The real story was that last time there was a shortage, he did ramp up production. But after the shortage ended, his customers dried up immediately and he was left with paying unemployment for all the new workers that he had to fire now. It nearly destroyed his business, and he's not making the same mistake again.

His masks cost 10c where Chinese-made masks cost 2c. There's no way to get hospitals to keep him in business during non-crisis times at 5x the price. If there were, he'd do it.

So it isn't just inability to physically increase production. Economics factors in heavily, too. If he could charge more for these masks, he could bank that extra and pay the unemployment (and other business expenses from ramping down) after this crisis ends.

That's just one of many additional costs companies that struggle to continue working are paying.

Some degree (within reason) of increased prices for an high-in-demand product is a necessary if you want to convince employees to work longer hours and through tough conditions.

...not to mention many of their underlying fabric costs are probably higher as well.

The guy buying up all the masks and reselling them for 10x the price is price gouging. He doesn't make anything.

If a manufacturer ramped production and billed the current inventory to cover costs, then that's a very different thing. Of course all of this is why the Defense Production Act even exists.

A perfect use of the DPA would be a mask manufacturer ramping up local production - if they had predictability of pricing beyond the current crisis, then it would let them forecast what they could and could not make, or get subsidized at the higher rate to ensure their business could ramp down gradually (or be retained at the subsidy price to ensure local availability for the next time).

This is essentially how finance, banking, markets, and pretty much our whole economy work.

The idea that producers should only be able to charge a modest margin over their "costs" is pernicious nonsense. Furthermore, if you punish this sort of risk-taking intensely enough, producers will just shut down during unusual times (the exact opposite of what is needed).

The guy buying up all the masks and reselling them for 10x the price is making availability, which is highly important in a crisis.

I want to be clear I'm intentionally separating two things. The gouger is making product available on the market where otherwise there would be none. The higher price discourages hoarders or others with lower needs. This is clearly a valuable service that some, perhaps many, are willing to pay for. I feel like these are indisputable facts.

There is a separate topic of moralizing about the issue, whether or not you think the gouger is a bad actor or whatever. You can keep going on about that, but I won't address it because I don't care about your feelings regarding my personal health.

Higher prices don't discourage hoarders, because a fair fraction of the hoarders are going to be people who are planning on reselling them to desperate people, so they're virtually guaranteed a profit. If you want to discourage hoarders, then enact purchasing limits: limit 1 per person.

But I noticed you didn't even attempt to engage with the solution of enforcing purchasing quotas instead of allowing price gouging.

Pricing (including gouging) may be imperfect, but it is better than central resource allocation, price fixing, etc. at leading to efficient allocation of resources.

Others with lower means, you meant?

Pricing (which includes 'gouging') is not perfect, but it's better than central planning, price fixing, and quotas at efficient allocation of resources. At the very least it provides a 'wisdom of the crowds' affect where anyone with enough money can reallocate some of the resources to a location of need that might lack visibility to the hand full of people that would hypothetically be centrally planning all the resource allocation.

I just wanted to clarify that when you said higher prices discourage those with lower needs, what you really meant is that it discourages those with lower means-weighted-needs. Which is to say, it discourages the desperate-but-poor, rebalancing demand toward the less-desperate-but-more-wealthy.

Pricing spreads the capability of resource allocation around. In the central planning model the poor desperate person is reliant on a tiny group of central planners to allocate them some resources, and the central planners may not see that particular poor/desperate group. With the pricing model, anyone with the means can allocate resources where they see a need. In both scenarios the poor are reliant on someone else to allocate them resources. In the pricing model, the poor person has a better chance of being seen by at least someone with the means to make it happen.

https://www.amazon.com/Basic-Economics-Fifth-Common-Economy/...

The availability is primarily negatively impacted because of hoarders and gougers.

If people shouldn't profit off disaster, why profit from any misfortune?

What kind of smile is there when there is nothing to buy at any price?

Before all these laws, in natural disasters there used to be marginal producers (people with a pickup truck etc) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is a bargain if that way you can keep your insulin chilled.

https://www.econlib.org/library/Columns/y2007/Mungergouging....

The article I linked too was the personal experience of an economist who was in Raleigh after a hurricane hit the area. As he writes:

>...The problem for Raleigh residents was all about price, at that point. The prices of all the necessities that I wanted to use to “preserve, protect, or sustain” my own life shot up to infinity. Within a day after the storm, there were no generators, ice, or chain saws to be had, none. But that means that anyone who brought these commodities into the crippled city, and charged less than infinity, would be doing us a service.

There were not tons of people bringing supplies into the city. The state had to actually beg other states and the federal government for supplies.

In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than spending money on more immediate things that are more likely to get votes. (We've now seen that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.)

For these reasons, a majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/

In the hypothetical, you have no idea whose life is more at risk. And the central planners who want to implement price fixing, purchasing quotas, etc. do not have much if any more insight than you.

A _manufacturer_ charging more is not _front-running_.

This is an anecdote, but if unemployment didn't exist I would have had a decent paying job within 4 months of being laid off. IMO this is preferable to being trapped in an unemployment system with terrible incentives.

I ultimately changed industries after realizing that cleaning up pollution is the last thing people will pay for during economic downturns.

Once you factor in the cost of this crisis as an externality, the cost of Chinese-made anything skyrockets. Outsourcing is a bait-and-switch, always was.

Cheap manufacturing cones from cheap labor, which comes from recently being a third world nation.

Then as now, the only thing that is forbidden is criticism of The Party. Want to exploit your workers and ignore all environmental and hygienic concerns? That was and is OK there. That’s how they undercut the West in manufacturing, no other reason. Concepts of protecting the environment or workers rights ironically only exist in the capitalist West.

Chinese labor is cheap because it has been a poor country, lacking capital to raise its productivity and labor standards to western levels.

Comparative advantage means both sides benefit when Chinese labor makes goods for the west. They get better paying work, and we get to make our goods cheaper.

