On the second part, your comment about long-run dynamics has some validity. However, in the short-run, this unconstrained profit-maximizing behavior resulted in severe hardship for consumers. I believe the government should manage such short-run fluctuations. You do not. This is a valid and persistent disagreement in economics, and there are reasonable arguments on both sides.

Now, I say that your argument has *some* validity. Your main mistake is that “competition” isn’t as potent a force in favor of consumers in this market as you think it might be. In particular, the existence of extremely high fixed costs limits entry.

I’d agree with your argument if we were discussing the market for oranges or sliverware, but the energy industry will always have firms that exercise significant market power, which means that “competition” isn’t the panacea that you think it is, even over the long-run.

I am still not sure how the Enron debacle relates to profit -maximizing after a natural disaster. But I will dive in again.

The market fixed the Enron situation. The feds came in after the ship was already sinking. They can no longer do what they were doing. Setting up shell corps to hide their losses while artificially inflating their stock prices with false earnings reports has been proven a bad business model. Nor can they artificially increase demand maximizing their profits.

I have been pondering your statement:

I’m saying that profit-maximizing behavior leads to firms’ reducing output in order to raise price.

So what? This only applies to government regulated and de-regulated monopolies like Enron. The fake de-regualtion of natural gas in Georgia is another example. If more competition was allowed in the energy sector we would not be having this discussing.

I am going to leave you with this. I believe in free markets. I believe private industry is more efficient than government because they work for profit. I do not believe that Government should be completely laissez-faire but they should not interfere with markets by setting pricing controls, or propping up industries like the energy sector.

The term “price gouging” is just the common term for the phenomenon.

I’m not “blaming” anything on anybody. I’m saying that profit-maximizing behavior leads to firms’ reducing output in order to raise price. See any economics textbook. The Enron example was merely a demonstration that this phenomenon was taking place.

Uhm… who posted that?

And to answer your question I disagree with your premise.

Firms shut down their profitable power plants because the upgrades required to meet the new emissions standards in California made those power plants unprofitable. In order to meet the standards older power plants had to cut back production or close.

As for Enron who is the hack? You blame them for everything. They are only a small part of the problem. Look where it got them too. The company is bankrupt, most of the executives responsible are in jail, on trial, or dead. Definitely a business model to follow.

And new power plants? Firms were actually shutting down profitable plants in this interval of time, again restricting supply in order to raise price and profits. This fact is well-known. I’m surprised I had to remind you.

You sound like a broken record and a hack when you blame the “zealous environmental lobby” and other liberals for anything that goes wrong in the universe. In this case, you’re flat-out wrong and profit-maximizing behavior by the power companies was transparently the proximate cause of the blackouts.

2. Your argument on price gouging is off-topic and you never answered my question. Do you believe that firms should be free to set any price they want for any good in the case of a natural disaster? This is a simple binary question.

As for supply and demand after a natural disaster you have it all wrong. Current regulation limiting price, guarantees the scarcity of goods and services. People take more than they need in times of crisis leaving less for others.

In the Atlanta area shortly after Katrina, our lame duck Governor scared the masses by saying we were going to run out of gas. Everyone rushed to the pumps even if they did not need gas. Prices began to soar. Demand started to back off because prices got close to $4/ gallon. Then our our knee-jerk reacting Governor decided to put price limits on gas, and temporarily suspended the state gas tax. Gas stations began running out of gas all over town. People were filling up every container they could find. Then as things were starting to get back to normal, the gas tax was reenacted causing another run on gas before it was reinstated.

The bottom line is it is not price gouging. It is charging what the market will bare. Guaranteeing the availability of a good or service to someone who needs it. Instead we have government intervention that encourages hoarding and waste of goods and services during a time of crisis.

Consider the CA electricity deregulation fiasco. By deregulating power suppliers, they began to behave as profit-maximizing firms with market power, exactly as economic theory would predict. As such, firms began deliberately inducing shortages (blackouts) to raise prices to exorbitant levels and raise their profit. Previously, regulation had prevented this.

Also, do you think price-gouging during natural disasters should be legal? Regulation in this case is nothing more than the government defeating the natural market price generated by high demand.

I wonder if the dogmatic free-market lemmings on this website would support unrestrained market outcomes in these cases.

Often government deregulation means more regulation. The “deregulation” of Natural Gas here in Georgia is a prime example. Natural Gas consumers got screwed as prices went up. Normally prices go down when competition is introduced into the market. Unfortunately in Georgia because the price is regulated by the Public Service Commission. its the liberal definition of deregulation: more regulation.

Raising an artificial lending cap is deregulation. Continuing with the Catholic metaphors, I thought that deregulation was a Holy Sacrament to you people. Not if a Democrat does it?

The sub prime mess we have today is different and is not insured by the Government.Consumers share the blame with the lenders because they knowingly bought homes they could not afford.

The lenders are not folding up their doors like the S&L’s did in the 1980s and do not need a buyout.

Lets not forget that S&Ls have been around since the 1800s and that it was not until Carter raised their lending limits in 1978 did the S&Ls begin to falter.