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Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skill, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less. My name is Joshua and I am your host today. Let's continue on this natural disaster theme with a vigorous and hopefully interesting discussion of the ethics, morality, and utility of price gouging.

This subject is one that is near and dear to my heart after just about every single natural disaster, almost immediately in the before and after of a natural disaster, we start reading articles of price gouging. I have been fascinated to watch the events in Houston over the last few days.

I've got three screens going on my desk the last couple of days while I work, just with the sound turned off, watching all of the live feeds from Houston and Texas-based local TV channels. And what always happens in the middle of a natural disaster is you start getting this, these discussions on price gouging.

Here are a couple of headlines, local headline from KHOU, which is one of the TV stations there in the Houston area. Interestingly, this is the TV station that was flooded out. The reporters of KHOU were actually on TV when the water started flooding into their studio and they had to evacuate their studio and go to a makeshift backup location in order to stay on the air.

But here from yesterday, August 28, 2007, Houston, headline, "How to Report Price Gouging from Hurricane Harvey." Houston, "Claims of price gouging have been surfacing throughout the Houston area. Many say they're being forced to pay excessive amounts of money for necessities ahead of Hurricane Harvey. Pictures have been pouring into KHOU11 News from customers who are concerned they're being taken advantage of.

One man sent a copy of his receipt. He says he paid almost $72 for four cases of water at a store in North Harris County. Another woman sent a picture from a different store near Cyprus. The sign in the picture says an 18-pack case of water is selling for almost $18.

"You're not supposed to artificially inflate prices of things that are emergency or needed because of a disaster," President with the Better Business Bureau of Greater Houston and South Texas Dan Parsons said. "Not only is price gouging during a natural disaster unethical, it's against the law." Parsons said those businesses will be heavily fined if found guilty of price gouging.

This applies to goods like drinking water, medicine, food, batteries, gas, generators, or services like towing. He says they expect to receive a number of complaints over the next week, and it's important to document any suspicions and hold on to those receipts. Article continues on, but more of the same.

Another article from CNBC.com, published again August 28, "Price gouging during Hurricane Harvey, up to $99 for a case of water," Texas Attorney General says. "There have already been more than 500 complaints about price gouging during Hurricane Harvey over the weekend," Texas Attorney General Ken Paxton told CNBC on Monday.

That includes reports of up to $99 for a case of water, hotels that are tripling or quadrupling their prices, and fuel going for $4 to $10 a gallon, he said in an interview with Closing Bell. "These are things you can't do in Texas," Paxton said. "There are significant penalties if you price gouge in a crisis like this." Anyone who does so can be hit with a $20,000 fine per occurrence, or up to $250,000 if the victim is someone age 65 or older.

As for whether there will be a shortage of goods, Paxton said, "The big retailers are in the process of reestablishing supply chains as quickly as they can." This is typical. And I want to walk you through some thinking on it. We're going to start with number one, the legality of price gouging.

Next, we're going to talk about the utility of price gouging. And finally, we're going to talk about the morality of price gouging. I'll start with the legality and begin by defining the term. Even the term itself is pejorative. The idea is gouging. Another word that's used for price gouging is scalping.

It's such an unpleasant word. Of course, the idea of somebody taking a knife or a tomahawk and disconnecting the skin on the top of your head and your hair from your skull. Not a very pleasant picture to hold in your mind. And that's the picture that we apply to people who are ticket scalpers and sell their tickets and resell them in the local market during a concert or something like that.

And so after any kind of event or in advance of any kind of event, in 34 different states, which is about two-thirds of the United States, the idea of price gouging is in fact illegal. I live in Florida. Price gouging is illegal. Texas, same thing. It is illegal. And as the attorney general here of Texas is saying, then there are so far about 500 complaints, and I'm sure there'll be many, many hundreds or thousands.

Now, will they ever be prosecuted? Who knows? I have no idea. Most likely, most of them won't be. They got bigger things to worry about. But these things always make the news. And they're particularly common in the modern social media space where everyone can immediately send out their complaint to anyone who cares and anyone who is interested in hearing about their complaint.

They can immediately go online and say, "I can't believe they're charging $15 for a case of water." So without question, in 34 of the United States, most of them throughout the South and the Southeast, most of the Southern and Southeastern states of the United States, price gouging is in fact illegal.

Now, I don't particularly care all that much that it's illegal, I care whether it's immoral or not. Legality or illegality is not a sign of what is right or wrong. It's simply a sign of what a society currently considers to be right or wrong. Illegality or legality means that you need to be very careful with your actions because they'll come with certain consequences and penalties.

But legality and illegality themselves are simply indications of what a society considers to be right or wrong. And we'll talk about whether it should or shouldn't be illegal in a moment. Now, I am, as no doubt you have guessed, I am firmly against the idea of price gouging being illegal.

We'll talk about why when we get to morality, but let's talk about the actual function and flow and the utility of price gouging. The basic picture that you should always hold in your mind when thinking about the market, a free market economy in which many of us are privileged to live, or at least one that is to some extent free.

The basic picture that you should always have in your mind is a picture of an auction. The free market is a giant auction and prices are largely set by the people who are interested in buying something. Many people have this confused picture of the free market thinking that it's somehow a machine where there's an intelligent brain over top of the machine that's saying, "Hey, here's exactly what this particular item is worth and here's what should be charged for it." It's a false picture to hold in your mind.

The appropriate picture to hold in your mind is an auction. And it's one giant auction that is created by millions and millions and millions of tiny little individual auctions. This is the way that every single price that you face in your life is set, as long as there's not external interference by the goons with guns.

This is how prices are set. So for example, let's say that you go and look up and you want to say, "How much is my car worth, my used car?" And so you go to something like Kelley Blue Book or Edmonds or the local car trader and you're trying to figure out what is the value of the car.

You have no idea. You bought the car five years ago and you don't really know what the value is. So what are these books reporting to you? What are these services reporting to you? They're reporting to you the basic response of – the basic outcome of many other little individual auctions, other transactions that have happened between other buyers and sellers.

And because we can see what other buyers and sellers are consummating their deal at, the price which they're consummating their deal, we can take that and we can say, "Well, I think I could consummate a deal at this number as well." Many people hold this idea in their head that buyers and sellers of products are in competition with one another.

This is a false concept. And if you hold it, you need to eradicate it from your mind. Buyers and sellers are not in competition with one another. Rather, buyers and sellers are in cooperation with one another. In every single financial transaction, in a free market, each person walks away from that transaction feeling like they got the better end of the deal.

If you come to me and you want to buy 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 without the use of force, I don't pick up my gun and point it at your head and say, "You have to pay me $5,000," and you don't pick up your gun and point it at my head and say, "Joshua, you've got to sell me your car for $5,000." If we come to an agreement without coercion, without involving anybody else and without coercion, without threats of violence and force, we just simply come to an agreement of $5,000.

If we shake hands and consummate that transaction, we will both walk away feeling like we got the better end of the deal because you have $5,000 in your pocket and you desire the car more than you desire to have the $5,000 in your pocket. I have the car and at the end of our transaction, I'm going to have the $5,000 in my pocket and I desire to have the $5,000 in my pocket more than I desire to have the car.

Every single successful transaction that happens freely without the threat of violence results in a buyer and a seller coming away feeling like they got the better end of the deal. I'm happier to have the money than the car and you're happier to have the car than the money. If that's not the case, we will not come to a successful transaction.

Now, what if you come up and you say that you'd like to have the car but you'd rather have the $5,000 in your pocket than the car, but you recognize that you might be willing to part with $3,000 and have the car? Well, I have to consider would I rather have $3,000 in my pocket or would I rather have the car?

And somewhere we may be able to come to a number. Very likely, I'm not going to be willing to sell you my car for $1,000. I'd rather just have the car than have the $1,000 because the $1,000 isn't very useful to me. It's not enough money to keep me going and it caused me to want to separate from my car.

I'd rather have the control and use of the vehicle. On the flip side, if you offered me $10,000, I would probably find it very easy to part with my car because I would value having the $10,000 more than the car. This is the fundamental basis of every single transaction that happens in a free market economy.