Working for Foxconn is a huge improvement in living standards over the rural jobs most of the Chinese workforce comes from.

Environmental protections cost money. It’s far easier for wealthier first world countries to bear those costs without significantly reducing their living standards.

Poor countries, whether it be China, first half 1900s USA, or as we saw previously with the USSR, are more likely to prioritize economic output over environmental protections.

Economic growth is why environmental standards improve over time. It costs proportionately less to increase them, and new technologies also lower costs of enacting tougher restrictions.

As China continues to grow wealthier, it will likely continue to increase its environmental protections. Especially if it ever turns into a real democracy.

You don't need to subsidise anything. > On March 1, 2018, Trump announced his intention to impose a 25% tariff on steel and a 10% tariff on aluminum imports. > Trade Act of 1974 allows the president to impose a 15% tariff for 150 days if there is "an adverse impact on national security from imports

>NAFTA originally required automakers to use 62.5% of North American-made parts in their cars to be imported duty free

You can just require that 25% of PPE purchased by the government has to be made domestically. That would give you 3-4 factories. You make a requirement so they are 1000 miles away from each other and be able to 4x capacity within 2 weeks.

Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each.

Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because by then either demand will be lower or production will be higher.

So nobody would be buying a million masks to hoard in a bunker right now. The people buying them would be the people who intend to use them.

Then you need to differentiate who needs them the most, but there is no way to do that efficiently from the top of a tower. And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity. A software engineer isn't going to pay a high price for a thousand masks they don't need any more than the billionaire is going to buy a million. But a doctor's office might very well pay a high price for a thousand masks they do need, which is exactly what you want to see because it causes them to get what they need.

There are 18.6 million millionaires in the US. If each of them bought 10 n95 masks just in case, or for themselves + family + friends, that's 186 million masks. They could easily pay $20 / mask (that's only $200 per millionaire), which would significantly push up the cost to hospitals of acquiring masks.

Hospitals might not even be able to afford the masks they need. They are having budget shortfalls due to the ban on elective surgery. Cuomo was complaining about paying $7/mask, and NY state is going to have budget shortfalls as well due to the recession.

But the most annoying thing about this thread is how it has turned into some kind of let's-forecast-the-markets game, instead of dealing with the underlying reality - that the markets failed to provide an essential good when it was needed, resulting in a significant number of avoidable deaths.

There should be a special word for the moral delusion that markets exist in an abstract philosophical vacuum and price signals are somehow more important than people's lives.

Please cite evidence that this was "millions of millionaires" buying masks.

When an oil refinery blows up and gas prices rise, that isn't evidence of millionaires hoarding, either. It's evidence of supply and demand at work.

From my perspective, there should be some word for the delusion that equitable distribution of a smaller, price-fixed supply is better than prioritized distribution of a larger, price-gouging supply. The lack of masks that not allowing higher prices causes is going to kill people, and you want to restrict the supply available to everyone in order to not be unfair to the poor?

In the real world, which recently has provided an ample sufficiency of evidence that manufacturers can do no such thing because the process depends on specialized machinery that takes considerable time to manufacture in its own right, such an argument can most kindly be described as struggling to achieve relevance.

Somewhat less kindly, one might note that such an argument equates to saying that, well, actually you can produce a baby in one month by getting nine women pregnant, as long as you pay all the women enough.

No, that's correct, because you can't (profitably) buy a million masks to hoard them right now.

If you'd done it on January 1 though, you'd have been able to buy as many masks as you liked.

Selling them now? Is this the height of the crisis? Perhaps.

> Real people don't behave like this.

They do, but most people don't have millions of dollars to fuck around with.

But if they think they can make a quick buck, they'll happily empty shelves in the local stores of masks, hand sanitiser, toilet paper, etc, and then turn around and try selling it on for a huge markup.

This is why I've not seen a roll of toilet paper on shelves in my local supermarkets or stores for three months now. Nor a bottle of hand santitiser, nor masks of any kind. But hey, I jump on local buy&sell sites and there's heaps of it there, at 10-100x markups.

For most of these folks, it is/was fairly low risk - they had the free cash, and they thought they could always return it. Some of them are stuck with supplies they now can't sell on, or return - so they now have a few years worth of toilet paper and hand sanitiser, but hey - it's not a huge loss for them.

Whereas my local Costco has had continuous stock of massive piles of toilet paper available for over 2 weeks now. That's an arbitrage opportunity that's not being exploited because of the difficulty travelling.

Three months ago was January 14th. Perhaps you are being a mite hyperbolic?

Mid February is when Toilet Paper, Kitchen Towels, Facial Tissues, and Hand Sanitiser disappeared. My understanding is that masks went earlier, but I don't have direct knowledge of those.

There were no purchase limits then, and now every time they're restocked there's a pile of people buying up every single one of them in record time. There's video from my local supermarket of a whole pallet stacked high with toiletpaper being delivered, and disappearing in minutes.

I don't understand why people aren't talking about how disposable PPE defies this point at the low end. Hoarding a million masks doesn't make you better off than buying a thousand, but buying ten N95 masks is as good as buying zero. Masks, gloves, even hand sanitizer are consumables, so getting a little bit of them for everyone is as good as just throwing them into a hole and setting on fire. They work only when concentrated in bulk. Like a thousand of masks per household, or a million per hospital. Enough hand sanitizer that you can actually disinfect your hands every time you accidentally touch something outside. Etc.

I'm in China and have sold over 30,000 masks to the US (not for profit, but I don't have the cash to just donate them). We've sold to hundreds of different individuals at this point, and none of them are using the buying patterns you describe. The only people buying more than a hundred or so are buying for employees, hospitals, or doing a good job of lying about their intentions. Everyone is buying just a few and making them last.

So far I've personally taken one 10-pack of KN95s from our stock (of which I use 4 so far, on rotation. the other 6 are still in the pack), and about 5 surgical masks. There are strategies for extending the life if you do a little research.

