What Rednecks do to Price-Gougers

Introduction to Mobonomics Part 2: Redneckonomics

In Part 1 — TANSTAAFL, we discussed what happens after a hurricane in Mobile, Alabama, and the advantages of a free market economy over the Mobonomics of State intervention.

In our scenario, Nick bought generators in Birmingham and sold them at high prices in Mobile. Soon there was competition for buyers of generators, and prices came down.

But what if Nick charged such high prices that even tolerant, freedom-loving people were outraged? Isn’t there some point at which the State should intervene?

No. There isn’t, and here’s why.

First, let’s just get this out of the way: They are Nick’s generators, and you can’t steal them from him either alone or as a mob. If it’s wrong for you to steal them, it’s wrong for a bunch of people to do it, and that’s all the State is — a large number of people imposing their will on everyone else. If it’s wrong for you to steal, it’s wrong for the State to steal. So Nick can set whatever price he wants for his generators, and if there are buyers willing to pay the price, so be it. In the end, the prices will come down.

Second, “price-gouging” doesn’t actually work in the real world, at least not for long, so there’s no reason for state intervention in the first place. In the real world, there’s more than money, and when the price of a good gets too high, a community of buyers responds by imposing new costs on the seller; costs such as reproval, discrimination, boycotting, and exclusion. If you let free people work things out, they will.

To see how it works, let’s go back to the corner convenience store where Nick is selling his first batch of twenty generators.

Nick Learns About Redneckonomics

After Nick sold his first ten generators and people saw there were only ten left, a bidding war began driving up the prices. Nick was ecstatic as he raked up the cash.

Now they were down to the last generator. Billy-Bob arrives just in time, breathless, desperate: his little girl is very sick, but the hospital is only taking bleeders and critical cases. The price is now ten times what Nick paid for the generators, but when he finds out that Billy-Bob is desperate, he doubles that — Billy-Bob can have the last generator for twenty times what Nick paid for it.

When they hear this, a brooding silence descends on the crowd.

This was a tactical error on Nick’s part, and he learns that a free society has a number of mechanisms for correcting it.

  • Nick Backtracks. Hey, everyone makes mistakes. Nick got greedy, but the crowd’s reaction alone made him feel his moral obligation. He lets Billy-Bob buy the last generator for ten times the original price instead of twenty. He even agrees to let Billy-Bob pay in installments. The crowd settles down, and Nick has learned his lesson — don’t charge unconscionable prices.
  • Nick Gets Competition.When Nick puts an outrageous price on the last generator, Jake comes to Billy-Bob’s aid. He had bought one of the first generators at double Nick’s cost, and he offers it to Billy-Bob at that price. Then, just to annoy Nick, Jake announces to the crowd that he’s driving to Birmingham overnight to buy fifty generators and he’ll sell them tomorrow for three times his cost. He takes orders on all fifty, and nobody buys anything from Nick ever again. Again, Nick learns not to charge ridiculously high prices.
  • Nick Gets Shamed. The Mobile rednecks start “Nick’s a Jerk” billboard campaign in his hometown; they plaster his face along the highways with a web site address that has videos of people talking about what a jerk Nick was in Mobile.This imposes a very high social cost on Nick. Yet again, Nick learns not to charge unconscionable prices, and in this case, thousands of others learn the same thing by watching the video.
  • Nick Gets Shamed, Version 2. This time the buyers pool their money to pay Nick’s outrageous price so Billy-Bob can take care of his daughter. Priceless community bonds are formed. Billy-Bob has friends for life, and years later as a grandfather he chokes up when telling his daughter’s children the story of how they came to be here. Meanwhile, Nick secretly feels like a jerk. His conscience imposes a very high cost on his behavior, and while that cost is never realized in dollars, it does improve his behavior in the future, strengthening the overall good of society.
  • Nick Gets Beat Up. For some reason, even after Nick realizes his mistake he refuses to back down. Unfortunately for him, no one in the crowd is able to respond to his stupidity by competing with him because their trucks are flooded, or they have responsibilities at home, or whatever. So Billy-Bob winds up having to pay twenty times the price. As Billy-Bob drives away, Nick prepares to go back to Birmingham and pick up more generators, but then he discovers that his truck is blocked in by other pickup trucks. And it’s getting dark. That evening, Nick discovers the concept of “community justice,” which is a sort of Mobonomics without the State. It’s a hard way to learn not to charge unconscionable prices. I’m not saying I approve of this instructional method, just that it is a real-world factor in Nick’s business dealings.

In conclusion, we see that in a free society, price-rationing is good because it relieves shortages of goods that are in high demand much better than political-rationing. We’ve also learned that a free society has all the tools it needs to deal with “price-gouging,” so there’s no reason to give the State power over prices in the first place.

For Liberty

~ Manny Edwards

 

  • Jill

    Very good explanation Manny. If we saw the government as we see individual people we would be outraged at how they behave!