It's depressing but not hugely surprising to find that the comment thread is mostly people defending price-gouging.
I've just spent a while trying to come up with an argument against, but really it comes down to whether your personal values prioritize cash flow over being decent to people, and that's not something I can talk anyone out of in a web post.
Except that price gouging commonly refers to taking advantage of people in duress. Voluntarily going to Omaha for a convention and finding that hotel room prices are higher due to higher demand is not duress.
Are hotels not supposed to increase nightly rates when there is increased demand? Should hotels in Manhattan sell their rooms for the same price as those in Omaha?
There is no "hotel lobby" that's pushing to outlaw selling your own residence on AirBnB. However, it's usually illegal because of the liabilities and disturbances a transient crowd can cause for people living around them, and it's the people that want these restrictions.
I upvoted your comment for the first two paragraphs, but I disagree with the third. The hospitality industry is big, they have lobbyists, and I would be surprised if they are not lobbying against AirBnB in some way. A quick Google search indicates that they are.
I don't see this as price gouging, though. Maybe that's just because I have been conditioned to expect lodging to be expensive in places where a popular event happens. But in this case, I see it as normal things-cost-what-people-will-pay effects. Part of it is that I don't see a hotel room, or even an investor visit, as a necessity. Both are luxury goods.
Jacking up the price of water after a hurricane? I see that as price gouging, even though it's also following basic supply-and-demand. But water is a human necessity, and I find it repugnant to exploit the circumstances of a natural disaster to charge more for a necessity.
> it comes down to whether your personal values prioritize cash flow over being decent to people
This is absolutely false. My personal values prioritize decency and integrity, but also logic, and my analysis of the facts leads to the inescapable conclusion that shocks to demand/supply should lead to shocks in the price, and suppressing those shocks just leads to more negative distortions and less value for everyone.
It is counterintuitive that, say, when a region is hit by a hard storm and supplies are hard to come by, that those holding the supplies (i.e. gas, water, food, etc.) should experience a windfall, but the windfall is only the consequence of making sure that those precious supplies are only consumed by those that absolutely need it. Are inequalities exacerbated in this scenario? Of course. But there is no good way to get around this fact through the price system (there are other, better ways of addressing inequalities here and elsewhere).
Wow. I like how you vaulted straight over the defensible middle-ground "hotels charging more during big events isn't actually the same thing as price-gouging" argument and went straight to defending incontrovertible, life-threatening, criminal-in-34-states price-gouging.
> the windfall is only the consequence of making sure that those precious supplies are only consumed by those that absolutely need it.
No. It's it's making sure they're only consumed by those with the most money.
> I like how you vaulted straight over the defensible middle-ground "hotels charging more during big events isn't actually the same thing as price-gouging" argument and went straight to defending incontrovertible, life-threatening, criminal-in-34-states price-gouging.
I did that because it clearly raises the bar for my argument. I have more to prove in the harder cases. And yes, I do think the logic holds despite what our emotions tell us, and I think that for the most part the laws are wrong.
> No. It's it's making sure they're only consumed by those with the most money.
Again, I'm granting that emergencies and other demand/supply shocks heighten the problems caused by inequality, and again, I'm granting that that's not ok and should be tackled appropriately by policy. I'm arguing that the price system is not the best way to tackle this and leads to other problems. This will seem a bit off-topic, but Chile tackled a similar problem in their water system by transferring cash to poor populations while letting their prices for water rise [1]. (This is only meant to illustrate how you can use more than one policy mechanism to tackle separate problems: prices for allocation, transfers for inequality).
You're right, people with the most money can purchase more, but you also have to think about how you allocate scarce resources in the absence of a rise in price: is it first-come-first-serve? Does everyone get the same amount? You have to have some other mechanism to allocate the scarce resources and they each have their problems.
Also, you must think about the supply side. People will find a way to supply areas with high prices. People are creative. In fact, the high prices in the Omaha rental market spurring people to turn to Airbnb is a perfect example of why we should let prices rise.
It's true that first-come-first-served isn't optimal, but at least it's not as brazenly monstrous as turning away people whose need is just as great because they can't afford to line your pockets as thoroughly. Limiting the amount per customer has a lot of potential, though.
