The Benevolently Selfish Arbitrageurs
I am a first world man temporarily banished to a third world land. I sit in the darkened city of New Orleans, disempowered to send an email or make coffee. I write to you on a half charged laptop, treasuring every minute of screen time I have left. When the electrons in this battery cease to flow so shall my thoughts upon the page. Then I will read by candlelight and perhaps churn some butter.
In this solemn hour I find myself reflecting upon bureaucrats and their insatiable need to interfere in free markets. Why must they enact laws restricting the sale of generators, bottled water, and gasoline in our time of greatest need? If a speculator loads up his trailer with food, water, and much needed supplies, and then risks his life driving into a hurricane’s aftermath he should be rewarded exactly as the market dictates. Instead if he tries to sell above the bureaucratically dictated price ceiling he goes to jail. So, instead of daring greatly and making the journey the potential arbitrageur stays at home and the people in need go without.
When you artificially constrain supply or demand you no longer have a functioning market. You will have shortages or surpluses. Earlier today, I had to drive to five gas stations to find one without plastic bags on the pump. Wouldn’t it make more sense for a gas station to have the ability to raise their prices as their inventory is depleted so that the most highly motivated customers can still get the fuel they need?
Instead we outlaw price increases in a disaster and people choose to hoard instead buying the amount they really need. This is what people would do if prices were temporarily 200–300% higher. In this case, I would have only got a quarter tank of gas and been able to meet my short-term transportation needs. Instead I almost got none. The free market is the fairest way to ration scarce goods.
The bureaucrats do not want arbitrageurs to bring much needed supplies to the people. The strict laws regarding price gouging prevent any man’s rational motivation for doing so. The bureaucrats prefer empty store shelves at low prices then stocked store shelves at higher prices.
Politicians refuse to allow storm surge pricing for fear of the following headlines: “Woman forced to pay 100% more for baby formula” or “Man forced to pay 200% premium for gasoline to get out of disaster zone.” The idea that we must prevent capitalist exploiters from taking advantage of the common man is something that should have died with Soviet Russia. They prefer voters be cold and hungry to avoid an inconvenient headline. The headlines they are encouraging include: “Baby goes hungry due to lack of formula” and “Man dies when looters invade his place of business.” Paying $5 for a gallon of gas to leave a dangerous area is not a disaster but being stranded there and dying is.
Keep in mind that both that mother and the man above would be choosing to purchase formula and gasoline from the arbitrageur. This would be a completely voluntary exchange that both parties entered into for their mutual benefit. Any attempt to constrain such exchanges is to defile the sovereignty and liberties of the individual.
This is the opposite of a bureaucrat enacting price-ceilings or price-floors. Calling a scarce resource a human right doesn’t make that resource any less scarce. You can say every person deserves food, housing, healthcare, a job, but that doesn’t make those things spring out of the ground. Reality not rhetoric dictates resource availability. High prices are the best solution to high prices.
When a centralized force exerts price control on a market in either direction this will result in either a dearth of buyers or sellers. In this instance you are constraining demand (price) and therefore the supply and demand curve must shift down into an equilibrium of lower supply.
Politicians and regulators have the best intentions. They think they are saving their constituents from spending their hard earned money. They believe they are saving them from the exploitation of business owners. But as Dr. Alan Grant in Jurassic Park 3 says “Some of the worst things imaginable have been done with the best intentions.”
We must look beyond the superficial optics of paying $10 for a gallon of milk or $5 for a gallon of gasoline. It is the underlying needs and motivations of the individuals involved that should be considered. Capitalism works because individuals are motivated with money to solve other people’s problems . The much lampooned quote by Gordon Gekko still applies “Greed is Good.” In fact the only places where it doesn’t are due to regulatory oversight. People who attempt geographic arbitrage to assist their fellow man should be applauded not chided.
