RPF0478-Price

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00:00:15.200 | Today on Radical Personal Finance, the morality and utility of price gouging.

00:00:21.920 | [Music]

00:00:38.480 | Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge,

00:00:41.760 | skill, insight, and encouragement you need to live a rich and meaningful life now while

00:00:46.000 | building a plan for financial freedom in 10 years or less. My name is Joshua and I am your host

00:00:50.480 | today. Let's continue on this natural disaster theme with a vigorous and hopefully interesting

00:00:56.720 | discussion of the ethics, morality, and utility of price gouging.

00:01:02.640 | [Music]

00:01:10.880 | This subject is one that is near and dear to my heart after just about every single

00:01:14.960 | natural disaster, almost immediately in the before and after of a natural disaster, we start reading

00:01:22.480 | articles of price gouging. I have been fascinated to watch the events in Houston over the last few

00:01:29.040 | days. I've got three screens going on my desk the last couple of days while I work, just with the

00:01:35.440 | sound turned off, watching all of the live feeds from Houston and Texas-based local TV channels.

00:01:44.480 | And what always happens in the middle of a natural disaster is you start getting

00:01:48.240 | this, these discussions on price gouging. Here are a couple of headlines, local headline from KHOU,

00:01:54.720 | which is one of the TV stations there in the Houston area. Interestingly, this is the TV

00:02:00.160 | station that was flooded out. The reporters of KHOU were actually on TV when the water started

00:02:08.240 | flooding into their studio and they had to evacuate their studio and go to a makeshift

00:02:13.120 | backup location in order to stay on the air. But here from yesterday, August 28, 2007, Houston,

00:02:18.720 | headline, "How to Report Price Gouging from Hurricane Harvey." Houston, "Claims of price

00:02:24.720 | gouging have been surfacing throughout the Houston area. Many say they're being forced

00:02:28.560 | to pay excessive amounts of money for necessities ahead of Hurricane Harvey. Pictures have been

00:02:34.160 | pouring into KHOU11 News from customers who are concerned they're being taken advantage of.

00:02:40.640 | One man sent a copy of his receipt. He says he paid almost $72 for four cases of water at a store

00:02:46.720 | in North Harris County. Another woman sent a picture from a different store near Cyprus.

00:02:51.040 | The sign in the picture says an 18-pack case of water is selling for almost $18.

00:02:56.160 | "You're not supposed to artificially inflate prices of things that are emergency

00:03:01.440 | or needed because of a disaster," President with the Better Business Bureau of Greater Houston and

00:03:06.080 | South Texas Dan Parsons said. "Not only is price gouging during a natural disaster unethical,

00:03:12.080 | it's against the law." Parsons said those businesses will be heavily fined if found guilty

00:03:17.760 | of price gouging. This applies to goods like drinking water, medicine, food, batteries, gas,

00:03:22.960 | generators, or services like towing. He says they expect to receive a number of complaints over the

00:03:28.800 | next week, and it's important to document any suspicions and hold on to those receipts.

00:03:34.640 | Article continues on, but more of the same. Another article from CNBC.com,

00:03:39.440 | published again August 28, "Price gouging during Hurricane Harvey,

00:03:44.240 | up to $99 for a case of water," Texas Attorney General says. "There have already been more than

00:03:50.800 | 500 complaints about price gouging during Hurricane Harvey over the weekend," Texas

00:03:54.800 | Attorney General Ken Paxton told CNBC on Monday. That includes reports of up to $99 for a case of

00:04:00.640 | water, hotels that are tripling or quadrupling their prices, and fuel going for $4 to $10 a

00:04:07.040 | gallon, he said in an interview with Closing Bell. "These are things you can't do in Texas," Paxton

00:04:14.880 | said. "There are significant penalties if you price gouge in a crisis like this." Anyone who does so

00:04:20.080 | can be hit with a $20,000 fine per occurrence, or up to $250,000 if the victim is someone age 65

00:04:27.840 | or older. As for whether there will be a shortage of goods, Paxton said, "The big retailers are in

00:04:33.360 | the process of reestablishing supply chains as quickly as they can." This is typical.

00:04:40.240 | And I want to walk you through some thinking on it. We're going to start with number one,

00:04:46.400 | the legality of price gouging. Next, we're going to talk about the utility of price gouging. And

00:04:53.840 | finally, we're going to talk about the morality of price gouging. I'll start with the legality and

00:05:00.720 | begin by defining the term. Even the term itself is pejorative. The idea is gouging. Another word

00:05:06.960 | that's used for price gouging is scalping. It's such an unpleasant word. Of course, the idea of

00:05:14.240 | somebody taking a knife or a tomahawk and disconnecting the skin on the top of your head

00:05:21.440 | and your hair from your skull. Not a very pleasant picture to hold in your mind. And that's the

00:05:26.160 | picture that we apply to people who are ticket scalpers and sell their tickets and resell them

00:05:30.480 | in the local market during a concert or something like that. And so after any kind of event or in

00:05:37.120 | advance of any kind of event, in 34 different states, which is about two-thirds of the United

00:05:42.160 | States, the idea of price gouging is in fact illegal. I live in Florida. Price gouging is

00:05:48.080 | illegal. Texas, same thing. It is illegal. And as the attorney general here of Texas is saying,

00:05:53.200 | then there are so far about 500 complaints, and I'm sure there'll be many, many hundreds or

00:05:59.360 | thousands. Now, will they ever be prosecuted? Who knows? I have no idea. Most likely, most of them

00:06:05.280 | won't be. They got bigger things to worry about. But these things always make the news. And

00:06:09.040 | they're particularly common in the modern social media space where everyone can immediately send

00:06:14.960 | out their complaint to anyone who cares and anyone who is interested in hearing about their complaint.

00:06:21.520 | They can immediately go online and say, "I can't believe they're charging $15 for

00:06:25.760 | a case of water." So without question, in 34 of the United States, most of them throughout the

00:06:32.880 | South and the Southeast, most of the Southern and Southeastern states of the United States,

00:06:37.760 | price gouging is in fact illegal. Now, I don't particularly care all that much that it's illegal,

00:06:44.960 | I care whether it's immoral or not. Legality or illegality is not a sign of what is right

00:06:50.960 | or wrong. It's simply a sign of what a society currently considers to be right or wrong.

00:06:56.400 | Illegality or legality means that you need to be very careful with your actions because they'll

00:07:01.600 | come with certain consequences and penalties. But legality and illegality themselves are simply

00:07:07.920 | indications of what a society considers to be right or wrong. And we'll talk about whether

00:07:13.360 | it should or shouldn't be illegal in a moment. Now, I am, as no doubt you have guessed,

00:07:21.120 | I am firmly against the idea of price gouging being illegal. We'll talk about why when we get

00:07:26.320 | to morality, but let's talk about the actual function and flow and the utility of price

00:07:31.440 | gouging. The basic picture that you should always hold in your mind when thinking about the market,

00:07:36.640 | a free market economy in which many of us are privileged to live, or at least one that is

00:07:41.120 | to some extent free. The basic picture that you should always have in your mind is a picture of

00:07:46.640 | an auction. The free market is a giant auction and prices are largely set by the people who are

00:07:54.320 | interested in buying something. Many people have this confused picture of the free market thinking

00:08:01.760 | that it's somehow a machine where there's an intelligent brain over top of the machine that's

00:08:08.080 | saying, "Hey, here's exactly what this particular item is worth and here's what should be charged

00:08:13.360 | for it." It's a false picture to hold in your mind. The appropriate picture to hold in your

00:08:16.800 | mind is an auction. And it's one giant auction that is created by millions and millions and

00:08:23.280 | millions of tiny little individual auctions. This is the way that every single price that

00:08:28.000 | you face in your life is set, as long as there's not external interference by the goons with guns.

00:08:33.280 | This is how prices are set. So for example, let's say that you go and look up and you want

00:08:37.840 | to say, "How much is my car worth, my used car?" And so you go to something like Kelley Blue Book

00:08:43.280 | or Edmonds or the local car trader and you're trying to figure out what is the value of the car.

00:08:48.560 | You have no idea. You bought the car five years ago and you don't really know what the value is.

00:08:52.160 | So what are these books reporting to you? What are these services reporting to you?

00:08:57.040 | They're reporting to you the basic response of – the basic outcome of many other little

00:09:05.280 | individual auctions, other transactions that have happened between other buyers and sellers.

00:09:10.400 | And because we can see what other buyers and sellers are consummating their deal at, the price

00:09:15.600 | which they're consummating their deal, we can take that and we can say, "Well, I think I could

00:09:19.200 | consummate a deal at this number as well." Many people hold this idea in their head that buyers

00:09:25.760 | and sellers of products are in competition with one another. This is a false concept.

00:09:33.360 | And if you hold it, you need to eradicate it from your mind. Buyers and sellers are not in

00:09:38.080 | competition with one another. Rather, buyers and sellers are in cooperation with one another.

00:09:44.160 | In every single financial transaction, in a free market, each person walks away from that

00:09:48.720 | transaction feeling like they got the better end of the deal. If you come to me and you want to buy

00:09:55.120 | my car and I tell you I'm going to sell you my car for $5,000, if we come to an agreement between us

00:10:01.920 | without the use of force, I don't pick up my gun and point it at your head and say, "You have to

00:10:05.840 | pay me $5,000," and you don't pick up your gun and point it at my head and say, "Joshua, you've

00:10:10.560 | got to sell me your car for $5,000." If we come to an agreement without coercion, without involving

00:10:17.120 | anybody else and without coercion, without threats of violence and force, we just simply come to an

00:10:22.400 | agreement of $5,000. If we shake hands and consummate that transaction, we will both walk

00:10:28.720 | away feeling like we got the better end of the deal because you have $5,000 in your pocket

00:10:36.080 | and you desire the car more than you desire to have the $5,000 in your pocket.

00:10:45.600 | I have the car and at the end of our transaction, I'm going to have the $5,000 in my pocket and I

00:10:51.040 | desire to have the $5,000 in my pocket more than I desire to have the car. Every single successful

00:10:59.760 | transaction that happens freely without the threat of violence results in a buyer and a seller

00:11:08.960 | coming away feeling like they got the better end of the deal. I'm happier to have the money than

00:11:14.960 | the car and you're happier to have the car than the money. If that's not the case, we will not

00:11:22.240 | come to a successful transaction. Now, what if you come up and you say that you'd like to have the

00:11:29.440 | car but you'd rather have the $5,000 in your pocket than the car, but you recognize that you

00:11:35.600 | might be willing to part with $3,000 and have the car? Well, I have to consider would I rather have

00:11:43.840 | $3,000 in my pocket or would I rather have the car? And somewhere we may be able to come to

00:11:50.720 | a number. Very likely, I'm not going to be willing to sell you my car for $1,000. I'd

00:11:58.880 | rather just have the car than have the $1,000 because the $1,000 isn't very useful to me. It's

00:12:02.960 | not enough money to keep me going and it caused me to want to separate from my car. I'd rather

00:12:07.200 | have the control and use of the vehicle. On the flip side, if you offered me $10,000, I would

00:12:13.920 | probably find it very easy to part with my car because I would value having the $10,000 more

00:12:18.960 | than the car. This is the fundamental basis of every single transaction that happens in a free

00:12:26.160 | market economy. And so you and I as buyers and sellers are not in competition with one another.

