The Department of Defense is trucking 12 million gallons of gasoline (that's a lot of gas) to New York. Until now there has been no gas. In other words, the Federal Gov't is supplying gas.
Where was the "invisible hand" of the free market? Where were the suppliers anticipating conditions as a result of listening to the perfect information supplied by the perfect, all-knowing market?
I just had to post this hysterical comment that Rob Parenteau put on my Facebook page. It's hilarious.
| Wait, Mike, you mean das Frei MarKet, with its illustrious and ever innovating Invisible Hand, didn't deliver the goods already? WTF? Must be price controls or sumpin inhibiting all those entrepreneurs from buying and selling and bartering and trucking all that fuel from transnational oligopolistic oil companies into place in near perfect anticipation or at least nearly complete knowledge of future demand schedules. And now, back to Atlas Slouched. |
I'm sure Libertards and conservatives will be all over this with lame excuses like it was gov't regulation or some other crap that blocked the ability of businesses and entrepreneurs to supply gas.
48 comments:
Where was the free market? Locked up in jail. "Price gouging" is illegal, remember? Repair people without licenses are being arrested by the nanny staters.
Another Mike Norman fraudulent argument. There is no other kind.
You guys are simply shameless.
That's what the slave-owners and snake-oil salesman said.
Bob, don't you have anything else better to do with your time than troll this site? Why don't you just jerk off like you usually do?
Mr. Norman:
Thanks for your usual insightful, thoughtful and scholarly reply. I expect nothing else from you.
Goodness sakes. Even Uber Keynesian Yglesias knows that anti-gouging laws cause shortages. Only a special mind does not know that.
http://www.slate.com/blogs/moneybox/2012/11/02/price_gouging_and_supply_elasticity.html
Government does these kinds of relief things far better than das frei market. It's not about price qouging and profit. Not enough people have figured that out yet. Takes something like this to drive the point home. Can you imagine what things would be like with no government to step in?
Goodness sakes. Even Uber Keynesian Yglesias knows that anti-gouging laws cause shortages. Only a special mind does not know that.
Unless govt draws on its buffer stock to increase supply during the shortage. Doh.
This is a market failure - pure and simple. High prices will cause a fall in demand, which will reduce the ability to transport people and goods. Which is the exact opposite from what you want in this situation. You want the situation to get back to "normal" as soon as possible.
High prices (gouging) will bring demand and supply into balance - but at a much lower usage -- lower usage is not optimal from a social point of view. So both anti gouging laws and the government moving supplies into shortage areas is perfectly rational and justified.
Right. Yet another instance of confusing market fundamentalism with social utility.
Why is there always a FIGHT over individual vs team actions? There are times for both, and NEVER a reality when coordination should be outlawed.
Bob Roddis, please stop arguing that any & all examples of public coordination will kill private initiative. We need to keep both return on personal initiative AND return-on-coordination in our repertoire.
Bob, just slowly back away from the asymptote, and no one will be deranged. Let the mania over extreme extrapolations go, and return to the safety zone BETWEEN tolerance limits. Hugging one of 'em just makes you a uselessly squeaky wheel. We need reason that is able to to traverse the entire zone between perspectives, not just plot an extreme direction and head that way.
Whether or not anti-gouging laws are good, fair, wonderful or horrible, when in place, the result is no longer a "free market" from a definitional standpoint.
The fact that none of the bloggers (as opposed to commenters) for this site can discern something as simple as the difference between identifying the name of the policy in place and the alleged results of such policy is quite telling. Just like most everything you guys say.
It really does not hurt my feelings when you so loudly and boldly display the workings of your sharp and analytical minds for the public to see.
Anti-gouging laws keep supply from increasing. So while initial high prices would have reduced the quantity demanded (not demand), it induces supply and a more "normal" environment. High prices in the short term are not a bad thing, gasoline would get allocated to where it's valued most, rather than how it's distributed now. Now, we see huge shortages, rationing, and no inducement for supply to increase. And anti-gouging laws as well as restrictions on interstate gasoline purchases are very far from a free market at all. The price system being impeded is the very definition of government intervention.
Bob, when are you going to realize that the so-called free market is a theoretical idealization that doesn't exist outside the mind.
