen so far was on Digby's blog. I don't really completely agree with either.

While my policy preferences would change things, right now, gasoline is a necessity for a large swath of this country, a luxury for a subset and totally useless for yet a third group.  Letting the market dictate prices benefits the luxury segment at the expense of the high need.  Restrictions in price changes that lead to huge lines disadvantage both, but, again, this falls more heavily on those that need gas than the others.  Straight up rationing works, but maybe not the easiest thing to implement, particularly in a crisis, and it may not prevent the lines anyway.

So what's the solution in these cases?  Some form of hybrid rationing would probably be best.  Everyone can get up to maybe 2 gallons at the normal price, then anything over is $$$.  The total volume locked in a the low price must be small enough to prevent lines but high enough to let people get somewhere.

Update: Really good read on this subject from Mark Thoma.

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