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Virginia Attorney General Bob McDonnell
Posted by: Jon Henke on Monday, May 22, 2006

I didn't vote for current Virginia Republican Attorney General Bob McDonnell, and this McDonnell-penned Richmond Times-Dispatch article make me glad I didn't...
Having previously helped disaster victims with the Salvation Army following Hurricane Camille in Biloxi, Mississippi, Ed was quite familiar with price gouging. "Gougers are no better than looters," he said from his home in Clifton.
Because, you know, looters only thieve on a voluntary basis; or perhaps these guoging gas stations are forcing people to pump at the point of a gun. Well, one person in this story is deploying the barrel of a gun, and it's not the gas stations. It's Attorney General Bob McDonnell..
When in the wake of an emergency a gasoline station charges $2.80 for gasoline one day, and $5.99 for the same product two days later, something is wrong. And that's when our office can intervene.
Ok, let's leave aside the usual — correct — points about supply, demand and personal freedom. Let's also leave aside the question of whether the higher-priced gas station was trying to ration its own gasoline. What happened in the story described by McDonnell was that a consumer didn't pay attention to the sticker price and ended up paying more than she could have had she simply looked at the price and driven down the street.
It's difficult to overstate the contempt I have for this politician and those like him
That happens to consumers all the time. If you comparison shop, you'll see differences of hundreds of dollars for the same computer — of thousands of dollars for the same car. But a difference of a couple bucks on gasoline is price gouging. The folk Marxism gets worse...
We successfully prosecuted these stations, returned money to the victims, and required them to donate to the Red Cross's Katrina relief fund. During and immediately after natural or man-made disasters, it is unlawful for any business to intentionally overcharge for goods or services.
Let me translate this Folk Marxism for you: "We successfully prosecuted these capitalists pigs,gave their to the People, and forced them to give even more money to punish their free enterprise. For periods during and immediately after disasters, we have criminalized the consequences of supply and demand and declared an official Glorious People's Profit. But just for gasoline. So far."

This kind of economic illiteracy is understandable, albeit embarrassing. But this open rejection of basic freedom is despicable beyond words. It's difficult to overstate the contempt I have for this politician and those like him. Sadly, those like him are the norm, rather than the exception.
 
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Duh!

Yes, it’s price gouging. Just as charging ten bucks for a bag of ice after a hurricane is price gouging.

I have no idea why you’d go off on the rant on something that is so obviously wrong. Perhapps the station was trying to ration it’s gas? Give me a break!

After or before a major hurricane "price shopping" for gas amounts to finding a station somewhere that still has gas and the ability to pump it.

Virginia has a law on the books and it would appear their government enforced it. What’s wrong with that?
 
Written By: davebo
URL: http://
Perhapps the station was trying to ration it’s gas? Give me a break!

After or before a major hurricane "price shopping" for gas amounts to finding a station somewhere that still has gas and the ability to pump it.
I wonder if you are aware that these two statements are contradictory.
 
Written By: Jon Henke
URL: http://www.qando.net/
During the recent rise in gas prices, a newspaper went out and asked gas stations why they were so quick to raise the prices, even by a cent or two.
The retort was always the same .. they didn’t want to have the lowest price because, else they would empty their tanks and lose regular customers.


But this all reminds me of the guy who rented a U-Haul filled it with gas generators and went to Mississippi to sell them. He offered them at twice what he bought them for (this is about typical for most stuff at Walmart). Even though there was a dire requirement for gas generators to replace the power lost to downed power lines, the police arrested him for gouging and seized the generators which have been held in storage since. Now exactly what common good was served ?
 
Written By: Neo
URL: http://
What happened in the story described by McDonnel was that a consumer didn’t pay attention to the sticker price and ended up paying more than she could have had she simply looked at the price and driven down the street.
Maybe but around here prices were both going up quickly and while you pumped your gas. The price increases went into effect on all pumps, even those currently in use. I could pay $3.00 for the first couple of gallons and, when the station prices increased, $3.25 for the rest for the rest of the tank. Under those conditions the station didn’t negotiate a price with me, they imposed one without my consent. That is gouging.

