How should the press release by Michigan Attorney General Bill Schuette be taken?
Yet recently and not for the first time, the Michigan Attorney General’s office has investigated, and prosecuted privately-held businesses for responding to demand and availability in ways they felt were necessary. Using taxpayer dollars, the AG’s office obtained a $500,000 settlement from a provider of propane, because that business raised its prices.
Though some of the investigation had legitimate reason to happen (established deals were not being honored), the underlying premise that the AG’s office presents is one that seemingly panders to the “its just not fair” crowd. When Schuette says :
“I’m happy we can put money back into the wallets of hard-working families who paid steep prices to heat their homes last winter while already trying to make ends meet.”
He is not saying he is “happy to provide enforcement of contract”
THAT is a problem. Its not the job of the Michigan Attorney General to make sure pricing is fair. Its not the Job of the Office of the Attorney General to ensure people can afford their utilities or everyday needs. Its definitely not Bill Schuette’s job to “put money back into the wallets” of those he deems to have been victimized by a brutally cold winter, or those who must provide the resources to deal with it.
This is a message that needs to be re-issued every couple of years. Price ‘gouging’ serves a purpose. Higher prices provide value to the buyers AND the sellers when uncontrollable conditions dictate it. In 2008 I wrote about Granholm’s similar quest to use government for control of gas prices:
But when considering the situation, how bad is it to charge more for gas, and at WHAT point is it considered price gouging? Not only that, but what RIGHT does GOVERNMENT have to CONTROL Prices? If a station owner is looking at NO deliveries for the next two to four days raises his prices because his supplier is unable to guarantee delivery, who is in a position to criticize it?. What is that person supposed to do? By gas prices going high temporarily, it guarantees that those who TRULY NEED the resource will have it.
Need is different from WANT.
High prices cause the reassessment of need in folks. Suppose you have the money, but don’t WANT to spend it when a price seems just too high? You will consider your purchase of service, product, etc. Those who truly NEED that service, product, etc., will find the resources to procure it. And at least they will have the opportunity.
In fact, the most efficient delivery of product to those who need them is served by allowing prices to rise to levels that may seem excessive to some. Personally, I have encouraged those with limited product or time available to raise their prices. About 20 years ago,after listening to my uncle (a plumber) complain about being so busy that he couldn’t think, and that it was affecting the family, etc., I suggested to him the answer was simple.
“Raise your prices Paul. Maybe just a little, and some of the folks might go off to other plumbers and your work load might diminish, but you will better your quality of life”
So for those of you in Bay City who could no longer afford HIS services? Sorry, but it helped him better the quality of his product for those who remained.
And in 2010, I even referenced his type of service. I also referenced product that has finite availability. While recognizing how one might get rid of obsolete and unneeded items, I suggested to all: RAISE YOUR PRICES! for items that still have specific demand:
In my own business, It seems almost daily that the products I sell have a reduced value. I have equipment on the shelf that I am now moving or attempting to move at 50% of what I paid. Why? Because there is little demand for the equipment, and in reality the particular equipment that I am talking about is not needed by anyone anymore. What I am doing by lowering the prices to (seemingly) ridiculous levels is making incentive for folks to buy, even when they don’t need it.
“For THAT price, I’ll FIND a use!”
Strangely however, there is equipment that I sell where the price has had to go up. A perfect example is this $199 B&W 9″ CCTV monitor. Amazingly, two years ago it could have been found for $99. In fact, few people would have thought such a thing as a low tech 9″ CRT black and white TV monitor would demand as much coin as it does now. What makes it so valuable?
Perhaps the fact it is no longer made.
No longer made, with no substitute, and the fact that CRT monitors have a very limited production throughout the world at this point. LCD and other technology has overtaken the monitor markets, yet LCDs have a problem in some areas. Primarily the fact that intensely hot environments will destroy an LCD monitor in short order. CRT monitors can withstand heat far beyond that of an LCD. So some purchasers who need the CRT monitors for the extreme environments are scrambling to find them.
Those monitors are gone now.
They are LONG gone, and I still get calls for them. Calls from people who need them at ANY PRICE. And its a nearly perfect example of how markets truly work.
Bill Schuette is understandably posturing as a defender of the people, and the action is well within his responsibilities as a defender of contract, if in fact the providers are breaching contract. Its appropriate to use taxpayer provided resources to perform that legitimate function of government; Not only appropriate, but a responsibility.
However, the message sent is not one that highlights that part of the effort. In what seems to be an effort of base populism, The AG pretends worry for those who are having a hard time paying bills, while actually carrying out the legitimate function of the office as defender of LAW. It is unfortunate and sad that our political leaders cannot provide a simple objective statement and determination without politicizing economic reality.
At some point we should wonder if the ‘need’ for such leadership has been overcome by the cost of the actual product.