The problem with economics with respect to usefulness is that many economists project their theoretical idealization into social, political, and economic policy, with disastrous results socially, politically and economically. Practical design problems are engineering problems and management issues that draw on theoretical models as one type of tool in the tool box. On the other hand, many economists take their chiefly assumption-based speculative way of the thinking as the only tool that is available, even rejecting other economic approaches as worthy of consideration. That's just dumb.
@ JBert
Theoretical nonsense. It would allocate a necessary resources based on ability to afford it. What we would see is a line of limos whose owners were willing to pay whatever without even asking what the price is, especially on the Eastern seaboard and NYC in particular.
I don't think that some people realize that if necessities were to be rationed by price in a disaster zone, the likely outcome would be a revolt. Gov. Cuomo, Mayor Bloomberg, Commissioner Kelly are aware of this, and likely Presidente Obama and other political leaders, too. It would make Occupy Wall Street like like tinker toys.
The high price is a signal. Gasoline prices going higher for a week or two would put it out of reach for very few and the wealthy argument is exaggerated. Right now, there are taxi drivers and commuters who have no gas. They'd pay higher prices. Commerce allocates resources based on ability to transact, necessary or otherwise. If it's your opinion that the new equilibrium in a free market would be a market failure based on allocation, then OK, that's your opinion. If it's the story that the current shortages and continued depressed supply in the mid-Atlantic is a result of a free market failure like the original post says, that is against the reality of the situation.
JBert, do you have any idea about what's happening there? Evidently not.
The free gas from the govt stock is arriving in NYC now and being allocated based on need, e.g., to firsts responders at the head of the line. The public is being told to hold off until that need is filled, and apparently everyone is is OK with it so far since it is reasonable. Most people that don't have much don't see price allocation as either reasonable or fair. In a situation where emotions are running high, that's not where the authorities responsible for maintaining order care to go.
The stock is needed because the supply is low, the supply is low because of restrictions on price and supply, therefore blaming the current problem on the market (the original post) is disingenuous. The gas that was allocated at an artificially depressed price is not allocated efficiently. The two well-known problems in such a situation are shortages and hoarding. People keep a safety stock that they may not use. With price-clearing, that gas gets allocated to higher value uses, as people economize on resources. How can those who need supplies most get them when there are hour long lines and shortages everywhere? Also, higher prices inducing supply would mean more gas, which is overlooked. You say price "rationing" would enrage people, yet I'd say shortages and actual rationing do as well. I think i'm informed of both the situation and the economics at work here, moderately condescending comments notwithstanding. What are you saying that free gas from the gov't makes the economics of the impetus for the free gas futile? Surely not. Have a good night, Tom.
Mike Norman,
Nice ad hominems when someone points out the San Andreas sized faults in your reasoning. Keep it classy.
If this is what MMT has to offer they are really in trouble...
Like the US relied on the free market to solve economic problems during WWII. If we had followed so-called fre market principles, you'd be speaking either German or Japanese depending on which side of the Mississippi you live.
Actually, Bob has a good point. Markets are the best way to allocate scarce goods. If public officials are smart, they can create incentives for the markets to do this in an equitable way.
As I've mentioned before, Congress would do well to set up Marty Feldstein's system of Tradeable Gas Rights(for obvious political reasons, they'd inevitably be allocated on statewide basis).
"A key feature of these gasoline rights is that they are tradeable. Individuals with more TGRs than they need could sell the excess, while those who want to use more gallons than their allocation would have to buy extra TGRs... while a gasoline tax lowers everyone's real income, the TGR system creates winners as well as losers. Someone who receives 800 TGRs for a year but only needs 500 would pocket $150 by selling his unwanted TGRs."
http://economistsview.typepad.com/economistsview/2006/06/tradeable_gas_r.html
I can't believe someone so ignorant of economics can have a popular site.
There is no free market in gas, or electricity, in the western world, and using this an example of market "failure" is not only disingenuous but fraudulent. I hope no one takes your stupidity seriously.
Just to give an example so simple even Mike N can understand-
If gas cost $10/gal then every gas truck west of the Mississippi would be on their way to NY/NJ. The price would then drop dramatically.
That's just how the true free market works.
Just to give an example so simple even Mike N can understand-
If gas cost $10/gal then every gas truck west of the Mississippi would be on their way to NY/NJ. The price would then drop dramatically.