As for the rest, if the government is so concerned with gasa prices they should adjust the gas taxes, but that will never happen.
 
Written By: Jeff the Baptist
URL: http://jeffthebaptist.blogspot.com
Davebo,

The short answer to your question is that it is a harmful law.

I’ll make this longer than necessary to make it sound a bit more profound, but the basic concept here is that rising prices immediately encourage more efficient use and eventually a greater supply of the good in question. When any market experiences a serious decrease in supply or increase in demand, only several things can happen: (1) people go without or, when possible, find some usually less desirable substitute, or (2) prices rise.

Rising prices has two generally beneficial effects: (A) it automatically and immediately sorts out who values the limited supply more and (B) it encourages potential suppliers to meet otherwise unmet demand until some sort of new market equilibrium is established. Take away the incentive to meet that demand and the market remains in disequilibrium longer than necessary.

Now, typically at this point the anti-gouging crowd chimes in with something along the lines of how gasoline is a necessity, by which they really mean inexpensive gasoline is a nice thing to have. People may need to move from one place to another, but they don’t actually have to do as much moving as they are used to doing and they don’t necessarily have to do it the way they prefer; namely, driving by themselves in their family car(s). Personally, I would prefer to pay nothing at all for anything my heart desired, but that doesn’t give me the right to take anything from you at a price below what other people are willing to pay for it, now does it?

Jeff the Baptist:

I am intrigued by your claim of prices changing as you filled up your tank. That must have been a very high-tech service station. In any case, there I would agree that the customer in that situation has a valid complaint, but I cannot help but believe that this is a rare situation. And, for what it is worth, when prices begin to decline, will you object to not having to pay as much for the last five gallons as the first?

 
Written By: D.A. Ridgely
URL: http://
Virginia has a law on the books and it would appear their government enforced it. What’s wrong with that?
Exactly. What is amazing about so-called "free marketers" is not the laws they complain about, but the ones they don’t. There are many, many laws that limit the operation of the "free market." Does that make those who enforce those laws "Marxists"? I don’t think so, anymore than Teddy Roosevelt was a Marxist because he was a proponent of the Sherman Act.

Jon, are you saying the law is wrong, morally speaking? Or are you saying it is morally wrong to enforce it? Or are you simply upset with the rhetoric used by the AG?
Because, you know, looters only thieve on a voluntary basis; or perhaps these guoging gas stations are forcing people to pump at the point of a gun.
The gouger and the looter each break the law. So what is the difference?
But this open rejection of basic freedom is despicable beyond words. It’s difficult to overstate the contempt I have for this politician and those like him.
And instead you would have the AG do what? Not enforce the law he has sworn to uphold? Your post is a little unclear.

Guess you wouldn’t mind, then, if I came over to your house and helped myself to your stuff. After all, in a free market system of the kind you seem to envision, laws against burglary and theft shouldn’t be enforced anymore than laws against price gouging. Each interferes with the natural order of things.

 
Written By: mkultra
URL: http://
Guess you wouldn’t mind, then, if I came over to your house and helped myself to your stuff. After all, in a free market system of the kind you seem to envision, laws against burglary and theft shouldn’t be enforced anymore than laws against price gouging. Each interferes with the natural order of things.

Oh MK, I’m not even a Libertarian/libertarian and I can see this is really, really sad...It’s my house, it’s MY PROPERTY! Burglary and theft are someone taking my property without my consent.

As to gauging it’s NOT theft or burglary... the gas, food, generators, etc. are the property of the so-called "gauger" s/he can sell them or give them away as s/he sees fit at the price the market will bear!

