Carpe Diem

‘Maximum temperature law’ to prevent ‘temperature gouging’ makes as much sense as laws to prevent ‘price gouging’

The summer of 2012 was the third-warmest summer on record in the United States.  The average temperature of 74.4 degrees from June-August this year was just one-tenth of a degree below last summer’s average temperature of 74.5 degrees, and two-tenths of a degree short of the hottest summer on record back in the Dust Bowl of 1936, according to the Weather Channel.

The extreme heat waves during the last two summers, and the hardships they have caused for millions of Americans (including 82 heat-related deaths this year), firmly establishes that we are at the mercy of a very cruel, ruthless, merciless, cold-hearted, and uncaring force: Mother Nature. Without some kind of government intervention in the market for high temperature readings being registered on existing thermostats, Mother Nature will continually and ruthlessly expose Americans to harsh summer conditions of unconscionably high temperatures. Who among us wouldn’t agree that the excessively high summer temperatures this year were a form of unfair “temperature gouging”?

To counteract the injustice of temperature gouging, let me propose a Maximum Temperature Law that will force all thermostats sold in the United States to have a maximum, reasonable and fair temperature reading of let’s say 90 degrees Fahrenheit.  As part of the new legislation, all existing thermostats in homes, offices, and businesses should be immediately replaced with new thermostats with a maximum reading of 90 degrees.

Any temperatures above the 90 degree maximum will be considered to be unconscionably excessive, and will be outlawed by the Maximum Temperature Law, with violations subject to penalties, fines and possible jail time for thermostat manufacturers continuing to sell thermostats with temperature readings above the government-mandated maximum.  Further, all news and weather reports, all TV and radio stations, and all newspapers and websites would be immediately prohibited from quoting any temperatures above the legal maximum of 90 degrees F.

Bottom Line: If the Maximum Temperature Law seems like a totally ridiculous solution to extremely warm weather, that’s because it is totally ridiculous.  And so are price gouging laws equally a ridiculous solution to shortages and rising prices following extreme weather like Hurricane Sandy.  Both solutions suffer from the same faulty logic of requiring the dissemination of inaccurate and untruthful information, about the temperature in the first case and about relative scarcity in the second case.

Just like artificially preventing a thermostat from going above 90 degrees doesn’t change the reality that it might actually be 100 degrees, preventing prices from going above a legally-mandated maximum after Hurricane Sandy won’t change the reality that many items like food, fuel, plywood, chainsaws and generators have a much higher value this week than last week.  Preventing prices for essential goods from rising to their true market value will now cause distortions, shortages and inefficiencies in the market because the artificially low prices won’t accurately and truthfully reflect the reality of increased scarcity. Instead, we’ll suffer from a government-mandated fantasy world where prices are forced to be disconnected from their market fundamentals.

Likewise, imposing a maximum temperature law would create a government-mandated fantasy world about weather conditions, with a disconnect between the true temperature (e.g. 100 degrees F) and an artificial government-mandated maximum temperature (90 degrees F). And just like price gouging laws distort the market for essential goods following a disaster, so would the maximum temperature law create havoc for Americans, because thermostats would be conveying inaccurate measures of the true temperature.

When it comes to the weather, we want the most precise measure possible of the temperature, and we get that from an accurate thermostat, not from artificial, government-mandated maximum temperature laws. When it comes to maximizing the efficiency of the market for essential goods and services on the East Coast following Hurricane Sandy, what we want are accurate, truthful and precise measures of relative scarcity, and we get those from market prices, not from artificial, government-mandated maximum prices established with price gouging laws.

22 thoughts on “‘Maximum temperature law’ to prevent ‘temperature gouging’ makes as much sense as laws to prevent ‘price gouging’

  1. Let’s remember, however, that while government mandated defective thermometers are simply useless but basically benign, government mandated low prices are theoretically murderous.

    Imagine in the wake of a catastrophe an individual has one bottle of water for sale, which he will sell for $100. The first would-be consumer comes, is incensed by the unfair price gouging, and doesn’t buy the water. The water remains in the store for any future customer who values the water over $100 to buy. The same thing happens a second, a third, a fourth time, and so on, until a man comes in with $100 to buy it for his elderly, dehydrated grandmother who will die without it. She lives.

    In the scenario with anti-price-gouging laws, the first consumer buys it for $1.50 and grandmother dies.

  2. It is an interesting conundrum: In principle, should life-saving water, food and medicine be rationed by only by price?

    And if rich people buy more than they need, and hoard it, resulting in the deaths of others?

    As for earth temps, I am not a global warmer.

    However, the free market fails when it comes to pollution. He who excretes at lowest cost (to himself) wins. Passing the cost of pollution onto the broader public is the goal of every polluter. The act of polluting, in the end, is a type of communism–we bear the cost of pollution in common, and by circumstance or force, not by choice.

    That’s one thing the GOP will never tell you.

    • Yes, it’s much better when water, food and medicine is rationed by a faceless bureaucracy that has no incentive to provide service beyond what is necessary to please their political bosses. Why would we want to depend on anything as democratic as the free market?

      Markets don’t fail when it comes to pollution. The state fails, by restricting the rights of property owners to sue polluters and by giving special privileges to their favorite polluters.

      • or worse, that price is held artificially too low meaning that it all disappears from the shelves leaving absolutely none at any price for those who might really need it and lessening the incentives for the private sector to ship more product to markets that desperately need it.

        shipping costs go up when you try to get goods into area hit by disaster. if you refuse to let prices rise, then you may force retailers to sell at a loss and thereby stop them from trying to restock.

        if there is one thing we learned from katrina it’s that you want walmart and home depot dealing with the logistics, not the government.