The vast majority of regular people just aren't currently using PPE in the way you describe. After reading up on it, personally I think there's a useful middle ground between throwing away masks like you would in an ICU and completely doing without.

Sanitizer and gloves I know less about. But we do sell gloves and nobody is ordering more than a few boxes of those, either.

Depends on the situation. N95 masks can be decontaminated and reused pretty easily (IIRC 150C for 10 minutes). If you're only using them once or twice per week, letting the mask sit for 3-4 days is enough for most of the viral material to be destroyed by exposure to the normal environment.

And even taking your clinic example, you see the same issues there. If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.

But then they're not price-insensitive billionaires, so if the price goes up it deters them from hoarding (and gives them a financial motive to unload their existing hoard), which is exactly what you want.

> It's 18 months or so before we get a vaccine. There's plenty of incentive to hoard PPE.

It's 18 months or so before we get a vaccine, but not before anybody can start manufacturing more PPE, which is already starting to happen and will only increase if demand doesn't subside. And if demand does subside, same result.

> If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.

What allocation process are you proposing that would avoid things like that happening? The same one we use to allocate tax dollars to bailouts doesn't feel like a strong candidate.

> but not before anybody can start manufacturing more PPE

I think you really aren't coming to grips with how people think and behave differently in crises. Possibly having more PPE in a few months is only valuable for reducing hoarding and profiteering now to the extent that people are confident that will happen.

> What allocation process are you proposing that would avoid things like that happening?

Letting local and state public health officials allocate scarce medical supplies is the obvious start. Point-of-sale purchase controls are another one that's easy to implement. In the long term, transparent rationing where needed. Fining, arresting, and imprisoning disaster profiteers are all excellent options when it's severe.

If we set up a dog-eat-dog world where only money matters, why would a billionaire hoard unneeded masks? They know that they can just buy what they need when the need it. The only people with incentive to hoard are poor and vulnerable people because they know they won't be able to afford masks when they run out. Entrepreneurial types looking for arbitrage will probably cause weird things to happen in the short term, but after a month or two things will rebound sharply to whatever the new normal is going to look like.

If this crisis has taught me anything, it was a mistake not to hoard. I assumed I would be able to buy what I needed at outrageous prices, instead I ran the risk of running out of toilet paper because prices stayed unreasonably low.

If bankrupting hoarders with high prices is going to be unacceptable, I'm going to become a hoarder out of necessity next time I see a crisis inbound. I'll stock up on much more toilet paper than I need because I can't predict when governments/major supermarkets/public at large will let me buy the stuff at market price; which is clearly a bit higher than what the supermarkets are charging.

TP selling for 200% that is headed to 400% shortly is a smarter buy than most stocks.

Since people can't actually store infinite TP wouldn't all hoarders end up with the max TP they are willing to hold in a reasonable time frame after which more supply becomes available for everyone else. In the mean time most buyers haven't been wiping with leaves they expected more effort to visit more stores and ultimately settled on buying some inferior TP. It's not even clear that your suggestion would bring equilibrium faster.

If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.

There isn't an alternative. If you assume people behave irrationally you may as well send the army in straight away. People are often stupid but rarely irrational given what they can understand. There is pretty solid evidence that people with money are the ones who spend it rationally.

And besides a private buyer's opinion of what is rational is just as valid as anyone else's.

> If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.

Yes? I'd like to live in a world where I can go to the store and buy toilet paper. Just like everyone else. This is not an unreasonable demand.

I'd like to see everything go back to normal as fast as possible, thanks. Policies that make it irrational to return to that happy equilibrium are not in my interests. We need producers and companies involved in consumer logistics to change their behaviors. Money is the fastest tool to do that.

Besides, seriously, why do you think people earn money if not to get first dibs on stuff they want? What do you think money is for? It isn't like everyone is going to get what they want, there is a massive shortage. Someone is going to have to do without. If someone has to do without we use money to figure out who. That is how life works in this era, and the eras before dating back to the invention of money. Price controls aren't going to win a war with the economy. It is more likely to take down the government than stop wealthy people getting what they want.

The point is not that you desire to be able to buy TP its that you are willing to sacrifice the general well being for your own convenience.

Hoarding of some non emergency items is self limiting and self correcting in a way that doesn't rob the poor of the ability to wipe their asses. It's a problem that doesn't need solving beyond the simple expedient of not allowing one person to buy too much of it to give other buys a chance.

Your solution by contrast is actually more likely to shift whose hoarding it and why then solve the problem.

If your position was apt then surely you can give one example of such a system working?

Economic modelling often fails because they assume a small number of rational and logic rules. But people are highly variable and rational for one person is irrational for another, depending upon experience and situations.

Your claim that people with money spend it rationally is countered by evidence that poor people are often spending money rationally, given their situation, needs and income. Different situations lead to very different definitions of rational and "common sense". (Mental stress & fatigue also becomes a decision making factor at low income levels.)

I claimed that most people spent their money rationally. You're not countering me with that point, we're agreeing. If wealthy people make a habit of spending irrationally they go broke.

This just isn't the case. Unless they're spending irrationally AND a large proportion of their wealth then spending irrationally is unlikely to make them go broke. And unfortunately some people have so much wealth that they can spend market-distorting amounts of money that are still a tiny fraction of their overall wealth.

Average person doesnt buy iphone because they need a new phone, or coke to quench their thirst.

This is false, as well as being a false dichotomy. We know people act at least somewhat irrationally. That's why we have laws on gambling. It doesn't mean sending in the military.

Of course there is - look at how people actually behave given various stimuli, rather than presuming enlightened rationality.

Enlightened rationality does not govern real actions, we know this, we have ample evidence of this, and making economic forecasts on this basis has been repeatedly exposed as a fools game.

There is an alternative: distribute wealth. On aggregate people tend to behave a lot more rationally than individuals do. So if you spread the buying power as widely as possible then you get a more rational market.

