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Every single human being ever in the history of time and space places infinite value on water (up to the quantity necessary to remain hydrated.)

You're not allocating based on how much they're willing to spend, because anyone would be willing to spend anything to stay alive. You're allocating based on wealth.

It may seem natural to the HN anarchist-libertarian crowd that someone's wealth is a prefect proxy for the extent to which he deserves to be alive and "very strange" to think otherwise.

Personally, people with that attitude are about as close to "evil" as it's possible to get outside of a movie villain.

Your first sentence is inherently contradictory and betrays a fundamental misunderstanding of the concept of value (or possibly, a misunderstanding of the concept of infinite).

Or you're not getting that he's saying that there's a discontinuity in the utility function.

there's no such thing as continuous utility, all value judgements are a weighted discrete graphs of relative preferences.

And this one goes to infinity at zero. When comparing the utility of a can of tuna to a castle made out of diamonds and staffed by trained unicorns, for a starving person the utility of the can of tuna is higher.

Clearly you are afflicted by not understanding the concept of 'infinity'.

Clearly you don't understand talking about infinity with approximations. Should I have added a liquid sapphire swimming pool attended by angels?

OK. The disconnect here is that I think there are things more valuable than my life, and you are selfish, and think there is nothing more valuable than yours.

You are going to die of thirst in the next few hours. There is one merchant selling bottled water.

There is no price at which you say, "fuck that, I'll live without it." You won't. You'll die.

So you pay whatever they're asking, up to and including everything you have. If you had more, you would pay more. That's what I mean by infinite value.

Actually, there are prices, where I will say "fuck that, i'll live without it". Easy example (but I would probably hold out for less): Would you trade torturing person X for water? (assuming assurances that they would be otherwise unharmed if I died of thirst)

Or you'll try to bargain with the merchant, explaining that you're dying of thirst. Or you'll try to take the water by force, since the merchant is obviously being unreasonable. Or...

In other words, your scenario does not just assume that you are dying of thirst. It also assumes that the merchant is evil, so evil that he will take everything you own in exchange for a single bottle of water when you are dying of thirst. Most humans are not like that. Why should you just happen to run across one that is at the precise moment when you are dying of thirst and he is the only merchant around? That's way too improbable to worry about.

> Or you'll try to bargain with the merchant, explaining that you're dying of thirst

In which case, he'll move on and sell it to the next guy.

> Or you'll try to take the water by force, since the merchant is obviously being unreasonable.

Okay, maybe, if you aren't outmatched.

> It also assumes that the merchant is evil, so evil that he will take everything you own in exchange for a single bottle of water when you are dying of thirst

This sort of proves my point. People understand that this kind of behavior is wrong, so they don't do it.

I was replying to someone saying it's puzzling that people consider this behavior wrong.

> In which case, he'll move on and sell it to the next guy.

Exactly what sort of situation are you envisioning, where there are multiple people who want to buy water (but nobody but you is dying of thirst), yet only one merchant selling it?

One can always make up improbable scenarios.

> People understand that this kind of behavior is wrong, so they don't do it.

That's one possible reason why people don't do it, but not the only one. There are game theoretic reasons why not doing it is adaptive.

In any case, if your argument is that people think it's wrong to take all the assets of someone who is dying of thirst, in exchange for one bottle of water, then you've shifted your ground. Your original argument was that people must assign infinite value to necessities like water, because they will pay whatever it takes to get them. Now your argument is that charging whatever the person dying of thirst will pay is "wrong". This is a different argument, and I don't see what it has to do with your original claim.

> I was replying to someone saying it's puzzling that people consider this behavior wrong.

Huh? The grandparent of my first post in this subthread was questioning your assignment of "infinite value" to water (or anything, for that matter). Perhaps you're thinking of another subthread?

And yet, food prices, despite not being set by law, are not infinitely high. Nor indeed are they terribly high.

Perhaps there's something you're missing here.

Or knowing that you haven't introduced any information that you could have possibly expected this person not to know, maybe you're missing something here.

When starving people participate in auctions with people who are not starving, even when both sides have equal wealth, the results may accord better with superuser2's prediction than yours.

Really?

So, let's say there's a sandwich. You aren't particularly hungry. I'm starving. We both have net assets of say, $125,000.

What exactly are you predicting? That you, not starving, will bid the price of the sandwich up to infinite levels because it's worth $125,000 to you to make me starve?

