Fluctuating Greed

by Don Boudreaux on November 21, 2005

in Prices

Yesterday, at a gasoline station that I frequently use, I noticed that the price of a gallon of 87-octane gasoline is down 36 percent to $2.17 — down from $3.39 about six or seven weeks ago.

I guess this fact means that oil-company executives are 36 percent less greedy today than they were in mid-September.

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{ 12 comments }

Christopher Meisenzahl November 21, 2005 at 9:12 am

LOL, great comment Don!

When people complain that "gouging-level" prices are too high, I always want to ask, "compared to what?". What is it that made the original prices okay?

Chris
http://amateureconblog.blogspot.com/

Randy November 21, 2005 at 9:15 am

Chris,

Good point!

Slocum November 21, 2005 at 9:27 am

Here's a meta question — why is the 'greed' meme so hard to kill? Is it just a question of familiarity — that 'greed' is more familiar to people that 'market price'?

Or is it that thinking in terms of 'greed' comes more naturally to people than thinking in terms of markets? Steve Pinker makes essentially that argument in 'The Blank Slate'. Well, what if it's true that 'greed' thinking comes naturally to people and 'market price' thinking does not? What impact, if any, would that have on economic theory and the role of economists?

Bruce Hall November 21, 2005 at 9:33 am

The oil companies were certainly the beneficiaries of a market distorted by speculation about possible oil and gasoline shortages. The subsequent price adjustment to the "compared to what" level reflects what a less speculative marketplace values those commodities.

The marketplace works… most of the time. It's only when speculators grasp control for awhile that oil and tulips reach untenable positions… and when the "Joe" on the street pays the price for their greed.

Randy November 21, 2005 at 9:51 am

Slocum,

I attack that meme every chance I get. Here's my take;

Greed is often understood to be a desire for excessive wealth. An alternate definition is a desire for undeserved or unearned wealth. In my opinion, only the second definition has value. Because earned wealth is always a good thing, regardless of the amount.

Of course, this merely transfers the debate to a question of what constitutes earned wealth. But this is important, because the debate no longer centers around those who have wealth, but now includes anyone who desires wealth, and the means they would use to obtain it.

Dom November 21, 2005 at 10:09 am

In my area of Jersey, regular gas is now $1.89, and I can see it dropping virtually every day.

Greed, as a meme, is hard to kill because Hollywood and writers in general like to play with it. When Stone's Wallstreet came out, no one asked the obvious question: "Did Stone negotiate the highest price possible from the studios?"

Dom

JohnDewey November 21, 2005 at 11:27 am

"Or is it that thinking in terms of 'greed' comes more naturally to people than thinking in terms of markets?"

From ages 5 to 8 my favorite television programs were Zorro and Robin Hood. Every week I learned that greed was evil. "Stealing from the rich and giving to the poor" was an honorable act.

School teachers in the 50's and 60's didn't explain the role markets and profits played in raising our standard of living. But they did celebrate that big government built the interstate highway system and led us into space.

My grandparents owned a retail store in the 30's and 40's. Their children saw firsthand how business worked. But those children – my father and my uncles – became as adults mere pawns in the big corporate world. So my generation heard not about inventory costs and the struggle to compete with the store across the street. Rather we learned that some bigshot at company headquarters had laid off workers to pay for his fancy new office and his private plane.

I'm not surprised that America today views big business and its leaders as greedy and evil. Or that some still view big government as noble.

John Ryan November 21, 2005 at 12:13 pm

It's $1.99 now here in the North Country (New Hampshire). . . less than before the hurricanes! Guess our nanny politicians will start talking about providing subsidies to oil companies to keep the petro flowing!!

Noah Yetter November 21, 2005 at 12:13 pm

Speculation does not distort the market, it is an integral part of the market.

Neal Phenes November 21, 2005 at 3:26 pm

The definition of greed is "acquisitive or selfish desire beyond reason" per Merriam-Webster. As I drove around Central NJ this weekend, I saw prices fluctuating from $2.09 to $2.39 per gallon. This is a very cagey price conspiracy. To make us think retailers are independent, they have colluded to charge different prices in different locations but keep the price within 30 cents of each other. They aren't greedy because they are using reason. They have master-minded a way to force us to pay different amounts in different places at different times. Oh, they know what they are doing. They will even lose money at times just to throw us off from their diabolical plan to profit. Bastards!!!!

dearieme November 21, 2005 at 7:34 pm

I'm sad to see this evidence of increased greed by the customers.

spencer November 23, 2005 at 9:58 am

As an investors in oil company stocks I do not want management to be 36% less greedy.

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