Just delegating responsibility for resource allocation to groups of people is not a silver bullet.

"Aggregate people" tasked with distributing wealth (or taking wealth and converting it to some resource and distributing that) seems to be highly succeptable to holding onto more and more of that wealth over time for trickle down distribution within it's own organization.

Large nonprofits regularly come under fire for using too much of their income on their leadership and luxury fluff for themselves. Governments routinely spend their income paying themselves and paying for pork for their friends and paying for fluff instead of making people's lives good. Religions tend to amass more and more wealth until some sub-group tells them to shove it and historically this results in violence. You could fill libraries with the volume of work written about all the ways organizations become corrupted and self serving and fail to achieve their goal.

It's basically democracy for economic power. And you're right, it's not a silver bullet. But I believe it could be a significant improvement on the status quo.

Distributing wealth is self-destructive behavior. Generally, you want wealth in capable hands, who can use this wealth to create more wealth. You don't just want to piss it away.

"Pissing it away" is also known as buying things, which drives economic growth. The poor spend every penny they make, and this is generally considered good for the economy.

We tried consuming our way to prosperity during the housing bubble in the early 2000s. That turned out how you might expect.

The growth in that sector is swallowed up by the overall hard-stop of the entire economy.

Indeed. Just the idea that TP is the topic of interest and not, say, food or medicine proves this. You don't need TP. A lot of the world don't even use TP. You can, instead, wash.

But there's not much you can do to replace eating.

The problem arises when rich people start hoarding at times when supply is constrained, because they can do it so much more rapidly and create a much greater shock to the system.

It was notable in London that severe shortages only really existed at stores you can drive to. Stores that you can only walk to have been much better stocked.

The market signal that would make rich people hoard masks in the good times would be ... an expectation that if an unexpected crisis arose then prices would rise to extreme values. Nothing else is going to make that happen. Not even most governments manage to resist economising and running down their medical supplies after the last health scare they faced.

I'm not going to hoard in good times because I'm not crazy; I know I can't be ready for everything. I'm just going to try and preempt everyone else at the start of a crisis. It won't work every time but that is the strategy that makes sense if the crisis response is includes 'stopping price-gouging'.

If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.

We don't want anyone hoarding (or gouging). However keeping TP enough for 2 weeks when supply was ample, whould have prevented this ever being an issue, and no gouging needed. TP production has never been an issue, the system shock of people panic buying (too much) all at once was. People aren't shitting more than before.

I have about a month's supply of TP at home, and have only bought 10 rolls since this whole thing began. I am not a prepper nor a hoarder. I just like having a buffer of things I like not being without. There's a miniscule opportunity loss of storage and sunken cost, but I'm not spending any more than I would with just-in-time purchasing.

> If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.

Great argument for not allowing price gouging then.

Like bananas, this is an issue of commercial and residential supply chains. Most commercial bathrooms have totally different toilet paper than home paper - thin, and on a huge roll. People are using the bathroom at home far more than before, since they’re not using it at restaurants, work or other public areas.

Disposable PPE is also funny in a way that it makes no sense to buy it unless you buy in bulk. If you can get 200 N95 masks for $20, it's OK. If you can buy 2 masks for $20, then you'd better spend $1000 or don't buy at all. A lot of people buying few masks each just wastes a whole supply of masks that could all go to one place (e.g. a hospital) where they would make a difference because there would be enough of them to be used properly.

There's no need to theorize or argue, the historical evidence is that price fixing (anti-gouging) leads to shortages (or gluts).

https://www.amazon.com/Forty-Centuries-Wage-Price-Controls-e...

Literally overnight. And they never returned since.

Food is largely a free market in the US. A billionaire could buy a billion dollars worth of beef tomorrow. But they don't, because why would they?

And in fact, markets have done a better job of feeding people than any centralized planning system has. I don't see why masks would be any different.

There is no single system that does better universally, but there are plenty of narrow fixes that do fine. As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation...

Sure, I was not saying markets are perfect, I asked what system with no markets is better?

> There is no single system that does better universally, but there are plenty of narrow fixes that do fine.

Agreed.

> As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation....

And if you investigate it I'm sure you'll also find plenty of examples of failures in organ allocation.

That only is true if we ignore the organ black markets that many millionaires/billionaires have access to.

No country in which there are corn subsidies is there a "free market."

After WWII in Poland, Moscow installed a communist government in Warsaw, which promptly started implementing communist policies. One of the biggest ones was collectivization of farming - taking pieces of land and joining them into massive, state-run farms. After around 10 years of this, the studies started showing that this collectivized farming is so much less efficient than private farming (which didn't receive any subsidies!) that, if the whole country converts to it, there's a risk of nation-wide hunger. Further collectivization was stopped shortly after, even though it was clearly against the official dogma of private property and capitalism being the root of all evil.

The US economy around 1800 was the first economy in history to produce a consistent food surplus. You can see the results of this in the astonishing increase in the average height of Americans throughout the 19th century.

In the Great Depression, the government ordered the slaughter of millions of hogs in order to try and raise the price of pork.

https://livinghistoryfarm.org/farminginthe30s/crops_17.html

Can you provide a source for this claim? Thanks.

Poland was a big exporter of food (mostly grain) around XV and XVI century. There was also no hunger in the country, which means that the exported grain constituted a pretty consistent surplus.

Hunger was still a constant specter, though.

Consider the rise in height in Americans after this achievement. This doesn't happen without plenty of food available all the time.

I'm old now. It wasn't until a couple years ago that I EVER went 24 hours without food (I was experimenting with fasting). Historically speaking, that is incredible.

Sure they do. Look at what happens when an oil refinery blows up (happens now and then). Price for gas goes up until demand matches supply. Billionaires don't hoard gas.

Gas prices fluctuate daily. This is all from matching supply with demand. The same goes for airline seats and the price of oranges. I don't think I ever pay the same price twice for oranges at the supermarket.

