MCViewPoint

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Posts Tagged ‘price gouging’

No, It’s Not “Greed” or “Price Gouging” That’s Driving up Gas Prices

Posted by M. C. on June 18, 2022

This has certainly succeeded in driving crude prices above what they would have otherwise been. Fortunately, the plan has also partly failed. China and India have been buying up large amounts of Russian crude, ensuring that supply remains in the global market. This means global supplies are not strained as much as would have occurred had the Biden administration’s attempt at isolating Russia succeeded.

But while access to crude has not evaporated as the US regime intended, refinery capacity continues to lag. This has driven up gasoline prices to higher peaks than crude.

https://mises.org/wire/no-its-not-greed-or-price-gouging-thats-driving-gas-prices

Ryan McMaken

Both consumer and producer prices rose near multidecade highs last month. Price inflation rose to 8.6 percent while wholesale producer prices rose by more than 10 percent.

In both cases, a significant factor behind rising prices—but certainly not the only factor—was high energy prices. This has been reflected in prices related to transportation and shipping. Prices for air travel, for example, have seen some of the biggest price increases in recent months, while gasoline (naturally) has fueled sticker stock for households across the nation.

Perhaps most notable to the average consumer has been the increase in gas prices. In June, gasoline prices have risen on average to a new nominal high of over $5 per gallon.

Short of recession (or depression), relief will likely have to come in the form of increasing supply. The easy-money policies of the central bank have fueled spikes in demand for nearly all products, but this leads to a problem: rising demand has not come with rising production. In other words, the regime can easily increase the supply of money, by simply creating money out of thin air. But the regime can’t do the same with oil or gasoline. Unlike fiat money, oil and gasoline must actually be extracted and processed.

So, we end up with increasing supplies of dollars chasing oil and gas supplies that are increasing at a much slower pace. The result is rising price inflation.

Unfortunately, there does not appear to be much relief on the horizon. US bans on Russian oil have disrupted global oil markets and cut off the US consumer from ready imports. This certainly hasn’t helped bring crude oil prices down. But when it comes to gasoline prices, another sizable factor is the fact refineries are running below past capacity. Even when US markets have access to crude oil, gasoline production lags.

Much of this is being blamed on logistical problems stemming from covid lockdowns and the 2020 collapse in demand. As governments across the US forcibly closed businesses and issued stay-at-home orders, many refineries became unprofitable and closed. Shortly thereafter, an avalanche of newly created money whipsawed demand in the opposite direction, and refineries could not keep up. Prices spiked.

Ultimately, the situation only illustrated what more astute observers had pointed out: claims that policy makers can “pause” the economy, and that we need only wait for the “V-shaped recovery” for everything to bounce back to normal were very wrong.

Oil Prices and Gasoline Prices

During the worst days of the covid lockdowns, gasoline prices fell to around a dollar per gallon in many areas. The national average fell to near $2 per gallon in 2022 dollars.

But by late 2021, fueled by trillions in newly printed money, gasoline prices surged to ten-year highs. As of June 2022, gasoline prices have hit new highs of over $5 per gallon. Even in inflation-adjusted terms, gasoline will soon hit some of the highest prices seen in many decades.

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The Cognitive Bias behind Anti–Price Gouging Laws

Posted by M. C. on March 15, 2022

To avoid the charge of status quo bias, they need to give a reason why $10 or anything close to it is preferable to the new market price. And just saying “Because that’s the way it used to be” is not a good reason.

We used to light our homes with kerosene lamps. That’s not a good reason to keep doing it when the world has changed.

https://mises.org/wire/cognitive-bias-behind-anti-price-gouging-laws

Patrick Carroll

People often believe that price gouging is so obviously immoral that making it illegal is the equivalent of criminalizing theft. In their minds, sellers who drastically hike their prices after a supply or demand shock are simply cruel capitalists taking advantage of poor consumers, who are practically forced to hand over their money.

The student of economics, of course, would sooner laud this practice than condemn it. After all, price changes are an important part of the market process because they help us economize scarce resources.

In theory, then, all that must be done is to explain this process to the public. A little bit of reasoning and a few graphs are all it should take to dispel this misguided objection to market prices. Yet somehow, it rarely seems to work. Economists have been trying for decades to break the irrational opposition to price gouging, but they have had little success. As it turns out, the art of shaping public opinion is somewhat different from the art of explaining economic phenomena.