That's just how the true free market works.
Maybe, but even if so, they couldn't get into NYC. Don't you pay attention to the Twitter feed and realize what is going on there?
I think that a lot of people commenting on free market solutions have never been in the military as least never near combat, and they haven't been in a disaster area either.
What is needed is effectiveness and resilience. That means chiefly preserving order and doing whatever it takes to get what's need where it is needed on time. Markets are not set up to do that or the military would be using them at the front.
Tweeted I'm in Far Rockaway. Help needed here. There's nowhere near enough food, no heat/power. Children in great need.
I guess prices aren't high enough there yet to bring in the scalpers.
Tom, I had a disaster declaration by President Obama in my county in the last few years. My sister commuted into Manhattan three nights ago with no problems. CT and NJ have gas shortages for miles around, which are not at all as hard to access as NYC/Interior NJ. Also the shortages cause traffic, as there's more people on the streets and they're driving farther for gas and supplies. In regards to food, raising prices on food in NY during an emergency is 100% illegal, as NY declared state of emergency 10/26. Note also that if prices cleared the market before the hurricane then there's a much better chance of supplies being available now, rather than the empty shelves syndrome of hoarding and panic buying at lower than clearing prices. When laws are on the books so that you know you can't move goods into an affected area and earn abnormal profits or compensatory profits for the trouble, then people won't bother. NY, NJ and others issue subpoenas and fines for such activity. Furthermore, the original Tweet that you quote mentioned "people looting" as well (@jcourtsull). Makes me wonder..... Anyway, I promise I'm done here, there's only so many straw-men a person can take. Adios.
When snow storm are coming, Walmart is famous for it's ability to direct inventory to stores in the area where the storm is going to hit... and they dont raise prices, they just see it as an opportunity to move more inventory sooner... same with Home Depot and lumber, when the Hurricane is coming, the lumber is the same basic price as it was 3 weeks ago...
only with petroleum products do you see this type of price gouging... thats why everybody hates oil companies and oil use... find somebody outside of oil areas who likes the oil companies..
although there are now water shortages being reported too, that sounds like an emergency management F up...
rsp,
"With the reopening of the Port of New York to tankers on Thursday, and the return of a critical Northeast fuel pipeline to full capacity on Friday, the biggest outstanding problems are the lack of power at hundreds of gas stations and continued panic buying by the public, industry officials said.
Because electricity will not be restored in parts of central New Jersey for seven to 10 days, gasoline shortages may remain severe in some areas. As of Friday, according to AAA, only 40 to 50 percent of the gas stations in New York City and New Jersey were operating, and even fewer were operating on Long Island. Most of the stations were out of service because of power failures.
“We have seen some stations open as power is restored, but other stations have closed while running out of gas,” said Michael Green, an AAA spokesman. “The long lines and supply problems will go away once power is restored.”
http://www.nytimes.com/2012/11/03/business/military-to-deliver-fuel-to-storm-region.html?ref=nyregion
Higher prices wont help restore power, generators will....
This is NOT a situation where "economics" can provide a solution, concerted action will...
Just saw on Twitter than the police are telling people not to hand out free food and stuff tomorrow because it is causing too much traffic. They need to keep the supply lines open for stuff on the way.
I am not particularly concerned about areas that are not actual disaster zones. But things are different in a disaster zone and ad hoc solutions can just impede organized disaster-relief operations.
Ordinarily I am not in favor of hierarchical solutions, but in situations requiring highly coordinated response, it's essential.
For example, a huge aspect of both the military and emergency relief involves logistics. Effective solutions that can deliver quickly on target require high-level command and control as well as agile adaptive tactics on the ground to get stuff to where it is needed in the right amount in a timely way. At the same time, the population needs to be made to feel safe and that everything possible is being done that can. The area affected by the storm is as large as Europe and it needs to be treated as an operational theater is treated by the military in wartime, where life is at stake and timing of the essence.
I am all for markets being used as tools where appropriate, but I don't think that there is a lot of scope for them in disaster areas. In fact, I think they can be detrimental if an attempt is made to use them where it is not appropriate and more effective means are available.