During the 1970's gas shortages (due to Nixon's price fixing policies) people hoarded gas by keeping their car tanks topped up. There were a number of newspaper stories about people waiting in line for hours for gas to add one gallon to their already nearly full tank.

Personally I have mixed feelings: If the prices don't go up, the incentive to ramp up production is pretty weak. It does, though, seem inhumane that increased prices can have an outsized bad effect for the very poor in disaster situations.

This caused a huge hue and cry about how terrible it was. So the law clamped down on it.

Now people in a hurricane zone get no gas while they wait around for the government to provide some.

So, which is better:

1. gas at a higher price

2. no gas

?

Per Sowell, there is no cosmic justice, and pretending so just makes things worse.

The law, in a system of democratic governance, is a big asterisk to that sentence! It's important too. But aside from that, price signaling is our most 'objective' way to determine importance.

I strongly disagree under these circumstances. Prices are one benchmark of importance/value and are often useful as such. But Goodhart's Law comes here in full force.

In particular I would argue that when unusual things happen, the usual benchmarks and proxies we have deserve extra scrutiny, since often any discrepancy between a measure and what is being measured is magnified in abnormal times.

And right now times are quite abnormal. Now is exactly when traditional benchmarks of value should be re-evaluated to see if they are still useful under present circumstances.

I don't think that that is always true. High prices will redirect scarce resources to those who have the means and desire to pay for them. That doesn't necessarily mean that those uses are more important, regardless of how one defines what it means for the resource usage to be important.

https://marker.medium.com/what-everyones-getting-wrong-about...

All the regularly priced milk, chicken, and eggs were sold out around March 25th but the "organic" milk and chicken at double the price was still in stock as was the AAA steak and the expensive Omega-3 eggs.

It appears there is still a fair amount of price elasticity of demand even in a pandemic.

Why wouldn't he just borrow the money to pay for it, hoard the supply and then flip it back onto the market when the price hits $40?

You're assuming a finite amount of money, but the monetary system is necessarily elastic.

Then the hoard, because it has gone up in value, becomes collateral for more loans.

Whereas rationing necessarily solves the distributional conflict instantly.

Price auctions only work when the demand is optional and the supply is elastic.

We know that the amount of toilet paper being produced matches how much is being consumed because it did pre-crisis and consumption/production aren't really changing. Any ramp up at all from the factories will quickly lead to a glut of the stuff. The problem is the commercial-private shift causing a mismatch between the orders for consumers and the supply for commercial toilets. If the price goes high enough someone will figure out how to match the two and it will happen really quickly. The price isn't going to climb after the initial spike; it is going to fall.

If we were talking about something really vital like food, those same 2 weeks become unacceptable.

It's a good thing that it did not happen at the same scale for food (supply is more elastic? demand is less elastic?) and that we can debate about an annoyance, not people starving.

The immediate result of price signals is huge amounts of money will become available to anyone who is producing a scarce good. If something in your scenario (government, public pressure, whatever) interferes with the market then the people who produce food will no longer be awash with money and will not produce more anywhere near as fast.

Even if people are starving the solution is not to ban disaster profiteers or implement price controls. The solution is for the government to start buying food at market prices and distributing it evenly. Working with the price signalling system, not against it. It isn't efficient but if people are starving then sure efficiency isn't the single biggest problem. At least it keeps the incentives where they need to be.

I think our divergence in opinion comes from how much extra incentives to produce there is between the normal margins and the supply-constrained margins and how helpful that incentives is.

My hunch is that as long as there is a profit to made, extra demand will be met as soon as possible. Massively increasing the profit would help only if it would go towards raising food faster, which I think is not something that can be meaningfully improved in the time-frame we are talking about. Yours seems to be that it would help us get food faster. I might be totally wrong, so any data is welcome.

Note that I am talking about a case where raising margin would be forbidden, not raising price if it is necessary to increase production. Also, this is only for the case where supply and demand did not change long term, and the current demand spike is caused by irrationality (panic buying or people trying to profiteer from panic buyers).

I can get a lot more for sale though; at some point it becomes cost effective for people to start moving chickens over from other countries by air freight.

There is a price where people will start going out and hunting too. In Australia if the price of meat went up enough we'd start harvesting kangaroos, for example. The meat is a bit tougher than chicken but it is pretty good.

The argument in that sentence, and I don't mean this unpleasantly, is that you are a limited human who can't imagine a way of getting food on the table quickly that costs a lot of money. That is a fault in your imagination rather than a real limit. And if the situation is so dire that no food can be found at any price, people are going to starve whatever is tried so it isn't like it makes much difference in the big picture of this hypothetical. But anything up to that and more people working on the problem will help.

> Massively increasing the profit would help only...

There is a price point where Goldman Sachs employees stop trying to figure out how to screw over the little guy and start trying to get food to people. Until prices have reached that point, more profits will help increase production ASAP.

There is ample evidence that a shortage problem is better solved with subsidies rather than quotas. The main complaint is that subsidies are too effective at triggering oversupplies. There is no faster way of going from shortage to sufficient than throwing money at the problem - so the suggestion here is maybe at least try throwing money at the problem. People don't have to starve; governments can step in and buy them food - but if we need more food paying more to food producers for food is the single most effective way to get it.

Interesting data point: about three weeks ago a guy was selling single rolls for $5 a piece outside our development. He put his kids in gas masks and had them prance around with a big sign. I'm sure he wasn't doing it for the kindness of his heart.

You can’t be sure that you’re buying on a sustained upswing in prices.

And there aren't enough millionaires for their toilet paper buying habits to have a meaningful effect on the market unless they each start buying millions of rolls, which is a ridiculous hypothetical with no chance of really happening.

The rational response to $20/roll is to buy as much as possible. It will be worth $40 soon.

Insulin, rent, or food? Ah, just prioritize, honey!