00:12:33.040 | We are cooperating with one another and we're each trying to get the better end of the deal.

00:12:38.480 | And there's a negotiation process that comes in wherein we come to a price and that price is the

00:12:48.960 | price at which we can agree to consummate the transaction. Buyers and sellers do not compete

00:12:55.760 | with one another. They cooperate with one another. So then who do buyers compete with and who do

00:13:01.680 | sellers compete with? Well, let's extend our example, our case study here, and let's say that

00:13:08.640 | now I have two people who are interested in my car, you and your brother. And you both come over

00:13:16.400 | or you and your next door neighbor, you both come over and you're standing in my driveway and you're

00:13:19.920 | looking at my car and I've got one car and I've got two people. And both of you would like to

00:13:26.720 | have the car and both of you have some amount of money. In this situation, the buyers, you and your

00:13:36.000 | neighbor are competing with one another. You guys aren't competing with me. But what you have to do

00:13:41.840 | in that situation is talk and each of you comes up and figures out how much you're willing to pay.

00:13:47.200 | And we go through an auction process wherein you compete with one another and I get to pick which

00:13:53.360 | deal I'm happy with. Now, if you started a thousand and your neighbor turns and says, "Well,

00:13:59.200 | I'll give you two," I'm going to turn to the neighbor and say, "Hey, two sounds pretty good,

00:14:03.120 | but I'm going to turn back to you and say, 'Would you like to offer more?'" And you say,

00:14:05.280 | "I'd like to offer three." Your neighbor says, "Well, I'll offer four." You look down and you

00:14:10.480 | say, "Well, I'll offer 4,500." Your neighbor says, "Well, I'll offer four, but not 4,500."

00:14:17.760 | Now, we have a price that's established because you two as buyers have competed with one another,

00:14:23.680 | have a price that's been established, and I get to choose, do I want to accept that price? Do I

00:14:28.160 | want to accept the 4,500 offer or do I want to hold out for more? A couple things could happen.

00:14:34.640 | I could say, "Yes, I'll accept the price of 4,500." Or I could say, "No, I want more. I want

00:14:40.160 | $5,000." And then you and the neighbor both have to look at one another and see, do we want to pay

00:14:44.720 | it? Both of you guys may say, "No, we'd rather keep the money," and you walk away. So buyers

00:14:50.880 | compete against buyers. Now, what about sellers? If I have a car and then my next door neighbor

00:14:58.320 | is also selling a car, and you and your next door neighbor are standing in our driveways looking at

00:15:04.080 | our two cars, now all of a sudden my car is in competition against my next door neighbor's car.

00:15:10.080 | Both of you have money. We both have cars. And now I've got to compete against my neighbor's car.

00:15:15.600 | My neighbor comes out and says, "Joshua is trying to charge $5,000 for his car. I'll sell you the

00:15:20.640 | car for $4,000." Well, all of a sudden, both you and your neighbor go next door and you're looking

00:15:27.120 | at that nice car for $4,000. I have to holler out at you from my driveway, "Wait, wait, wait, wait,

00:15:32.000 | wait, wait. I might be willing to sell my car for 3,000." You come over here. Now my neighbor is

00:15:37.440 | calling out and saying, "Come back over here." And we go back and forth and back and forth.

00:15:41.120 | So the key is to recognize that this example applies in every single transaction, for every

00:15:48.000 | single good and service that we buy in a free market economy. It applies for the purchase and

00:15:52.640 | sale of cars, and it applies for the purchase and sale of bottled water. And every buyer is competing

00:16:01.120 | against all the other buyers, and every seller is competing against all of the other sellers.

00:16:06.160 | And the prices at which those buyers and sellers can come to an agreement,

00:16:10.240 | those prices will vary depending on the circumstances of the sale.

00:16:17.680 | The lowest price is not always the most successful transaction.

00:16:28.160 | Rather, transactions are consummated based upon the total picture of factors that are involved.

00:16:36.160 | Question. Have you ever purchased something from a convenience store checkout rack?

00:16:44.960 | A candy bar, a stick of gum, something like that, an energy shot, a five-hour energy shot,

00:16:53.600 | things like that. Or have you ever purchased something from the end cap or the checkout rack

00:16:58.960 | at a grocery store? I would dare say that most of us have, at least at some point.

00:17:06.320 | Now, of course, we probably try not to do it routinely. I was at the store with my son the

00:17:12.480 | other day, and I'm instructing him, "Hey, don't ever look at, just avert your eyes from the things

00:17:16.800 | on the end caps because you don't want to give in to temptation. And the products here are the

00:17:21.120 | highest price in the store, but I'm sure we've all done it." Now, when you've done it, have you sat

00:17:27.120 | down and moaned and groaned over the fact that if you got online and bought a case of 500 packs of

00:17:32.880 | gum, you could have had a delivered to your house in a week and you would have paid 50 cents a pack

00:17:42.480 | instead of the $2 a pack that you just paid at the grocery store checkout? No, of course not.

00:17:48.400 | Why didn't you? Well, you were happy to pay for that $2 pack of gum at the grocery store checkout

00:17:54.720 | or the expensive candy bar because it was convenient. It was positioned right where you

00:18:00.400 | were, when you were in the mood to have it, when you most wanted to have it. You had an urging to

00:18:06.800 | eat that Snickers bar. It was tantalizingly placed right in front of you as you're checking out,

00:18:12.320 | and you thought, "You know what? That price is okay. I know it's not the cheapest, but I'll go

00:18:17.520 | ahead and buy it." And so you went ahead and purchased it immediately and paid a higher price

00:18:23.920 | for it because it was useful to you at that point in time. It had a higher utility value to you. It

00:18:30.240 | was more useful to you at that point in time. If you didn't have that urge, you wouldn't have

00:18:38.400 | purchased the candy bar because you could have gone to the restaurant supply store or the big box

00:18:47.520 | warehouse store a week later and purchased a box of 100 of them. It had a much lower cost.

00:18:54.080 | But you chose to consummate a transaction. Remember, all of this has to do with

00:19:03.360 | a free market transaction where there's no coercion. You don't point your gun in the face

00:19:10.960 | of the store clerk and say, "You've got to sell me that cheaper," and they don't point their gun at

00:19:14.720 | you and say, "You've got to buy this." There's no coercion involved.

00:19:17.840 | So now let's talk about a hurricane and a flood. Market prices are always set

00:19:25.920 | in a tiny little auction process, and that auction process varies depending on the circumstances

00:19:38.400 | involved. I cannot remember the last time I purchased something from an end cap at a grocery

00:19:47.840 | store. I can't remember the last time I purchased something from a checkout line at a convenience

00:19:52.400 | store. I try to work hard to discipline myself not to purchase things like that because I know

00:19:59.200 | those are very expensive items on a per unit basis. But if I were hungry and I were in a hurry

00:20:08.320 | and I were in a hurry, all of a sudden my needs change and I'm willing to pay the price.

00:20:15.440 | The reason that I'm willing to pay the price, however, is probably because I didn't plan ahead.

00:20:24.480 | If I had planned ahead, I would have purchased a box of 100 candy bars. I would have saved them

00:20:31.760 | in my house. And when I was getting ready to head out of my house in the morning, I would have

00:20:34.800 | recognized I may not have the time to eat later on. And so I need to make sure to bring a Snickers

00:20:40.880 | bar, an energy bar with me so that I can have some food while I'm on the go. But if I didn't plan

00:20:47.920 | ahead, I look down and I might be willing to pay the price. And this is what happens during times

00:20:54.000 | of disaster. This is what happens during hurricanes. When gas stations start increasing the price of

00:21:01.360 | the gas, it becomes costlier and you have to look down and say, "Well, how badly do I want gas?"

00:21:09.600 | If you look down and you say, "Hey, look, here's bottled water for sale and it's double the price

00:21:15.840 | or triple or quadruple the price that it normally is," you have to think, "Well, how badly do I need

00:21:21.040 | bottled water?" And all of a sudden the demand from buyers and the supply from sellers

00:21:30.480 | needs to start changing. If those prices are allowed to change, there will be a very valuable

00:21:37.760 | effect. What happens is buyers start to think twice and consider, "Do I really want this? Do I

00:21:44.800 | really need this? Or would I rather continue on my way?" If you were selling candy bars for $10 a

00:21:51.120 | candy bar, I would say, "I'm happier to be hungry." And the same way, if I'm desperate for water and

00:21:59.520 | there's a hurricane about and you're selling a package of water, but all of a sudden the price

00:22:03.840 | went from the normal price of $5 for a case to $20 for a case, I'm more likely to either buy none

00:22:11.200 | or buy less. I'll just buy one case. But if you keep the price at $5, I'm very likely to buy a bunch.

00:22:20.080 | And this is what leads to shortages.

00:22:26.640 | If you don't allow the prices to change, people can't get good signals about the value of

00:22:32.560 | something. If you keep the prices constant, then the buyers who recognize their increased desire

00:22:41.040 | to have the product start buying massive quantities. And instead of buying one or two

00:22:48.080 | cases of water at $20 a case, they turn around and they just buy one or two. This leaves a greater

00:22:53.840 | supply available and this leads to more people being able to get their needs met.

00:22:58.400 | So for the good of the buyers, the people who are interested in actually having

00:23:06.160 | the product or the item, the prices need to be allowed to change.

00:23:11.040 | Because when the prices change, that will lead to fewer shortages.

00:23:16.320 | Let's use another important example of gas. On yesterday's show, I talked about the need to be

00:23:22.960 | able to get out of town. If you're heading out of Houston and you didn't fill up your gas tank and

00:23:26.880 | you didn't do what I talked about and have gas stored at home so that you could at least fill

00:23:30.080 | up your tank and get 300 or 400 miles out of the affected area, which will get you out of trouble

00:23:35.520 | in the vast majority of natural disasters. If you didn't do that and you swung by the gas station

00:23:41.600 | and you see a bunch of cars that are heading there, think about two things. Let's say that

00:23:48.160 | gas is its normal current $2.50 a gallon. Well, in that situation, you would immediately choose

00:23:53.600 | to fill up your tank because it's $2.50 a gallon. And you know that there are lots of other people

00:23:58.640 | who are going to come and who are going to be doing the same thing you are, trying to get out

00:24:01.760 | of town before the hurricane hits. And so you would immediately fill up your tank. Well, there goes

00:24:06.480 | 20 gallons, 30 gallons, but you're happy because $2.50 and you're on the road. But now let's say

00:24:13.200 | that the gas station owner had increased the price. Well, if they'd increased the price from $2.50 a

00:24:19.600 | gallon to $8 a gallon, you might look down and actually think, "Well, I'm heading out of town,

00:24:25.200 | but I don't have to go 400 miles. I need to go 100 miles. And I'm sure that there'll be more gas

00:24:29.520 | stations and probably lower prices 50 miles away." And you might look down and you might choose to

00:24:35.520 | only put in a half a tank or a quarter tank because you didn't want to pay the higher prices.