For most people in Western countries, most of the time, the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government). If there's not enough food being grown or retailers are charging too much, new farmers and new retailers eventually drive the price down through competition. This works because demand for food is predictable, fungible, and relatively constant.

Now imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food. Retailers can basically inflate prices to whatever they like and people will pay, because they desperately need that water and food and it's not like a new retailer is going to set up shop and dramatically undercut them before the disaster hits. There are certain business practices that cannot be solved by the market, and price gouging during disasters is one of them.

You need food and water to survive. Transportation is probably not in that same category.

> the market more or less succeeds in ensuring that food's available at a reasonable price (generally with quite a bit of help from the government)

The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall.

> imagine a natural disaster is expected and suddenly everyone needs to stock up on water and food

How long will the natural disaster last? How much can people economize on food and water during that time by simply eating less? How much can people economize by eating cheaper foods that provide nutrition but might not taste as good as what they normally eat? And so on.

Retailers can't inflate prices as much as they want because sane people will be asking themselves all the above questions, and will simply refuse to buy food and water at a price point that isn't worth it to them, all things considered. People need food, but the need is not infinite.

> The government doesn't help; it hinders, by subsidies, protective tariffs, and other distortions of the market. These policies help certain politically connected groups (mainly large agribusinesses), but they hurt consumers overall.

This is so true. In the aftermath of Hurricane Sandy there were plenty of gasoline shortages around NY; but the price did not significantly go up. If the stations were able to charge $9 or $10 a gallon, and the government didn't interfere, you can bet that companies/drivers would have been more than willing to import gasoline from other states. Why sell it in Ohio for $4, when you can sell it in NY for $10. Within a day or two, rather than the close to a week it took for normalcy to be restored; there would have been plentiful gasoline if you wanted it enough to pay.

Instead we had stupidity like even and odd days in some counties, and long lines when a station happened to have gas.

Competition.

We have government roads that are not flooded down which anyone can drive a truck full of produce/whatever to compete with the incumbents.

Competition is less likely to exist when the infrastructure is decimated. Until transportation gets rebuilt, the local stores that have water are the only games in town.

Price gouging is by definition when merchants set prices for basic survival goods higher than they would be in a normally functioning competitive market.

A normally functioning competitive market responds to changes in external conditions that cause changes in the relative scarcity of goods and services. Such changes should cause changes in prices, because the prices are signals that tell consumers about the relative scarcity of goods. If the price of bottled water goes up during a natural disaster, that's telling you, the consumer, that water is scarce and you should economize.

> (up to the quantity necessary to remain hydrated.)

You do realize that this qualifier (which is entirely correct and necessary) completely undermines the rest of your argument, right?

Please explain how superuser2's argument is undermined by that.

Because even the wealthiest person in the world only needs a finite, limited quantity of water (or any other necessary substance, like food) to stay alive. So wealthy people simply have no incentive to bid up the prices of necessities so high that nobody else can afford them. If they did, Bill Gates and the other top ten wealthiest people would own all the groceries and water in the world.

If one is really worried about certain people simply not being able to afford necessities during times of scarcity, like natural disasters, forcing prices to remain fixed won't solve that, because if prices remain fixed, people have no incentive not to buy things they don't really need (for example, water that they won't need to drink until after the natural disaster is over). So forcing prices to remain fixed just means goods get allocated by who can get to the store first, rather than who is willing to pay the most. What one would need to do is allow prices to increase, but subsidize purchases of necessities for people who truly can't afford them in a crisis. (Or one could set up a charity that bought the goods, paying the higher price if needed using donations for funding, to ensure they would be available to the indigent.)

What if the total amount of water available in a region is just slightly above the minimum required in that region?

In this case, rich people will not stop buying water at the absolute minimum necessary - after all, people (a) like to be more comfortable than just the absolute minimum necessary, and (b) are not very good at estimating what the absolute minimum necessary is. So your argument is wrong: rich people will bid up prices significantly to be able to go through the crisis with less discomfort. [0]

As a consequence, it is quite likely that poor people will have to suffer a loss of almost all of their (already few) assets just to survive. That's not a very moral outcome.

Besides, you seem to be operating under a false dichotomy. The choice isn't between (a) letting market forces run wild and (b) fixing prices while otherwise pretending as if nothing bad has happened. The choice is between (a) letting market forces run wild and (b) fixing prices while in the meantime implementing explicit rationing and making sure the underlying infrastructure problems are resolved as quickly as possible.