And so you and I as buyers and sellers are not in competition with one another. We are cooperating with one another and we're each trying to get the better end of the deal. And there's a negotiation process that comes in wherein we come to a price and that price is the price at which we can agree to consummate the transaction.

Buyers and sellers do not compete with one another. They cooperate with one another. So then who do buyers compete with and who do sellers compete with? Well, let's extend our example, our case study here, and let's say that now I have two people who are interested in my car, you and your brother.

And you both come over or you and your next door neighbor, you both come over and you're standing in my driveway and you're looking at my car and I've got one car and I've got two people. And both of you would like to have the car and both of you have some amount of money.

In this situation, the buyers, you and your neighbor are competing with one another. You guys aren't competing with me. But what you have to do in that situation is talk and each of you comes up and figures out how much you're willing to pay. And we go through an auction process wherein you compete with one another and I get to pick which deal I'm happy with.

Now, if you started a thousand and your neighbor turns and says, "Well, I'll give you two," I'm going to turn to the neighbor and say, "Hey, two sounds pretty good, but I'm going to turn back to you and say, 'Would you like to offer more?'" And you say, "I'd like to offer three." Your neighbor says, "Well, I'll offer four." You look down and you say, "Well, I'll offer 4,500." Your neighbor says, "Well, I'll offer four, but not 4,500." Now, we have a price that's established because you two as buyers have competed with one another, have a price that's been established, and I get to choose, do I want to accept that price?

Do I want to accept the 4,500 offer or do I want to hold out for more? A couple things could happen. I could say, "Yes, I'll accept the price of 4,500." Or I could say, "No, I want more. I want $5,000." And then you and the neighbor both have to look at one another and see, do we want to pay it?

Both of you guys may say, "No, we'd rather keep the money," and you walk away. So buyers compete against buyers. Now, what about sellers? If I have a car and then my next door neighbor is also selling a car, and you and your next door neighbor are standing in our driveways looking at our two cars, now all of a sudden my car is in competition against my next door neighbor's car.

Both of you have money. We both have cars. And now I've got to compete against my neighbor's car. My neighbor comes out and says, "Joshua is trying to charge $5,000 for his car. I'll sell you the car for $4,000." Well, all of a sudden, both you and your neighbor go next door and you're looking at that nice car for $4,000.

I have to holler out at you from my driveway, "Wait, wait, wait, wait, wait, wait. I might be willing to sell my car for 3,000." You come over here. Now my neighbor is calling out and saying, "Come back over here." And we go back and forth and back and forth.

So the key is to recognize that this example applies in every single transaction, for every single good and service that we buy in a free market economy. It applies for the purchase and sale of cars, and it applies for the purchase and sale of bottled water. And every buyer is competing against all the other buyers, and every seller is competing against all of the other sellers.

And the prices at which those buyers and sellers can come to an agreement, those prices will vary depending on the circumstances of the sale. The lowest price is not always the most successful transaction. Rather, transactions are consummated based upon the total picture of factors that are involved. Question. Have you ever purchased something from a convenience store checkout rack?

A candy bar, a stick of gum, something like that, an energy shot, a five-hour energy shot, things like that. Or have you ever purchased something from the end cap or the checkout rack at a grocery store? I would dare say that most of us have, at least at some point.

Now, of course, we probably try not to do it routinely. I was at the store with my son the other day, and I'm instructing him, "Hey, don't ever look at, just avert your eyes from the things on the end caps because you don't want to give in to temptation.

And the products here are the highest price in the store, but I'm sure we've all done it." Now, when you've done it, have you sat down and moaned and groaned over the fact that if you got online and bought a case of 500 packs of gum, you could have had a delivered to your house in a week and you would have paid 50 cents a pack instead of the $2 a pack that you just paid at the grocery store checkout?

No, of course not. Why didn't you? Well, you were happy to pay for that $2 pack of gum at the grocery store checkout or the expensive candy bar because it was convenient. It was positioned right where you were, when you were in the mood to have it, when you most wanted to have it.

You had an urging to eat that Snickers bar. It was tantalizingly placed right in front of you as you're checking out, and you thought, "You know what? That price is okay. I know it's not the cheapest, but I'll go ahead and buy it." And so you went ahead and purchased it immediately and paid a higher price for it because it was useful to you at that point in time.

It had a higher utility value to you. It was more useful to you at that point in time. If you didn't have that urge, you wouldn't have purchased the candy bar because you could have gone to the restaurant supply store or the big box warehouse store a week later and purchased a box of 100 of them.

It had a much lower cost. But you chose to consummate a transaction. Remember, all of this has to do with a free market transaction where there's no coercion. You don't point your gun in the face of the store clerk and say, "You've got to sell me that cheaper," and they don't point their gun at you and say, "You've got to buy this." There's no coercion involved.

So now let's talk about a hurricane and a flood. Market prices are always set in a tiny little auction process, and that auction process varies depending on the circumstances involved. I cannot remember the last time I purchased something from an end cap at a grocery store. I can't remember the last time I purchased something from a checkout line at a convenience store.

I try to work hard to discipline myself not to purchase things like that because I know those are very expensive items on a per unit basis. But if I were hungry and I were in a hurry and I were in a hurry, all of a sudden my needs change and I'm willing to pay the price.

The reason that I'm willing to pay the price, however, is probably because I didn't plan ahead. If I had planned ahead, I would have purchased a box of 100 candy bars. I would have saved them in my house. And when I was getting ready to head out of my house in the morning, I would have recognized I may not have the time to eat later on.

And so I need to make sure to bring a Snickers 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 ahead, I look down and I might be willing to pay the price. And this is what happens during times of disaster.

This is what happens during hurricanes. When gas stations start increasing the price of the gas, it becomes costlier and you have to look down and say, "Well, how badly do I want gas?" If you look down and you say, "Hey, look, here's bottled water for sale and it's double the price or triple or quadruple the price that it normally is," you have to think, "Well, how badly do I need bottled water?" And all of a sudden the demand from buyers and the supply from sellers needs to start changing.

If those prices are allowed to change, there will be a very valuable effect. What happens is buyers start to think twice and consider, "Do I really want this? Do I really need this? Or would I rather continue on my way?" If you were selling candy bars for $10 a candy bar, I would say, "I'm happier to be hungry." And the same way, if I'm desperate for water and there's a hurricane about and you're selling a package of water, but all of a sudden the price went from the normal price of $5 for a case to $20 for a case, I'm more likely to either buy none 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. And this is what leads to shortages. If you don't allow the prices to change, people can't get good signals about the value of something. If you keep the prices constant, then the buyers who recognize their increased desire to have the product start buying massive quantities.

And instead of buying one or two cases of water at $20 a case, they turn around and they just buy one or two. This leaves a greater supply available and this leads to more people being able to get their needs met. So for the good of the buyers, the people who are interested in actually having the product or the item, the prices need to be allowed to change.

Because when the prices change, that will lead to fewer shortages. Let's use another important example of gas. On yesterday's show, I talked about the need to be able to get out of town. If you're heading out of Houston and you didn't fill up your gas tank and you didn't do what I talked about and have gas stored at home so that you could at least fill up your tank and get 300 or 400 miles out of the affected area, which will get you out of trouble in the vast majority of natural disasters.

If you didn't do that and you swung by the gas station and you see a bunch of cars that are heading there, think about two things. Let's say that gas is its normal current $2.50 a gallon. Well, in that situation, you would immediately choose to fill up your tank because it's $2.50 a gallon.

And you know that there are lots of other people who are going to come and who are going to be doing the same thing you are, trying to get out of town before the hurricane hits. And so you would immediately fill up your tank. Well, there goes 20 gallons, 30 gallons, but you're happy because $2.50 and you're on the road.

But now let's say that the gas station owner had increased the price. Well, if they'd increased the price from $2.50 a gallon to $8 a gallon, you might look down and actually think, "Well, I'm heading out of town, 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 stations and probably lower prices 50 miles away." And you might look down and you might choose to only put in a half a tank or a quarter tank because you didn't want to pay the higher prices. That leaves more gas available so that the guy behind you, instead of running out of gas right when you're done pumping your car full, the guy behind you can go ahead and get a couple of gallons as well.

And that can get everyone a little ways out of town. And like ants running out of a fire ant nest, where if you put your finger right in the nest, there's ants covering every inch of the sand. But as they start to disperse, there starts to be more room between them.