00:24:39.920 | That leaves more gas available so that the guy behind you, instead of running out of gas right

00:24:44.400 | when you're done pumping your car full, the guy behind you can go ahead and get a couple of gallons

00:24:48.080 | as well. And that can get everyone a little ways out of town. And like ants running out of a fire

00:24:54.640 | ant nest, where if you put your finger right in the nest, there's ants covering every inch of the

00:25:01.120 | sand. But as they start to disperse, there starts to be more room between them. The same thing would

00:25:05.120 | happen with gas as people try to get out of an affected area. There's plenty of gas on the

00:25:09.520 | perimeter, but there's not a lot of gas in the middle and everyone's doing the same thing. So

00:25:13.120 | the pricing changes would lead to people making different decisions. This leads to a greater

00:25:17.680 | supply available to meet the higher demand because the prices are changing.

00:25:24.400 | Now, what other ways of rationing exist? Because you've got to ration. When there's a massive

00:25:31.280 | amount of demand, you have essentially three ways that supply can be rationed.

00:25:37.920 | There's when circumstances change, when all of a sudden there is a ton of demand for a product,

00:25:49.520 | hurricanes coming, the shelves are swept clear. How does the rationing happen? Well, number one,

00:25:56.640 | it can happen based upon price. Buyers and sellers can start to come to differing arrangements based

00:26:03.200 | upon price. And that's the way that things work most of the time. The second way that it can happen

00:26:10.080 | is based upon lines. And this is the way that usually happens because when the price is not

00:26:17.840 | allowed to be affected, then it happens based upon lines. And now you form massive queues of people.

00:26:25.760 | And so this is why you have massive lines of people at a grocery store, you have massive lines

00:26:31.600 | of people at a gas station, etc. I've been in circumstances where I had plenty of gas on hand,

00:26:37.120 | but the hurricane's coming and I look and say, "Okay, well, there's a line there, but they're

00:26:40.160 | not charging anymore." And all of a sudden I say, "I do have a few empty cans. Let me go and make

00:26:44.160 | sure that I get a few more." If the price were higher, I would probably be not willing to pay

00:26:50.480 | the price because I have plenty of gas, but I might be willing to pay in lines. Now, lines do

00:26:56.080 | work as a form of rationing. If I had to wait all day in line to pick up a few gallons of gas,

00:27:00.960 | I wouldn't do it because I have enough. But if I had to wait a few minutes, I would do it.

00:27:06.320 | And so lines are effective at reducing the demand, but they're not nearly as effective as

00:27:12.640 | price. And usually what happens is there's a combination of them. The third way of rationing,

00:27:17.760 | of course, is based upon connections. And if you don't allow prices to change and to fluctuate and

00:27:24.000 | to go up and down, if you don't allow that to happen, then you have lines form and then people

00:27:33.600 | start to use political connections and political power and political influence to get what they

00:27:40.560 | want and get what they need. And these are alternative forms of currency. The problem is

00:27:46.480 | that market is hidden. It all happens behind closed doors where only the powerful have access.

00:27:52.800 | These prices are public. If you don't allow prices to change, you have shortages. And if you don't

00:28:01.520 | allow people to earn higher prices, you ensure that those shortages will continue on an ongoing

00:28:10.960 | basis. Let's give an example with gasoline or with bottled water, which are a couple of things that

00:28:15.600 | are very practical, are very important to people who are fleeing before a disaster.

00:28:21.520 | I'm an entrepreneur and I'm an investor, and I am always looking for a way to make a little bit of

00:28:27.600 | money. I like making money. I like making a profit, and I'm willing to take risk. And I'm always

00:28:33.040 | interested in any opportunity that I think can be helpful and appropriate to me. I live in Florida,

00:28:41.600 | about a day's drive from Houston, and I would dearly love to be there to help out. But I've got

00:28:48.160 | a busy week planned. I've got a lot of priorities, a lot of work in my business, a lot of family

00:28:52.800 | responsibilities, responsibilities here where I live. And it's just not really worth it to me to

00:28:58.080 | get in the car and go and take a week of my life right now to go and help people in Houston. If I

00:29:03.760 | were closer, I would probably go and do it just because I want to be charitable and I want to

00:29:07.360 | help people who are hurting. But it's really hard for me to say, "I'm going to take a week and take

00:29:12.240 | it away from productivity." But as an investor, if there were an opportunity to make a profit, I

00:29:19.280 | would be happy to fund it. I'm not that interested myself in loading up, for example, a car with

00:29:28.080 | bottles of water and gas cans, filled gas cans, to go and resell to people who are interested.

00:29:33.680 | That would probably not be enough to move the needle enough for my wealth to make it valuable.

00:29:39.760 | But I know a lot of people who are desperately in need of work, a couple of people that I work with

00:29:45.680 | who are desperately – friends of mine who are desperately in need of work. And I have the

00:29:50.640 | equipment that I could use. I own a big old van that I could use. I have access to large trailers

00:29:58.240 | that I could use. I own the equipment. I have the money where I could easily afford to go and fill

00:30:05.200 | a big van and a big trailer full of water, full of food, full of diapers, full of cans of gas.

00:30:13.600 | And I have access to the labor. If there were a way where I could justify it financially because

00:30:23.440 | we could sell products for a large amount of money and make a profit enough to make a return

00:30:29.840 | on my money, enough to pay the other person who's going to be driving the van, I could have put a van

00:30:36.080 | and a trailer filled with products that would have been valuable on the road over the weekend.

00:30:41.440 | I probably could have done a few of them. And I'm not the only one who would do that.

00:30:46.720 | Now, this would be an area where I wouldn't be doing it exclusively for the profit motive.

00:30:53.600 | I would probably be doing it partly for the altruism. I want to help people. I really do.

00:30:59.040 | I've considered, I seriously consider, anytime there's a disaster, I consider just doing it all

00:31:03.360 | for free and funding it all myself and giving it away because I do want to help people.

00:31:07.120 | But it's a whole lot easier to help people when I can make money and get rich doing it. And I can

00:31:13.040 | help the people who are there, who are affected, who need the products to make their life better.

00:31:16.560 | And I can help the person who needs work. And I can be the underwriting funding merchant.

00:31:20.800 | But if I can't make enough of a profit to make it worth my time and my money,

00:31:26.560 | the whole thing falls apart. And that's what happens. There are thousands and tens of thousands

00:31:33.840 | of people just like me who could move quickly in those times and who can basically hit and run

00:31:41.360 | and who would be happy to go and sell gas and water, et cetera, on the side of the road.

00:31:45.520 | Now, this is fundamentally accurate and proper. I went to go see the eclipse last week. When I

00:31:52.160 | went to see it, I didn't plan ahead. I didn't have glasses. I hadn't bought them when they

00:31:55.360 | were cheap. I hadn't gotten them when they were free. I was thrilled to pay 10 bucks to somebody

00:32:00.000 | on the side of the road and get a pair of glasses. Totally happy with it. And there would have been

00:32:04.000 | plenty of people who would have been thrilled to buy gallons of gasoline, five-gallon cans of

00:32:09.440 | gasoline from me at 10 bucks a gallon for 50 bucks a pop if it got them out of town or bottles of

00:32:15.440 | water. I hope you get the idea. If you allow prices to change, it sends a signal to the marketplace

00:32:22.720 | and the market will respond quickly. Those high prices will only carry on for a couple of days

00:32:31.360 | because very quickly the competition will step in and all of a sudden those prices will be driven

00:32:35.280 | down. But the free market is the most responsive, reactive mechanism that has ever been discovered

00:32:45.360 | to meet the needs of the largest number of people. Now, in a moment, I'm going to read an essay from

00:32:53.760 | the Los Angeles Times from their op-ed column by Michael Hiltzik called this. The title is

00:33:00.400 | this, "Memo to Economists Offending Price Gouging in a Disaster. It's Still Wrong Morally and

00:33:06.000 | Economically." I'm going to read you that essay because it's written as a direct rebuttal of

00:33:10.080 | everything that I've said so far. And I'll demonstrate to you the other insanity of this

00:33:15.360 | positioning. Basically, in order to come against what I've described here, which is logical,

00:33:22.160 | rational, and proven again and again and again all over the world, you have to use the argument,

00:33:28.960 | "But I don't think that's the way it should be." That is the only argument that exists.

00:33:34.080 | I don't think that's how it should be. It just doesn't seem right to me. And it's about as

00:33:38.000 | effective as saying, "Well, I don't think we should have to build airplanes to fly. I think

00:33:42.240 | we should be able to glue together eagles' feathers and jump off a cliff like Icarus did and think

00:33:47.840 | that it's somehow wrong that he plunged to his death, as the legend goes, just because it should

00:33:55.440 | be different." It doesn't really matter how you or I think life should be. That doesn't matter.

00:34:02.880 | What matters is how life is. And we live in a world where the people who proclaim the loudest

00:34:10.240 | hear how things should be and don't actually have any evidence for their position are lauded

00:34:15.760 | and applauded. This is nuts. And it's one of the things that drives me crazy about... Excuse me.

00:34:23.280 | It's one of the things that I don't like about our modern world, where the people who can talk

00:34:29.360 | the most about the way that things should be and picture an ideal world, but are never held

00:34:34.960 | accountable for their actions, never held accountable for their words, never held accountable

00:34:38.400 | for the actual results of what happens, gain the notoriety and gain the acclaim. For example,

00:34:45.200 | the past 30 minutes of this recording have been all about how price gouging, which is a pejorative

00:34:53.760 | term that shouldn't be used, should be used. Prices that change in response to changing market

00:35:03.520 | conditions, whatever would be a better way of expressing that phrase, that prices have changed

00:35:08.160 | and adapt in response to changing market conditions, that is the most fundamentally

00:35:12.720 | valuable way to eliminate shortages. I, in that opinion, probably will be, but would be,

00:35:20.960 | and probably will be, roundly derided in public as wrong and cold and unfeeling and uncaring.

00:35:31.040 | And yet all the people who say this shouldn't be so sit around and talk about how I can't

00:35:37.200 | believe that price gougers are changing prices. And meanwhile, people are going hungry,

00:35:40.880 | they're going thirsty, and their cars are sitting useless on the side of the road because they don't

00:35:45.200 | have fuel. So we all walk around engaging in moral preening and moral posturing, trying to express

00:35:54.960 | how useful and adaptive we are, trying to claim the credit from society for somehow being good.

00:36:02.880 | Meanwhile, people are going hungry, they're cold, they're thirsty. And we moan and whine and bemoan

00:36:10.240 | the results of that, saying, "Well, it shouldn't be this way," when in reality it doesn't have to

00:36:15.440 | be that way. It's only that way because people get in the way. And this is why I love business.

00:36:21.840 | Walmart Corporation or Amazon Corporation have done far more good on a global scale

00:36:33.600 | than the American Red Cross.

00:36:36.400 | The American Red Cross

00:36:40.320 | Because they actually solve problems for people each and every day. Now there's a place for both.

00:36:45.360 | There's a place for the Red Cross, there's a place for the Salvation Army, and there's a place for

00:36:48.720 | Walmart. There's a place for people to charge a lot of money, and there's a place for people to

00:36:54.480 | give things away. There's a place and a need for both because not everything can be delineated

00:37:00.560 | in terms of dollars. Not every transaction can be consummated in an auction process.