It’s all about YOUR property and your right to dispose of it as you see fit. Plus the fact that "gauging" and the price mechanism are CENTRAL to the allocation of resources in any situation, normal or emergency. You want MORE of something, have someone gauge and make an "obscene profit" folks will be in your area trying to replicate that ROI and hence the price will fall in response to increased supply that emerged from the increased demand signalled by the higher equilibrium price previously established by "gaugers."

Are you really this economically illiterate? Or as I have asked others is it just any port in a storm in an argument?
 
Written By: Joe
URL: http://
Oh MK, I’m not even a Libertarian/libertarian and I can see this is really, really sad...It’s my house, it’s MY PROPERTY! Burglary and theft are someone taking my property without my consent.
So what. If I am bigger and stronger than you, then I should be able to take your stuff. To the extent that the government interferes with my taking, it is Marxist.
As to gauging it’s NOT theft or burglary... the gas, food, generators, etc. are the property of the so-called "gauger" s/he can sell them or give them away as s/he sees fit at the price the market will bear!
Then you wouldn’t mind me selling some crack cocaine to your kids. After all, it is my property and I should be able to dispose of it as I see fit.

You are missing the point, as usual Joe. There is a LAW AGAINST PRICE GOUGING. Just like there is a law against theft and burglary.

Joe: Do you or do you not want the Attorney General to enforce the law?
You want MORE of something, have someone gauge and make an "obscene profit" folks will be in your area trying to replicate that ROI and hence the price will fall in response to increased supply that emerged from the increased demand signalled by the higher equilibrium price previously established by "gaugers."
You rely on a false premise, namely, that in an emergency situation there will be no unusual barriers to entry into the marketplace by suppliers. Indeed, I imagine if you did a little research on the history of the law, you would find it was probably enacted for precisely this reason.

 
Written By: mkultra
URL: http://
Yes, yes, they should be able to charge whatever they want in ordinary circumstances.

However hiking prices during or immediately after a natural disaster, when people have no other recourse (conditions don’t exactly permit comparison shopping - particularly when your car is out of gas and you have to evacuate) seems pretty foul to me.

I guess this is a case where I don’t let my belief in an economic philosophy override my common sense. YMMV.
 
Written By: BillB
URL: http://squidly.com
Then you wouldn’t mind me selling some crack cocaine to your kids. After all, it is my property and I should be able to dispose of it as I see fit.
Confused and doesn’t work at any level, Mk, I’m not libertarian, we’re not talking about drugs, AND it misses the point about gauging... try to sell drugs, set your own price, market will determine how much or little of your crack it buys...sorry none of that works.
There is a LAW AGAINST PRICE GOUGING. Just like there is a law against theft and burglary.

Joe: Do you or do you not want the Attorney General to enforce the law?
No and I suspect that the POINT of the article was to demonstrate that "gauging laws" are ineffective or counter-productive, this being a nest of libertarians and/or economists.
You rely on a false premise, namely, that in an emergency situation there will be no unusual barriers to entry into the marketplace by suppliers. Indeed, I imagine if you did a little research on the history of the law, you would find it was probably enacted for precisely this reason.
No MK the LAW is based on a false premise, that because the road is washed out you ought not charge me more for a generator, yet it is PRECISELY because the road is washed out that I OUGHT TO BE ALLOWED TO CHARGE MORE. IF I can’t charge a premium for extra effort for a good or service, why bother going to the expense or bother of doing so? IF to provide a generator I have to LOSE money, guess what untilt he road is fixed or the law relaxed that area won’t many genrators, because few will take the loss to overcome the obstacle(s). I can sell a modicum of generators at my store NOW, and get a profit, so if I can’t get a premium price and profit for MUCH HIGHER COSTS of overcoming a washed out road, exactly what incentive do I have to stir myself from my comfy store front?

I would imagine that the law emerged from a number of positions, economic illiteracy, the idea of "doing good" and anger at being "Gauged", but none of them provide a good justification for prohibitions on "gauging"; fundamentally that people will go to extreme lengths to make money, removing tha incentive reduces the amount of that particular good or service available.

I think YOU miss the point.
 
Written By: Joe
URL: http://
The law in question, Va. Code § 59.1-527, strikes me as a turkey. However, I’m not sure I’d fault the AG for enforcing the law, which is simply doing his job. I’m more bothered by the part about investigating the oil companies for collusion, when there’s no evidence any has occurred.
 
Written By: Xrlq
URL: http://xrlq.com/
...AG for enforcing the law, which is simply doing his job.
This is the point at which I want ’gouging’ to be defined. My friend has a shop. He buys lots of items and sells them for sometimes DOUBLE what he paid. Other items he makes only a few points on. Is he gulty of gouging?
However hiking prices during or immediately after a natural disaster, when people have no other recourse (conditions don’t exactly permit comparison shopping - particularly when your car is out of gas and you have to evacuate) seems pretty foul to me.
So the price of gas stays low right after an emergency. Guess what I do... I take all 3 of my cars over and fill them up. All the way up. And I bring a few 5 gallon gas jugs and fill them up. Because, you know, they might run out of gas *which they will now because everyone is filling up, topping off and getting as much as they can*

Or, after a disaster I see that the price of gas is up over $5.00 a gallon. Well now, in that case I’ll make sure my Camry is filled (gets the best mileage) and I’ll the the f**k out of town. And there will now be gas there for mk and BillB. Which they will gladly take until the crisis is over and then they’ll sue the bad man at the pump for GOUGING.
 
Written By: meagain
URL: http://
I remember when I spent 10.5 hours on the road trying to get from Houston to Dallas. Gas stations all over were out and I was lucky to wake up at 4am that morning and fill up at the station across the street. However driving back 2 days later there was no gas to be found along the way. Except for the places that had much higher prices. Thank God they were "gouging" or I might have ran out of gas.
 
Written By: Chris
URL: http://
If you don’t see the difference between stealing somebody else’s property and disposing of your own, you’re beyond moral argument.
You are missing the point, as usual Joe. There is a LAW AGAINST PRICE GOUGING. Just like there is a law against theft and burglary.
Just like there were laws against interracial marriage; just like there were laws preventing abortion; just like there were laws criminalizing criticism of public officials. The fact that there’s a law does not make something right, MK.
You rely on a false premise, namely, that in an emergency situation there will be no unusual barriers to entry into the marketplace by suppliers.
Two problems with this argument:

1) In the article, McDonnell himself pointed out that the "victims" husband went right out and found plenty of places with cheaper gas.

2) Laws like this are, themselves, barriers to entry. As in the example cited earlier, when prices are artificially suppressed, the incentive to provide a supply is suppressed. For example, should there ever be a major disaster in Virginia and ice is hard to find, you can bet that no individuals will find it worthwhile to drive a truck loaded with ice from neighboring states.
However hiking prices during or immediately after a natural disaster, when people have no other recourse (conditions don’t exactly permit comparison shopping - particularly when your car is out of gas and you have to evacuate)
As noted above, conditions did permit comparison shopping. Oh, and Virginia was not quite in the evacuation area of Hurricanes Ivan or Katrina. Is it any better to have no gas available at any station because gas was forced below the market clearing price? What if I run out of gas when there’s not an emergency? Is it permissable to sell me gas at a price of their choosing then?
However, I’m not sure I’d fault the AG for enforcing the law, which is simply doing his job.
I do fault him for doing that part of the job. He has some degree of discretion on how to proceed. Reasonable people may disagree on the degree of discretion he has, so I won’t really differ too much with you there. Still, writing an article forcefully advocating the pursuit of these "price gougers" is far outside the scope of "merely doing his job".
 
Written By: Jon Henke
URL: http://www.QandO.net
If you don’t see the difference between stealing somebody else’s property and disposing of your own, you’re beyond moral argument.
Euphemism as argument is just that - a euphemism. Stealing is against the law. Price gouging is too. The voters of Virginia have effectively declared each to be illegal. Now, some might be against gouging because they think it immoral. Others might be against it because they believe such a law is practically necessary. Just as some may be against stealing because they think it is immoral, while others may not see it as a moral issue at all, but may still believe it is a good idea.

Now, is stealing worse, morally speaking, than price gouging? Perhaps. But murder is worse than stealing. So is there a difference between gouging and stealing? Sure. Does it matter? No.
Just like there were laws against interracial marriage; just like there were laws preventing abortion; just like there were laws criminalizing criticism of public officials. The fact that there’s a law does not make something right, MK.
No - not just like. Laws against interraical marriage, laws banning abortion in all cases, and laws criminalizing criticism of public officials all share one thing in common - they are unconstitutional. Contrast that with the law against price gouging. It is not. So no, they are not "just like" each other. Indeed, they are the very opposite of each other.

Now, if you want to make an argument that price gouging laws are unconstitutional, go for it. I would love to read it. And don’t forget the citations. But until then, comparing laws against price gouging with laws against interraical marriage is both over the top and legally infirm.
1) In the article, McDonnell himself pointed out that the "victims" husband went right out and found plenty of places with cheaper gas.

2) Laws like this are, themselves, barriers to entry. As in the example cited earlier, when prices are artificially suppressed, the incentive to provide a supply is suppressed. For example, should there ever be a major disaster in Virginia and ice is hard to find, you can bet that no individuals will find it worthwhile to drive a truck loaded with ice from neighboring states.
1) Then change the law so it does not apply in this situation. Or get a better lawyer if it was not meant to apply.

2) Sure they are. And laws against selling unapproved drugs are barriers to entry in the pharmaceutical market. And laws requiring labeling of food are barriers to entry in the food selling market. And laws requiring .... well, you get the picture. You’re not really making a point here.
 
Written By: mkultra
URL: http://
From The Incredible Bread Machine By R.W. Grant

Now let me state the present rules,"
The lawyer then went on,
"These very simple guidelines,
You can rely upon:
You’re gouging on your prices if
You charge more than the rest.
But it’s unfair competition if
You think you can charge less!
"A second point that we would make
To help avoid confusion...
Don’t try to charge the same amount,
That would be Collusion!
You must compete. But not too much,
For if you do you see,
Then the market would be yours -
And that’s Monopoly!


http://www.vex.net/~smarry/oldbbs/bread.html
 
Written By: m.jed
URL: http://
Isn’t there a simpler solution? After a disaster, or perhaps even an unsettling event, *ALL* gas stations should immediately suspend the sale of gasoline until it can be figured out what the right price _should_ be. I expect the various interests should get together and have a big debate over this and then a price should be set. I don’t see why it should take more than a few months to figure out what the correct price should be. So we’re all without gas for a few months. So what? Isn’t it MUCH, MUCH more important that no ’gouging’ take place?

After all, command-and-control marketing worked wonderfuly well in the old USSR.

For mkultra and others of equal understanding, this is written with tongue firmly in cheek.

 
Written By: JorgXMcKie
URL: http://
The law says the price charged must be "unconscionable" or "grossly exceeding" what would be the "normal price" for the good. Kind of vague. Does a 10% increase qualify? What about a 50% increase? 200%? Any increase at all? It doesn’t say, and I suspect it’s up to the prosecutor’s discretion.

Essentially, it seems the law calls for a price freeze a the time of an emergency. Sure, some people think price freezing is good policy. It’s a non-starter at this blog, though.