The same thing would happen with gas as people try to get out of an affected area. There's plenty of gas on the perimeter, but there's not a lot of gas in the middle and everyone's doing the same thing. So the pricing changes would lead to people making different decisions.

This leads to a greater supply available to meet the higher demand because the prices are changing. Now, what other ways of rationing exist? Because you've got to ration. When there's a massive amount of demand, you have essentially three ways that supply can be rationed. There's when circumstances change, when all of a sudden there is a ton of demand for a product, hurricanes coming, the shelves are swept clear.

How does the rationing happen? Well, number one, it can happen based upon price. Buyers and sellers can start to come to differing arrangements based upon price. And that's the way that things work most of the time. The second way that it can happen is based upon lines. And this is the way that usually happens because when the price is not allowed to be affected, then it happens based upon lines.

And now you form massive queues of people. And so this is why you have massive lines of people at a grocery store, you have massive lines of people at a gas station, etc. I've been in circumstances where I had plenty of gas on hand, but the hurricane's coming and I look and say, "Okay, well, there's a line there, but they're not charging anymore." And all of a sudden I say, "I do have a few empty cans.

Let me go and make sure that I get a few more." If the price were higher, I would probably be not willing to pay the price because I have plenty of gas, but I might be willing to pay in lines. Now, lines do work as a form of rationing.

If I had to wait all day in line to pick up a few gallons of gas, I wouldn't do it because I have enough. But if I had to wait a few minutes, I would do it. And so lines are effective at reducing the demand, but they're not nearly as effective as price.

And usually what happens is there's a combination of them. The third way of rationing, of course, is based upon connections. And if you don't allow prices to change and to fluctuate and to go up and down, if you don't allow that to happen, then you have lines form and then people start to use political connections and political power and political influence to get what they want and get what they need.

And these are alternative forms of currency. The problem is that market is hidden. It all happens behind closed doors where only the powerful have access. These prices are public. If you don't allow prices to change, you have shortages. And if you don't allow people to earn higher prices, you ensure that those shortages will continue on an ongoing basis.

Let's give an example with gasoline or with bottled water, which are a couple of things that are very practical, are very important to people who are fleeing before a disaster. I'm an entrepreneur and I'm an investor, and I am always looking for a way to make a little bit of money.

I like making money. I like making a profit, and I'm willing to take risk. And I'm always interested in any opportunity that I think can be helpful and appropriate to me. I live in Florida, about a day's drive from Houston, and I would dearly love to be there to help out.

But I've got a busy week planned. I've got a lot of priorities, a lot of work in my business, a lot of family responsibilities, responsibilities here where I live. And it's just not really worth it to me to get in the car and go and take a week of my life right now to go and help people in Houston.

If I were closer, I would probably go and do it just because I want to be charitable and I want to help people who are hurting. But it's really hard for me to say, "I'm going to take a week and take it away from productivity." But as an investor, if there were an opportunity to make a profit, I would be happy to fund it.

I'm not that interested myself in loading up, for example, a car with bottles of water and gas cans, filled gas cans, to go and resell to people who are interested. That would probably not be enough to move the needle enough for my wealth to make it valuable. But I know a lot of people who are desperately in need of work, a couple of people that I work with who are desperately – friends of mine who are desperately in need of work.

And I have the equipment that I could use. I own a big old van that I could use. I have access to large trailers that I could use. I own the equipment. I have the money where I could easily afford to go and fill a big van and a big trailer full of water, full of food, full of diapers, full of cans of gas.

And I have access to the labor. If there were a way where I could justify it financially because we could sell products for a large amount of money and make a profit enough to make a return on my money, enough to pay the other person who's going to be driving the van, I could have put a van and a trailer filled with products that would have been valuable on the road over the weekend.

I probably could have done a few of them. And I'm not the only one who would do that. Now, this would be an area where I wouldn't be doing it exclusively for the profit motive. I would probably be doing it partly for the altruism. I want to help people.

I really do. I've considered, I seriously consider, anytime there's a disaster, I consider just doing it all for free and funding it all myself and giving it away because I do want to help people. But it's a whole lot easier to help people when I can make money and get rich doing it.

And I can help the people who are there, who are affected, who need the products to make their life better. And I can help the person who needs work. And I can be the underwriting funding merchant. But if I can't make enough of a profit to make it worth my time and my money, the whole thing falls apart.

And that's what happens. There are thousands and tens of thousands of people just like me who could move quickly in those times and who can basically hit and run and who would be happy to go and sell gas and water, et cetera, on the side of the road. Now, this is fundamentally accurate and proper.

I went to go see the eclipse last week. When I went to see it, I didn't plan ahead. I didn't have glasses. I hadn't bought them when they were cheap. I hadn't gotten them when they were free. I was thrilled to pay 10 bucks to somebody on the side of the road and get a pair of glasses.

Totally happy with it. And there would have been plenty of people who would have been thrilled to buy gallons of gasoline, five-gallon cans of gasoline from me at 10 bucks a gallon for 50 bucks a pop if it got them out of town or bottles of water. I hope you get the idea.

If you allow prices to change, it sends a signal to the marketplace and the market will respond quickly. Those high prices will only carry on for a couple of days because very quickly the competition will step in and all of a sudden those prices will be driven down. But the free market is the most responsive, reactive mechanism that has ever been discovered to meet the needs of the largest number of people.

Now, in a moment, I'm going to read an essay from the Los Angeles Times from their op-ed column by Michael Hiltzik called this. The title is this, "Memo to Economists Offending Price Gouging in a Disaster. It's Still Wrong Morally and Economically." I'm going to read you that essay because it's written as a direct rebuttal of everything that I've said so far.

And I'll demonstrate to you the other insanity of this positioning. Basically, in order to come against what I've described here, which is logical, rational, and proven again and again and again all over the world, you have to use the argument, "But I don't think that's the way it should be." That is the only argument that exists.

I don't think that's how it should be. It just doesn't seem right to me. And it's about as effective as saying, "Well, I don't think we should have to build airplanes to fly. I think we should be able to glue together eagles' feathers and jump off a cliff like Icarus did and think that it's somehow wrong that he plunged to his death, as the legend goes, just because it should be different." It doesn't really matter how you or I think life should be.

That doesn't matter. What matters is how life is. And we live in a world where the people who proclaim the loudest hear how things should be and don't actually have any evidence for their position are lauded and applauded. This is nuts. And it's one of the things that drives me crazy about...

Excuse me. It's one of the things that I don't like about our modern world, where the people who can talk the most about the way that things should be and picture an ideal world, but are never held accountable for their actions, never held accountable for their words, never held accountable for the actual results of what happens, gain the notoriety and gain the acclaim.

For example, the past 30 minutes of this recording have been all about how price gouging, which is a pejorative term that shouldn't be used, should be used. Prices that change in response to changing market conditions, whatever would be a better way of expressing that phrase, that prices have changed and adapt in response to changing market conditions, that is the most fundamentally valuable way to eliminate shortages.

I, in that opinion, probably will be, but would be, and probably will be, roundly derided in public as wrong and cold and unfeeling and uncaring. And yet all the people who say this shouldn't be so sit around and talk about how I can't believe that price gougers are changing prices.

And meanwhile, people are going hungry, they're going thirsty, and their cars are sitting useless on the side of the road because they don't have fuel. So we all walk around engaging in moral preening and moral posturing, trying to express how useful and adaptive we are, trying to claim the credit from society for somehow being good.

Meanwhile, people are going hungry, they're cold, they're thirsty. And we moan and whine and bemoan the results of that, saying, "Well, it shouldn't be this way," when in reality it doesn't have to be that way. It's only that way because people get in the way. And this is why I love business.

Walmart Corporation or Amazon Corporation have done far more good on a global scale than the American Red Cross. The American Red Cross Because they actually solve problems for people each and every day. Now there's a place for both. There's a place for the Red Cross, there's a place for the Salvation Army, and there's a place for Walmart.

There's a place for people to charge a lot of money, and there's a place for people to give things away. There's a place and a need for both because not everything can be delineated in terms of dollars. Not every transaction can be consummated in an auction process. But at the end of the day, you can preen and prance about speaking language that sounds good while your actions are destructive to people's lives, or you can be willing to make statements that sound bad but actually help people.