00:37:06.320 | But at the end of the day, you can preen and prance about speaking language that sounds good

00:37:13.760 | while your actions are destructive to people's lives, or you can be willing to make statements

00:37:20.240 | that sound bad but actually help people. And unfortunately, more and more it seems like you

00:37:25.520 | have to choose between those things. And unfortunately, we very rarely have opportunities

00:37:31.840 | to see the two working together in a free market. Because here's the reality. The person who gives

00:37:39.840 | services away for free is also in competition with the person who's charging for services.

00:37:46.000 | And the person who's giving products away for free is also in competition with the person

00:37:51.120 | who's charging for services. So let's talk about the morality of price gouging. We covered the

00:37:59.840 | utility. Let's talk about the morality of changing prices. Here's the fundamental truth.

00:38:06.160 | I have no right whatsoever to invade your home and tell you what to do with your property.

00:38:15.120 | It's your choice what you do with that property. It's your choice if you want to hold onto the

00:38:20.800 | property. It's your choice if you want to sell the property. It's your choice if you want to

00:38:25.360 | give your property away. It's your choice what you want to do with your time. It's your choice

00:38:30.400 | if you want to sell your time out to the highest bidder or give it away freely. That is your choice.

00:38:35.280 | And you can make any choice that you want. And I have no moral right or authority to tell you what

00:38:42.160 | you should do with your time and your property, with your life. That's your choice. If you have

00:38:53.120 | a tank full of gas and your car is full of gas and you have a few extra cans of gas, it is your

00:38:59.040 | choice if you want to keep those cans of gas in reserve or if you want to give them away to your

00:39:04.000 | neighbor. That's up to you. It doesn't matter what I think you should or shouldn't do. That's yours.

00:39:12.640 | You have that right to decide. And you can make any decision that you want.

00:39:20.560 | So let's say that I'm unhappy with the decision that you're making. Well, I have two choices.

00:39:25.200 | I can choose the moral route or I can choose the immoral route. If you have property,

00:39:31.520 | you have cans of gas, and I'd like to get them from you, I can come to you and I can make you

00:39:36.880 | an offer. And I can say, "I'm willing to trade you this item of value, these dollars, this car,

00:39:43.200 | these hours of service, this particularly useful thing. I'm willing to trade you these things in

00:39:47.840 | order for your gas." That's upright. And I can make you as many offers as you're willing to hear.

00:39:53.840 | And you're entitled to accept any offer that you want or to decline any offer that you want.

00:39:59.760 | It's your property and you can choose what to do with it.

00:40:02.800 | Or the flip side is I can get a gun, maybe get a couple of my friends, and now the goons with guns

00:40:11.760 | can come and show up at your door and point their guns at you and say, "We need your gas. We're

00:40:16.000 | taking your gas." Now, in this circumstance, if gas is short and I just was willing to make you

00:40:24.480 | a free market offer of $20 for $100 for a five-gallon can of gas, which would usually sell

00:40:32.480 | for maybe $20 plus the value of the can, but stick with me. If I make you an offer for $100 and you

00:40:37.920 | just declined it, if I pull out a gun, stick it in your face and say, "I want this can of gas. And

00:40:43.600 | oh, by the way, here's $20 to make you feel better." What have I actually just done? I've stolen from

00:40:50.960 | you $80 because you just had an offer for $100. So I've effectively stolen from you $80. I have

00:41:01.520 | no right to do that. I have no right to steal from you. It doesn't matter how much I envy and covet

00:41:10.080 | your gas. I have no right to use violence against you to steal your gas from you. It's your gas.

00:41:17.760 | You can do whatever you want with it. I'm not allowed to steal and I'm not allowed to covet

00:41:25.120 | your property. It's your property and you can do anything you like with it. This is what angers me

00:41:33.520 | about things like price fixing laws, which is what anti-price gouging laws are. It's price fixing.

00:41:41.280 | It's a form of theft. And so we institutionalize immorality, the immorality of theft,

00:41:46.880 | and it's indulging in envy. We pit the hordes of people who want gas, want what someone else has.

00:41:55.680 | And because the hordes have become politically powerful due to the power of the horde,

00:42:02.480 | we encourage their envy and their covetousness against the person who has something, who is

00:42:06.720 | thoughtful and who thought ahead. And even worse what this system does is it encourages

00:42:14.080 | larceny behind the scenes. Because the mayor of the town comes over and says, "Hey, business owner,

00:42:21.440 | we need to take your gas from your gas station in order to provide for the public good.

00:42:26.160 | So we're going to give you a little bit of money in order to provide for the public good." And so

00:42:31.920 | they come and they take it from you and they bring it out and say, "We're going to give this

00:42:37.040 | away to the people who are in need." Ostensibly, this sounds good. Supposedly, this sounds great.

00:42:42.560 | But here's what's really happening behind the scenes. The mayor, of course, is busy encouraging

00:42:47.840 | people to say, "We've got to stand together. We've got to make sure that we all stand and support

00:42:52.960 | one another. And so we're taking this gasoline from the business owner who doesn't need it,

00:42:56.240 | because after all, they have plenty of gasoline. And we're going to pass this out to the townspeople

00:43:03.520 | who are in real need." But what actually happens behind the scene is the mayor needs some gas. And

00:43:08.960 | so the mayor gets a little bit of special favor because they don't have more money to allow special

00:43:14.160 | favor to the people who have more money. The mayor has more influence and more connections.

00:43:18.000 | And then the law of nepotism comes in and all of a sudden the mayor has plenty of gas in their car.

00:43:23.120 | And then the mayor's nephew has gas in his car. And his niece has gas in her car. And that gas

00:43:29.040 | starts to filter out and it all magically winds up in the family members of the mayor.

00:43:35.440 | This is what happens across the world. Now, I'm using strong terms that are obviously strong.

00:43:40.800 | I'm being dramatic for effect. When I talk about the goons with guns and me walking over and

00:43:47.120 | sticking a gun in your face and the mayor and all these things, I'm using dramatic terms to try to

00:43:52.240 | demonstrate the clear principles. The United States is nowhere near that,

00:43:56.560 | thankfully. But it's important not to indulge the direction that we're going.

00:44:03.520 | And that's what we do. And that's what's happening culturally.

00:44:06.560 | Instead of admiring the entrepreneur who comes and who has the foresight

00:44:13.680 | to stock up on gasoline with the intent of making a profit,

00:44:20.720 | we criticize that person as being somehow cruel or unloving.

00:44:25.360 | And this results over time in a really destructive trend where instead of rewarding

00:44:34.640 | foresight and forethought, every single Houstonian could have enough gasoline to get them out of town

00:44:40.880 | and enough bottled water to get them through an emergency. Everyone could. We don't do that.

00:44:49.200 | We don't encourage those things. So, I'm just seeking to use a strong example to make an

00:44:55.520 | ideological point and to challenge you to think what's going on under the surface.

00:44:59.360 | Now, in rebuttal to everything that I've said thus far, let me read this essay to you and show

00:45:04.480 | you the thinking that goes into this. And then I'll close with some practical tips and pieces

00:45:11.520 | of advice for what you can practically do. How do you navigate this challenge of

00:45:18.320 | laws and legality, etc., and whatnot? So, here's the memo. So again, "Memo to Economists Defending

00:45:29.600 | Price Gouging in a Disaster. It's Still Wrong Morally and Economically," published August 28

00:45:37.040 | in the Los Angeles Times by – essay by Michael Hiltzik. "As surely as flooding disasters like

00:45:42.800 | Hurricane Harvey are followed by health concerns and homelessness, they're followed by calls to

00:45:47.600 | legalize price gouging. And sure enough, the waters were still rising all across the Houston area

00:45:53.360 | when the first such calls were heard. They came from conservative economists, Tim Worstall of

00:45:58.720 | Britain's Adam Smith Institute, writing in Forbes, and Mark Perry of the American Enterprise Institute,

00:46:03.600 | whose piece appeared on the AEI website and at Newsweek. Both demonstrated the chief flaw of

00:46:09.200 | such analyses. They were based on irreproachable textbook economics and showed no sensitivity

00:46:17.040 | whatsoever to how things work on the ground during a major catastrophe." Pause. Let me

00:46:25.680 | rephrase that. Let me read it again. "Both demonstrated the chief flaw of such analyses.

00:46:30.800 | They were based on irreproachable textbook economics and showed no sensitivity whatsoever

00:46:35.920 | to how things work on the ground during a major catastrophe."

00:46:39.920 | One of the fundamental flaws in our society currently is that we've lost the ability to tell

00:46:45.840 | the truth, no matter how hard or how easy the truth is. And we've raised sensitivity to a place

00:46:54.480 | of supremacy over accuracy or over truthfulness. And we've somehow come to the place at which

00:47:03.440 | it's more admired and respected to say nice things than to face reality as it is. Well,

00:47:09.680 | guess what? It's not sensitive to say that a hurricane is coming for your city and you better

00:47:13.680 | get out. That's not sensitive. And it's not sensitive to those who don't have a car and who

00:47:18.320 | can't put gasoline in their car to get out. But it's true. And it would help a whole lot more

00:47:24.080 | than sitting around and saying, "Well, it's not nice to talk about the damage that the hurricane

00:47:27.680 | can do." It's not sensitive to say things that are hard, but it's actually useful. It's actually

00:47:35.360 | helpful. And this is what accounts for modern thinking that a Los Angeles Times columnist can

00:47:41.040 | say, "Both demonstrated the chief flaw of such analyses. They were based on irreproachable

00:47:46.240 | textbook economics, irreproachable textbook economics and showed no sensitivity whatsoever

00:47:52.560 | to how things work on the ground during a major catastrophe." Again, I go back to aerodynamics.

00:47:57.360 | "Well, Johnny, you made... Oh, Johnny Icarus, you made these beautiful wings. They look phenomenal.

00:48:05.040 | You used wax to put these feathers together. You know, that should work because, Johnny,

00:48:09.280 | you look like an eagle. And I'll bet you, you feel like an eagle, don't you? You identify as

00:48:13.760 | an eagle. Well, Johnny Icarus, here is a cliff. Why don't you jump off? And if you flap your wings

00:48:19.040 | because you identify as an eagle and you feel like an eagle, then I think it would be very

00:48:22.960 | sensitive that you should be able to fly like an eagle." And Johnny's dashed to death on the rocks

00:48:31.120 | below. Wasn't sensitive to say, "Johnny, you don't understand the irreproachable textbook laws of

00:48:37.760 | aerodynamics." But it would have saved his life. And that's what angers me about these cretins who

00:48:46.480 | come around and wax eloquent about, "Wow, this is the way the world should be."

00:48:52.880 | And in reality, people suffer for it. It happens with price gouging. It happens with minimum wage

00:48:59.760 | laws. It happens all across the board. It happens with immigration laws. It happens with all of

00:49:03.520 | these things. You sound good because you say, "Well, we don't want high prices because we're

00:49:08.320 | going to protect the most disadvantaged among us." It sounds really good.