Option (b) is what most down-to-earth, clear-thinking humans will come up with in a matter of minutes. It is also the better course of action.

[0] In addition to this, consider that an argument that you made yourself can be used against you: Given the uncertainty of the crisis situation, it is quite plausible that rich people will make panic hoarding purchases of more than they need until the crisis is over, thereby bidding prices up even further.

> What if the total amount of water available in a region is just slightly above the minimum required in that region?

Then, as you imply later on, you have an underlying infrastructure problem. This is a different scenario from a natural disaster, which was the original scenario under discussion. A natural disaster is temporary; a shortage of water such as you are describing is not.

> fixing prices while in the meantime implementing explicit rationing and making sure the underlying infrastructure problems are resolved as quickly as possible.

You can't both fix prices and implement explicit rationing, because explicit rationing replaces the price mechanism; it doesn't supplement it. Explicit rationing and the price mechanism are both resource allocation methods; you can't have the same resources being allocated by two different methods.

As for resolving the underlying infrastructure problem, I'm all for that, but it's subject to the same issues: just look at the history of water rights in the southwest U.S. Government intervention hasn't fixed that.

> Given the uncertainty of the crisis situation, it is quite plausible that rich people will make panic hoarding purchases of more than they need until the crisis is over

Now you're back to the original temporary situation again. Which one do you want to discuss? They're different.

Also, you have now added uncertainty to the mix, which makes things more realistic, but also undermines your argument, in both the temporary and the permanent cases. If there is uncertainty about what the resource availability actually is, then a central allocation mechanism, like explicit rationing, can go wrong just as the price mechanism can; no method can guarantee success if the true facts are unknown. So just saying that the price mechanism might not work is pointless; you have to show that the price mechanism must necessarily be worse than explicit rationing.

It is very common for natural disasters to temporarily obstruct infrastructure that had previously been working just fine, and which can be restored to working order in a short period of time (under a month, say).

Or perhaps you just failed to understand the obvious ellipsis? (total amount of drinkable water available in the region in the aftermath of natural disaster)

> You can't both fix prices and implement explicit rationing, because explicit rationing replaces the price mechanism;

Step 1: Fix the price of a bottle of water to whatever it was pre-disaster. Step 2: Institute a system whereby each household may buy at most X bottles. It's not exactly rocket science.

> the obvious ellipsis

It wasn't obvious to me before, no, but now I understand what you were getting at.

Btw, I did misspeak here: > You can't both fix prices and implement explicit rationing, because explicit rationing replaces the price mechanism

I should have said that fixing prices, in and of itself, replaces the price mechanism; the price mechanism only works if you let the market determine the price instead of fixing it. If you intended "fixing prices" to imply that you are replacing the market price mechanism, then we don't actually disagree on that point. Sorry for the confusion on my part.

> Step 1: Fix the price of a bottle of water to whatever it was pre-disaster.

How do you know that's the right price? If your answer is "because that was the market price pre-disaster", then whence comes this sudden faith in markets?

> Step 2: Institute a system whereby each household may buy at most X bottles.

How do you determine what X is? What if it varies by household? What if some people need more water per person because of a health condition? What if...

You are making the mistake central planners always make: you are assuming that whoever is rationing the water can know all the necessary information in order to ration it correctly. In the real world, this can't happen; there is too much information and no way for the central planner to get it all.

Okay, seems like things are a bit clearer now. I don't think it makes a lot of sense to answer quote-by-quote. At a high level, it seems to me that our disagreement is based on a different understanding of how markets work.[0]

Market mechanisms and prices are useful for guiding the long-term structure of production relations in society. In a sense, market mechanisms provide a meta-heuristics-type solution (think genetic algorithms) for problems that are very difficult to solve via other means.[1]

Now, two things greatly diminish the usefulness of markets in a natural disaster crisis. First, market mechanisms tend to operate on a very large timescale (when prices rise, it takes months or years for new entrants to the market to appear). Second, the problems created by natural disasters are actually pretty straightforward.

You wouldn't use genetic algorithms to solve a minimum spanning tree problem, which is more or less the precise problem you need to solve when re-establishing transportation, for example.

On a more meta-note, while markets are obviously extremely useful, I don't think there's a lot of evidence that they work well when there is genuine scarcity for true essentials (such as food, shelter, water). They work well enough to provide those things at a steady rate as long as there are no shortages, but in times of shock (or, actually, if you look at the problem of hunger globally, when there are shortages) they don't seem to work so well (if by work well you mean delivering results that are acceptable to an average person's morality).