And unfortunately, more and more it seems like you have to choose between those things. And unfortunately, we very rarely have opportunities to see the two working together in a free market. Because here's the reality. The person who gives services away for free is also in competition with the person who's charging for services.

And the person who's giving products away for free is also in competition with the person who's charging for services. So let's talk about the morality of price gouging. We covered the utility. Let's talk about the morality of changing prices. Here's the fundamental truth. I have no right whatsoever to invade your home and tell you what to do with your property.

It's your choice what you do with that property. It's your choice if you want to hold onto the property. It's your choice if you want to sell the property. It's your choice if you want to give your property away. It's your choice what you want to do with your time.

It's your choice if you want to sell your time out to the highest bidder or give it away freely. That is your choice. And you can make any choice that you want. And I have no moral right or authority to tell you what you should do with your time and your property, with your life.

That's your choice. If you have a tank full of gas and your car is full of gas and you have a few extra cans of gas, it is your choice if you want to keep those cans of gas in reserve or if you want to give them away to your neighbor.

That's up to you. It doesn't matter what I think you should or shouldn't do. That's yours. You have that right to decide. And you can make any decision that you want. So let's say that I'm unhappy with the decision that you're making. Well, I have two choices. I can choose the moral route or I can choose the immoral route.

If you have property, you have cans of gas, and I'd like to get them from you, I can come to you and I can make you an offer. And I can say, "I'm willing to trade you this item of value, these dollars, this car, these hours of service, this particularly useful thing.

I'm willing to trade you these things in order for your gas." That's upright. And I can make you as many offers as you're willing to hear. And you're entitled to accept any offer that you want or to decline any offer that you want. It's your property and you can choose what to do with it.

Or the flip side is I can get a gun, maybe get a couple of my friends, and now the goons with guns can come and show up at your door and point their guns at you and say, "We need your gas. We're taking your gas." Now, in this circumstance, if gas is short and I just was willing to make you a free market offer of $20 for $100 for a five-gallon can of gas, which would usually sell for maybe $20 plus the value of the can, but stick with me.

If I make you an offer for $100 and you just declined it, if I pull out a gun, stick it in your face and say, "I want this can of gas. And oh, by the way, here's $20 to make you feel better." What have I actually just done? I've stolen from you $80 because you just had an offer for $100.

So I've effectively stolen from you $80. I have no right to do that. I have no right to steal from you. It doesn't matter how much I envy and covet your gas. I have no right to use violence against you to steal your gas from you. It's your gas.

You can do whatever you want with it. I'm not allowed to steal and I'm not allowed to covet your property. It's your property and you can do anything you like with it. This is what angers me about things like price fixing laws, which is what anti-price gouging laws are.

It's price fixing. It's a form of theft. And so we institutionalize immorality, the immorality of theft, and it's indulging in envy. We pit the hordes of people who want gas, want what someone else has. And because the hordes have become politically powerful due to the power of the horde, we encourage their envy and their covetousness against the person who has something, who is thoughtful and who thought ahead.

And even worse what this system does is it encourages larceny behind the scenes. Because the mayor of the town comes over and says, "Hey, business owner, we need to take your gas from your gas station in order to provide for the public good. So we're going to give you a little bit of money in order to provide for the public good." And so they come and they take it from you and they bring it out and say, "We're going to give this away to the people who are in need." Ostensibly, this sounds good.

Supposedly, this sounds great. But here's what's really happening behind the scenes. The mayor, of course, is busy encouraging people to say, "We've got to stand together. We've got to make sure that we all stand and support one another. And so we're taking this gasoline from the business owner who doesn't need it, because after all, they have plenty of gasoline.

And we're going to pass this out to the townspeople who are in real need." But what actually happens behind the scene is the mayor needs some gas. And so the mayor gets a little bit of special favor because they don't have more money to allow special favor to the people who have more money.

The mayor has more influence and more connections. And then the law of nepotism comes in and all of a sudden the mayor has plenty of gas in their car. And then the mayor's nephew has gas in his car. And his niece has gas in her car. And that gas starts to filter out and it all magically winds up in the family members of the mayor.

This is what happens across the world. Now, I'm using strong terms that are obviously strong. I'm being dramatic for effect. When I talk about the goons with guns and me walking over and sticking a gun in your face and the mayor and all these things, I'm using dramatic terms to try to demonstrate the clear principles.

The United States is nowhere near that, thankfully. But it's important not to indulge the direction that we're going. And that's what we do. And that's what's happening culturally. Instead of admiring the entrepreneur who comes and who has the foresight to stock up on gasoline with the intent of making a profit, we criticize that person as being somehow cruel or unloving.

And this results over time in a really destructive trend where instead of rewarding foresight and forethought, every single Houstonian could have enough gasoline to get them out of town and enough bottled water to get them through an emergency. Everyone could. We don't do that. We don't encourage those things.

So, I'm just seeking to use a strong example to make an ideological point and to challenge you to think what's going on under the surface. Now, in rebuttal to everything that I've said thus far, let me read this essay to you and show you the thinking that goes into this.

And then I'll close with some practical tips and pieces of advice for what you can practically do. How do you navigate this challenge of laws and legality, etc., and whatnot? So, here's the memo. So again, "Memo to Economists Defending Price Gouging in a Disaster. It's Still Wrong Morally and Economically," published August 28 in the Los Angeles Times by – essay by Michael Hiltzik.

"As surely as flooding disasters like Hurricane Harvey are followed by health concerns and homelessness, they're followed by calls to legalize price gouging. And sure enough, the waters were still rising all across the Houston area when the first such calls were heard. They came from conservative economists, Tim Worstall of Britain's Adam Smith Institute, writing in Forbes, and Mark Perry of the American Enterprise Institute, whose piece appeared on the AEI website and at Newsweek.

Both demonstrated the chief flaw of such analyses. They were based on irreproachable textbook economics and showed no sensitivity whatsoever to how things work on the ground during a major catastrophe." Pause. Let me rephrase that. Let me read it again. "Both demonstrated the chief flaw of such analyses. They were based on irreproachable textbook economics and showed no sensitivity whatsoever to how things work on the ground during a major catastrophe." One of the fundamental flaws in our society currently is that we've lost the ability to tell the truth, no matter how hard or how easy the truth is.

And we've raised sensitivity to a place of supremacy over accuracy or over truthfulness. And we've somehow come to the place at which it's more admired and respected to say nice things than to face reality as it is. Well, guess what? It's not sensitive to say that a hurricane is coming for your city and you better get out.

That's not sensitive. And it's not sensitive to those who don't have a car and who can't put gasoline in their car to get out. But it's true. And it would help a whole lot more than sitting around and saying, "Well, it's not nice to talk about the damage that the hurricane can do." It's not sensitive to say things that are hard, but it's actually useful.

It's actually helpful. And this is what accounts for modern thinking that a Los Angeles Times columnist can say, "Both demonstrated the chief flaw of such analyses. They were based on irreproachable textbook economics, irreproachable textbook economics and showed no sensitivity whatsoever to how things work on the ground during a major catastrophe." Again, I go back to aerodynamics.

"Well, Johnny, you made... Oh, Johnny Icarus, you made these beautiful wings. They look phenomenal. You used wax to put these feathers together. You know, that should work because, Johnny, you look like an eagle. And I'll bet you, you feel like an eagle, don't you? You identify as an eagle.

Well, Johnny Icarus, here is a cliff. Why don't you jump off? And if you flap your wings because you identify as an eagle and you feel like an eagle, then I think it would be very sensitive that you should be able to fly like an eagle." And Johnny's dashed to death on the rocks below.

Wasn't sensitive to say, "Johnny, you don't understand the irreproachable textbook laws of aerodynamics." But it would have saved his life. And that's what angers me about these cretins who come around and wax eloquent about, "Wow, this is the way the world should be." And in reality, people suffer for it.

It happens with price gouging. It happens with minimum wage laws. It happens all across the board. It happens with immigration laws. It happens with all of these things. You sound good because you say, "Well, we don't want high prices because we're going to protect the most disadvantaged among us." It sounds really good.

