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Everyone Hates the Gouger
Once upon a time in the not-too-distant past, there was a coastal town called Portside. A large hurricane was headed for Portside and the mayor ordered a complete evacuation.
There were only two routes out of Portside. Each route had a gas station situated just outside of town. After both gas stations, there wasn’t another one for 100 miles. One gas station was owned by Sammy Sweetpants. The other was owned by Gavin Gouger.
Sammy Sweetpants was a good citizen. He knew his pronouns and always used the right ones for others. He always recycled. He had his pets spayed and neutered. He always obeyed the speed limit and stopped twice at every stop sign. He never smoked, cussed or ate beef. Sammy drove a Prius.
Gavin Gouger was different. He ate huge steaks, owned assault rifles, smoked big smelly cigars and cursed like a sailor. He drove a giant gas-guzzling pickup truck with over-sized tires and the biggest engine available. He didn’t care about pronouns and flew a great big American flag at his gas station.
When the evacuation began, Gavin realized that there would be a large demand for gasoline and that it would be in short supply. Gavin raised his price to $12 per gallon. Some would call it gouging.
Sammy didn’t believe in price gouging and kept his price at $3 per gallon.
During the evacuation, the townspeople used both routes to get out of town.
At Sammy Sweetpants’ station, everyone on the route stopped and filled up because they liked his price. Even if their tank was almost full, they would top it off. Everybody loved Sammy Sweetpants.
At Gavin’s Gouger’s station, it was a different story. People would see the $12 price and, if they had enough gas in the tank, would continue to the next station 100 miles down the road. Those whose tanks were almost empty had to stop at Gavin’s station and pay his exorbitant price. They cursed Gavin Gouger for taking advantage of them. Everybody hated Gavin Gouger.
Because of his low prices, Sammy Sweetpants sold his gasoline at a much faster pace than did Gavin Gouger.
Then, Sammy’s station ran out of gas.
Sammy being out of gas wasn’t a problem for people who had enough gas to drive the additional 100 miles to the next station. But some people needed that gas. The price of it ceased to be an issue. Instead of being stuck paying an exorbitant price, they couldn’t buy gasoline at all. The result was stalled cars on the side of the road. Entire families were stranded on the evacuation route and a hurricane was on the way. Some deaths resulted, but were underreported by the media.
That didn’t happen at Gavin Gouger’s station. Drivers that had enough gas drove past his station when they saw his price. Those who really needed the gasoline stopped and paid the exorbitant price, grumbling the whole time about being “gouged.” Few of them realized that gasoline was available to them solely because of Gavin’s high price and would not have been otherwise.
When the hurricane was over, Sammy Sweetpants was lionized by the press, because he kept his prices low during a crisis. The press ignored the serious problems caused by Sammy’s good intentions.
Gavin Gouger, on the other hand, was vilified by the press, even though there were no stranded families on his route.
Years went by. Hundreds of people attended Sammy Sweetpants’ funeral. Testimonials were given about that day he kept his prices low during the hurricane.
Practically no one attended Gavin Gouger’s funeral, even though he likely saved lives on the day of the hurricane.
Published in Economy
Also, Gavin worked his contacts and paid double to get a supplier to come a day early. More families made it out of Houston and to a hotel in San Antonio and did not spend 24 hours on the side of road in BF Texas.
Wait, isn’t it Gavin GAger?
I bet Gavin still had some li’l smokies, while Sammy was lucky to have some SweeTarts.
You don’t understand “hospitillity” work.
I learned this lesson by listening to Walter Williams on Rush Limbaugh.
Did he put it in the form of a story?
Econ 101 – Supply and Demand. Allow the marketplace to appropriately ‘discriminate’ upon the charged price and their need. They are smarter than all of the politicians put together. It’s their money anyhow, not yours (Mz. Government Price Controller)
Of course, one factor left out is whether some people could afford Gavin’s price, even if they would have been willing to pay it.
After Sammy Sweetpants runs out of gas, those people would have been unable to buy gas on either route.
I realize that. On the other hand, if they went the Sammy Sweetpants route and were on the early side, they got out. Otherwise they didn’t. Just pointing out that there might be a little more complication.
On the plus side, there’s usually some pretty significant warning of a possible hurricane. So the smart people gas up early, before anyone has a chance to raise their price on the last day.
And those gas stations 100 miles away might get overwhelmed and run out too.
The Florida Turnpike was, to my recollection, a good place to buy gasoline. Other stations ran out but since the turnpike was more expensive they didn’t.
And while some customers would fill up the tank at Gavin’s, you can bet many would just fill up to halfway, because that would get them plenty far enough to get to another station where they could buy cheaper gas, thereby leaving more gasoline available for the next customer at Gavin’s. High prices in a shortage cause people to think about how much they really need right now.