If you've noticed, a lot of companies are just making stuff available free. In the end, it will be good business for them, too, as well as the right thing to do in an emergency when they have the resources available.
All good points, Matt. energy is showing itself to be a sine qua non of civilization. Hopefully, we will learn something from this.
Regarding the gas shortage, two points. Hard to store gasoline safely, so it is not unexpected that there would be shortages for lack of storage space locally. Secondly, generally tanks are running half-full on average, but when there is a shortage threat everyone tops up. That drains the normal supply. The authorities were right to truck in that gas and give it out free to get things moving again ASAP. Without energy, modern life grinds to a screeching halt.
Water is no different in a disaster zone. It is almost always a problem, and I doubt that lack of preparedness is the major issue here. Costal cities and town are exposed and there is not a lot that can be done about that against the forces of nature. That water has to be pumped and when the electricity goes down, the water pressure does too.
Maybe this will be a wake up call to upgrade the grid and also decentralize power, too.
Right Tom by now we should have had all local delivery level electric lines buried... gas stations should be given tax credits to put in mods to their panels for connectors and switches for hook up to FEMA supplied mobile generators capable of running the stations (100A should do) to at least run the fuel operations...
Or allow them a tax credit to put in something like this:
http://www.homedepot.com/buy/generac-10kw-automatic-standby-generator-with-100-amp-transfer-switch-5871.html#.UJXLd2872YF
gasoline stations are critical energy distribution points in our transportation infrasturcture...
rsp,
Furthermore, the original Tweet that you quote mentioned "people looting" as well (@jcourtsull). Makes me wonder
Actually, when people who have no food break into stores during a disaster, I don't call that "looting."
From what I can tell, actual looting has been minimal so far, and there's been much more unorganized and voluntary cooperation and coordination than conflict. In previous disasters I've seen, which were on a much smaller scale, the national guard was called out with orders to shoot looters. I thought then that that was over the top. Glad to see it off the table this round.
This has got to be the worst blog post I have ever seen in the history of the internet.
Mike Norman:
When the state enforces anti-price gauging laws (effectively price controls), which is the case for gasoline in NY, that is not a free market. If those price controls did not exist, then the price would be free to rise to whatever the market will bear, and with those higher prices, it becomes profitable for gasoline sellers to transport gasoline from outside the area from greater distances.
The reason there is a gas shortage in NY is because the state is imposing de facto price controls on the sale of gasoline. If the nominal demand for gasoline rises, but the state is enforcing anti-gauging laws, then that will lead to the quantity demanded rising above the quantity supplied. Ergo a shortage.
Tom Hickey:
It is an epic red herring to argue that the free market is a "theoretical idealization of the mind." Mike Norman is incorrectly claiming that the gas shortage is a market failure, when it is en example of state interference in prices.
Price controls are not a certainty. They have to be chosen, and they haven't always been enforced. Lack of price controls is not a theoretical construct only. Lack of price controls are both theoretically possible and has historically occurred.
Why aren't you saying to Norman that he is mistaken about this being a free market failure, when you yourself believe that the free market is nothing but a theoretical idealization? Wouldn't blaming such a mental idealization for what happened in the real world NY be something that you would see as a falsehood?
Clonal:
You're as ignorant as Norman.
I think it would be a good idea to only take seriously those arguments made by our sane critics.
The insanity is strong with this thread, and it ain't coming from Mike....
Pete, no modern developed economy is a free market economy. They are all mixed economies.
I leave you to pine away for one, or to join your Libertarian friends on one of those islands they are building where gold is the only money.
"I'm sure Libertards and conservatives will be all over this with lame excuses like it was gov't regulation or some other crap that blocked the ability of businesses and entrepreneurs to supply gas."
...And they did!
lol, as if people who lost everything they had washed to the sea can really afford gas at all, when they're at their most vulnerable; how inconvenient it is when you need the most help in your life,you're told "no you're not worth it, you have to pay for help" for something that is really trivial as worrying about gas. this idea that you have to pay for everything even the basic of human needs in disaster zone is really barbarous and cynical at best.
Tom Hickey:
Pete, no modern developed economy is a free market economy. They are all mixed economies.
Tell that to Norman, Tom. He is the one who blamed this non-existent economic system for the gas shortage in NY.