Ludwig von Mises draws attention to this distinction in the final pages of Human Action. “The flowering of human society,” he writes, “depends on two factors: the intellectual power of outstanding men to conceive sound social and economic theories, and the ability of these or other men to make these ideologies palatable to the majority.”

How, then, can public opinion be shaped? Perhaps the answer lies in psychology. After all, “irrational” is a psychological word, not an economic one. So maybe the key is not so much to explain economic principles, but to identify and debunk the various biases that give rise to the public’s antimarket beliefs.

Price gouging, I believe, provides an illustrative example of how this can be done.

Step 1: Identify a Potential Bias

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William Hartung, Mission (Im)possible — and You’re Paying for It

Posted by M. C. on February 4, 2022

When all else fails, the Pentagon’s fallback argument for the F-35 is the number of jobs it will create in states or districts of key members of Congress. As it happens, virtually any other investment of public funds would build back better with more jobs than F-35s would. Treating weapons systems as jobs programs, however, has long helped pump up Pentagon spending way beyond what’s needed to provide an adequate defense of the United States and its allies.

As it happens, though, there are just a few teeny, weeny glitches with it. For one thing, it reportedly can’t reliably either launch or retrieve the planes that make it an aircraft carrier. And for good measure, according to Bloomberg News, it can’t defend itself effectively from incoming missiles either. 

https://tomdispatch.com/what-a-waste/

Whatever the U.S. military may be considered, it isn’t usually thought of as a scam operation. Maybe it’s time to change that way of thinking, though. After all, we’re talking about a crew with a larger “defense” budget than the next 11 countries combined (and no, that’s not a misprint). Mind you, I’m not even focusing here on how a military funded, supplied, and armed like no other on this planet has proven incapable of winning a war in this century, no matter the money and effort put out. No, what’s on my mind is its weaponry in which American taxpayers have invested so many endless billions of dollars.

For example, take the latest, most up-to-date, most expensive aircraft carrier in history, the USS Gerald Ford. (Yes, it’s named after the president everyone’s forgotten, the one who took over the White House when Richard Nixon fled town in disgrace.)  Hey, what a bargain it was when Huntington Ingalls Industries delivered that vessel to the Navy for a mere (and no this isn’t a misprint either) $13 billion — $20 billion, if you’re including the aircraft it carries. And it only represents the first of a four-ship, $57-billion program.  You might imagine that, with $13 billion invested in a single ship, you’d be getting the sort of vessel that would do Star Trek proud, a futuristic creation for at least the 21st, if not the 22nd century of war.

As it happens, though, there are just a few teeny, weeny glitches with it. For one thing, it reportedly can’t reliably either launch or retrieve the planes that make it an aircraft carrier. And for good measure, according to Bloomberg News, it can’t defend itself effectively from incoming missiles either.  After “cannibalizing” parts from another aircraft carrier under construction, it is, however, finally being deployed, only four years late.

Honestly, it would be easy enough to think that I was writing a ridiculous parody here, but no such luck. And, remarkably enough, as TomDispatch regular and Pentagon expert William Hartung points out today, that ship is anything but alone in the U.S. arsenal. Just see his comments below on the F-35 jet fighter for another obvious example. In fact, as you read Hartung, ask yourself whether this boondoggle — and just about the only thing that Congress can agree on with remarkable unanimity — turns out to be a “defense” version of Watergate. So, where’s Gerald R. Ford when we really need him? Tom

What a Waste!

$778 Billion for the Pentagon and Still Counting

By William Hartung

2021 was another banner year for the military-industrial complex, as Congress signed off on a near-record $778 billion in spending for the Pentagon and related work on nuclear warheads at the Department of Energy. That was $25 billion more than the Pentagon had even asked for.

It can’t be emphasized enough just how many taxpayer dollars are now being showered on the Pentagon. That department’s astronomical budget adds up, for instance, to more than four times the cost of the most recent version of President Biden’s Build Back Better plan, which sparked such horrified opposition from Senator Joe Manchin (D-WV) and other alleged fiscal conservatives. Naturally, they didn’t blink when it came to lavishing ever more taxpayer dollars on the military-industrial complex.

