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You'll find a similar argument in any basic econ textbook. Put a cap on prices, then when demand rises for something (which normally leads to an increase in pri

You'll find a similar argument in any basic econ textbook. Put a cap on prices, then when demand rises for something (which normally leads to an increase in price, all other things being equal), the lack of an accompanying rise in price means there is no incentive to produce more of the good (no incentive for more producers to enter the market), so there isn't a corresponding increase in supply. Might work okay in China, where the government can e.g. command factories to switch to producing masks, but it means American factory owners won't have any incentive to switch over to producing them.

hobs 7y ago
Do you actually think our economy needs 200x as much hand sanitizer production? If the demand runs high enough for long enough, it wont be an emergency, and emergency measures don't apply.
- logicchains 7y ago
  >Do you actually think our economy needs 200x as much hand sanitizer production? Yes I do. If everybody is now sanitising their hands thoroughly and regularly throughout the day to prevent infection, this could easily be a 200x increase in hand sanitizer usage compared to what it was previously.
wbl 7y ago
The President does have the power to direct factories to make masks during a national emergency.
- logicchains 7y ago
  That would be much more effective at increasing supply than price caps.
XorNot 7y ago
And like most things, basic econ is not the be all and end all of how the world works otherwise we wouldn't have those all-important second year econ classes. Price gouging is not an efficient market result for anyone - the goods aren't actually, in real terms, worth the temporary price (the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up) nor does their value represent efficient allocation of resources - the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty. But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. After all, if we don't allow sudden plunges, what incentive will there be for investors to properly allocate their risk in the future? But, no one's making that argument. Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.
- logicchains 7y ago
  >the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up This is not necessarily true, especially if we consider that the pandemic may continue for a few months, and people will be using orders of magnitude more hand sanitizer and masks than before. > the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty. He distributes supply over time. Instead of everyone panicking and buying up all the supply at time T, the scalper buys up some, and then gradually sells it at times T+1, T+2, T+3... Scalping is arbitrage between current demand and future demand, and ensures more supply is available when people need it in future. >But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. This is comparing apples to oranges. A circuit breaker is not a price floor except in a very limited sense; the price is free to fall further the next day. I don't think many people would object to a rule like "the price of masks can only rise 10% per day".
- loeg 7y ago
  > But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. Yes, you're basically right despite intending to be sarcastic. The circuit breakers are stupid and there's no real good reason for them to exist. Levine: > The basic idea of stock-market circuit breakers is, like, some news happens, and the market reacts precipitously, and stocks fall 7%, and the market gets turned off for 15 minutes so that everyone can have some time to think and digest the news and see if they want to buy. On an average Tuesday afternoon, not everyone who might want to buy stocks is watching the market every minute. The computers are, sure, but some long-term investors are busy doing other things, reading 10-Ks or meeting with executives or whatever. Someone needs to call them up and say “hey not sure if you noticed but stocks are cheap now, you should buy some.” > But you generally want to do this sort of thing through mechanical bright-line rules, and occasionally those rules get applied in kind of weird circumstances. The market did not fall 7% by 9:34 a.m. today because of shocking news that came out at 9:32! Investors had all weekend to ponder coronavirus news, and all of Sunday to ponder oil-price news, and they pondered it at their leisure, and futures traded limit-down, and then the stock market opened and investors applied their weekend’s worth of pondering to the market, with the result that the market shut down four minutes later. A weekend of pondering, four minutes of trading, 15 more minutes of pondering. I am not sure what you learned in the 15 minutes that you didn’t learn over the weekend. Back to you: > Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market. The government didn't do that. It loaned $1.5T over a very short term to banks. It was not targeted at the stock market and had no impact there.

hobs 7y ago

Do you actually think our economy needs 200x as much hand sanitizer production? If the demand runs high enough for long enough, it wont be an emergency, and emergency measures don't apply.

logicchains 7y ago
>Do you actually think our economy needs 200x as much hand sanitizer production? Yes I do. If everybody is now sanitising their hands thoroughly and regularly throughout the day to prevent infection, this could easily be a 200x increase in hand sanitizer usage compared to what it was previously.

wbl 7y ago

The President does have the power to direct factories to make masks during a national emergency.

logicchains 7y ago
That would be much more effective at increasing supply than price caps.

XorNot 7y ago

And like most things, basic econ is not the be all and end all of how the world works otherwise we wouldn't have those all-important second year econ classes. Price gouging is not an efficient market result for anyone - the goods aren't actually, in real terms, worth the temporary price (the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up) nor does their value represent efficient allocation of resources - the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty. But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. After all, if we don't allow sudden plunges, what incentive will there be for investors to properly allocate their risk in the future? But, no one's making that argument. Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.

logicchains 7y ago
>the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up This is not necessarily true, especially if we consider that the pandemic may continue for a few months, and people will be using orders of magnitude more hand sanitizer and masks than before. > the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty. He distributes supply over time. Instead of everyone panicking and buying up all the supply at time T, the scalper buys up some, and then gradually sells it at times T+1, T+2, T+3... Scalping is arbitrage between current demand and future demand, and ensures more supply is available when people need it in future. >But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. This is comparing apples to oranges. A circuit breaker is not a price floor except in a very limited sense; the price is free to fall further the next day. I don't think many people would object to a rule like "the price of masks can only rise 10% per day".
loeg 7y ago
> But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. Yes, you're basically right despite intending to be sarcastic. The circuit breakers are stupid and there's no real good reason for them to exist. Levine: > The basic idea of stock-market circuit breakers is, like, some news happens, and the market reacts precipitously, and stocks fall 7%, and the market gets turned off for 15 minutes so that everyone can have some time to think and digest the news and see if they want to buy. On an average Tuesday afternoon, not everyone who might want to buy stocks is watching the market every minute. The computers are, sure, but some long-term investors are busy doing other things, reading 10-Ks or meeting with executives or whatever. Someone needs to call them up and say “hey not sure if you noticed but stocks are cheap now, you should buy some.” > But you generally want to do this sort of thing through mechanical bright-line rules, and occasionally those rules get applied in kind of weird circumstances. The market did not fall 7% by 9:34 a.m. today because of shocking news that came out at 9:32! Investors had all weekend to ponder coronavirus news, and all of Sunday to ponder oil-price news, and they pondered it at their leisure, and futures traded limit-down, and then the stock market opened and investors applied their weekend’s worth of pondering to the market, with the result that the market shut down four minutes later. A weekend of pondering, four minutes of trading, 15 more minutes of pondering. I am not sure what you learned in the 15 minutes that you didn’t learn over the weekend. Back to you: > Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market. The government didn't do that. It loaned $1.5T over a very short term to banks. It was not targeted at the stock market and had no impact there.