    • I wouldn’t say “rationed” as that implies a certain intention, and I wouldn’t say “by prices” but rather by the owners’ agreement.

      Also, it does not follow, from saying that markets have difficulties dealing with certain kinds of pollution, that governments fare any better or don’t introduce worse side effects.

  3. During an emergency, nearly everyone agrees that basic necessities, such as water and food, shouldn’t be subject to market pricing. That’s why every civilized country provides food and water to flood victims.

    • How does a “country provide” anything? The food and water had to be produced and aggregated by people. If you mean those people choose to give it away, then that’s the market price at that moment. And even in that case you still have the problem that the demand for free goods will always exceed the supply.

      • SeattleSam: How does a “country provide” anything?

        Um, the same way it does anything. By taxing and spending. Food and water are often stockpiled, or transported long distances, as required.

        SeattleSam: The food and water had to be produced and aggregated by people.

        Yes, that’s right. So, the government purchases and stores emergency supplies. When these are insufficient, the government will buy supplies from places outside the disaster zone, then transport them, often at great expense, and give supplies away to victims of the disaster. That means the delivered cost is much, much higher than what people pay at the point of delivery.

        SeattleSam: And even in that case you still have the problem that the demand for free goods will always exceed the supply.

        In a disaster, most people understand that a temporary distortion of the market may be necessary to save lives. They also understand that someone charging a person the deed to their home for a life-saving drink of water is abuse.

        Not sure what you’re saying. Are you saying the government shouldn’t intervene during a major emergency?

        • The question is not whether the government should give away water, food, gas, etc. The argument is that for those people who need gas from a private gas station, letting prices rise will get everyone to curtail their consumption, leaving more for others. Instead, the first to get there take the newly-valuable resources at a below-market price, leaving none for the rest. Of course, those who buy it early could then gouge people. No one yells are private citizen gougers (ebay?) – only when a “company” is doing it.

  4. The entire story reminds me of a minimum wage.

    I believe that the MW should be something like $50 p/h with a built-in annual escalator of 10%.

    How’s that sound to all you hamburger flippers?

    • It sounds like the NHL…… LOCKED OUT

      and by the way it’s “hamburger logistical supervisor technician”

      went to college to become that

  5. Again, Mark, you’re focusing on results rather than intentions (which means you’re probably a heartless conservative). A maximum temperature law may not be effective, but it IS well-intended. Increased welfare spending may actually increase the numbers of people in poverty, but it is well-intended. Minimum wage laws may result in low-skilled workers being priced out of jobs, but they can just tap into welfare programs. Spending more and more money to hire more and more teachers may not have improved education performance, but doesn’t everyone (even Mitt Romney) love teachers? Those, like you, who obnoxiously insist on looking at performance simply don’t like teachers. You’re not compassionate. You’re racist. Or something.

  6. quote of the day (from coyote)

    “For all you hipster large and small towns in the northeast who have taken great pride in banning big box stores like Wal-Mart and Home Depot, good luck rebuilding after the storm. I am sure you are going to be really happy that you banned retail establishments with worldwide logistics resources and that have developed special skills in routing supplies needed for post-storm cleanup. Good luck getting a generator from that boutique hardware store you have been protecting.”

  7. I believe that every American should have a shot at a career in the NBA. Therefore, my Minimum Height Mandate will be that all children shall grow to no less than 6′-8″ in height and that my MHM will be strictly enforced by my Height Czar.

    We are all equals.

  8. Maximum thermostat setting sounds like a good idea to me. Ultimately it won’t work, but that doesnt mean it can’t alleviate a lot of suffering an at lesst some needless deaths.

    At one time there was a maximum reading on speedometers. No telling how many teens it saved from dying while tryimg to bury the needle at 120.

    But why only water saving shower heads are available is beyond me.

  9. Benjamin is correct. There are things thst the market fails at.

    This boils down to an insufficient definition of property rights, and indufficient protection of them: a primary government responsibility.

  10. Tim ignores the question of how many grandmothers
    Died before someone was able to shell out the hundred bucks. His argument is basically that some lives are worth more than others.

    • Do you have a better idea? It doesn’t have to be $100. It could be $10. People would still complain. But to stay alive, most people would get $10. Even steal it. A misdemeanor would be a small price to pay for life.

  11. If the wisdom of the markets is the best way to allocate resources then you should do something beyond permitting price gouging. If you allow price gouging, and you believe in the law of supply and demand, then you should also allow people who are hungry enough and cold enough, to pay what they want also. If demand is high enough that looters will raid the stores and take the food and clothing they need that should be legal whenever price gouging is also legal.

    So I would give store owners a choice, they can maintain their usual prices during the emergency or they can charge what they want, but customers and looters can pay what they want too.

    All laws are an agreement among members of society on what is acceptable behavior. If you want to change that agreement you open up Pandora’s box because other people might have a different opinion on what changes are a good idea.

    • So in normal times when customers are offering very low prices for these goods store owners should be allowed to break into customer’s homes and ‘loot’ the dollars that they need?

  12. I’m a visitor from a site I regularly visit, Cafe Hayek, who linked to you. Loved your post! When it comes to price gouging, I see two expressions of it: the first is the typical gas sign with $8/gal gas or something akin to it; the other are long lines and shortages, which really is a form of gouging. Time is money and shortages contribute to economic poverty.

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