And it leads to shortages. And it leads to people like me who would happily underwrite a big truck full of gasoline and bottled water to go into a hurricane area and give half of it 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.

Unfortunately, we've bowed our knees to sensitivity and sounding nice instead of doing something. The reason I mentioned minimum wage laws, same exact thing proven again and again and again. Minimum wage laws lead to unemployment for the most disadvantaged people again and again and again. And yet the nice sounding thing is to say, "Well, we should advocate for it." Well, guess what?

If you want to pay me $5 a gallon for my gas that's worth $20 a gallon, I'm just not going to sell it. And I'm going to be secretive about it. And the exact same thing if you want me or if I want you as a business owner to pay $15 an hour for a job that's worth $5 an hour, you're just not going to do it because none of us are actually stupid.

We keep our mouths shut because we get tired of being dumped on, but we're not actually stupid. Continuing on, "As I've observed before, the odd things about these defenses of price gouging is that they cross ideological boundaries." Huh, I wonder why, Joshua's comment. "They're often favored by conservatives and liberals alike.

It's unclear why this should be so unless liberals relish the rare chance to show that they're not opposed to the free market now and then. But the notion that the free market can somehow redress the extreme disruption of supply and demand that occurs during a disaster is exactly wrong." Pausing on the essay, think about this statement, "But the notion that the free market can somehow redress the extreme disruption of supply and demand that occurs during a disaster is exactly wrong." That's called a straw man because nobody is saying that the free market can somehow redress the extreme disruption of supply and demand comprehensively.

The point is there's a disaster. There is a disaster. The disaster has happened. The disaster is not something that somebody decided to do. The disaster is an act of God. It's not an act of man. Now, of course, the act of God can be exacerbated by the act of man.

You pave over all over the ground and you get rid of the water and you wind up with a landscape that can't hold water, and all of a sudden you have major problems. You build a city that's low in the environment and you're going to face the disaster. But nobody is saying that the free market can completely redress the disruption of supply and demand.

That's not the argument. That's a straw man. The argument is the free market can redress the supply of demand better than the totalitarian status response that leaves people standing in lines and without under claims of moral superiority. Talk to anybody who grew up under the communist system and you find that yes, prices were cheap when you could find anything.

It does you no good whatsoever to know that gas is priced at $2.50 a gallon when it's priced that way in Nebraska and not in Houston because it's not in Houston. Continuing on, we now need some method of rationing that limited and scarce supply. Rationing by price is always the efficient way of doing this.

Economist Tim Worstall, he's quoting some other economists. Continuing to read, "When the market breaks down utterly as in Houston where huge swaths of the region will have little or no access for days at least to fresh water, auto fuel, and electricity, almost nothing the free market can do will get supplies of these commodities to places that can't be physically reached.

Instead, the market will impose a level of price discrimination that could become life-threatening for people at the wrong end of the income stream. If one conceives," let me just pause here for a moment, read the statement again, "almost nothing the free market can do will get supplies of these commodities to places that can't be physically reached." This is an absurdly false claim.

If I knew that I could sell five-gallon containers of gas on the outskirts or the inside of Houston, Texas, and if I knew I could sell flats of water that I could pick up at Costco for five bucks a piece, if I could sell them for 25 bucks, I would have a van and trailer on the road today.

I'd do that for as many days as I could until the price dropped. Now, nobody is claiming that somehow you can magically convey these things to the middle of the city where there's floodwaters all around, except that actually I'm willing to make that claim. Here in Florida where I live, I'm always interested when I go out to these places where the boats gather.

Here in West Palm Beach, there's a popular boating spot called Peanut Island. It's kind of the local party sandbar place. All the towns on the water have this or the lake has it or whatever. I'm always fascinated to see the businesses that spout up. If you go out to Peanut Island here in West Palm Beach on the weekend, you'll find that there are a bunch of boats and everyone's boozing and hanging out and playing on the sandbar and the dogs are running around, et cetera.

There's always amazingly enough the things that you want to buy right there at some price. There's a boat wandering around selling fresh hot pizza. There's a boat that someone has made selling fresh hot food, Philly cheesesteaks and all kinds of stuff. Magically in the middle of water, these entrepreneurs figure out a way to deliver fresh hot pizza and fresh hot Philly cheesesteaks and fries and cold Cokes.

Why? Because they want to help the people who are there without pizza? No, because they want to make a profit. If you want to get water and rides to a place that's affected, allow people to come and do that for free and lots of us will and allow people to make money on it if that's what some people want to do.

Just don't force someone to buy or don't force someone to sell. So the statement, "Almost nothing the free market can do will get supplies of these commodities to places that can't be physically reached," is absurd. I can buy Coca Cola, sometimes an ice cold Coca Cola, in any corner of the world.

No amount of government action got that Coca Cola there. Other statement, "If one conceives an important function of government as ensuring that the market doesn't unduly disadvantage some people compared to others, then times like this are precisely the moment it should step in by putting a leash on profiteering on essential goods, for instance." It's an accurate statement.

If one conceives that an important function of government is ensuring that the market doesn't unduly disadvantage some people compared to others, then times like this are precisely the moment it should step in. But who would ever conceive that that's an appropriate function of government or even something that is ever possible to achieve?

Continuing on, "The problem with the free market is that it's not really universally free. Not all participants come to the marketplace with equivalent standing. In a crisis, those disparities are magnified." Now, let me insert a couple of other words. I'm going to change some of his words. "The problem with the world is that not all people are universally identical.

Not all participants come to the marketplace with equivalent standing. In a crisis, those disparities are magnified." Sure seems to me like it would be nice if everybody were the same. But guess what? I didn't make the world and neither did you. So we don't really have much of a say in how the world should work.

I don't really like gravity. I think it would be cool to be able to flap my arms and fly up into the sky, but I can't because somebody invented this thing called gravity and somebody decided that the world should be governed by gravity. I can sit around and weep and moan and cry about the fact that there's gravity or about the fact that there are continents on the world or about the fact that some places have more trees than others.

I can do it all day long and people will admire me for the fact that I can weep and moan and see the problems. Or I can roll up my sleeves and say, "Hey, look, there's this thing called gravity. What can we do that would be useful with it and how can we overcome it?" If you sit around and moan and cry about the fact that people are not all the same, people don't all have the same advantage, people don't all have the same privilege, people don't all have the same background, people don't have all the same advantages, you may look really good and you get nothing done.

Far better to roll up your sleeves and say, "How can we help other people? How can we serve other people? What can we do that would influence for good the people that are nearby?" Now, if I lived in just outside Houston, Texas, I might be willing to take the gas from my garden shed and drive it into town and try to pull people out and help put it in their cars, but I don't.

I live in West Palm Beach, Florida, and I'm not willing to load up my car with that much stuff and spend several days of my life driving there just in order to help people a little bit, but I'd do it for a profit. And the problem comes in when you think that's the only thing operating in the world.

These things are not mutually exclusive. Profit and charity are not mutually exclusive. That's where these types of analyses always go wrong. People don't only do things for profit. People are not universally greedy. Everybody has some expression of charity in their hearts. But the beauty of understanding how the market actually works and the world actually works is you can provide an outcome wherein people's greed and their charity work for the common good.

And this results in a vastly more well-served people. And now because you create profits, you create profits that can be used to help those who are the most helpless. I want to continue on because I want to read the essay to you, and I'll try to do it with more limited comment going forward just so that you can understand what this author's full argument was.

Again, Los Angeles Times, major newspaper. Let's see how reality conflicts with the idealized pictures offered by Mr. Werstall and Perry. When the municipal water supply is knocked out and people are dependent on bottled water, Werstall proposes, "We now need some method of rationing that limited and scarce supply over that increased demand.

Rationing by price is always the efficient way of doing this." He argues that raising the price will encourage suppliers to flood the market, so to speak, with bottled supply. We want, for example, people to start trucking bottled water from Louisiana to Texas. More money to be made by doing so will encourage people to do so.

And as that extra supply arrives, then prices will go down again as demand is met. It's as easy as that. Perry's target commodities include water, plywood, fuel, ice, generators, chainsaws, hotel rooms, etc. He writes, "As cruel as it may sound to those who are long on indignation and short on economics, market forces and market prices will address the post-disaster shortages in Texas and Louisiana more quickly and more effectively than government-determined, non-market-based prices that result from price-gouging laws." Notice Perry's swift gloss over the cruelty of this regime as if that's irrelevant.