I leave you to pine away for one, or to join your Libertarian friends on one of those islands they are building where gold is the only money.
I leave you to continue to sanction factually incorrect blog posts, and I also leave you with your statist friends to continue to make low quality posts like this one.
You are in no way presenting any gotcha or knock down argument against anything I said by continuing to repeat ad nauseum that we don't have a free market. Playing show and tell isn't exactly what I would call sophisticated and subtle discourse.
Why are not correcting Norman's blatantly false claim? Are you not interested in factually correct blg posts?
lol, as if people who lost everything they had washed to the sea can really afford gas at all, when they're at their most vulnerable; how inconvenient it is when you need the most help in your life,you're told "no you're not worth it, you have to pay for help" for something that is really trivial as worrying about gas. this idea that you have to pay for everything even the basic of human needs in disaster zone is really barbarous and cynical at best.
I'll be generous and call it clueless.
Tom Hickey:
When are oungoing to clue in to the fact that the market is a process? When are you going to clue in to the fact that even though we don't have a free market all around due to state intervention, that market forces are still present and take the form of particular outcomes when there is state intervention present?
The gas shortage in NY is an example of market forces that are putting upward pressure on the demand and price of gasoline, but the price cannot rise because the state is using threats agianst both sellers and buyers preventing them from raising the exchange price of gasoline. This has caused shortages of gasoline, long line ups, and now the state is now stealing from others in order to pretend to be a hero of society by providing gasoline for "free".
Just because we don't have free market all around, it doesn't mean that the gas shortage is somehow no longer the effect of state intervention.
Andy Summers:
How much charity are you giving to the victims of the hurricane? Do you actually believe that everyone who sees you pontificating on your morality play soapbox are stupid enough to be convinced that you are all charitable and giving and something other than a fake two two faced greedy bloviator who is claiming to be all moral because the state is robbing Peter to give to Paul?
You aren't fooling me.
Tom:
So is there going to be a future redaction on this blog post anytime soon? Is there going to be any "woops, Norman was a clueless moron, he doesn't understand how the free market process works, so we take back his claim that the shortage is caused by the non-existent free market process that would have otherwise seen gas prices rise to initially level down the quantity demanded to the quantity supplied, and then, because of the higher price, gas suppliers from out of state would have had an incentive to transport more gas into the disaster areas, which would have resulted in a subsequent increase in supply and lower prices?
Or is there going to continue to be this fake moral outrage BS?
People who need gasoline obviously have not los
The gas shortage in NY is an example of market forces that are putting upward pressure on the demand and price of gasoline, but the price cannot rise because the state is using threats agianst both sellers and buyers preventing them from raising the exchange price of gasoline. This has caused shortages of gasoline, long line ups, and now the state is now stealing from others in order to pretend to be a hero of society by providing gasoline for "free".
Just because we don't have free market all around, it doesn't mean that the gas shortage is somehow no longer the effect of state intervention.
La-la land.
With no electricity gas that was in the tanks could not be pumped. The shortage was not of gas but failure of electricity and increasing the price of electricity would not fix the power outage any sooner.
So is there going to be a future redaction on this blog post anytime soon? Is there going to be any "woops, Norman was a clueless moron, he doesn't understand how the free market process works, so we take back his claim that the shortage is caused by the non-existent free market process that would have otherwise seen gas prices rise to initially level down the quantity demanded to the quantity supplied, and then, because of the higher price, gas suppliers from out of state would have had an incentive to transport more gas into the disaster areas, which would have resulted in a subsequent increase in supply and lower prices?
Or is there going to continue to be this fake moral outrage BS?
More la-la land. All theory and ignorance of the facts on the ground.
did you just call me a " greedy two-faced bloviator"-- and you accused me of that despite knowing about me at all? there's no use of arguing with undisciplined lunatic, not wasting my time with a crazy cynic such as yourself, bye bye.
Tom Hickey:
La-la land.
Not a valid response
With no electricity gas that was in the tanks could not be pumped.
Gas could have come in from other areas.
The shortage was not of gas but failure of electricity and increasing the price of electricity would not fix the power outage any sooner.
No, the shortage was of gas.
More la-la land.
More non-response.
All theory and ignorance of the facts on the ground.
Your beliefs are not facts on the ground.
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