In my opinion, capitalism in its purest form must thrive on misery (as it must exploit essential needs). This is what a truly free market implies.
What I find interesting (though I don't think this is the point you're making), is that there are still people defending this obvious flaw and marketing it as a feature. But once essential needs are met (i.e. housing, food and security), what's even left? Luxuries, I guess. But even that can vary drastically between periods and societies (is gas a luxury? is higher education a luxury?).
Capitalism thrives on misery only as much as it alleviates it. That's what an increase in prices is - a sign that people are desperate for something and willing to handsomely reward whoever will provide it.
It's why I'm in favor of legalizing price gouging - if someone goes to great personal effort, risk, and expense to buy electrical generators and drive them into a disaster area, that's a good thing and should be rewarded. And when the area has enough generators, the price will fall and the gouging will stop.
The thing we do have to watch out for is deliberately creating a need so that the entrepreneur can swoop in and fill it. I suppose this also applies to many forms of advertising, game design, and website design though, too.
As a former Floridian, here's what I know about Hurricane economics:
* People need gas. Gas stations run out. It's illegal for people to pay more for gas companies to ship extra. People struggle to travel before and after the hurricane.
* People evacuate and buy hotel rooms. Hotels are required charge normal prices. People have little incentive to make efficient use of rooms, and they run out. People struggle to evacuate.
* After 2004 hurricanes, home insurance companies try to increase prices. State passes law limiting premium increases. Insurance companies drop coverage for unprofitable high-risk properties. State creates a government-run pool for people insurance companies can't insure. Thus, taxpayers get to subsidize property insurance for rich people on the coast.
STOP MESSING WITH THIS! If you really insist on throwing supply out of whack, can you at least not do it during a natural disaster??? Things are crappy enough as it is. Thanks.
You're ignoring inelastic demand, which would happen in the case of a disaster area.
If a company is one of or the only company that can bring something important/necessary like generators to a disaster site, and the company knows this, it will charge more than is fair, e.g. more than the cost of the generator plus the expenses of transporting them. Price gouging generally hurts the people that need the product the most because they have no choice, and many people consider it unethical in cases like disasters. This situation is similar to the economics of life saving medicine, because its demand is also inelastic.
Also I don't think it's fair to use the term "someone", because it's often a company that does something like this. Don't humanize companies.
Elasticity of demand doesn't matter, more just elasticity of supply.
What elasticity of demand does in an emergency is help ration goods. If you're considering buying ice, and ice becomes temporarily much more expensive, you'll cut out elastic demand (eg, having cold drinks), which leaves more ice available for inelastic demand (eg, keeping insulin from spoiling).
>Also I don't think it's fair to use the term "someone", because it's often a company that does something like this. Don't humanize companies.
I had a specific example in mind: John Shepperson, who, in the aftermath of Hurricane Katrina, bought 19 generators, rented a U-haul, and drove from Kentucky to Mississippi. He got arrested and the generators were confiscated. This is not the sort of incentive that we want to provide.
If it's possible for higher prices to induce supply, you want to let high prices induce supply and let the magic of price information do its work. The modern capitalist system is high magic, and prices are an important piece of how the magic works. Remember when fidget spinners got suddenly popular? March of this year they weren't a thing, and in April they were in pretty much everywhere. Messing with prices is how you break the magic. Do Not Mess With Prices.
I find your idea of "ethical" and "fair", highly unethical and unfair.
Such social engineering has a long and bloody history of turning around and disproportionately hurting the poor and the weak, in unexpected (sic!) ways. That is the socialist tragedy -- think with your heart, but only one step ahead.
"… the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood."
Oh please. Is there great personal risk involved in raising ticket prices to 6000 dollars on flights that would fly anyway? Is there great personal risk in raising the price of life or death medicine to 750 dollars per pill?
Well the fact that demand and prices were higher during the evacuation of Florida meant that airlines were incentivised to have more flights out. It seems like this directly resulted in the huge volume of flights headed to and from Florida, which meant more people were able to evacuate by plane. And those people weren't clogging up the highway so people who couldn't afford tickets also ended up better off.
How was the "price gouging" in this case not an unequivocal good on the macro level? It seems the alternative is that the airlines held prices fixed but ran out of supply immediately.
The thing is that other forms have been tried. It turns out that unless a form of society does not have enough capitalist underpinnings, it indeed thrives in misery of most people: North Korea, Soviet bloc, religious tyrannies, aristocracy with indentured servitude, etc.
But you can have capitalism without free trade, or even many rights at all. Liberal freedoms and rights tend to favor capitalism as an economic system, but not the other way around.
You can have a system that is somewhere between "capitalism in its purest form" and "communism". When both extremes thrive on misery, why not try some kind of middle ground?
What I find interesting (though I don't think this is the point you're making), is that there are still people defending this obvious flaw and marketing it as a feature. But once essential needs are met (i.e. housing, food and security), what's even left? Luxuries, I guess. But even that can vary drastically between periods and societies (is gas a luxury? is higher education a luxury?).
And yet here we are.