Unfortunately, people at the wrong end of the cruelty continuum could end up dead. I'm going to pause because I can't go past it. Notice again what counts for careful, thoughtful analysis. This author, Michael Hiltzik, never rebuts a single argument with facts or evidence or logic or any kind of argument other than, "I don't think this is how it should be.

I don't think this is the way the world should work." Rather, he says, "The world shouldn't work this way." Let me continue on. Reading again his words, "As I've observed before, most such justifications of price-gouging fail to take notice of the population that can't pay the higher, gouged prices under any circumstances.

Let's say, for instance, that the market allows a convenience store to jack up the price of a bottle of water to $7 from $1, as a resident reported to the Houston Chronicle. There's no question that the bottle would remain on the shelf and therefore putatively available for purchase for longer than normal or until someone came by with such a desperate need for water that he or she would swallow the price.

Where does that leave a low-income mother with, say, three children needing to be hydrated? She might need a couple of dozen bottles, for which the price has now risen to $168 from $24. Throw in that, with the electricity out, she might not even have access to cash at an ATM.

She might very well value that water at $7 a bottle in principle, but that won't matter because she can't afford it. This is why the public typically views price-gougers in a crisis as creeps. Their action substitutes one market phenomenon for another that seems much less fair. Instead of a first-come, first-served advantage, it creates a most-money, best-served advantage.

It's all very well—let me pause. Here's what happens. So again, this sounds very compassionate, sounds very caring, but here's what happens. That mother who can't afford the $7 bottle of water is most likely not going to have been first in line to buy up all the bottles of water when they were available for $1 a bottle.

Rather, she would have been busy with her children, she would have had no money to go to the store and get the water, and I would have come along, recognized that there was a hurricane coming, recognized the fact that the shop owner was selling this water way too cheap, and I would have bought up his entire store.

Not to sell it, because of course I can't sell it and I can't give it to the mother, just to stick it in my back room and make sure that I had it, just like every single other person does when the storm is coming. That's why the shelves are clear.

So, instead of me being willing to take the many bottles of water that I have in my back room and sell them out at some price, and then to notice the fact that, "Hey, this mother has no water, maybe I should give her some." We're going to use the threat of violence at the end of law, the government goons with guns that are going to come from the Attorney General of Texas and try to enforce a $25,000 to $250,000 fine for price gouging.

Instead of using that, I got mixed up here, hopefully you understand the idea. Continuing on and finishing off, "It's all very well to cite the textbook claim, as Perry actually did in response to my earlier column, that price gouging merely avoids serious misallocation of resources. The issue for government officials tasked with managing a disrupted market is who receives the newly allocated resources.

In this example, it's only those who have $168 to spend, presumably in cash. Another factor commonly overlooked by defenders of price gouging is that natural disasters tend to be, one, short term and two, not amenable to rapid response by market forces. If there's no physical way to get a new supply of bottled water into some part of Houston, then allowing unrestrained price increases won't produce a larger supply." This guy is obviously going to take issue with every single textbook because here's what happens.

The answer is never that there's no supply. The answer is that there's not supply at the current market price. If I can buy a Coca-Cola in the middle of some forgotten outpost in the Sahara, as you can, or if I can buy a pizza when I'm paddle boarding around Peanut Island, I guarantee you we could figure out a way to get bottled water into downtown Houston through the 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 on the boats. Shortages don't indicate a problem in the free market system. Shortages indicate a mispriced transaction. An entrepreneur who is one who sees that mispriced and who quickly steps in to take advantage of it, buys cheap, turns around, sells high, takes a risk, loads up the pickup truck with water, and drives it right into the middle of the city to pass it out and sell it.

Here was his next statement. "Retailers lucky enough to have a few cases in the back room when the crisis hits, however, will reap a windfall. But who does that help except the lucky retailers?" Number one, if you think that a guy who runs a convenience store is going to be magically transformed into a wealthy aristocrat because he sold out his supply of 50 cases of water at 20 bucks a pop, you've never run a business.

And on what basis should that retailer not make that profit? What actually happens is the retailer decides how much of the bottled water they want to take home to protect their own family, how much they want to keep in the back, and how much they're willing to go out and sell.

And they hide the stock that they're not willing to sell at the artificially low price. Another argument in favor of removing crisis stage price controls is that they fail to accommodate the higher cost of getting a scarce commodity, such as water or gasoline, into the stricken market. That's a fair point, but it's also why price gouging laws typically allow for price increases within a certain limited range, or allow situations where a higher transport or production cost can be documented.

Perry and Werstall and other defenders of price gouging would eliminate all controls, especially in disasters. The conventional defenses of free market pricing tend to have a bloodlessness about them that underscores their irrelevance to real world conditions. Last October, Harvard economics professor N. Gregory Mankiw spoke up for free market pricing using his quest for Broadway tickets to Hamilton as the exemplary case.

He had paid scalpers $2,500 per seat and was happy about it because, you know, it was a hit show. Had ticket scalping laws been enforced, he wouldn't have been able to see it when he wished. As I observed then, however, Mankiw's effort to generalize from his experience to every possible application of the market ended up proving the opposite point.

To be sure, he wrote, most people can't easily afford paying so much for a few hours of entertainment. That is indeed lamentable. The word lamentable was asked to carry a lot more weight in that sentence than it should. Substitute paying so much for drinking water, or shelter, or life-saving medicine, and the situation starts to look a lot worse than lamentable, doesn't it?

Anyone can survive missing out on Hamilton. These other things, not so much. Certainly, there are situations where price controls are too rigid or even unnecessary. But when the task involves opening access to a market isolated from the outside world by natural disaster, the free market is powerless to help.

Its only ability is to direct scarce, life-giving resources exclusively to those who can pay. The only force that can address the market is government by making the cost of crucial commodities irrelevant by getting them into the market at its own cost. We're talking about a case where nature herself has thrown the economics textbooks into the drink.

It behooves academic economists like Werstall, Perry, and Mankiw to keep something in mind, always. We're not talking about tickets to a show. That's the end of the essay, and with my many interruptions, you've heard it in full. I will link it in the notes for today. Final commentary. Number one, nature herself is a myth.

There's no such thing as nature herself, this mythologized, personified person. You either have to say that there is a direct, controlling influence on the world, or you have to say that it's all an accident. But an economic textbook doesn't sit around and try to defend the idea that there are certain rules or laws or observations that should apply in some circumstances that don't apply in others.

Any more than a chemist makes certain chemical reactions and says that, "Well, I don't know if you're in Africa or in Asia or in the middle of a hurricane or when the sun is shining, I think you might get different chemical outcomes based upon the combining of these chemicals." There either is a law or a principle or a theory that governs certain behavior or there's not.

Now, if you can account for a law or a theory that governs certain behavior and you can account for the fact that it would change circumstantially, then you can make that argument. But you can't say, "I don't like a scientific law. I don't like the law of gravity or I don't like the law of chemistry, and so therefore I'm going to ignore it when I don't want to think about it or I'm going to accept it when I do." You don't ban chemical reactions because you like it when they make a nuclear reactor power plant, but you don't like it when they make a nuclear bomb.

The same thing is responsible for both. You try to figure out how can we work within the constraints of this ongoing process, and it's exactly the same with the law of economics. If you're going to take on every single economics textbook and in your commentary talk about the fact that this is irreproachable economic logic and this is a textbook example, but I don't like the outcome, you better have a little bit more evidence for your position than simply, "Well, I don't like the way that this looks.

I don't like it when we blow people up on the other side of the world, but I don't deny the fact that there are certain chemical reactions that are going to influence that." Got to figure out how to work with reality. Reality is people are happy to buy and sell at some certain price, and if you put price fixing laws in place, it results in people not being willing to sell because they know what they own is more valuable than what you're offering them.

I'm not selling you my $5,000 car for $1,000. Unless I simply want to be charitable, but you can talk past all day long how could Joshua charge 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 the back, and I won't even tell you I have it, which is exactly what people do in a time of natural disaster and in a time of emergency.

