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.
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.