IMO, the law is just stupid. Can anyone - even MK - deny that really high prices encourage widespread conservation? Does anyone - even MK - think that what’s left of a precious commodity should be first-come-first-served-no-limit, leaving the rest out in the cold? It’s the high price that effectively enforces a limit on how much of that commodity any one person is likely to take for himself. What’s so hard to understand about that? Why can’t some people see the obviously bad consequences of such otherwise well-intentioned legislation?

lol Jorg
 
Written By: equitus
URL: http://
No - not just like. Laws against interraical marriage, laws banning abortion in all cases, and laws criminalizing criticism of public officials all share one thing in common - they are unconstitutional. Contrast that with the law against price gouging. It is not. So no, they are not "just like" each other. Indeed, they are the very opposite of each other.
The first two on your list certainly were not found to be unconstitutional until quite late in the history of the republic, and who knows what law might be struck down next. In the meanwhile, however, the logic of this position is that every law, regardless of how absurd, should be enforced absolutely.

Well, that will at least solve the traffic congestion problem. Lots of people taking mass transit after losing their licenses from repeated speeding violations (say, doing 28 in a 25 mph zone). That will be good for the economy and further important social goals, too. Then again, we’ll have to pay more to build many more prisons when the police start rigorously enforcing minor drug possession laws and, especially in those three strikes and you’re out states, the prison population explodes. (WaPo headline: Prison Population Still High Despite Declining Drug Sales)
And laws against selling unapproved drugs are barriers to entry in the pharmaceutical market. And laws requiring labeling of food are barriers to entry in the food selling market. And laws requiring .... well, you get the picture. You’re not really making a point here.
Of course he is, the point being that people really want available gas at high prices more than they want no gas available at low prices. Of course, they’ve been conned by the economically ignorant and/or dishonest into believing they can have both under any and all circumstances, but passing a statute to repeal the law of supply and demand will have about as much effect as a statute repealing the law of gravity.
 
Written By: D.A. Ridgely
URL: http://
Hear, hear DA Ridgely, HOWEVER your plan has a flaw. Why wait until the emergency? I say every state, and locality form a task force with the Federal Department of Commerce and the Department of Homeland Security/FEMA. The task force to consist of the local executive branch/legislative branch representatives, concerned local citizens, the local state house representatives and senators, and state emergency management officials, plus the regional Federal representatives. I believe these task forces should begin to immediately meet and begin to produce "price lists" for certain commodities in the event of several emergency scenarios. Se this is EASY. No problem with price gauging...man why we need markets at all just escapes me.
 
Written By: Joe
URL: http://
The law is an ass. It should be changed.

It would be better to have no limit on increases, but a reasonable compromise seems to be a simple 100% "maximum" emergency surcharge — the price is doubled.

Perhaps the law should be amended to read that "no gouging occurs after an emergency if the temporary price increase is 100% or less". In fact, the voters need to learn to expect doubled prices in an emergency, just like convenient groceries at the gas station cost more than in Wal-Mart.

The generators taken are a good example of why such a law change, and debate, should make people learn about the supply issues. For almost nothing does doubling the price in an emergency create excessive hardship, but it immediately makes folk do more conserving, as well as rapidly increasing the supply.
 
Written By: Tom Grey - Liberty Dad
URL: http://tomgrey.motime.com
Sorry, Jon, but by your definition, there is essentially no such thing as price gouging. So I guess we should just strike it from any law. Followed soon after by the non-term, "monopoly", then "price-fixing", and maybe "collusion", because we wouldn’t want to unfairly penalize any business, up to and including major league baseball.
 
Written By: Sherard
URL: http://
Sherard, there is no such thing as price gouging. I have yet to ever hear or seen anyone give an actual definition of price gouging that can stand up in all circumstances. Are you willing to give such a definition?

Monopolies are also a non-worry, along with price fixing and collusion. Neither of the three can work in a truly free market society. The only time they can work, long-term, is when the government props them up through laws that create high barriers of entry. There might be short-term price fixing, collusion, and monopolies, but they’ll collapse as soon as a new competitor enters the market.

As for baseball — it could survive without the antri-trust exemption. (And, yes, baseball is a monopoly that currently enjoys an exemption from the anti-monopoly laws.) Most of the sports leagues in Europe are free market leagues that actually compete against each other.
 
Written By: Joe Martin
URL: http://www.minorthoughts.com/

 
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