Re: Supply and Demand Does Not Justify Price Gouging


royls@xxxxxxxxx wrote:
> On 1 Sep 2005 07:30:15 -0700, mapant@xxxxxxxxx wrote:
> Supply is also restricted. Both conditions must be in place.

My point is that price of gas does NOT have to depend on supply. The
gas can be sold at the price it cost to produce (plus a reasonable
profit). It can be sold first come first served regardless of demand.
The price does not HAVE to go up when supply does not meet demand.

> It is not actually the "product" that is getting expensive. It's the
> unproduced natural resource, the oil in the ground. Oil sellers have
> to pay more economic rent for access to that resource.

That is a fundamental point that we disagree on. I believe that the
oil doesn't have an inherent price or value. When we buy a gallon of
gas, we should be paying for the human resources (man-hours) that go
into extracting, refining, and other overhead in bringing it to market
and to the consumer who consumes it.

> >The price of gas has almost
> >doubled over the past year or so, but the cost to pump oil out of the
> >ground, refine it, and bring it to the market has remained the same.
>
> No, the royalty cost (economic rent) to pump it out of the ground has
> in many cases risen greatly.

Again, the oil has no inherent value. It's price should be
compensation and profit to the people who extract and bring it to
market.

> Well, what has Bush done about bringing the cost of residential land
> in line with its true cost to produce (i.e., $0)?

Although I didn't mention it in my original message, I make a
differentiation between consumables like food and oil that are the
sustaining lifeblood of an economy, and things like money and land that
are assets, which are like the "metric" of the economy, whose values
are arbitrarily set by a supply and demand.

> Actually, it's people who are a lot dumber than economists think.

:-)

> Think: land costs nothing at all to produce, yet it commands enormous
> prices. Why? Likewise, no one produced the oil in the ground, yet it
> is rapidly becoming more and more valuable. The concept of economic
> rent is necesary to any understanding of these phenomena.

I have thought about this already. As I have stated before, in order
to realize a healthy economy that benefits all fairly, the price of an
item should be determined by how much human resources were used to
extract or create the product and bring it to the consumer to be
consumed.

> Depends what you mean by "produce." The folks who extract, refine and
> sell oil have to pay more and more for the oil in the ground, which no
> one produced, and which got there at zero cost. The economic rent
> they pay for access to that resource is part of their cost of
> production.

By produce I mean how many man hours went into bringing it to the
consumer. How much money went into the paychecks of all the people who
created that product and brought that product to the consumer. The
price should be determined by that.

.

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