Essentially if they can afford to pay higher prices continually then it implies some sort of sustained utility. If their decisions are foolish they would start losing said capability squandering it and give it to the "sources" one way or another.

That doesn't say anything about the morality, sanity, or time pressures but I can see some truth to it.

But that's life. If you can't pay, you won't get what you want, no matter how important it may be. Expecting other people to cover for you is called entitlement.

If anyone truly needs a mask, (e.g. a delivery driver delivering packages to customers, a doctor, a nurse), that represents an economic need for whatever service they provide.

Their employer will be able to charge a high price for their service, and afford to pay a high price for PPE for them.

Even when the mapping is imperfect, the fact that the rich guy was able to afford a mask while others weren't does some social good: it increases the reward for being wealthy, which promotes more productive behaviour from society at large.

Greed is good is an ideology for the morally impaired with limited attention span. A relatively small differential in wealth and large differential in social standing is arguably enough to achieve maximum "productive" behavior after which diminishing returns are had.

As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.

Defining pursuit of self-interest as greed is the type of ideologically motivated moralizing that leads to people ignoring rational arguments and the evidence on what types of laws work and what don't.

>>As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.

1. The U.S. is significantly more productive than Europe on a per capita basis.

2. Even if 1 weren't true, your argument would prove nothing, as there are a vast array of differences between the EU and the US that could explain your observation. Your 'proof' is nothing of the sort. It's lazy confirmation bias. The empirical evidence, in the form of analysis on large datasets, strongly suggests being more market-based is associated with more rapid economic development. For example see this study: https://web.archive.org/web/20170821004405/http://ime.bg/upl... There's no evidence of any threshold where that benefit diminishes. These empirical observations are strongly supported by the basic economic theory.

> My imaginary capitalist has capital because he worked hard clearing part of the boundless forest while his employee to be was being lazy and living on what he could gather--so it is entirely just that the capitalist gets part of the output of his land and his employee's labor. But the leftist doesn't like that hypothetical. His imaginary capitalist inherited his capital from a father who stole it. I don't like that hypothetical.

http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_o...

I often suspect Friedman is right that a lot of normative disagreements boil down to different intuitions about what people typically do to become wealthier.

The fact that market economies so vastly outperform non-market ones is a pretty clear indication that wealth-generation in market economies generally has positive economic externalities, and as such is socially beneficial on the balance.

It encourages rent-seeking behaviour, which is not necessarily productive, and in times of crisis, demonstrably not so.

That's true. Don't you think it's also true that those who need a good more have a greater desire to pay for that good? I understand that not everyone has the same ability to pay, but we can't crucify the market on the cross of equity. History shows that when you try to allocate goods based on feelings (some random official's idea of "need") and not prices (which reflect true preferences), you create shortages, black markets, and misery. Command economies just don't work.

There are ways of addressing monetary inequality (e.g., a stipend) in an emergency that don't break the fundamental resource allocation function of the market.

Does one person with a million dollars in excess liquidity to spend on water represent a greater "need" than one million people with no liquidity to spare?

Would it be moral for that person to buy more than they need, solely to inflate prices? Would the resulting spot price in the market be in any way a meaningful gauge of the actual need?

Market prices are only one gauge, and they are pretty faulty, easily manipulated one at that.

Next up, you'll probably tell me that story points are a solid basis for predicting delivery times and making decisions about resource allocation.

In the current situation, if a business owner decides to drop you on the ground, you're literally gonna starve to death in the next month.

That's not true at all. We have an extensive network of assistance programs. Of course these programs can be better in numerous ways. Nevertheless, nobody is starving in the street in the US.

That the accepted answer to this question has become "who has the most money?" is a victory for... well, the people with the most money, so I guess we can call this a sterling example of the effects of income inequality. The vast majority not only don't have the majority of the money; they don't even have the moral standing of "legitimate" need.

Money is still really important, but it’s dishonest and counterfactual to argue that mere access to liquidity can determine the clearing price for a market.

We know it doesn’t. That’s why we have the Fed.

It's mildly astonishing to me that someone would attempt to make an argument in favor of not regulating absurd prices by comparing the alternative to gruesome public execution. Even ignoring the hyperbole, it isn't a very compelling argument; yes, we all agree that destroying the economy is bad, but the whole discussion is about whether enacting these regulations would _actually_ harm the economy more than it helps, so just asserting that it would with an exaggerated metaphor doesn't really add anything useful.

There's 0 financial reason to ramp up supply if the price is the same, and you're now suddenly in a heavily controlled market.

It's risky by itself to ramp up production, because you may end up hiring 100 people and having to fire them 3 months later, which is not exactly pleasant for anyone.

Capacity for manufacture is not infinite and it cannot be changed at a moments notice. It takes months or years to establish supply chains, facilities, machinery, and expertise needed to increase manufacture, and by that time the crisis is over and the extra demand is gone.

So perhaps right now the supply chain isn't able to do this, but that doesn't mean it can't move towards it.

I am sure there are people who need more than that, and any system of rationing should allow for exceptions.

But when people insist that a "free" market is inherently correct, it's no different from insisting that your OS scheduler is perfect even though some processes never get to run

https://en.wikipedia.org/wiki/Starvation_(computer_science)

In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again.

Except the demand is going to fall back down in the future, and your hypervisor is sentient and realizes there's no point in spending its own resources to provision more vCPUs if they're going to be running idle by the time they're activated.

The grocery stores don't want to keep stocking-out and restocking kleenex and paper towels either.

People opportunistically filling up their carts won't have space to buy other higher-margin products.

And kleenex and paper towels take up a lot of space on the trucks, taking up space from higher-margin deliveries.

Seems crazy to me we aren’t seeing a “free market” at play, where both inherently the stores “win” and the people receive the goods they need / can justify.

It's as if there's something going on there that this reductionist model didn't account for.