00:49:15.920 | And it leads to shortages. And it leads to people like me who would happily underwrite

00:49:20.880 | a big truck full of gasoline and bottled water to go into a hurricane area and give half of it

00:49:27.200 | away if I felt like that's what I'm doing. But I want to do that because that's what I want to do.

00:49:30.880 | Unfortunately, we've bowed our knees to sensitivity and sounding nice instead of doing

00:49:40.880 | something. The reason I mentioned minimum wage laws, same exact thing proven again and again

00:49:44.400 | and again. Minimum wage laws lead to unemployment for the most disadvantaged people again and again

00:49:52.080 | and again. And yet the nice sounding thing is to say, "Well, we should advocate for it." Well,

00:50:00.720 | guess what? If you want to pay me $5 a gallon for my gas that's worth $20 a gallon, I'm just not

00:50:06.400 | going to sell it. And I'm going to be secretive about it. And the exact same thing if you want

00:50:11.120 | me or if I want you as a business owner to pay $15 an hour for a job that's worth $5 an hour,

00:50:17.840 | you're just not going to do it because none of us are actually stupid.

00:50:22.240 | We keep our mouths shut because we get tired of being dumped on,

00:50:27.520 | but we're not actually stupid. Continuing on, "As I've observed before, the odd things about

00:50:33.600 | these defenses of price gouging is that they cross ideological boundaries." Huh, I wonder why,

00:50:37.680 | Joshua's comment. "They're often favored by conservatives and liberals alike. It's unclear

00:50:42.480 | why this should be so unless liberals relish the rare chance to show that they're not opposed to

00:50:48.640 | the free market now and then. But the notion that the free market can somehow redress the extreme

00:50:54.080 | disruption of supply and demand that occurs during a disaster is exactly wrong." Pausing on the essay,

00:51:04.640 | think about this statement, "But the notion that the free market can somehow redress

00:51:08.720 | the extreme disruption of supply and demand that occurs during a disaster is exactly wrong."

00:51:14.560 | That's called a straw man because nobody is saying that the free market can somehow

00:51:23.520 | redress the extreme disruption of supply and demand comprehensively. The point is there's

00:51:29.680 | a disaster. There is a disaster. The disaster has happened. The disaster is not something that

00:51:35.600 | somebody decided to do. The disaster is an act of God. It's not an act of man.

00:51:39.600 | Now, of course, the act of God can be exacerbated by the act of man. You pave over all over the

00:51:46.480 | ground and you get rid of the water and you wind up with a landscape that can't hold water, and all

00:51:50.240 | of a sudden you have major problems. You build a city that's low in the environment and you're

00:51:55.040 | going to face the disaster. But nobody is saying that the free market can completely redress the

00:52:00.960 | disruption of supply and demand. That's not the argument. That's a straw man. The argument is

00:52:07.120 | the free market can redress the supply of demand better than the totalitarian status response that

00:52:15.600 | leaves people standing in lines and without under claims of moral superiority. Talk to anybody who

00:52:22.560 | grew up under the communist system and you find that yes, prices were cheap when you could find

00:52:30.560 | anything. It does you no good whatsoever to know that gas is priced at $2.50 a gallon when it's

00:52:38.480 | priced that way in Nebraska and not in Houston because it's not in Houston. Continuing on,

00:52:44.080 | we now need some method of rationing that limited and scarce supply. Rationing by price is always

00:52:49.760 | the efficient way of doing this. Economist Tim Worstall, he's quoting some other economists.

00:52:55.600 | Continuing to read, "When the market breaks down utterly as in Houston where huge swaths of the

00:53:00.000 | region will have little or no access for days at least to fresh water, auto fuel, and electricity,

00:53:05.840 | almost nothing the free market can do will get supplies of these commodities to places that

00:53:10.480 | can't be physically reached. Instead, the market will impose a level of price discrimination

00:53:16.160 | that could become life-threatening for people at the wrong end of the income stream.

00:53:19.840 | If one conceives," let me just pause here for a moment, read the statement again, "almost nothing

00:53:24.800 | the free market can do will get supplies of these commodities to places that can't be physically

00:53:29.120 | reached." This is an absurdly false claim. If I knew that I could sell five-gallon containers of gas

00:53:40.720 | on the outskirts or the inside of Houston, Texas, and if I knew I could sell flats of water that I

00:53:49.200 | could pick up at Costco for five bucks a piece, if I could sell them for 25 bucks,

00:53:52.640 | I would have a van and trailer on the road today.

00:53:56.320 | I'd do that for as many days as I could until the price dropped. Now, nobody is claiming that

00:54:05.200 | somehow you can magically convey these things to the middle of the city where there's floodwaters

00:54:12.480 | all around, except that actually I'm willing to make that claim. Here in Florida where I live,

00:54:20.240 | I'm always interested when I go out to these places where the boats gather. Here in West

00:54:26.000 | Palm Beach, there's a popular boating spot called Peanut Island. It's kind of the local party

00:54:30.720 | sandbar place. All the towns on the water have this or the lake has it or whatever.

00:54:34.800 | I'm always fascinated to see the businesses that spout up. If you go out to Peanut Island here in

00:54:40.960 | West Palm Beach on the weekend, you'll find that there are a bunch of boats and everyone's boozing

00:54:44.880 | and hanging out and playing on the sandbar and the dogs are running around, et cetera. There's

00:54:49.680 | always amazingly enough the things that you want to buy right there at some price. There's a boat

00:54:58.080 | wandering around selling fresh hot pizza. There's a boat that someone has made selling fresh hot food,

00:55:04.320 | Philly cheesesteaks and all kinds of stuff. Magically in the middle of water,

00:55:09.120 | these entrepreneurs figure out a way to deliver fresh hot pizza and fresh hot Philly cheesesteaks

00:55:16.160 | and fries and cold Cokes. Why? Because they want to help the people who are there without pizza?

00:55:23.440 | No, because they want to make a profit. If you want to get water and rides to a place that's

00:55:31.840 | affected, allow people to come and do that for free and lots of us will and allow people to

00:55:38.240 | make money on it if that's what some people want to do. Just don't force someone to buy or don't

00:55:43.360 | force someone to sell. So the statement, "Almost nothing the free market can do will get supplies

00:55:48.240 | of these commodities to places that can't be physically reached," is absurd. I can buy Coca

00:55:52.960 | Cola, sometimes an ice cold Coca Cola, in any corner of the world. No amount of government

00:56:00.080 | action got that Coca Cola there. Other statement, "If one conceives an important function of

00:56:11.360 | government as ensuring that the market doesn't unduly disadvantage some people compared to others,

00:56:17.120 | then times like this are precisely the moment it should step in by putting a leash on profiteering

00:56:22.800 | on essential goods, for instance." It's an accurate statement. If one conceives that an

00:56:28.960 | important function of government is ensuring that the market doesn't unduly disadvantage some people

00:56:33.440 | compared to others, then times like this are precisely the moment it should step in.

00:56:37.360 | But who would ever conceive that that's an appropriate function of government or even

00:56:42.560 | something that is ever possible to achieve? Continuing on, "The problem with the free

00:56:54.960 | market is that it's not really universally free. Not all participants come to the marketplace with

00:56:59.440 | equivalent standing. In a crisis, those disparities are magnified." Now,

00:57:09.760 | let me insert a couple of other words. I'm going to change some of his words.

00:57:16.000 | "The problem with the world is that not all people are universally identical.

00:57:21.680 | Not all participants come to the marketplace with equivalent standing.

00:57:26.640 | In a crisis, those disparities are magnified."

00:57:28.880 | Sure seems to me like it would be nice if everybody were the same. But guess what? I

00:57:37.840 | didn't make the world and neither did you. So we don't really have much of a say in how the world

00:57:42.800 | should work. I don't really like gravity. I think it would be cool to be able to flap my arms and

00:57:47.840 | fly up into the sky, but I can't because somebody invented this thing called gravity and somebody

00:57:54.480 | decided that the world should be governed by gravity. I can sit around and weep and moan and

00:58:02.480 | cry about the fact that there's gravity or about the fact that there are continents on the world

00:58:06.400 | or about the fact that some places have more trees than others. I can do it all day long and

00:58:11.760 | people will admire me for the fact that I can weep and moan and see the problems.

00:58:17.040 | Or I can roll up my sleeves and say, "Hey, look, there's this thing called gravity.

00:58:21.840 | What can we do that would be useful with it and how can we overcome it?"

00:58:26.640 | If you sit around and moan and cry about the fact that people are not all the same,

00:58:33.120 | people don't all have the same advantage, people don't all have the same privilege,

00:58:36.000 | people don't all have the same background, people don't have all the same advantages,

00:58:39.440 | you may look really good and you get nothing done.

00:58:41.600 | Far better to roll up your sleeves and say, "How can we help other people? How can we serve other

00:58:50.080 | people? What can we do that would influence for good the people that are nearby?"

00:58:55.840 | Now, if I lived in just outside Houston, Texas, I might be willing to take the gas from my garden

00:59:02.560 | shed and drive it into town and try to pull people out and help put it in their cars, but I don't.

00:59:07.040 | I live in West Palm Beach, Florida, and I'm not willing to load up my car with that much stuff and

00:59:13.200 | spend several days of my life driving there just in order to help people a little bit,

00:59:16.880 | but I'd do it for a profit. And the problem comes in when you think that's the only thing

00:59:23.440 | operating in the world. These things are not mutually exclusive. Profit and charity are not

00:59:29.360 | mutually exclusive. That's where these types of analyses always go wrong. People don't only do

00:59:35.920 | things for profit. People are not universally greedy. Everybody has some expression of charity

00:59:44.000 | in their hearts. But the beauty of understanding how the market actually works and the world

00:59:50.000 | actually works is you can provide an outcome wherein people's greed and their charity

01:00:00.160 | work for the common good. And this results in a vastly more well-served people.

01:00:08.800 | And now because you create profits, you create profits that can be used to help those who are

01:00:15.280 | the most helpless. I want to continue on because I want to read the essay to you, and I'll try to

01:00:22.400 | do it with more limited comment going forward just so that you can understand what this author's full

01:00:27.520 | argument was. Again, Los Angeles Times, major newspaper. Let's see how reality conflicts with

01:00:32.240 | the idealized pictures offered by Mr. Werstall and Perry. When the municipal water supply is

01:00:37.280 | knocked out and people are dependent on bottled water, Werstall proposes, "We now need some method

01:00:42.240 | of rationing that limited and scarce supply over that increased demand. Rationing by price is always

01:00:48.400 | the efficient way of doing this." He argues that raising the price will encourage suppliers to

01:00:53.600 | flood the market, so to speak, with bottled supply. We want, for example, people to start trucking

01:00:58.720 | bottled water from Louisiana to Texas. More money to be made by doing so will encourage people to

01:01:04.000 | do so. And as that extra supply arrives, then prices will go down again as demand is met.