[0] Naturally, I am arrogant enough to believe that my understanding is more refined ;)

[1] Not necessarily because those problems are computationally hard, but because those problems are difficult to model and the input data is difficult to obtain.

I agree that we have a different understanding of how markets work. To hit what seem to me to be the key points:

(1) Markets do not just affect the long term structure of production relations (though they certainly do that). Prices of many goods and services fluctuate on a daily or even hourly basis. That is markets operating in close to "real time" to restructure economic activity in response to all kinds of changes in conditions.

(2) Markets do not just change when new entrants appear. There are other actions that market participants can take on shorter timescales to respond to changes in supply or demand. One key one is finding substitutes for goods or services that have become scarce due to some change in conditions.

(3) It's true that markets can't solve all problems, and that they work less well when there are non-market constraints operating, such as those imposed by a natural disaster. However, people who support markets (like me) are not claiming that markets can solve all problems; we are claiming only that, in cases where markets don't work well, other solutions (such as central planning) work even worse.

(One key reason for this is that most problems of resource allocation meet the conditions of your footnote #1: they are difficult to model and the input data is difficult to obtain. This applies to natural disasters as much as anything else: your apparent belief that such disasters are "straightforward" to handle does not seem to me to be borne out by what actually happens when central planners try to deal with such disasters. Btw, I think these problems are also computationally hard, in addition to the other characteristics you cite; that's another reason why markets, which are essentially distributed computation, work better than central planning, which is basically the Von Neumann architecture with a single-core CPU, with all its well-known bottlenecks.)

(4) If your criterion for working well is delivering results that are acceptable to an average person's morality, I don't think any system devised by humans has ever consistently done that in times of crisis. We're all still floundering, from that point of view. Markets are simply the "least worst" of the systems we've discovered so far.

Btw, I'd be interested to see your response to the "mixed" (market + non-market) method I proposed, in the post in this subthread that you originally responded to, for dealing with shortages in a crisis such as a natural disaster: some charitable organization (which could be the government, but does not have to be) buys necessities like food and water at the (increased) market price, and then distributes them to those who need them and can't afford them. This would allow the market to work, by giving an incentive to suppliers to increase supply (because prices are higher), but would also provide a mechanism for achieving a fairer outcome, by having the charitable organization act as a market proxy for the indigent. (Of course, it still leaves the charitable organization with the problem of how to fairly distribute its goods, but that problem is going to be there no matter how the goods are obtained.)

Robin's logic only works if you think the existing distribution of wealth is equitable. If you think unjust systems and behavior led to the current distribution, you would want to limit the extent to which wealth imbalance impacts the consumption of goods you consider essential.

Precisely.

To put a finer point on it: Imagine a disaster that seriously impacts food delivery for several days, e.g. while access roads are cleared of debris/snow/whatever. You want some reasonable mechanism that distributes food to people until normal operations can continue.

Given wealth distributions as they exist today - i.e., unequitable ones - using flexible prices may lead to a situation where sufficiently rich people maintain their eating habits to an extent where not enough food can be provided to the poor, who are then likely to suffer entirely unnecessary deaths.

An alternate system of explicit rationing, such as has been used during major wars, works better in such situations.

The horror - horror! - of rich people having more stuff than poor people is not alleviated by preventing prices from rising in times of scarcity - rich people can just pay others to stand in line for them.

Equity of distribution doesn't strike me a particularly good metric for dealing with emergencies anyway since it's easily maximized by not letting anyone have anything, which is essentially what 'gouging' bans achieve.

> processes that are consistently worse at giving goods to those who value them the most

I believe the willingness to stand in line for an extended period of time is a much better indicator of value then having large amounts of money.

CBC radio did an excellent program about price gouging a couple years ago; I highly recommend it (and also the rest of the Invisible Hand series): http://www.cbc.ca/theinvisiblehand/episodes/2012/06/27/the-g...

i think. there's also a difference in the supply/capacity part. transport services are usually scaled to meet average load or perhaps somewhere a little more than that..i think they're usually not scaled to meet peak load. on the other hand, disasters are like a sudden decrease in supply. perhaps news of the decrease in supply will drive people's expectations..perhaps to imagine it will become worse..but demand could be largely the same.. the expectations part is fairly interesting..it seems to say that people dont trust the government to be of help when there is a disaster. or something like that.