People who get upset about the lack of high prices for scarce commodities seem to me to be inconsistent - if you aren't in a high stakes zero-sum competition, then why should you care much about being able to outbid others? And if you think that you are, how can you ethically defend everyone not getting a minimum ration or be sure that in a so-called free market you will get yours?

If the marginal profit on TP is $0.10/roll and the price is not allowed to increase in time of excess demand, you’re likely to see factories optimize to squeeze every efficiency out, trying to eek out another penny per pack of 6 rolls.

Imagine instead a world where prices rise in times of excess demand. Producers now have an incentive to maintain flexibility in monthly production, not squeezing the last fractional penny out and instead allowing flex to over-produce when demand is high (and prices/marginal profit is higher).

Likewise, warehouse and distribution adapts to capitalize on high prices, using those high prices as a signal to get more goods to flow to those demanding the goods. In other words, more toilet paper is available for people who want toilet paper.

Instead of today’s world where I have to shop twice a week instead of once, or can’t add a more vulnerable neighbor’s shopping to my own, because we are limited to how many eggs I can buy in a single trip. How does that help anyone’s health?

Everybody believes that, in general. But in the short term, the elasticity of supply with respect to price approaches zero. If we ramped up production though, it would be too late, and then there would be a glut.

If some other store did not ration the product, then they would have empty shelves, so I'd go to the one that did.

Because they had a government gun to their head in the form of anti-gouging laws, or implications for the same. That's what I am arguing against.

If they were free to set prices, they might consider raising prices to keep stores in stock, rather than ration. They might not, if they calculate it will be a long-term PR hit. But right now, they are not free to choose.

Further, local and state politicians and AGs often are seen grandstanding about how they stand ready to prosecute anyone who is raising prices on necessities beyond the normal price (sometimes allowing +10%, but often not even being explicit about that, leaving businesses in a murky area).

Watch for it next time a power disruption hits your local area.

To me, the fairest way to distribute any good is to the highest bidder. If someone is truly desperate for food, they will find a way to get the money to pay for it. I would rather that food be instantly available to that highest bidder with a true need, rather than having to jump through some kind of Soviet bread line to get their “ration”.

Are you saying it is “ethically” better to have an empty shelf with government price controls than a full shelf with prices set by your high-bidding neighbors?

With an empty shelf there is no negotiation possible, simply the will of the government bureaucrat or store manager (with a government gun to his head). They don’t have any personal knowledge of the hungry.

With a full shelf the food is right there, and it’s only money. The hungry can communicate their immediate need for food on the spot by forking over the cash.

So hell yes the capitalist system is the most ethical. Hunger is a private matter that affects individuals - not a faceless mass to be treated as robots with a government program.

This is one of the saddest things I've ever seen on HN.

Try re-reading the post I replied to. If it's not making you feel a bit sick, might want to spend some time on introspection.

Qu'ils mangent de la brioche though I guess.

Persuasive.

"If someone is truly desperate for food, they will find a way to get the money to pay for it."

Are both massively ignorant and quite sickening, and that if you aren't reacting at least a little bit to that sort of statement too, you may have a serious lack of empathy.

Anyway, good luck in life, I have no interest in carrying on a conversation on this matter any further. If you're not seeing it you're not seeing it, I just hope you never get anywhere you can make policy.

"If someone is truly desperate for food, they will find a way to get the money to pay for it."

Just wow. Ignorant and awful.

And if you end up going without, that's your issue. Not only that, but that's the best and fairest system, the way it should be! This is a pure expression of "Fuck everyone else, I got mine"

> maybe you should remember that the person who made that point is a human being and not a monster.

Yes, totally, because saying their posts are ignorant and cruel is totally the same as treating them like something other than human.

If we arrange the rules of human behavior, such that there is an incentive to create a surplus of food and money, then the poor will be much better off.

Those who have tried to simply make a law that says "no one is allowed to die of huger" have created monstrous regimes which led to the starvation of millions.

If you’re hearing “fuck everyone else” that’s pure projection. You’re obviously putting words into his mouth. That seems cruel to me and counterproductive.

You should be more empathetic when you discuss with people on the internet, assume good faith.

> If you’re hearing “fuck everyone else” that’s pure projection.

  "If someone is truly desperate for food, they will find a way to get the money to pay for it."
  "The hungry can communicate their immediate need for food on the spot by forking over the cash."
  "Hunger is a private matter that affects individuals"

At this point we're just going round in circles.

Nope, that’s just your projection. You’re callously disregarding him.

There is not enough time to solve the coordination problem (or, more accurately, we solved it in advance).

The government elected by most market participants steps in (or threatens to step in) to help maintain order. This seems like a less crazy idea than seeing how many nurses will pay $500 for a mask.

Elections as currently administered are highly limited in their ability to produce good collective judgments, so the fact that politicians support sonething is no indication that it's socially beneficial. If the democratic process produced socially optimal governance decisions, no democracy on Earth would institute rent control for example, and we see the opposite in practice.

And yes, if the shortage for masks is so severe, that they would fetch $500 in a free market, we need prices to spike that high, to spur massive rapid restructuring of the economy to ramp production of masks and alleviate that shortage.

Capping the price doesn't solve the fundamental problem, which is the shortage. It interferes with the process of solving the shortage.

It takes time to build and staff and supply a mask factory, meanwhile you risk the scarce (in the best of times), skilled clinicians getting sick en masse or abandoning their jobs.

Market solutions work when there is no coercion besides price, unfortunately viruses won't take checks, nor will people who are fearful or desperate.

And in most situations, money can solve the problem, and get the essential item in the hands of those who need them. Those with stockpiles typically have them in order to sell them during a shortage. Not pointlessly hoard them and forego the profit earning opportunity.

The long-term damage of anti-price-gouging laws is fewer stockpiles to prevent shortages from emerging during future crises, and a slower ramp up of production and distribution when a shortage does emerge.

The store is competing with other stores, but the management determines what to do within the store without either voting or unregulated competition.