01:01:09.360 | It's as easy as that. Perry's target commodities include water, plywood, fuel, ice, generators,

01:01:15.360 | chainsaws, hotel rooms, etc. He writes, "As cruel as it may sound to those who are long on

01:01:20.720 | indignation and short on economics, market forces and market prices will address the post-disaster

01:01:26.320 | shortages in Texas and Louisiana more quickly and more effectively than government-determined,

01:01:32.080 | non-market-based prices that result from price-gouging laws." Notice Perry's swift gloss

01:01:38.000 | over the cruelty of this regime as if that's irrelevant. Unfortunately, people at the wrong

01:01:42.640 | end of the cruelty continuum could end up dead. I'm going to pause because I can't go past it.

01:01:48.080 | Notice again what counts for careful, thoughtful analysis. This author, Michael

01:01:56.480 | Hiltzik, never rebuts a single argument

01:02:04.560 | with facts or evidence or logic or any kind of argument other than,

01:02:11.280 | "I don't think this is how it should be. I don't think this is the way the world should work."

01:02:18.720 | Rather, he says, "The world shouldn't work this way."

01:02:23.840 | Let me continue on. Reading again his words, "As I've observed before, most such justifications

01:02:31.520 | of price-gouging fail to take notice of the population that can't pay the higher,

01:02:35.600 | gouged prices under any circumstances. Let's say, for instance, that the market allows a

01:02:40.240 | convenience store to jack up the price of a bottle of water to $7 from $1, as a resident

01:02:45.520 | reported to the Houston Chronicle. There's no question that the bottle would remain on the

01:02:49.440 | shelf and therefore putatively available for purchase for longer than normal or until someone

01:02:54.320 | came by with such a desperate need for water that he or she would swallow the price. Where does that

01:02:59.520 | leave a low-income mother with, say, three children needing to be hydrated? She might need a couple of

01:03:04.880 | dozen bottles, for which the price has now risen to $168 from $24. Throw in that, with the electricity

01:03:12.240 | out, she might not even have access to cash at an ATM. She might very well value that water at $7

01:03:17.920 | a bottle in principle, but that won't matter because she can't afford it. This is why the

01:03:22.720 | public typically views price-gougers in a crisis as creeps. Their action substitutes one market

01:03:27.920 | phenomenon for another that seems much less fair. Instead of a first-come, first-served advantage,

01:03:33.120 | it creates a most-money, best-served advantage. It's all very well—let me pause. Here's what

01:03:40.160 | happens. So again, this sounds very compassionate, sounds very caring, but here's what happens.

01:03:44.640 | That mother who can't afford the $7 bottle of water is most likely not going to have been first

01:03:53.360 | in line to buy up all the bottles of water when they were available for $1 a bottle.

01:03:57.920 | Rather, she would have been busy with her children, she would have had no money to go

01:04:01.760 | to the store and get the water, and I would have come along, recognized that there was a hurricane

01:04:07.200 | coming, recognized the fact that the shop owner was selling this water way too cheap, and I would

01:04:13.360 | have bought up his entire store. Not to sell it, because of course I can't sell it and I can't

01:04:18.400 | give it to the mother, just to stick it in my back room and make sure that I had it, just like every

01:04:22.960 | single other person does when the storm is coming. That's why the shelves are clear.

01:04:29.440 | So, instead of me being willing to take the many bottles of water that I have in my back room and

01:04:36.960 | sell them out at some price, and then to notice the fact that, "Hey, this mother has no water,

01:04:42.480 | maybe I should give her some." We're going to use the threat of violence at the end of law,

01:04:49.920 | the government goons with guns that are going to come from the Attorney General of Texas and

01:04:53.920 | try to enforce a $25,000 to $250,000 fine for price gouging. Instead of using that,

01:05:02.720 | I got mixed up here, hopefully you understand the idea. Continuing on and finishing off,

01:05:10.080 | "It's all very well to cite the textbook claim, as Perry actually did in response to my earlier

01:05:14.400 | column, that price gouging merely avoids serious misallocation of resources. The issue for

01:05:20.240 | government officials tasked with managing a disrupted market is who receives the newly

01:05:24.640 | allocated resources. In this example, it's only those who have $168 to spend, presumably in cash.

01:05:32.000 | Another factor commonly overlooked by defenders of price gouging is that natural disasters tend

01:05:37.600 | to be, one, short term and two, not amenable to rapid response by market forces. If there's no

01:05:43.200 | physical way to get a new supply of bottled water into some part of Houston, then allowing unrestrained

01:05:48.160 | price increases won't produce a larger supply." This guy is obviously going to take issue with

01:05:56.800 | every single textbook because here's what happens. The answer is never that there's no supply.

01:06:02.160 | The answer is that there's not supply at the current market price.

01:06:08.080 | If I can buy a Coca-Cola in the middle of some forgotten outpost in the Sahara, as you can,

01:06:15.760 | or if I can buy a pizza when I'm paddle boarding around Peanut Island,

01:06:22.000 | I guarantee you we could figure out a way to get bottled water into downtown Houston through the

01:06:27.280 | middle of a flood. It's not like boats don't work in the water and it's not like you can't put water

01:06:30.960 | on the boats. Shortages don't indicate a problem in the free market system. Shortages indicate

01:06:41.520 | a mispriced transaction. An entrepreneur who is one who sees that mispriced and who quickly steps

01:06:53.280 | in to take advantage of it, buys cheap, turns around, sells high, takes a risk, loads up the

01:06:57.760 | pickup truck with water, and drives it right into the middle of the city to pass it out and sell it.

01:07:01.360 | Here was his next statement. "Retailers lucky enough to have a few cases in the back room

01:07:08.560 | when the crisis hits, however, will reap a windfall. But who does that help except the

01:07:12.880 | lucky retailers?" Number one, if you think that a guy who runs a convenience store is going to be

01:07:19.040 | magically transformed into a wealthy aristocrat because he sold out his supply of 50 cases of

01:07:27.440 | water at 20 bucks a pop, you've never run a business. And on what basis should that retailer

01:07:35.840 | not make that profit? What actually happens is the retailer decides how much of the bottled water

01:07:42.640 | they want to take home to protect their own family, how much they want to keep in the back,

01:07:46.320 | and how much they're willing to go out and sell. And they hide the stock that they're not willing

01:07:51.200 | to sell at the artificially low price. Another argument in favor of removing crisis stage price

01:07:56.880 | controls is that they fail to accommodate the higher cost of getting a scarce commodity,

01:08:01.040 | such as water or gasoline, into the stricken market. That's a fair point, but it's also why

01:08:05.600 | price gouging laws typically allow for price increases within a certain limited range,

01:08:09.840 | or allow situations where a higher transport or production cost can be documented.

01:08:14.240 | Perry and Werstall and other defenders of price gouging would eliminate all controls,

01:08:17.760 | especially in disasters. The conventional defenses of free market pricing tend to have a bloodlessness

01:08:23.600 | about them that underscores their irrelevance to real world conditions. Last October, Harvard

01:08:29.440 | economics professor N. Gregory Mankiw spoke up for free market pricing using his quest for Broadway

01:08:34.960 | tickets to Hamilton as the exemplary case. He had paid scalpers $2,500 per seat and was happy about

01:08:41.920 | it because, you know, it was a hit show. Had ticket scalping laws been enforced, he wouldn't

01:08:46.160 | have been able to see it when he wished. As I observed then, however, Mankiw's effort to

01:08:50.880 | generalize from his experience to every possible application of the market ended up proving the

01:08:55.360 | opposite point. To be sure, he wrote, most people can't easily afford paying so much for a few hours

01:09:00.720 | of entertainment. That is indeed lamentable. The word lamentable was asked to carry a lot

01:09:06.000 | more weight in that sentence than it should. Substitute paying so much for drinking water,

01:09:11.120 | or shelter, or life-saving medicine, and the situation starts to look a lot worse than

01:09:16.160 | lamentable, doesn't it? Anyone can survive missing out on Hamilton. These other things, not so much.

01:09:22.320 | Certainly, there are situations where price controls are too rigid or even unnecessary.

01:09:26.960 | But when the task involves opening access to a market isolated from the outside world by natural

01:09:32.960 | disaster, the free market is powerless to help. Its only ability is to direct scarce, life-giving

01:09:39.120 | resources exclusively to those who can pay. The only force that can address the market is

01:09:44.000 | government by making the cost of crucial commodities irrelevant by getting them into

01:09:48.960 | the market at its own cost. We're talking about a case where nature herself has thrown the economics

01:09:54.400 | textbooks into the drink. It behooves academic economists like Werstall, Perry, and Mankiw to

01:09:59.840 | keep something in mind, always. We're not talking about tickets to a show. That's the end of the

01:10:05.280 | essay, and with my many interruptions, you've heard it in full. I will link it in the notes for today.

01:10:11.600 | Final commentary. Number one, nature herself is a myth. There's no such thing as nature herself,

01:10:20.080 | this mythologized, personified person. You either have to say that there is a direct,

01:10:27.520 | controlling influence on the world, or you have to say that it's all an accident.

01:10:33.440 | But an economic textbook doesn't sit around and try to defend the idea

01:10:40.880 | that there are certain rules or laws or observations that should apply in some

01:10:44.800 | circumstances that don't apply in others. Any more than a chemist makes certain chemical reactions

01:10:51.840 | and says that, "Well, I don't know if you're in Africa or in Asia or in the middle of a hurricane

01:10:57.040 | or when the sun is shining, I think you might get different chemical outcomes based upon

01:11:01.840 | the combining of these chemicals." There either is a law or a principle or a theory that governs

01:11:09.600 | certain behavior or there's not. Now, if you can account for a law or a theory that governs

01:11:15.680 | certain behavior and you can account for the fact that it would change circumstantially,

01:11:19.600 | then you can make that argument. But you can't say, "I don't like a scientific law. I don't like

01:11:26.000 | the law of gravity or I don't like the law of chemistry, and so therefore I'm going to ignore

01:11:30.080 | it when I don't want to think about it or I'm going to accept it when I do." You don't ban

01:11:36.000 | chemical reactions because you like it when they make a nuclear reactor power plant, but you don't

01:11:40.640 | like it when they make a nuclear bomb. The same thing is responsible for both. You try to figure

01:11:45.840 | out how can we work within the constraints of this ongoing process, and it's exactly the same

01:11:51.280 | with the law of economics. If you're going to take on every single economics textbook and in

01:11:55.920 | your commentary talk about the fact that this is irreproachable economic logic and this is a

01:12:01.840 | textbook example, but I don't like the outcome, you better have a little bit more evidence for

01:12:06.960 | your position than simply, "Well, I don't like the way that this looks. I don't like it when we

01:12:12.720 | blow people up on the other side of the world, but I don't deny the fact that there are certain

01:12:18.960 | chemical reactions that are going to influence that." Got to figure out how to work with reality.

01:12:30.000 | Reality is people are happy to buy and sell at some certain price, and if you put price fixing

01:12:38.480 | laws in place, it results in people not being willing to sell because they know what they own

01:12:47.520 | is more valuable than what you're offering them. I'm not selling you my $5,000 car for $1,000.

01:12:58.400 | Unless I simply want to be charitable, but you can talk past all day long how could Joshua charge

01:13:10.320 | 5,000 bucks, and at the end of the day, I'll keep my mouth shut. I'll park my car in the garage in

01:13:15.040 | the back, and I won't even tell you I have it, which is exactly what people do in a time of

01:13:22.880 | natural disaster and in a time of emergency. I would love it if the world worked differently

01:13:29.840 | than the way it does, but unfortunately, actually fortunately, I'm not God. I didn't set up the

01:13:36.320 | world the way that it is. I don't get to manufacture my own reality, and neither do you.