Opposing Build Back Better while throwing so much more money at the Pentagon marks the ultimate in budgetary and national-security hypocrisy. The Congressional Budget Office has determined that, if current trends continue, the Pentagon could receive a monumental $7.3 trillion-plus over the next decade, more than was spent during the peak decade of the Afghan and Iraq wars, when there were up to 190,000 American troops in those two countries alone. Sadly, but all too predictably, President Biden’s decision to withdraw U.S. troops and contractors from Afghanistan hasn’t generated even the slightest peace dividend. Instead, any savings from that war are already being plowed into programs to counter China, official Washington’s budget-justifying threat of choice (even if outshone for the moment by the possibility of a Russian invasion of Ukraine). And all of this despite the fact that the United States already spends three times as much as China on its military.

The Pentagon budget is not only gargantuan, but replete with waste — from vast overcharges for spare parts to weapons that don’t work at unaffordable prices to forever wars with immense human and economic consequences. Simply put, the current level of Pentagon spending is both unnecessary and irrational.

Price Gouging on Spare Parts

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To Attack the Root of Evil, Fix the Money | The Libertarian Institute

Posted by M. C. on January 14, 2022

https://libertarianinstitute.org/articles/to-attack-the-root-of-evil-fix-the-money/

by Jp Cortez

After the Consumer Price Index surged last year to its highest level since 1982, politicians are feeling pressure from constituents to do something about it.

Last Monday, President Joe Biden announced $1 billion in grants, loans, and other assistance for small meat producers. Another costly government program will, supposedly, help tame rapidly rising beef and poultry costs.

Four giant companies control 85% of the market for meat—raking in massive profits while families pay higher prices. I’m glad @POTUS is taking steps to create a more competitive beef and poultry industry. We need to break up Big Ag and lower prices. https://t.co/EHQZWaD2du

— Elizabeth Warren (@SenWarren) January 3, 2022

Massachusetts Senator Elizabeth Warren has been on a tear lately, and there is a startling commonality between all these ideas:

Prices at the pump have gone up. Why? Because giant oil companies like @Chevron and @ExxonMobil enjoy doubling their profits. This isn’t about inflation. This is about price gouging for these guys & we need to call them out. pic.twitter.com/kxiQkC2tYa

— Elizabeth Warren (@SenWarren) November 20, 2021

Consolidation in the semiconductor industry is causing shortages and supply chain bottlenecks that increase consumer prices and hurt workers. I’m urging @SecRaimondo to act swiftly to increase competition. https://t.co/Y7Izd6X0Fl

— Elizabeth Warren (@SenWarren) December 17, 2021

This is your brain on fiat monetary systems and central banking: price inflation is caused by everything except for printing loads of new money.

If Senator Warren believes that prices increase because of the greed of price gouging companies, does she believe that when prices fall, it is the result of corporate benevolence?

See the rest here

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EconomicPolicyJournal.com: This is How the COVID-19 Panic is Being Used by the Crony Crowd for Profit

Posted by M. C. on April 12, 2020

https://www.economicpolicyjournal.com/2020/04/this-is-how-covid-19-panic-is-being.html

I have written often that when there is a central power those who are close to the power benefit.

The COVID-19 panic is creating the potential for all kinds of crony opportunists for Washington D.C.  power players.

Consider this.

A week-old firm is now claiming it is the “Largest Global COVID-19 Supplier Network.”

The PEU Report informs:

Blue Flame [Medical LLC] was formed Monday, March 23, 2020 as a Delaware corporation.  It bills itself as the “the largest global network of Covid-19 medical suppliers.”  How can that happen in a week?

In politics – especially if you’re at a high enough level – you are one phone call away from anybody in the world.” — John Thomas, President

“I have relationships with a lot of people.”– Mike Gula, CEO

Blue Flame’s website had information on these two opportunists.  One, Mike Gula, is a political fundraiser:

The other, John Thomas, is a political strategist and specialist in healthcare real estate.
Politico reports:

Thomas declined to specify how he and Gula had managed to obtain masks that have become so rare that some hospitals have resorted to reusing them or having health care workers tie bandannas or scarfs around their faces. “It’s just relationship-based,” he said. “I can’t say anything else.”