This is just a simple story intended to demonstrate a concept. Real life will always be more complicated.
No, you did it much better
I happen to know that Gavin, gruff as he was, gave away free gas to a few poor folks who couldn’t afford his prices, after threatening them with bodily harm should they tell anyone of his generosity.
Then there was Rudy Redneck from Atlanta who loaded up his 4×4 pickup and flatbed trailer with all the bottled water and supplies he could haul and headed to the affected area after the storm passed. He planned to sell them for twice what he paid, providing a valuable service to those in need while being compensated for his time and expense. He was arrested and is currently serving 5 years in prison. The water and supplies spoiled in the police impound yard. This was called justice.
I believe it’s called “bottled water justice.” It’s an academic discipline now. Also agitprop.
Life’s not filled with guarantees in my experience. Quite a few “mights” along the way.
This doesn’t have to be a situation solely because of a hurricane. A couple of weeks ago I drove to Wisconsin on fumes for cheap gas at Woodman’s, only to have the pump stop after ten cents worth. The station was out of regular. Many people drove off; I filled up with premium at much more per gallon. I neither had the time nor the inclination to drive further down the road for regular. I needed gas and I made the decision to fill up rather than just get 20 bucks worth. I weighed what my time was worth later in the week, what the value of less anxiety from running on fumes would be, and the fact that premium in Wisconsin is still cheaper than regular in Illinois.
The market speaks louder than politicians.
Another option would be a sensible mayor who would deploy a few cops to prevent Gavin’s profiteering, while checking the gas gauges of customers at both locations to ensure that everyone got the gas that they needed.
Rationing, during the crisis, which would work fine.
This would have accomplished the same distributional goal, while preventing Gavin from receiving a windfall from this short-term unexpected event.
Of course, this is not just an unexpected event, it’s quite a strange hypothetical. A town with only 2 gas stations, with 100 miles of isolation, and apparently with a large population that could rapidly drain the storage tanks of those two stations.
I should add another point.
The libertarian-type making up stories of this type also assume that Mr. “Sweetpants” is a well-meaning idiot. Because he, too, could decide to restrict his sales to what customers needed in the moment of emergency, without any need for intervention by my hypothetical mayor.
So, I’ve hypothesized a second virtuous course that solves the problem prevented by the hurricane hypothetical.
These two solutions are obvious, aren’t they? So why don’t they occur to those creating such hypotheticals?
Yup. Price controls and rationing. Works every time. You forgot to suggest the windfall profits tax.
I thought that he did because I heard a similar story on some conservative radio show, also using a hurricane evacuation as the basis. The host went a different route and used hotel rooms. Same story though. You have a cranky dad with five children. If Sammy keeps room rates the same, dad decides to get two rooms to split the kids up. Some other family escaping the hurricane goes without. At Gavin’s hotel, dad decides everyone can suck it up and stay in one room, leaving a scarce room available for another family.
https://www.deseret.com/2005/9/28/19914372/walter-e-williams-raising-prices-is-one-way-to-curb-hoarding-of-gas/
A lot of people also don’t understand what they are paying for. The station owner doesn’t set the price based on what he paid for the gas in the ground, but what it will take to refill his storage tank. “You only paid $2.00/gal for the gas, why are you charging $2.359?” “Well, my supplier is now charging me $2.25.” No central planner can account for all those details.
This is a very good article. I’m disappointed to hear that the bad actor in it was (then Attorney General) Greg Abbott.
Cops don’t grow on trees. They have to be paid. While they’re preventing profiteering, homes are being looted due to the lack of sufficient police patrolling.
The USSR spent a lot of money on policing. In the Soviet era Russian movies a policeman was only a holler for help away, and while exaggerated there was some truth in it. But it incurred a large cost to have all those police officers at the ready.
Another problem during that evacuation was that police prevented anyone from exiting the interstate unless they could prove they lived in the immediate area. People weren’t allowed to use secondary roads to evacuate. Once the interstate was blocked by an accident or car trouble, everyone behind the obstruction were forced to sit there, with a choice of running their car to get A/C (until they ran out of gas, adding another obstruction) or sweltering in the potentially-lethal Texas heat, all while a hurricane was bearing down. It took days for the resulting snarl to be fully cleared.
It doesn’t necessarily have to be a LARGE population. Gas stations may receive deliveries more than once per week. The family of a school friend in Oregon owned a Chevron station which got refilled at least 3 times a week.
“Hurricane chow” always gets me.
By what authority are these cops going to decide that I have “enough” gas?
You want to look at my gas gauge? Come back with a warrant.