I would love it if the world worked differently than the way it does, but unfortunately, actually fortunately, I'm not God. I didn't set up the world the way that it is. I don't get to manufacture my own reality, and neither do you. You can wish that things were different than they are all day long, but the minute that you become empowered to actually change something is the minute you say, "I'm going to accept what is and figure out a way to work within the constraints of what is." And that's the kind of thinking we should be applying steadily, systematically.

It doesn't matter if you're called bloodless. It doesn't matter if you're criticized as being unfeeling. You can't hope to make any progress if you don't start by dealing in a world of reality. The only way you change the world is by starting with the way it is and then figuring out how to make it better.

So some final practical comments. What do you do in a world of shortages? Number one, I don't think it's worth the time or the money to try to fight against price-gouging laws and actually do it. For the average person who owns a store, selling your bottle of water at 20 bucks a piece is not going to make a difference.

The only people that this stuff makes a difference to really in the United States of America is somebody like my friends who are out of work, don't have a job. And for them, going and doing this hard work and moving in to make a few hundred dollars or a thousand dollars of profit in a couple of days, that's a windfall opportunity.

But for you and me, it's unlikely that that's a big opportunity for you. When the financial penalties are so significant, you have to count the cost and see if it's worth your being involved in the black market. I love the black market. I think it's so valuable. It actually brings a bit of honesty in other places.

When you go to a country where the government fixes a ridiculous exchange rate and you go in the black market and get twice as good for exchanging money or something like that, the black market solves a tremendous benefit to people all over the world. But you've got to decide, is it worth it getting involved?

And for most people, it's just simply not going to be worth it because of the significant penalties that are involved. It's also not going to be worth it because of the fact that generally people are going to perceive that people have long memories about people who increase prices. And people who increase prices significantly will find that the envy of their customers and the long memories will continue generally.

While I was looking around for comments on this on social media, I found one person who talked about the fact that a number of years ago, there had been an event and somebody had increased their price of gas, I believe it was, from up to $8 a gallon in order to ration it appropriately so they wouldn't sell out of gas.

And this person said, "I've never shopped there again." And so because most of these things are for such a short period of time, a hurricane or similar, I mean, there's just not enough profit there for most people like you and me to get involved. So I personally wouldn't bother too much.

I think the best strategy for this is use it as an opportunity for charity. People know the value of what you're doing. They know the price of the bottle of water is not five bucks. They know that in a time of shortage, whether they want it to be or not, it costs us a lot more.

And so use it to build goodwill and take your compensation in other forms. Nobody can sue you if you didn't take specific financial compensation, but you can reap the goodwill by working with your customers and doing it that way and working with them and giving things to them. But just coming up against the laws is rarely – going head to head with the laws and trying to confront the goons with guns is almost never a winning strategy.

If you have significant stockpiles of things and you see the hordes that are coming, the best thing to do is set those things aside, pull them off of the rack, put them aside and start to adjust the supply a little bit and then you'll be able to dispense them as charity when they're really valuable as well.

If you're the kind of person who has things, if you're the kind of person who has water, gasoline, if you're the kind of person who has a generator for a hurricane, that's the reason why you got to be private about it and not share that with everybody else. Encourage other people to do it, but don't go talking about the fact that you keep a thousand-gallon gas tank tucked in your backyard, assuming you live in a place where you could do something like that.

You should be circumspect in all of your business dealings. Envy is a powerful force and in a time when everything is good and there's relative plenty as thankfully most of the time we're in, then things are fine. But when you get into times that are difficult, all of a sudden people start looking at you differently, which is why you should be careful and circumspect.

When you talk about how much money you have and how wealthy you are and the resources that you have, you have to be very careful because that influence of covetousness and envy that works on people is dramatic. If you do find yourself working on the black market, make sure that you take steps to protect yourself.

I think if you're broke and you're near Houston and you can load up your pickup truck with gallons of water or whatever it is that you find that's in demand, diapers, I don't know what it is, you could probably find customers that would be happy to pay for it.

But you probably shouldn't sell those out of the front of a well-known store. You should sell them out of the back of a pickup truck with the license plate covered up, just like people do all over the world when you buy your raw milk or when you buy your fish off the side of the road and all this stuff.

So cover your license plates up and do business in cash and realistically, there's very little concern. If you're a big store, there's no reason to get involved in this stuff. Read the laws. There are states in which price gouging is not illegal, in which case you can perform a valuable service if you're willing to move fast and fill the market demand with your supply if you can move quickly.

Read the laws that apply to your specific situation. Always read the laws. Usually laws are written and they're written by bureaucrats who don't usually know what they're doing. And so if you actually just sit down and read the law, as somebody who's an expert in the business that you're engaged in, you'll usually find the circumstances that apply to you and you can just simply choose to not engage in those circumstances.

So sometimes this is easy and sometimes it's hard. Let me read as an example, the Florida price gouging law from chapter 501, section 160 of the Florida statutes. "Rental or sale of essential commodities during a declared state of emergency, prohibition against unconscionable prices." So as an example, right there, we're talking about essential commodities.

We want to know what does that mean? And we're talking about a declared state of emergency. That's why these states of emergency are so important because they trigger certain laws to apply. If the government triggers that state of emergency, then that's one thing. So an example would be, there's nothing wrong with your changing prices and selling bags of chips for $3 inside or for $5 inside of a stadium.

That's not considered price gouging because it's not a state of emergency. And so if you own a stadium, you get to charge $10 for a hot dog. It's just the state of emergency that triggers the idea of price gouging. So think about that. As used in this section, here's the Florida law, "Commodity means any goods, services, materials, merchandise, supplies, equipment, resources, or other article of commerce, and includes, without limitation, food, water, ice, chemicals, petroleum products, and lumber necessary for consumption or use as a direct result of the emergency." So of course here, commodity is expanded to basically include anything that can be sold, any good, any service, any material, any merchandise, any supply, any equipment, any resource, or any other article of commerce.

So obviously that's inclusive of all. So that means that if you're engaged in any business whatsoever doing anything, you're covered by price gouging laws. And B, "It is prima facie evidence that a price is unconscionable if, one, the amount charged represents a gross disparity," defined in a moment, "between the price of the commodity or rental or lease of any dwelling or self-storage unit or self-storage facility that is the subject of the offer or transaction and the average price at which that commodity or dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or sale in the usual course of business during the 30 days immediately prior to a declaration of a state of emergency, or unless the state increase in the amount charged is attributable to additional costs incurred in connection with the rental, sale, or commodity, or rental, or lease of any dwelling unit." Anyways, I can't get bogged down in this.

Forgive me. I just wanted to read this. I want to point how you can read this. Number one, there are a bunch of things you can do. For example, you can wait time, sometimes when time goes by. And that's why these temporary shortages are usually pretty short, because we're blessed to live in a world where the transportation system is generally pretty efficient.

Usually, we only have a few days. These opportunities of massive price disparities only exist for a few days. And then Walmart is filled, Costco is filled, et cetera. But you can make sure if you change something, then document your evidence as to what you're doing and why you're doing it.

So if I were going to drive a van in a trailer from Florida to Texas to sell stuff, I would make sure that I documented very carefully all of the costs associated with that trip, things like that, so you have support for yourself if you ever wound up in a situation.

Remember, you can always adjust the way that you sell something. You don't necessarily have to charge it on a fixed price. You can adjust. And so maybe something like bringing in an auction price, et cetera. So look at your business and you look at the law and read it and look for all of the exceptions that you can use to go around it.

That's always the answer. It's never a good idea, almost never a good idea to go face up against the goons with guns. It's always a better idea just to read the law and work around it. And most times, it's just not worth it. If you have these things, use these opportunities as a time for charity.

And you'll get the most bang for your buck. You'll get the most benefit if you just simply take it and share things with charity with yourself, with your friends, with people there, and just give it away. People know the value of it during those times, and you're going to get the highest return rather than dealing with these laws and dealing with the finances of it.

You're going to get the most value by just simply giving the stuff away and helping your neighbors. The goodwill generated by helping your neighbors and working together as a community is going to be far more valuable than an extra couple of hundred bucks in your pocket. None of this negates the ideological argument that I have made, but speaking practically, ideology is one thing, and I desire to affect your ideology.