01:13:44.160 | You can wish that things were different than they are all day long, but the minute that you become

01:13:50.960 | empowered to actually change something is the minute you say, "I'm going to accept what is

01:13:55.680 | and figure out a way to work within the constraints of what is." And that's the kind of thinking we

01:14:02.880 | should be applying steadily, systematically. It doesn't matter if you're called bloodless.

01:14:07.680 | It doesn't matter if you're criticized as being unfeeling. You can't hope to make any progress if

01:14:14.720 | you don't start by dealing in a world of reality. The only way you change the world is by starting

01:14:22.640 | with the way it is and then figuring out how to make it better. So some final practical comments.

01:14:28.720 | What do you do in a world of shortages? Number one, I don't think it's worth the time or the

01:14:33.440 | money to try to fight against price-gouging laws and actually do it. For the average person who

01:14:38.000 | owns a store, selling your bottle of water at 20 bucks a piece is not going to make a difference.

01:14:43.360 | The only people that this stuff makes a difference to really in the United States of America is

01:14:47.680 | somebody like my friends who are out of work, don't have a job. And for them,

01:14:51.360 | going and doing this hard work and moving in to make a few hundred dollars or a thousand dollars

01:14:56.480 | of profit in a couple of days, that's a windfall opportunity. But for you and me, it's unlikely

01:15:01.120 | that that's a big opportunity for you. When the financial penalties are so significant,

01:15:09.200 | you have to count the cost and see if it's worth your being involved in the black market.

01:15:12.960 | I love the black market. I think it's so valuable. It actually brings a bit of honesty

01:15:18.080 | in other places. When you go to a country where the government fixes a ridiculous exchange rate

01:15:22.000 | and you go in the black market and get twice as good for exchanging money or something like that,

01:15:26.080 | the black market solves a tremendous benefit to people all over the world. But you've got to

01:15:31.360 | decide, is it worth it getting involved? And for most people, it's just simply not going to be

01:15:35.680 | worth it because of the significant penalties that are involved. It's also not going to be

01:15:42.240 | worth it because of the fact that generally people are going to perceive that people have long

01:15:46.800 | memories about people who increase prices. And people who increase prices significantly will

01:15:53.680 | find that the envy of their customers and the long memories will continue generally.

01:15:58.080 | While I was looking around for comments on this on social media, I found one person who

01:16:04.640 | talked about the fact that a number of years ago, there had been an event and somebody had

01:16:08.320 | increased their price of gas, I believe it was, from up to $8 a gallon in order to ration it

01:16:13.840 | appropriately so they wouldn't sell out of gas. And this person said, "I've never shopped there

01:16:18.000 | again." And so because most of these things are for such a short period of time, a hurricane or

01:16:24.000 | similar, I mean, there's just not enough profit there for most people like you and me to get

01:16:28.320 | involved. So I personally wouldn't bother too much. I think the best strategy for this is use

01:16:33.920 | it as an opportunity for charity. People know the value of what you're doing. They know the price of

01:16:41.280 | the bottle of water is not five bucks. They know that in a time of shortage, whether they want it

01:16:45.360 | to be or not, it costs us a lot more. And so use it to build goodwill and take your compensation

01:16:49.760 | in other forms. Nobody can sue you if you didn't take specific financial compensation, but you can

01:16:54.960 | reap the goodwill by working with your customers and doing it that way and working with them and

01:17:02.800 | giving things to them. But just coming up against the laws is rarely – going head to head with

01:17:09.920 | the laws and trying to confront the goons with guns is almost never a winning strategy.

01:17:15.440 | If you have significant stockpiles of things and you see the hordes that are coming, the best thing

01:17:21.440 | to do is set those things aside, pull them off of the rack, put them aside and start to adjust the

01:17:29.520 | supply a little bit and then you'll be able to dispense them as charity when they're really

01:17:34.480 | valuable as well. If you're the kind of person who has things, if you're the kind of person who has

01:17:40.160 | water, gasoline, if you're the kind of person who has a generator for a hurricane, that's the

01:17:47.840 | reason why you got to be private about it and not share that with everybody else. Encourage other

01:17:52.160 | people to do it, but don't go talking about the fact that you keep a thousand-gallon gas tank

01:17:57.360 | tucked in your backyard, assuming you live in a place where you could do something like that.

01:18:01.840 | You should be circumspect in all of your business dealings. Envy is a powerful force

01:18:07.680 | and in a time when everything is good and there's relative plenty as thankfully most of the time

01:18:13.200 | we're in, then things are fine. But when you get into times that are difficult,

01:18:17.760 | all of a sudden people start looking at you differently, which is why you should be careful

01:18:22.880 | and circumspect. When you talk about how much money you have and how wealthy you are and the

01:18:28.000 | resources that you have, you have to be very careful because that influence of covetousness

01:18:33.600 | and envy that works on people is dramatic. If you do find yourself working on the black market,

01:18:40.400 | make sure that you take steps to protect yourself. I think if you're broke and you're near Houston

01:18:45.280 | and you can load up your pickup truck with gallons of water or whatever it is that you find that's in

01:18:51.040 | demand, diapers, I don't know what it is, you could probably find customers that would be happy

01:18:55.360 | to pay for it. But you probably shouldn't sell those out of the front of a well-known store.

01:19:00.240 | You should sell them out of the back of a pickup truck with the license plate covered up,

01:19:04.000 | just like people do all over the world when you buy your raw milk or when you buy your fish off

01:19:09.680 | the side of the road and all this stuff. So cover your license plates up and do business in cash and

01:19:14.960 | realistically, there's very little concern. If you're a big store, there's no reason to get

01:19:21.040 | involved in this stuff. Read the laws. There are states in which price gouging is not illegal,

01:19:25.360 | in which case you can perform a valuable service if you're willing to move fast and fill the market

01:19:33.680 | demand with your supply if you can move quickly. Read the laws that apply to your specific

01:19:40.080 | situation. Always read the laws. Usually laws are written and they're written by bureaucrats who

01:19:45.520 | don't usually know what they're doing. And so if you actually just sit down and read the law,

01:19:49.120 | as somebody who's an expert in the business that you're engaged in, you'll usually find the

01:19:53.360 | circumstances that apply to you and you can just simply choose to not engage in those circumstances.

01:19:58.320 | So sometimes this is easy and sometimes it's hard. Let me read as an example,

01:20:02.320 | the Florida price gouging law from chapter 501, section 160 of the Florida statutes.

01:20:08.400 | "Rental or sale of essential commodities during a declared state of emergency,

01:20:12.640 | prohibition against unconscionable prices." So as an example, right there, we're talking about

01:20:17.520 | essential commodities. We want to know what does that mean? And we're talking about a declared

01:20:20.960 | state of emergency. That's why these states of emergency are so important because they trigger

01:20:25.680 | certain laws to apply. If the government triggers that state of emergency, then that's one thing.

01:20:32.560 | So an example would be, there's nothing wrong with your changing prices and selling

01:20:38.000 | bags of chips for $3 inside or for $5 inside of a stadium. That's not considered price gouging

01:20:45.280 | because it's not a state of emergency. And so if you own a stadium, you get to charge $10 for a

01:20:51.120 | hot dog. It's just the state of emergency that triggers the idea of price gouging. So think

01:20:57.200 | about that. As used in this section, here's the Florida law, "Commodity means any goods, services,

01:21:04.080 | materials, merchandise, supplies, equipment, resources, or other article of commerce,

01:21:11.920 | and includes, without limitation, food, water, ice, chemicals, petroleum products,

01:21:17.840 | and lumber necessary for consumption or use as a direct result of the emergency."

01:21:22.800 | So of course here, commodity is expanded to basically include anything that can be sold,

01:21:27.120 | any good, any service, any material, any merchandise, any supply, any equipment,

01:21:32.080 | any resource, or any other article of commerce. So obviously that's inclusive of all. So that

01:21:37.360 | means that if you're engaged in any business whatsoever doing anything,

01:21:40.560 | you're covered by price gouging laws. And B, "It is prima facie evidence that a price is

01:21:48.240 | unconscionable if, one, the amount charged represents a gross disparity," defined in a

01:21:54.960 | moment, "between the price of the commodity or rental or lease of any dwelling or self-storage

01:22:01.200 | unit or self-storage facility that is the subject of the offer or transaction and the average price

01:22:07.280 | at which that commodity or dwelling unit or self-storage facility was rented, leased, sold,

01:22:12.400 | or offered for rent or sale in the usual course of business during the 30 days immediately prior

01:22:16.880 | to a declaration of a state of emergency, or unless the state increase in the amount charged

01:22:22.320 | is attributable to additional costs incurred in connection with the rental, sale, or commodity,

01:22:26.640 | or rental, or lease of any dwelling unit." Anyways, I can't get bogged down in this. Forgive

01:22:30.320 | me. I just wanted to read this. I want to point how you can read this. Number one, there are a

01:22:33.840 | bunch of things you can do. For example, you can wait time, sometimes when time goes by. And that's

01:22:41.520 | why these temporary shortages are usually pretty short, because we're blessed to live in a world

01:22:47.040 | where the transportation system is generally pretty efficient. Usually, we only have a few

01:22:52.800 | days. These opportunities of massive price disparities only exist for a few days. And

01:22:56.960 | then Walmart is filled, Costco is filled, et cetera. But you can make sure if you change something,

01:23:04.480 | then document your evidence as to what you're doing and why you're doing it.

01:23:08.000 | So if I were going to drive a van in a trailer from Florida to Texas to sell stuff, I would make

01:23:15.840 | sure that I documented very carefully all of the costs associated with that trip, things like that,

01:23:21.360 | so you have support for yourself if you ever wound up in a situation. Remember, you can always adjust

01:23:26.160 | the way that you sell something. You don't necessarily have to charge it on a fixed price.

01:23:28.960 | You can adjust. And so maybe something like bringing in an auction price, et cetera.

01:23:32.880 | So look at your business and you look at the law and read it and look for all of the exceptions

01:23:38.080 | that you can use to go around it. That's always the answer. It's never a good idea,

01:23:43.520 | almost never a good idea to go face up against the goons with guns. It's always a better idea

01:23:48.480 | just to read the law and work around it. And most times, it's just not worth it.

01:23:53.200 | If you have these things, use these opportunities as a time for charity. And you'll get the most

01:23:59.280 | bang for your buck. You'll get the most benefit if you just simply take it and share things with

01:24:04.320 | charity with yourself, with your friends, with people there, and just give it away.

01:24:09.120 | People know the value of it during those times, and you're going to get the highest return rather

01:24:14.480 | than dealing with these laws and dealing with the finances of it. You're going to get the most value

01:24:18.320 | by just simply giving the stuff away and helping your neighbors. The goodwill generated by helping

01:24:23.520 | your neighbors and working together as a community is going to be far more valuable than an extra

01:24:28.000 | couple of hundred bucks in your pocket. None of this negates the ideological argument that I have

01:24:33.680 | made, but speaking practically, ideology is one thing, and I desire to affect your ideology.

