> only applies in circumstances where supply is fixed

After SARS, something like COVID-19 was foreseeable to the professionals. But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency. We've optimized out spare capacity we actually needed.

Companies could’ve stopped doing stock buybacks and instead invested. But that doesn’t raise the stock value.

Look at the airline industry: They spent billions on stock buybacks and are now complaining of having no money.

Exactly this. It's a self-fulfilling law, and unfortunately, the plebs suffer. Only for the government "saviors" to swoop in to save the day whilst at the same time blaming "capitalism" because it failed to stockpile enough demand without any way to recoup the costs.

>But when a retailer knows they can't raise prices during any emergency, they can't justify investment to prepare for the next emergency.

None of the preparations for an emergency involve allowing front-line retailers to hoard resources and fleece people on them. Inventory space isn't the main issue here, and that's the only investment front-line retail has to make. This take is completely divorced from reality.

When supply is fixed the price gouging serves as an important mechanism promoting efficient use of it. If a 30 oz bottle of hand sanitizer costs $50 then everyone would ask themselves: "Do I REALLY need 5 bottles of it?"

That kind of reasoning only works when all the things you need add up to roughly all the money you have. Otherwise, the rich person will say, "fuck it, I'll take 5", while countless of poor people won't be able to afford any.

If we're that concerned about the poor people, then maybe our laws should rather ignore price gauging and instead focus on implementing government-run distribution and storage centers for the inevitable emergency so that everyone can get their basic supplies. I can buy the argument that we don't like the way that a free market would solve this problem. But then we have to actually put down something reasonably-likely to work in its stead. Right now we have neither (whilst the poor suffer), and we're blaming the side that's saying "leave it alone, the market can kinda fix it".

So with anti-price-gouging laws, we're making a bet that rich people are more constrained by the ability to use certain items than they are constrained by money. That is, if they can't buy up the supply and resell it at absurd prices, they have no reason to buy more than they truly need, so the goods remain available to more people in need, at lower price.

I do like the idea of government-run emergency stockpiles, and rationed distribution of those. But then, I have a feeling that people who want price gouging to be allowed are also the people who, in times of calm, complain about government being fat, and demand the emergency stockpiles to be cut down.

How does that line of thinking work with something like baby formula? If I have a hungry baby now, what good does it do me if I have to wait two weeks because I'm priced out of baby formula today?

In emergency situations we pretty much already know what peoples needs generally are. We don't need price as a market mechanism to know people need access to food water etc.

Additionally, price gouging is sending artificial pricing signals. The rise in price is not the result of organic demand but people taking advantage of a short term supply constraint, so if I'm a manufacturer/distributor I can't react to this rise in prices the same way I would in a normally functioning economy. I may not even be able to.

If your baby needs formula, and the supply is disrupted, the choices are generally, with price gouging, you wouldn't be able to feed your baby because the formula is too expensive, and without price gouging, you wouldn't be able to feed your baby, because you didn't get to the store while they still had it.

With feeding babies, there are other options to feeding formula for many babies. The question is which option gets more formula to babies that don't have good other options.

With price gouging, the parents of babies with options may have a threshold price, maybe they're willing to pay normal price but no higher, or 2x normal price or whatever. As prices rise, demand from this population will drop, but demand from babies without good other options is rather inelastic, so a lot of the formula will go to babies without good options.

With a fixed price, the demand can't be fulfilled because supply was disrupted, and distribution is essentially random. Some babies who didn't get formula have other good options and will be fine, other babies don't and will have a big problem.

You could probably design a better way to distribute the formula than either price based, or random based, but it would require a lot more coordination, and since you need to do it for lots of goods in a crisis, some of which are needed on a daily basis, it's hard to set that up.

> If your baby needs formula, and the supply is disrupted, the choices are generally, with price gouging, you wouldn't be able to feed your baby because the formula is too expensive, and without price gouging, you wouldn't be able to feed your baby, because you didn't get to the store while they still had it.

Not quite. With price gouging, even fewer people get formula because there is a strong incentive to hoard and withhold supply until the price creeps up. Supply can’t ramp up quickly enough in emergency situations. It’s too inelastic for such short time horizons.

So with protections against gouging, people with the supply are incentivized to get as much of it as they can and move it into people’s hands as fast as they can. Without such protections they’re incentivized to hold onto to whatever they can and trickle it out at a metered pace. You just end up creating a speculative bonanza, not any meaningful increases in supply.

A situation where everyone has an equal chance to get part of a limited supply is much preferable to a situation where the less fortunate are priced out of being able to buy.

Having more buying power does not make you more worthy to receive essential supplies in an emergency.

The rise in price is the result of the market thinking there will be future rise in organic demand. The price rises because the value rises. There's nothing artificial about it.

That tug-on-your-heartstrings argument works the other way around, too: If I have a hungry baby now, but despite whatever wealth I have I can't find any in stores because price controls have resulted in a chronic shortage, what good does it do me that some people can buy baby formula at an artificially reduced price?

> The rise in price is the result of the market thinking there will be future rise in organic demand.

In a disaster situation there won’t be a future rise in organic demand so the market has no incentive to actually adjust. Price gouging doesn’t change that. The only meaningful effect is that you’re either distributing finite resources by raffle or by ability to pay. (Or by ration ticket if your government has its shit together enough to set something like that up). I don’t know any ethical framework that thinks ability to pay is the optimal distribution scheme there.

Kantians would opt for a raffle as it values people as ends in themselves rather than as money havers.

Utilitarians would opt for a raffle as random chance is more likely to distribute goods to their most valued uses than distribution according to the wealthiest.

Rawlsians would opt for a raffle because if you apply a veil of ignorance where nobody knows how much money they have before the situation starts, everyone would conclude the raffle is more fair.

Or the people that can afford it buy 100s of them and sell for even higher price to the people who might need one.

Efficient if people broadly have the same wealth. It's not efficient for me to buy hand sanitizer I barely need at the expense of care workers who do.

This is true in theory. In practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production. This paradox is severe for products with low marginal cost but high fixed cost, which is most things nowadays thanks to modern economy of scale.

Price laws are per unit, but peoduction costs are amortized across a whole production lifetime, and the difference between "X units per month for 10 years" is quite different from "10X units per month for 1 month" is substantial.

>n practice, as has been seen with Covid PPE, the price "gouging" threshold is sometimes set below the cost of production (due to fixed startup capital costs), preventing production.

If it was actually socially important you could just. . . pay for it out of the public funds as a form of emergency assistance or social insurance. Why enable retailers to gouge and exploit the most vulnerable people when you could just have everyone pitch in to fill the gap?

Any source on that happening with Covid PPE? I’d love to read about it.