Maybe, but depending on where you are, you might be 3 weeks into this and demand is subsiding.

Open markets only span something like 1/3rd of our economy. (Most other trades are intra organizational, government appropriations, etc.)

We're geeks, right? Obsessed with optimization, right?

So it seems crazy to me that so many will only consider Freedom Markets™ while dismissing every other possible strategy.

As seen in this very thread, the meme of Freedom Markets™ is so engrained that even the critics only argue in those terms, rather than having an affirmative agenda based on alternatives.

Outlawing price gauging alone just ensures masks go to people who don’t need them as much as doctors.

The problem is that doesn't seem to reflect the reality of the situation. Why are hospitals still experiencing shortages? What stops manufacturers and sellers from limiting supply to drive up prices? This is why governments are stepping in and forcing medical supplies to go to healthcare. They wouldn't get there otherwise.

This has to be one of the most late-stage capitalist things I've heard all pandemic.

If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.

Yeah, that's grotesque. Everyone who works on the front lines of providing care to COVID patients is a first responder, and whether they or their employers pay, is irrelevant.

It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later.

Not to mention, I've always said we need more expensive health insurance in America.

> If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.

That's not true, the government can learn from this catastrophe and not disband the entire pandemic preparedness department a few months before a pandemic. It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices. As they have done with oil. And helium. And raisins.

https://www.washingtonpost.com/opinions/2020/03/16/no-white-...

I bet it's relevant to them.

> It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later.

But what does that even mean? Suppose Donald Trump is suddenly made owner of all PPE. How is he qualified to allocate it efficiently? What does someone do who legitimately needs it but didn't make his list?

> Not to mention, I've always said we need more expensive health insurance in America.

You need more healthcare during a pandemic. It costs money. It has to come from somewhere.

> It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices.

And then go several years without a pandemic at which point the stockpile will either have rotted or been cut from the budget as "unnecessary" before the next one.

This is the type of problem where you want redundancies. The government can try to keep a stockpile and you still want private stockpiles in case they fail or are insufficient -- as has obviously happened. It's not like this is the first ever pandemic in the world that no one could have ever foreseen. What is going to cause them to do any better next time?

> As they have done with oil. And helium. And raisins.

The strategic petroleum reserve is some kind of a silly farce. Oil is a global commodity and the US is a major producer. The reserve exists entirely as a result of politics, it isn't really useful for much.

The "helium reserve" exists primarily because the government is a major producer of the stuff. Nearly all the helium on earth is a product of nuclear reactors.

And the "strategic raisin reserve" (insert eyeroll) was recently found unconstitutional.

>In New York police arrested a man who had stockpiled medical gear, allegedly selling it for a 700% mark-up.

To limit supply to drive up the price, this will only work if the mask manufactures are a cartel.

Every extra dollar spent on those high prices is a dollar that could have been spent providing better care in some other way.

Increasing prices does not increase hospitals' budgets for PPE; it only means something else must be cut.

I think it's important to recognize in this case that "important" is being passed off as the same as "ability to pay."

>Outlawing price gauging alone just ensures masks go to people who don’t need them as much as doctors. Price ceilings don’t force masks to go to doctors.

This is such a non-sequitur, it almost feels disingenuous. If you remove controls, you're just going to guarantee that the masks go to the people with the highest ability to pay. And that may or may not be doctors and medical personal. In fact, I don't see any evidence anywhere that it would actually lead to more medical personal actually getting these supplies at all.

That would seem to be the likely end result if it were greatly restricted.

We've already seen that with healthcare in the US. It is expensive, so is it used on more important people?

If I give a wealthy person $100, and a poor person $100... the poor person will spend it, the rich person generally will not.

This plays out in economic stimulus studies time and again.

Saving money is better than wasting it away on booze or whatever else the poor person would want to spend it on. Spending money on things you do not need or are expecting a return on is pissing money away.

How you spend money makes a big difference.

1. people won't buy what they don't really need, leaving more for others

2. people will become motivated to sell their surplus supply rather than hoarding it

Further helping things is demand will be reduced due to gouging because people:

1. will not be motivated to buy and hoard

2. will not buy for frivolous purposes

Trying to force companies to produce more at a fixed price is less effective than enticing them to via making more money. An economy cannot be run on altruistic impulses.

In a crisis there is a desperate need for producers to produce more of the goods that are in shortage. Blocking crisis profiteering means that whoever is getting the benefits of arbitraging the shortage the only people with no opportunity to benefit are the producers. Ie, the only action that gets blocked is consumers formally allocating more resources to production using money.

From that frame it is a bizarre strategic blunder to implement pricing restrictions in a crisis. The problem won't get solved at any hurried speed if it is only a little bit profitable to solve it. Market theory suggests the pre-crisis prices were optimised to minimise profits; they really need to go up to get a response from marginal producers.

To me that seems like a very reasonable policy to make sure people who need it can still get it, while at the same time sending a strong signal to only buy as much as you need. That the seller profits from the policy is just a side effect.

That is a good point. Another point is (as Paul Romer mentioned in an interview), high profits during a shortage mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage. If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than on things that are more likely to get votes. (We've now seen that all the talk of the national stockpile was greatly exaggerated.)

A majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/

> “Last time he geared up and went three shifts a day working his tail off,” the mayor recalled. “As soon as the issue died, he didn’t have any sales. He had to pay unemployment for all these people, and he had to gear down.”

It's not a "physical limit" problem, it's that the costs incurred by rapid ramp-up for a temporary spike in production outweigh the payout -- you're asking businesses to bankrupt themselves to spike production which will fall off in four months... and they're stuck with equipment that hasn't paid itself off, and employees which cost unemployment and benefits.

There needs to be an increase in prices NOW (or some other explicit subsidy) to possibly justify the cost.

But the man on the street finds this offensive, and you can see that in the downvotes your comment is receiving.