Price Is More Than Just What We Pay

Plus, free speech and how to use it

Oct 24, 2024

Last night Kamala Harris appeared on CNN for a “Town Hall” event, and it went about exactly as well as you’d expect. (Watch here — if you dare.)

I don’t want to spend too much time on this because it’s only a segue into today’s article, but this may be the worst answer to a political question since…..well, the last time Kamala Harris answered a question.

I’m sure many people think a lot of things about Kamala Harris, but absolutely nobody believes she doesn’t have immediate answers to questions because she wants to study the issues. As I wrote a few weeks ago, people who actually study the issues can effortlessly talk about those issues for hours at a time.

Are we to believe that Harris simply hasn’t studied the issue of when she noticed Biden’s condition? Or that she needs to study the border issue for longer before speaking about it?

Even if we believed that, wouldn’t it be sort of disqualifying that after four years studying the issue, Harris still doesn’t understand it well enough to explain it to others? (IMO the sign of actually understanding a topic.)

We see a perfect example (actually many, but this one’s relevant for today) at last night’s event when Harris is asked about high inflation. Her answer: A national ban on price gouging. No, really:

This brings us to today’s article.

When I was little I had a computer game that simulated running a lemonade stand. (You can play it here! https://c64online.com/c64-games/lemonade-3-3/) Although this is a very simplified version of a market, it includes important business aspects such as cost of supplies, possible ‘spoilage’, and variable demand. (More business when it’s hot!)

At the end of every week, the computer would spit out the ‘optimal’ price for lemonade, and how much you would have earned if you had charged that much. You also had to set aside some bribe money, because every now and then the cops would bust you for not having a valid business license. (Okay, maybe not that last part.)

But even back then I understood just making more money isn’t always the best option. A lower price might garner more sales, but those sales also use more supplies. (On the other hand, you don’t want to be stuck with supplies at the end of summer, either!) If the weather is bad, people might be only interested in lemonade at 2 cents/cup — but if you are using 3 cents/cup in supplies……..

This is a very basic rendition of the market, one that I more or less ‘mastered’ as an adolescent. And I have very little doubt that adolescent me knows more about economics than current-day Kamala Harris if she really thinks price gouging is a problem.

Price gouging is one of those issues that give libertarians a bad rap. “You just hate poor people!” is one of my favorite lines — but the market is an incredibly complex system, and prices are much more than just the cost of an item. When we get right down to it, prices relay information while also sending signals to the rest of the market.

Imagine you move to a new town with a single burger place that charges $20 for a regular hamburger. This is a huge signal that there’s an opportunity for another business to move in and undercut the current one. (It might also be a signal you live in California.)

When the market is behaving normally, these signals fly under the radar of most people — even though they benefit massively from businesses competing with one another for market share.

But when disaster (such as Helene) strikes, people see abnormally high prices and complain to people like Kamala Harris.

“Gas is only $4 normally, why is it $10 today?”

Well, for one thing the supply is limited to whatever is currently in stock, because there are no more roads to bring in more gas. High prices are also a signal to consumers that the situation has drastically changed and normal buying patterns are disrupted.

After a disaster, we have individuals with wildly varying needs. One person might need 5 gallons of gas to power a generator to run medical equipment. Another might need 2 gallons to run a chainsaw to clear timber. Other people may not need gas any more than normal. Higher prices are how we get people to ‘self-select’ based on need.

Without higher prices, whoever shows up at the gas station first gets the gas. This might be considered ‘fair’, but it certainly doesn’t address the fact that some people really need that gas more than others — and at regular prices, people would likely fill up ‘just in case’.

Rationing is an option, but this doesn’t really solve the problem that the people who show up first get the gas — you’ve just doubled the number of people who do. This also leads to workarounds such as sending your family members to buy more ‘rounds’ of rationed goods and/or using resources to make sure people play by the rules.

So while higher prices after a disaster aren’t perfect (because nothing is in this situation), they are the best way we have to get resources to the people who need them most.

But more importantly, high prices are a HUGE signal to the market to flood the area with supplies as soon as possible. After a disaster, we generally have three avenues of help: charity, government, and the market. Since businessmen are greedy and will do anything to make a buck, anybody who can get supplies into the area and make a quick profit will do it. (Right, progressives?) This drives prices down more quickly, as every new entrant into the market must undercut his current competition.

If we eliminate people’s ability to do this, all we’re doing is removing the market and leaving everybody dependent on charity and government. And to make matters worse, now the people who WOULD have been helped by the market are ‘competing’ for the free supplies offered by charity and government — straining THOSE systems.

Of course, I am sympathetic to the idea that consumers could get ripped off by greedy assholes with way too much marketplace power. So if Kamala really wants to dive into price gouging, I have a place for her to start —

A quick update on that video I posted last week of the AI man accusing Tim Walz of sexual assault. Predictably, the actual Matt Metro has come forward saying that it’s not him, and the media is — also predictably — using it as an example of why they need to crack down on free speech.

This is why we must be careful before sharing information.

In the process of doing some research, I came across this gem of an article from 2016 that was too good not to share:

TRUMP THREATENS FREE SPEECH AND THAT’S VERY BAD SO WE, THE PROGRESSIVES, WILL STOP HIM!

Do you hear any of these people speaking out against the censorship industrial complex? Do you hear any of them sounding the alarm at the Harris/Walz commitment to censoring the legal speech of Americans?

Me neither.

Wonder why not.

The good news is — free speech is moving up the list of the issues Americans care about in this election: