Economists often react to events differently than most people. Often, critics of economics will say something like “sure, it’s easy for you to say that because of the position you’re in, but if you were in someone’s shoes I bet you’d change your tune!” ” For example, economists do not regard the so-called “price reduction” as a bad insult – but perhaps that is because those economists have never been on the receiving end of a price increase, and if they had been, they would have reconsidered. But such critics should not be so sure. Economist John Cochrane recently explained why his experience of getting a “price hike” was positive:
Uber’s surge pricing was an important lesson for me. I loved it. I could always get a car if I really needed it, and I could see how much extra I was paying and decide if I didn’t need it. I’m happy that Uber has allowed me to pay other people to postpone their trips for a while, and to send the word out that more drivers are needed. But the drivers reported that everyone hated it and felt cheated.
Cochrane also explains that his mother was upset when they tried to get a hotel room in what turned out to be the middle of Woodstock II. Finally, they found one at a Super Motel 8 that was more expensive than the chain’s average. He tried to convince his mother that the room available at the high price was, in fact, something to be thankful for:
I tried hard to explain. “If he had charged $50, or $100, those rooms would have been gone and we would be sleeping in the car tonight. Thank him and thank you! He is a struggling, entrepreneurial immigrant. We don’t need handouts from people who run Super-8s in upstate New York.” But, even though she was a wonderful, intelligent, intelligent, and well-traveled woman, she didn’t have it. Nothing I could do would convince him that the hotel owner was not a bad person for “taking advantage of us.”
My own experience of this comes from the other side of things – being in a situation where there was no “price gouging,” and I wish there had been.
This was back in 2016. I left my job at the Medical University of South Carolina in Charleston and moved to Minnesota. Most of my belongings had been picked up by the movers a few days earlier, and I was leaving that weekend. However, a few days before I was to leave, Hurricane Matthew would make landfall in Charleston. So I decided to get up early the next morning and hit the road a few days earlier than I had originally planned.
When I woke up the next morning, I realized that I was dead. My gas tank was very low, bordering on empty, and I had a long way to go. So, I had to get gas. And what I found was that even at 4:30 in the morning, the nearest gas station had a very long line for every pump, as people were getting ready to leave the area ahead of the storm. However, the price of fuel has not changed at all – no price hike to be found here! And that bothered me.
Everyone needed gas, but not everyone needed it equally. I’m sure many people in that line, as well as those who filled up and left in the previous days, had tanks that were close to full or full but wanted to “jump” before hitting the road. Then there are other people like me, whose gas tanks were full of smoke and who couldn’t even make it ten minutes down the highway to hit the gas station in the next town. In a perfect world, the remaining gas would go to people like me rather than those with full tanks. And that’s exactly the kind of world that price signals will often guide us into. If the price was allowed to go up, someone who already has three-quarters of a tank of gas might think “It’s not worth filling up another way at this price, I’ll just go out now and get gas there.” we’re a few hours down the road.” Anyone who made that kind of decision would leave a lot of gas behind for people in a situation like mine, where it was a “now or never” situation. I would happily pay a few extra bucks a gallon to be sure of the ability to fill my tank, rather than risk being stuck next to a gas station that advertises the “correct” price next to their empty gas wells.
Luckily it didn’t come to that – I finally managed to get to the front of the line and fill up the tank. I also noticed that the gas flow from the faucet was slower and weaker than before or since. I was lucky – if I had left an hour later that morning there might have been no fuel left at all, and I would have been caught in the storm. And I would not at all feel protected or watched over by the laws that keep the price of gas from going up. John Cochrane was very grateful for the high prices he had to pay – and I was very depressed about the low prices I had to pay.
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