As I write this, Hurricane Dorian is taking aim at Florida. What’s fun about that? you might ask. Well, nothing. And I don’t want to minimize the potential for disaster. But the hurricane hasn’t hit yet and the runup to a storm provides a lot of amusement and some educational moments. I just can’t resist.I’ll start with the good news! Florida is about to enjoy an ECONOMIC BOOM! If you believe the Keynesians that is. Now, if you have a shred of common sense, well, maybe it’s not such good news.Anyway, I live in Kentucky, but my mom lives north of Jacksonville and I spent about 20 years in the Tampa Bay area, so I tend to pay more attention to hurricanes than your average land-locked Joe. I’ve got the National Hurricane Service saved to my favorites toolbar, and like most Floridians, I
Michael Maharrey considers the following as important: Dorian, Economics, Fun on Friday, hurricane, Price gouging
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As I write this, Hurricane Dorian is taking aim at Florida. What’s fun about that? you might ask. Well, nothing. And I don’t want to minimize the potential for disaster. But the hurricane hasn’t hit yet and the runup to a storm provides a lot of amusement and some educational moments. I just can’t resist.
I’ll start with the good news! Florida is about to enjoy an ECONOMIC BOOM! If you believe the Keynesians that is. Now, if you have a shred of common sense, well, maybe it’s not such good news.
Anyway, I live in Kentucky, but my mom lives north of Jacksonville and I spent about 20 years in the Tampa Bay area, so I tend to pay more attention to hurricanes than your average land-locked Joe. I’ve got the National Hurricane Service saved to my favorites toolbar, and like most Floridians, I start watching these storms long before they pose any threat to anything. To be completely honest, this is kind of dumb and leads to all kinds of pointless worry. Nobody has any clue where these storms will actually make landfall.
I know; the people of the Weather Channel act like they know. They use all of this technical talk and fancy computers to make it seem like a science. But they’re just guessing like the rest of us. Just listen to the words they use. “Cone of uncertainty.” That’s actually a technical term for, “Hell if I know.”
As far as Dorian goes, my mom says she’s not worried. Jim Cantori is in Miami. That’s a long way from Jacksonville. She figures if Jim shows up in Jax, she’ll worry. Until then, she’s good. Seems about as reliable as depending on the “cone of uncertainty” to me.
Nevertheless, people are getting prepared. Mom says they are already running out of bottled water and bread at local stores. And Cantori hasn’t even made an appearance.
I want to take this opportunity to talk a little about hurricane preparedness. Preparedness implies “beforehand.” That means more than a couple of days. Like, if you are really serious about being prepped for a storm, you need to do it months in advance. As in, before hurricane season starts. Trust me, you don’t want to be out there trying to buy batteries and bottled water a couple of days before a hurricane.
Look, I don’t want to go to Walmart on a normal Saturday. Too peoplely. I sure as heck don’t want to go there when a killer storm is bearing down on me and people are in panic mode. I’d end up punching somebody. Then I’d be riding out the storm in the county jail. That seems less than ideal.
But if you enjoy people-watching and want some amusement, heading to Walmart before a storm can be entertaining. The thing the cracks me up is the way people prepare for a storm.
People buy a lot of bread. I get it. Bread is a staple. But I remember being in a Publix during storm prep panic (for a storm that never showed up) and seeing this guy with like 10 loaves of bread. That’s it. Just bread. What was he planning to put on the bread? Bread almost always goes with something else. Bread and cheese. Bread and sandwich meat. Bread and peanut butter. But not for this dude. Nope. It was just bread.
And one case of water.
Let me let you in on a little secret. If you are in a storm that knocks out the water supply, one case of bottled water isn’t going to get you very far. It’s like buying one firecracker for the Fourth of July. Or one bottle of beer for your Super Bowl party. There is almost literally no point.
This leads me to some economics. There’s nothing like a natural disaster to bring out the ignorance in people – especially economic ignorance. People are already talking about “price gouging.”
There are sound economic reasons that so-called price gouging really isn’t such a bad thing. It’s a natural function of supply and demand. Prices rise as demand goes up. Pretend you know it’s going to rain for a month straight. You would probably buy an umbrella, right? A lot of people would. And that means the price of an umbrella would go up. Now, if umbrella prices stayed really low, say because some knuckleheaded politician passed a law that said you can’t raise the price of an umbrella when the weatherman is predicting rain, you might buy one for each member of your family. But if prices spiked in response to demand, you would probably make do with one or two, leaving some umbrellas for somebody else. Nice, right?
The rising price would also help boost supply. If umbrellas get expensive enough, some guy in a less rainy locale where there is less umbrella demand might be willing to bring in a shipment of bumbershoots. It would be worth his while to pay higher transportation costs to take advantage of the higher price. But if the knuckleheaded politician has his way, the price won’t rise and our budding umbrella entrepreneur will just stay home and sell sunglasses.
Makes sense, right?
The problem is no matter how compellingly you explain the economics behind rising prices during a disaster, you’re going to win the argument. People just react negatively to rising prices during a crisis. Muh feelz trump logic.
Of course, these people will pay $12 for a beer at a baseball game, but when you ask them to pay $3 for a bottle of water before a storm, it’s a crime of epic proportions. Nevermind that while people are yelling and screaming about “price gouging,” there’s nothing left on the shelf to buy. Too bad there were no price signals to direct supply and demand.
Feelings trump economics. Every. Single. Time.
Do you know who doesn’t have feelings? SchiffGold precious metals specialists.
OK, to be fair, they have feelings. They’re nice guys, really. But they are willing to look at cold economic facts and use them to make decisions. If you want some help with your portfolio, give the guys a call at 1-888-GOLD-160.