You're also assuming that profit-gouged emergency supplies are necessarily limited. If the local water supply has failed after a hurricane, and you've got enough bottled water to comfortably supply your community, you've still got a captive audience; you can maximize your profits by forcing them to empty their wallets to survive, if you're an asshole.
> You're also assuming that profit-gouged emergency supplies are necessarily limited.
You're right, I'm making this assumption. I have to make this assumption assuming there are at least a few possible suppliers (i.e. a few gas stations or convenience stores) because otherwise there would be no supply shock and concomitant price increase.
> and you've got enough bottled water to comfortably supply your community
Here I would say you're begging an important question, which is in regards to who has this and other important information? How would a convenience store owner know that the overall bottled water supply in the area is enough or not - and how could they possible make those calculations in time to properly allocate the water? Prices are a great way to spread information and incentivize people to get creative in finding a solution. If bottled water prices go up 10x, I guarantee you people will find a way to get more bottled water there.
Here are some more thoughts from people far smarter than me:
Tyler Cowen: "I agree gouging should not be illegal" [1]
Paul Krugman: [On Uber's 7x surge pricing during horrible snowstorms in New York] "This makes a lot of sense from a rational economic point of view" [2]
"A rational economic point of view" means that you value your personal cash flow (including factors like long-term customer goodwill, admittedly) over other concerns, which is what I already said. If someone gives you a magic button that kills one random stranger and then turns into a $100 bill, the rational economic decision is to press it. You're not scoring any points here.
No, Krugman is making the point (in his whole blog post) that price "gouging" allocates resources in the best possible way, and that our emotional response to it sometimes confounds this "first best" outcome. Which is actually a good description of the debate we're having here (on the broader thread).
You keep saying "your personal cash flow" as if I or Krugman or others actually do make a buck off selling services to those in distress. I work in climate policy; I don't sell anything. You seem to think it's not even possible for me to actually, really, think that our natural, emotional responses to price "gouging" does us a disservice. I don't have anything to gain except a world that works a bit better.
During emergencies, many brick-and-mortar stores do not raise prices, and will eat the cost to avoid making people upset. People hold grudges. You may gain in the short term, but are likely to lose in the long term.
Also, because brick-and-mortar stores don't raise prices (often due to price-gouging laws), people who find themselves in a store with bottled water, for example, will buy much more than they would have if the water was suddenly $50 per bottle. They buy more than they need, leaving none for people who need it just as much but showed up to the store 5 minutes later.
When demand exceeds supply, there will be some mechanism by which some demand will be satisfied and other demand will not. In the case of hotels, it's price, in the case of water in an emergency, it's randomness or physical strength grabbing bottles in the grocery store, and in some cases the government steps in and starts rationing goods.
(1) The surprise factor -- there is plenty of time to plan for a conference and nobody should be surprised by the going rates.
(2) The business factor -- attending an investor conference is a business-to-business transaction.
So I personally don't see anything indecent here.
Charging a high price is not bad by itself, and can actually have a number of good effects. For instance, if prices are high during times of high demand, then people might naturally share rooms. That's more efficient than a family deciding that the price is low, so they might as well get two rooms; leaving another family with no room at all. An innkeeper who sells out all of the rooms at low price and low density isn't really doing any favors to the people who are out in the cold.
No, that's a problem with firms where the voting power is distributed among people whose only shared interest is making money.
The corporate form is pretty much tangential to this, relevant only in that that form is often attractive to widely held (in terms of equity distribution) firms regardless of distribution of authority, and the more widely distributed authority is (which often roughly parallels equity distribution), the more likely that the only shared interest (or at least, the most salient shared interest) is financial profit. But, conceptually, you can get the same issue with big partnerships, LLCs, etc. -- or even small (in number of partners/members) ones and sole proprietorships, where that's all the partners/members/owners care about.
There's an interesting observation about audience selection in here somewhere. Your typical hacker tends towards progressive politics and attitudes, and would be likely to condemn price gouging. "Hacker News," though, is associated with Y-Combinator and disproportionately attracts the Valley-startup/venture-capital/exit-strategy subset of hackers, who tend a lot more towards Objectivist-libertarian profit-obsession, so you get what you see here.
I've just spent a while trying to come up with an argument against, but really it comes down to whether your personal values prioritize cash flow over being decent to people, and that's not something I can talk anyone out of in a web post.