He also declined to reveal how much money the pair had made but said they were not price gouging.

“We are incredibly sensitive to gouging,” he said.

RW

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Managing a Disaster – LewRockwell

Posted by M. C. on April 1, 2020

Many of the problems associated with a disaster would be eliminated if people’s buying behavior were the same as it was before the disaster. To get people to behave nicely and consider their neighbors is the ultimate challenge. I think rising prices are the best and most dependable way to get people to be considerate of their fellow man.

https://www.lewrockwell.com/2020/04/walter-e-williams/managing-a-disaster/

By

I’m not sure whether COVID-19, first identified in Wuhan, China, in the U.S. qualifies as a true disaster. Putting the disease in perspective, we might look at current influenza illnesses. According to Centers for Disease Control estimates, between Oct. 1, 2019, and March 14, 2020, there have been 390,000 to 710,000 hospitalizations as a result of the flu, 38,000,000 to 54,000,000 flu illnesses and 23,000 to 59,000 flu deaths. That’s compared with, as of March 27, a total of 85,356 cases of COVID-19 resulting in the deaths of 1,246 people.

But let’s agree that COVID-19 is a disaster and ask what the appropriate steps that are to deal with it. One of the first observations about any disaster is that the quantity demanded of many goods greatly exceeds the supply. There is a shortage. The natural market response when there is a shortage is for prices to rise. Rising prices produce several beneficial effects. They reduce the incentive for people to hoard while suppliers, motivated by the prospect of higher profits, are incentivized to produce more of the good in short supply.

Thirty-four states and the District of Columbia have anti-price gouging laws that prohibit “excessive and unjustified” increases in prices of essential consumer goods and services during a federal, state or local declared emergency. Price gouging is legally defined as charging 10 to 25% more for something than you charged for it during the month before an emergency. Sellers convicted of price gouging face stiff fines and perhaps prison terms.

But what about hoarding? Often, hoarding creates the shortage. In uncertain times, people may purchase three dozen eggs instead of one dozen. They may want to maintain stockpiles of canned goods and buy up large quantities of cleaners, paper towels and toilet paper. This kind of behavior has left some with overflowing freezers, shelves of sanitizers and garages full of toilet paper while their neighbors are left either wanting for the same items or paying what some call “excessive and unjustified” prices.

While it’s difficult to get beyond emotions, the fact is that consumers are not forced to buy products for the higher (gouged) price. If they pay, it is likely because they see themselves as being better off acquiring the good than the alternative – keeping their money in their pocket. Higher prices charged have a couple of unappreciated benefits. First, they get people to economize on the use of the good whose price has risen. That is higher prices reduce demand and encourage conservation. That helps with the disaster.

With higher prices, profit-seeking suppliers know that they can make more money by bringing additional quantities of the goods to the market. This increases the supply of goods, which helps to drive prices back down. Anti-price gouging laws disrupt these two very important functions of the marketplace and enhance and prolong a disaster. In other words, in a disaster, we want people to economize their use of goods and services and we want suppliers of these goods and services to produce more. Rising prices encourage these actions. Anti-price gouging laws stymy those incentives and create the pretense that a disaster does not exist.

Some people might reluctantly agree that allowing prices to rise during a disaster helps allocate resources. But they’ll complain that’s not the intention of greedy sellers who are out to profit. I say, so what? It’s not sellers’ intentions that count but what their actions accomplish that’s important — namely, getting people to conserve more and suppliers to produce more.

Many of the problems associated with a disaster would be eliminated if people’s buying behavior were the same as it was before the disaster. To get people to behave nicely and consider their neighbors is the ultimate challenge. I think rising prices are the best and most dependable way to get people to be considerate of their fellow man.

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Why I Love Price Gouging–and Why You Should Too | Mises Institute

Posted by M. C. on March 31, 2020

There is a photo (that I did not save) from a Scandinavian store that charges a decent price for the first item but the second of the same thing is 10X more.