01:24:39.200 | But speaking practically, ideology is not everything. In every situation,

01:24:43.360 | we've got to look practically and say, "How do I deal with the situation practically as it exists?"

01:24:48.320 | And finally, this. Recognize that the most important thing is don't be stuck with the

01:24:56.640 | people who are desperate. Don't be the person, if you care about money, don't be the person who

01:25:03.520 | didn't buy the box of Snicker bars online for cheap or at the warehouse store for cheap and

01:25:09.360 | stick one in your pocket before you left for the day so that you wind up paying $3 at the gas

01:25:13.520 | station. If you're concerned about money, don't be the person who didn't eat before you went into

01:25:18.240 | the movie theater and paid $11 for a hamburger and $15 for a bucket of popcorn, unless you

01:25:23.040 | just like to do that because that's your thing that you enjoy doing. And don't be the person

01:25:27.680 | who runs out to the store all of a sudden and clears the shelf of bread and milk right before

01:25:36.960 | the storm, thus leading to shortages for others because the store couldn't change their prices to

01:25:41.600 | affect the demand. Be the person that stocks up on those things far in advance, and then you don't

01:25:47.520 | have to worry about a lot of this stuff. And you'll have the safety and the security and the

01:25:51.200 | peace of mind where you can go out and get in your boat and go help the neighbors and get in your car

01:25:55.440 | and deliver the bottles of water. And if you have plenty, then you'll feel confident enough to share

01:26:00.800 | with other people and to give charitably. And it can make a huge difference in the people's lives

01:26:06.480 | who are in need. Because here's the reality. The author of this piece was right. When talking about

01:26:12.720 | the woman who, the low-income mother with say three children that need to be hydrated,

01:26:22.000 | she writes this, or he writes this, "Where does that leave a low-income mother with say three

01:26:27.120 | children needing to be hydrated? She might need a couple of dozen bottles for which the price has

01:26:31.440 | now risen to $168 from $24. Throw in that with the electricity out, she might not even have access to

01:26:39.440 | cash at an ATM. She might very well value that water at $7 a bottle in principle, but that won't

01:26:45.840 | matter because she can't afford it. This is why the public typically views price gougers in a crisis

01:26:52.800 | as creeps." The author's right about that. She can't afford it. Here's the other side of it.

01:26:59.120 | She won't get it and she won't have any chance of getting it if the price is fixed because there'll

01:27:04.560 | be a shortage and she was busy changing diapers with her little baby and she didn't get out to

01:27:09.040 | do that. So make sure that you're coming from a place of strength and make sure you're looking

01:27:13.760 | for the single mother with three children. You have a much higher responsibility to support

01:27:19.600 | the widows, the single mothers, and the orphans than you do of supporting the person who wants

01:27:26.240 | to go out and buy the bottle. So be the person who's wealthy, who's done the hard work in advance

01:27:31.520 | and who's stored up the bottles of water so that you have plenty to dispense as charity in a time

01:27:36.480 | of need. Be the person who saved the money so that you can go and pay the $168 for the case of water

01:27:45.520 | and give it to the mother. That's your responsibility. We can't fix the stupid laws.

01:27:54.560 | I don't know how to fix them. I don't have any hope of changing them.

01:27:56.960 | I just feel it's important to point out that we should deal with facts. That's about all I've got.

01:28:02.880 | But you can fix your situation and you can deal with that. And if you fix your situation and make

01:28:09.120 | sure that you have plenty of water, then you can help that mom who needs it. And that's your

01:28:15.600 | responsibility. And the infamous words of the person in the movie with the guy who got…Spider-Man

01:28:25.280 | movie, what is it? Great power comes great responsibility? It's absolutely true. The

01:28:32.000 | writers of Spider-Man stole that line without giving credit directly from Jesus. And Luke 12

01:28:38.240 | said, "When someone has been given much, much will be required in return. And when someone has

01:28:44.320 | been entrusted with much, even more will be required." You and I have been given a lot.

01:28:52.320 | That means that a lot is required of us.

01:28:55.600 | You and I have tremendous resources. We're accountable for how we use those resources.

01:29:03.520 | I don't read a lot of scripture on this show, but let me just read that verse in context.

01:29:09.280 | It comes from Luke 12 and Jesus speaking, it says this, "And the Lord replied,

01:29:14.080 | 'A faithful, sensible servant is one to whom the master can give the responsibility

01:29:19.920 | of managing his other household servants and feeding them. If the master returns and finds

01:29:26.880 | that the servant has done a good job, there will be a reward. I tell you the truth,

01:29:33.040 | the master will put that servant in charge of all he owns. But what if the servant thinks,

01:29:39.200 | 'My master won't be back for a while,' and he begins beating the other servants,

01:29:43.040 | partying and getting drunk? The master will return unannounced and unexpected,

01:29:48.880 | and he will cut the servant in pieces and banish him with the unfaithful. And a servant who knows

01:29:55.920 | what the master wants but isn't prepared and doesn't carry out those instructions will be

01:30:00.400 | severely punished. But someone who does not know and then does something wrong will be punished

01:30:06.400 | only lightly. When someone has been given much, much will be required in return. And when someone

01:30:13.280 | has been entrusted with much, even more will be required." Very next verse, most people don't

01:30:20.240 | know this verse is in the Bible, Jesus speaking, says, "I have come to set the world on fire,

01:30:24.960 | and I wish it were already burning. I have a terrible baptism of suffering ahead of me,

01:30:31.920 | and I am under a heavy burden until it is accomplished. Do you think that I've come

01:30:36.560 | to bring peace to the earth? No, I've come to divide people against each other."

01:30:41.840 | Goes on. If you're interested in that, if you've never read the book of Luke, read the book of

01:30:46.240 | Luke. A lot of people have deep impressions. If you're not a Bible reader, a lot of people have

01:30:50.080 | deep impressions of what the Bible says that aren't corroborated by what it actually says.

01:30:54.800 | I heard an amazing interview a couple weeks ago of the guy who was a grand wizard in the KKK,

01:31:00.800 | and the man is now a pastor at a prominent, traditionally historically black church in

01:31:07.680 | the American South. Amazing testimony, but one of the most fascinating things about his story,

01:31:15.920 | as I heard it, as he was telling his story, again, he was a grand wizard in the KKK,

01:31:19.520 | and the place that he was actually, the reason he, when he left the KKK, he was recruited into

01:31:27.360 | the KKK from an early age, one of the most leading members of the KKK in Arkansas. He was leading,

01:31:35.280 | as he said, the largest terrorist organization in the United States back during the 1970s.

01:31:39.200 | And during that period of time, he was looking to advance in the KKK and in the leadership. He's

01:31:49.360 | already a grand wizard, and so he went to kind of the leader over the US, the guy who was in

01:31:53.440 | charge of the whole KKK all across the country, and he went to him and he said, "How do I advance?"

01:31:57.840 | And he said, "Well, all of our leadership positions are full right now." And he said,

01:32:07.440 | "But we have a spot for a chaplain." And so he said, "Why don't you go and get a Bible and read

01:32:14.560 | a Bible and prepare some stuff that sounds good, prepare some sermons, and we can promote you to

01:32:19.680 | chaplain. That'll be a good step up for you." And so this man went and he got a Bible and he

01:32:24.080 | started reading the Bible. And all of a sudden, he found all of these passages, started reading

01:32:28.240 | the book of John, and he finds all these passages that the KKK chaplains had preached on. But what

01:32:32.720 | he found was that he had always, they'd always stopped short and hadn't read the whole passage.

01:32:40.080 | For example, the example that he gave in the interview I listened to was,

01:32:46.640 | forgive me, there's a little bit of a sidetrack, I'm done with finances, but it's just a short

01:32:51.120 | story to wrap it up. This passage, he was reading the passage where Jesus is speaking with the

01:32:56.960 | woman at the well. And the woman at the well says, as an example, she says, "Well, you Jews,

01:33:01.920 | you know, you don't have anything to do with us Samaritans." And the guy, and the KKK guy,

01:33:07.200 | had always heard KKK chaplains use that to preach about the fact that, well, look, Jesus was against

01:33:13.200 | race mixing and was against people mixing their races. So we've got to be those who secure races.

01:33:21.840 | And when he read the story for himself, what he found out was he'd been lied to. Because that

01:33:26.160 | wasn't what the story said. The very next verse contradicted that. And so I use that as an example.

01:33:30.560 | I've almost never heard somebody quote in public that Jesus said this, "I have come to set the

01:33:35.040 | world on fire, and I wish it were already burning." Now, of course, the question is,

01:33:39.840 | what did he mean by that? And that, my friends, is something that you will have to investigate.

01:33:45.520 | Section is Luke chapter 12 if you're interested. Book of Luke is one of the best books in the Bible

01:33:50.480 | to read if you're interested. That's it for today's show. Forgive my foray,

01:33:58.800 | slightly off topic. I hope it's been useful. Long show, but I spoke strongly. I hope I didn't

01:34:07.200 | overspeak. I don't think I regret anything I said in the show. I just want to speak clearly. I get

01:34:11.680 | tired of fuzzy thinking and tired of the lack of truthfulness that exists in our modern society.

01:34:21.920 | As the 12-steppers say, right, the first step to solving a problem is admitting that there is one.

01:34:29.040 | Well, the first step to making progress is to understand the world as it actually is.

01:34:36.240 | Does you no good to think about how you wish things were unless you've started with how things

01:34:41.040 | are. And that's what frustrates me about so many things. You know, if I like to compare,

01:34:47.520 | economics is not a hard science like chemistry is. It's a fuzzy social science in many ways.

01:34:53.120 | And there's a massive difference between the way that you approach chemistry versus economics,

01:34:58.160 | even though they're both considered to be a science. But there's a huge difference between

01:35:02.320 | them. But articles like this, this guy's what passes for modern commentary and modern opinion

01:35:12.160 | pieces in the L.A. Times is basically somebody saying, I know that all of the academics who,

01:35:17.280 | both conservative and liberal people who cross ideological boundaries, believe that this is

01:35:22.560 | valuable and this is helpful. But I think they're wrong because I think that there should be it

01:35:27.040 | should be different. It's like me saying to a chemist, I know that these two things produce

01:35:32.320 | this reaction, but I wish that they spouted rainbow colored clouds of smoke instead of

01:35:37.760 | blowing up the lab. Well, you can spout rainbow clouds of smoke, but you got to use some different

01:35:43.680 | chemicals and find a different way to accomplish it. Anyway, I'm out of here. Thank you all so

01:35:47.120 | much for listening. I'll be back with you soon. Didn't do any ads today. If you'd like to support

01:35:51.120 | the show, it's been helpful to you. Come on by and become a patron of the show. Radical

01:35:53.760 | personal finance dot com slash patron. Buck a month, couple bucks a month. That helps me.

01:35:57.360 | Radical personal finance dot com slash patron. Thank you very much. Be back with you soon.

01:36:01.760 | This show is part of the Radical Life Media network of podcasts and resources.

01:36:13.920 | Find out more at Radical Life Media dot com.

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