But speaking practically, ideology is not everything. In every situation, we've got to look practically and say, "How do I deal with the situation practically as it exists?" And finally, this. Recognize that the most important thing is don't be stuck with the people who are desperate. Don't be the person, if you care about money, don't be the person who didn't buy the box of Snicker bars online for cheap or at the warehouse store for cheap and stick one in your pocket before you left for the day so that you wind up paying $3 at the gas station.

If you're concerned about money, don't be the person who didn't eat before you went into the movie theater and paid $11 for a hamburger and $15 for a bucket of popcorn, unless you just like to do that because that's your thing that you enjoy doing. And don't be the person who runs out to the store all of a sudden and clears the shelf of bread and milk right before the storm, thus leading to shortages for others because the store couldn't change their prices to affect the demand.

Be the person that stocks up on those things far in advance, and then you don't have to worry about a lot of this stuff. And you'll have the safety and the security and the peace of mind where you can go out and get in your boat and go help the neighbors and get in your car and deliver the bottles of water.

And if you have plenty, then you'll feel confident enough to share with other people and to give charitably. And it can make a huge difference in the people's lives who are in need. Because here's the reality. The author of this piece was right. When talking about the woman who, the low-income mother with say three children that need to be hydrated, she writes this, or he writes this, "Where does that leave a low-income mother with say three children needing to be hydrated?

She might need a couple of dozen bottles for which the price has now risen to $168 from $24. Throw in that with the electricity out, she might not even have access to cash at an ATM. She might very well value that water at $7 a bottle in principle, but that won't matter because she can't afford it.

This is why the public typically views price gougers in a crisis as creeps." The author's right about that. She can't afford it. Here's the other side of it. She won't get it and she won't have any chance of getting it if the price is fixed because there'll be a shortage and she was busy changing diapers with her little baby and she didn't get out to do that.

So make sure that you're coming from a place of strength and make sure you're looking for the single mother with three children. You have a much higher responsibility to support the widows, the single mothers, and the orphans than you do of supporting the person who wants to go out and buy the bottle.

So be the person who's wealthy, who's done the hard work in advance and who's stored up the bottles of water so that you have plenty to dispense as charity in a time of need. Be the person who saved the money so that you can go and pay the $168 for the case of water and give it to the mother.

That's your responsibility. We can't fix the stupid laws. I don't know how to fix them. I don't have any hope of changing them. I just feel it's important to point out that we should deal with facts. That's about all I've got. But you can fix your situation and you can deal with that.

And if you fix your situation and make sure that you have plenty of water, then you can help that mom who needs it. And that's your responsibility. And the infamous words of the person in the movie with the guy who got…Spider-Man movie, what is it? Great power comes great responsibility?

It's absolutely true. The writers of Spider-Man stole that line without giving credit directly from Jesus. And Luke 12 said, "When someone has been given much, much will be required in return. And when someone has been entrusted with much, even more will be required." You and I have been given a lot.

That means that a lot is required of us. You and I have tremendous resources. We're accountable for how we use those resources. I don't read a lot of scripture on this show, but let me just read that verse in context. It comes from Luke 12 and Jesus speaking, it says this, "And the Lord replied, 'A faithful, sensible servant is one to whom the master can give the responsibility of managing his other household servants and feeding them.

If the master returns and finds that the servant has done a good job, there will be a reward. I tell you the truth, the master will put that servant in charge of all he owns. But what if the servant thinks, 'My master won't be back for a while,' and he begins beating the other servants, partying and getting drunk?

The master will return unannounced and unexpected, and he will cut the servant in pieces and banish him with the unfaithful. And a servant who knows what the master wants but isn't prepared and doesn't carry out those instructions will be severely punished. But someone who does not know and then does something wrong will be punished only lightly.

When someone has been given much, much will be required in return. And when someone has been entrusted with much, even more will be required." Very next verse, most people don't know this verse is in the Bible, Jesus speaking, says, "I have come to set the world on fire, and I wish it were already burning.

I have a terrible baptism of suffering ahead of me, and I am under a heavy burden until it is accomplished. Do you think that I've come to bring peace to the earth? No, I've come to divide people against each other." Goes on. If you're interested in that, if you've never read the book of Luke, read the book of Luke.

A lot of people have deep impressions. If you're not a Bible reader, a lot of people have deep impressions of what the Bible says that aren't corroborated by what it actually says. I heard an amazing interview a couple weeks ago of the guy who was a grand wizard in the KKK, and the man is now a pastor at a prominent, traditionally historically black church in the American South.

Amazing testimony, but one of the most fascinating things about his story, as I heard it, as he was telling his story, again, he was a grand wizard in the KKK, and the place that he was actually, the reason he, when he left the KKK, he was recruited into the KKK from an early age, one of the most leading members of the KKK in Arkansas.

He was leading, as he said, the largest terrorist organization in the United States back during the 1970s. And during that period of time, he was looking to advance in the KKK and in the leadership. He's already a grand wizard, and so he went to kind of the leader over the US, the guy who was in charge of the whole KKK all across the country, and he went to him and he said, "How do I advance?" And he said, "Well, all of our leadership positions are full right now." And he said, "But we have a spot for a chaplain." And so he said, "Why don't you go and get a Bible and read a Bible and prepare some stuff that sounds good, prepare some sermons, and we can promote you to chaplain.

That'll be a good step up for you." And so this man went and he got a Bible and he started reading the Bible. And all of a sudden, he found all of these passages, started reading the book of John, and he finds all these passages that the KKK chaplains had preached on.

But what he found was that he had always, they'd always stopped short and hadn't read the whole passage. For example, the example that he gave in the interview I listened to was, forgive me, there's a little bit of a sidetrack, I'm done with finances, but it's just a short story to wrap it up.

This passage, he was reading the passage where Jesus is speaking with the woman at the well. And the woman at the well says, as an example, she says, "Well, you Jews, you know, you don't have anything to do with us Samaritans." And the guy, and the KKK guy, had always heard KKK chaplains use that to preach about the fact that, well, look, Jesus was against race mixing and was against people mixing their races.

So we've got to be those who secure races. And when he read the story for himself, what he found out was he'd been lied to. Because that wasn't what the story said. The very next verse contradicted that. And so I use that as an example. I've almost never heard somebody quote in public that Jesus said this, "I have come to set the world on fire, and I wish it were already burning." Now, of course, the question is, what did he mean by that?

And that, my friends, is something that you will have to investigate. Section is Luke chapter 12 if you're interested. Book of Luke is one of the best books in the Bible to read if you're interested. That's it for today's show. Forgive my foray, slightly off topic. I hope it's been useful.

Long show, but I spoke strongly. I hope I didn't overspeak. I don't think I regret anything I said in the show. I just want to speak clearly. I get tired of fuzzy thinking and tired of the lack of truthfulness that exists in our modern society. As the 12-steppers say, right, the first step to solving a problem is admitting that there is one.

Well, the first step to making progress is to understand the world as it actually is. Does you no good to think about how you wish things were unless you've started with how things are. And that's what frustrates me about so many things. You know, if I like to compare, economics is not a hard science like chemistry is.

It's a fuzzy social science in many ways. And there's a massive difference between the way that you approach chemistry versus economics, even though they're both considered to be a science. But there's a huge difference between them. But articles like this, this guy's what passes for modern commentary and modern opinion pieces in the L.A.

Times is basically somebody saying, I know that all of the academics who, both conservative and liberal people who cross ideological boundaries, believe that this is valuable and this is helpful. But I think they're wrong because I think that there should be it should be different. It's like me saying to a chemist, I know that these two things produce this reaction, but I wish that they spouted rainbow colored clouds of smoke instead of blowing up the lab.

Well, you can spout rainbow clouds of smoke, but you got to use some different chemicals and find a different way to accomplish it. Anyway, I'm out of here. Thank you all so much for listening. I'll be back with you soon. Didn't do any ads today. If you'd like to support the show, it's been helpful to you.

Come on by and become a patron of the show. Radical personal finance dot com slash patron. Buck a month, couple bucks a month. That helps me. Radical personal finance dot com slash patron. Thank you very much. Be back with you soon. This show is part of the Radical Life Media network of podcasts and resources.

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