Everyone is a winner.

https://mises.org/power-market/why-i-love-price-gouging-and-why-you-should-too

Joseph T. Salerno

Yesterday I went looking to buy hand soap—not hand sanitizer, but regular old hand soap—in 7.5 ounce pump dispensers.  As you can see from the photo above, I found the shelves at my local Winn-Dixie supermarket completely bare.   In lieu of the soap, I encountered a large sign that read, in part: “Please BE KIND to one another and limit yourself only to what you really need at this time.”  Alas, the sign did not work and never really had a chance.  For it was in direct conflict with the more powerful smaller signs advertising the prices of the different brands of hand soap for $1.29 and $1.99 per dispenser.   These signs did work—to encourage people to buy and hoard large quantities of the item.  Had the smaller signs displayed much higher prices, say $10.29 and $10.99 or tenfold the actual prices, there would have been enough soap on the shelves to permit me and anyone else to purchase hand soap to our heart’s content.  Of course at those prices I would have been content with one or two bottles rather than the fifteen or twenty  I was planning to buy and hoard.  Furthermore, not only would higher prices have spared me the time and energy of going  elsewhere in my search for soap but it would also have spared me the irritation of reading that absurd sign.

soap
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EconomicPolicyJournal.com: Lefty Confusion About Price “Gouging”; Face Masks and Purell

Posted by M. C. on March 8, 2020

One example of why central (government) planning does not work.

The Soviet Union, Venezuela and North Korea are others.

https://www.economicpolicyjournal.com/2020/03/lefty-confusion-about-price-gouging.html

Joe Weisenthal is an interesting writer and thinker. He is co-host of the Odd Lots podcast and ‘What’d You Miss?’ on Bloomberg TV and editor at Bloomberg.

I have been following him for years at @TheStalwart.

I am not sure he would identify as a Lefty but he sent out a snarky tweet yesterday that sure fits into the Lefty model of not thinking deeply about economic issues.

Here is the tweet I am referring to:

Joe is missing a lot here.

First off, without price signals, manufacturers don’t know how intense the demand for N95 masks and Purell are.

Would people be willing to pay an extra $10 per item or $25?

This is important to know.

The higher the price, the more resources a manufacturer would be willing to devote to providing more supply.

To illustrate my point, let us, just for argument’s sake, say that people were willing to pay $1,000 for an N95 mask. Well that is a lot more than only being willing to pay $5.00 extra. Thus it tells the manufacturer that if a key component of the mask is in another part of the country or the world that it might make sense to have the part flown over by plane rather via usual ocean shipping modes.

In other words, the size of the price “gouging” signals to a manufacturer how aggressive he should get in making more masks.

But that is not all.

Mask price “gouging” also signals to consumers how in demand masks are. If someone wants to buy a mask to travel by subway to go to a movie and the mask is $200, the consumer might think twice and not buy the mask, Thus leaving it for someone else. At the same time, a heart surgeon may want to buy a mask to travel the same subway to perform heart surgeries. He might be very willing to pay $200 for a mask.

Thus price signals provide much more complex signals then what Joe implied in his tweet that manufacturers only get the idea there is a lot of demand for masks. A lot of complex signaling goes on at different price levels to signal manufacturers, retailers and consumers.

RW

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In Defense of Price Gouging – LewRockwell

Posted by M. C. on September 10, 2019

https://www.lewrockwell.com/2019/09/laurence-m-vance/in-defense-of-price-gouging-2/

By

As a resident of Florida, I was naturally concerned about how the state would be impacted by Hurricane Dorian. But now that the storm has passed, I am still concerned about something that happened in Florida after Governor Ron DeSantis declared a state of emergency on Wednesday, August 28, for several counties in the hurricane’s path.

But first note that according to Florida Statutes, Title XXXIII, “REGULATION OF TRADE, COMMERCE, INVESTMENTS, AND SOLICITATIONS,” Chapter 501, “CONSUMER PROTECTION,” Section 160, “Rental or sale of essential commodities during a declared state of emergency; prohibition against unconscionable prices”:

(1) As used in this section:
(a) “Commodity” means any goods, services, materials, merchandise, supplies, equipment, resources, or other article of commerce, and includes, without limitation, food, water, ice, chemicals, petroleum products, and lumber necessary for consumption or use as a direct result of the emergency.  (b) It is prima facie evidence that a price is unconscionable if:

1. The amount charged represents a gross disparity between the price of the commodity or rental or lease of any dwelling unit or self-storage facility that is the subject of the offer or transaction and the average price at which that commodity or dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or sale in the usual course of business during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends; or
2. The amount charged grossly exceeds the average price at which the same or similar commodity was readily obtainable in the trade area during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends.
(2) Upon a declaration of a state of emergency by the Governor, it is unlawful and a violation of s. 501.204 for a person or her or his agent or employee to rent or sell or offer to rent or sell at an unconscionable price within the area for which the state of emergency is declared, any essential commodity including, but not limited to, supplies, services, provisions, or equipment that is necessary for consumption or use as a direct result of the emergency. This prohibition is effective not to exceed 60 days under the initial declared state of emergency as defined in s. 252.36(2) and shall be renewed by statement in any subsequent renewals of the declared state of emergency by the Governor.

What happened in Florida was that Attorney General Ashley Moody activated the state’s “price gouging hotline” so residents could report businesses violating the state’s price gouging law if they charged “too much” for lodging or goods during the period of the state of emergency. Business caught charging elevated prices for goods, could face “civil penalties of $1,000 per violation and up to a total of $25,000 for multiple violations committed in a single 24-hour period.”

The Attorney General’s office says that more than 2,000 cases of price gouging were reported. Typical commodities involved are water and gasoline.

Now, there are many economic arguments in defense of price gouging:

  • Higher prices help prevent a handful of consumers from hoarding the majority of supplies.
  • Higher prices create incentives for suppliers of goods to help to restore people’s lives.
  • Higher prices encourage conservation among end users.
  • High prices can bring much-needed supplies into a disaster zone.
  • Higher prices send a signal to market actors that something is scarce and that profits are available to those who produce or sell that something.
  • Higher prices set off an economic chain reaction that ultimately remedies the shortages that led to the price gouging in the first place.
  • Higher prices tell suppliers what their customers want most.

You can read articles here, here, here, and here. I have even written this.

This, of course, doesn’t mean that it is just, right, moral, or ethical to raise prices on essential goods and services during the time before a hurricane hits. It just means that it should not be against the law. If you don’t like the price of a gallon of gas at your local gas station during the time that a hurricane is approaching, then you can choose to not only not purchase your gas there, but also to never patronize that particular gas station again. What you should not have the option of doing is calling a price gouging hotline and having the state fine the business and force it to lower its prices.

Economic considerations aside, there is an important philosophical reason why I write in defense of price gouging…

The ability of a business to raise or lower its prices on a particular good or on all the goods it sells is one of the essential things that distinguishes a free market from government central planning. The reason why a business raises or lowers its prices is absolutely irrelevant.

Free and unfettered interaction between producers and consumers, buyers and sellers, lessors and lessees, owners and renters, and businesses and customers is always to be preferred to government intervention.

Once it is accepted that the government has the authority, knowledge, and competence to establish arbitrary price ceilings during the onset or aftermath of a natural disaster, no reasonable or logical argument can be made against the government’s setting prices during ordinary times.

Price-gouging laws are an assault on private property, free exchange, freedom of contract, free enterprise, free markets, and a free society.

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Politicians–Not Hurricanes–Ensure Shortages | The Daily Bell

Posted by M. C. on September 20, 2018

https://www.thedailybell.com/all-articles/news-analysis/politicians-not-hurricanes-ensure-shortages/

By Harrison Burge

In 2006, Kentucky resident John Shepperson tuned in from his home to watch Hurricane Katrina destroy the Gulf Coast.

Shepperson desperately wanted to help the recovery efforts… and to make some money in the process.

So, he and his family bought 19 generators, rented a U-Haul truck and drove 600 miles to an area of Mississippi without power.

There in Mississippi, he offered the generators for double the price he paid in Kentucky.

Shepperson found a welcoming market. Grateful residents afflicted by the storms lined up to buy his generators. Price be damned – these people valued the generators more than their money. Shepperson’s generators meant Gulf Coast residents would at least have some comfort amidst their misery.

But, the prospective buyers never received the generators they wanted and valued. And Shepperson’s goodwill was not rewarded with a profit. Read the rest of this entry »

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