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The price of an item is a very blunt instrument. It doesn't distinguish between producers and scalpers/hoarders. Both of those parties are equally incentivized

The price of an item is a very blunt instrument. It doesn't distinguish between producers and scalpers/hoarders. Both of those parties are equally incentivized to produce stock and sell it if the price goes up. From the point of view of a potential buyer, toilet paper straight from the factory, and toilet paper from the guy next door who bought some ahead of time are equally good. > This is a case of consumers attempting to create small niches of artificial scarcity so that they can profit. To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important! > The price gouging law is not bringing toilet paper to levels where the producer of the product is taking some kind of operating loss or even reduction in profit of any kind. This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner. Here's the crux of the issue: when supply is judged to be sufficient, nobody will hoard. When the supply of an item in the short term is in doubt, one of three things happen: 0) The price does not change, but the item goes out of stock. Some proportion of people are unable to procure the item, independently of their need for it. 1) Hoarders step in and cause the price of an item to rise. The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. The hoarding profits are a charge to the rest of society for a more efficient distribution of the item compared to 0. What bothers people here primarily is that hoarders made money while everyone else is suffering. 2) The government steps in and does the distribution directly, e.g. via rationing. Here, the government decides who needs the item the most.

geofft 7y ago
> The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. The hoarding profits are a charge to the rest of society for a more efficient distribution of the item compared to 0. > What bothers people here primarily is that hoarders made money while everyone else is suffering. No, what bothers me is the assumption that "higher desire" means "more willingness [and ability] to pay," and that "more efficient" means "assigned to the people with higher desire." For reasons of life and death (which I, personally, find more important than the principle of a free market), I think a "more efficient" tool should be one that distributes to people with higher need, and need is generally not correlated with ability to pay. It may even be inversely correlated: I as a tech worker can just stay home for weeks, and I haven't needed a drop of hand sanitizer. Someone who drives buses or makes hamburgers can't do that and must be out in the world for their job, and their jobs pay them a lot less than my job does. So, government rationing would be an "efficient" solution in my definition, yes, but there's a milder option here: use the government's influence to artificially prevent the price of the product from rising. Then there's no incentive for people to buy large quantities with the purpose of reselling it, and it's more likely that everyone will buy the small amount that they need.
- rahimnathwani 7y ago
  "use the government's influence to artificially prevent the price of the product from rising" How would that work? If Dollar Tree were fully stocked with hand sanitizer, I would go there right now and buy 10 bottles. But so would 99 other people. So we 100 would get all the 1000 bottles, and everyone else would be SOL.
  - geofft 7y ago
    Why would you buy 10 bottles? What are you going to do with them? Are you afraid they're going to run out? Why? (Put another way, why aren't you buying 10 bottles of drain cleaner right now?) One of my local pharmacies had hand sanitizer in stock for $3 and no obvious limit on purchases. I bought one, because I needed one, and I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it. But it kind of lasts for a long while.
    - rahimnathwani 7y ago
      I would buy 10 because that would last me 2 months (current expectation) to a year (normal usage), so I don't need to think about it for a wbile and, yes, I would not need to worry that they would run out. "I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it" Anti-price-gouging laws might stop people selling at high prices near you, but they don't stop people buying up all local supply, and re-routing it to places without such laws.
      - KyleJune 7y ago
        That's why we need rationing in addition to anti price gouging laws. Anti price gouging laws make it riskier for people to buy large quantities with the intent to just sell it for a profit. If there was a high risk of punishment, people like the guys who went around Tennessee buying all of the available local supply of hand sanitizer with the intent to price gouge wouldn't have done so. Then rationing(like limits on how much of an item can be purchase at a time) would make it harder for individuals to buy more than they need. When there is a massive line of people just to get toilet paper and other basic necessities like we have seen at stores the past few days, people would be less likely to go through the hassle of finding the items and going through line again. Without a purchase limit, some people will completely fill up their carts leaving those who were not quick enough with less. The fear of people bulk buying the whole supply and the knowledge that people will do it to price gouge just increase the amount of panic and make more people feel the urge to go and buy in bulk. https://www.marketwatch.com/story/tennessee-man-sitting-on-almost-18000-bottles-of-hand-sanitizer-says-hes-doing-a-public-service-2020-03-14 https://www.marketwatch.com/story/tennessee-man-sitting-on-a...
rahimnathwani 7y ago
Even with #2, I worry that people who are short of money would sell their allocated hand sanitizer to pay for more urgent needs (rent, food, fuel), so we'd end up with an allocation similar to #1, but with higher transaction cost.
EdgarVerona 7y ago
> To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important! Are you sure? https://www.nytimes.com/2020/03/14/technology/coronavirus-purell-wipes-amazon-sellers.html https://www.nytimes.com/2020/03/14/technology/coronavirus-pu... "Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic." > This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner. How will they make more product sooner? By expanding their businesses - making new factories, procuring new manufacturing machinery, hiring new workers? What happens when demand reduces, and they're back to not only having a normal amount of demand, but having that further reduced by the glut of supply - supply of a nonperishable good in particular? We have certainly fallen back on rationing during times of emergency in our society - even here in America. If it comes to that, I know many people will find it distasteful, but your point of: > The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. Is unfortunately the truth (though it's interesting that you chose to phrase "ability to pay" as "willingness to pay" - that discounts the fact that many people have a high desire for these items, but could be forced to choose between them and other items needed for basic survival), and left unchecked it will result in a pretty quick reversal of the "rising tide lifts all boats" argument for Capitalism if this situation continues long enough. It'll be pretty hard to argue that the free markets help all Americans when only people who can afford to do so can wipe their ass, or have access to basic health necessities.
cadlin 7y ago
>To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. This is pure ideology. Do you have any evidence that a single person buying 10,000 masks from every hardware store in an entire state has no marginal impact on the scarcity of a product? Basic math would suggest this is not the case.
- ggreer 7y ago
  Do you have evidence that someone has bought 10,000 masks from every hardware store in a state? Otherwise you're arguing from fiction.
  - jamespollack 7y ago
    https://www.nytimes.com/2020/03/14/technology/coronavirus-purell-wipes-amazon-sellers.html https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
    - ggreer 7y ago
      He bought most of the masks from a single liquidation company a month ago, and he bought the hand sanitizer from some stores in Kentucky & Tennessee, but not in large enough quantities to cause shortages there. He definitely didn't buy from every hardware store in the state. Not even close.

geofft 7y ago

> The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. The hoarding profits are a charge to the rest of society for a more efficient distribution of the item compared to 0. > What bothers people here primarily is that hoarders made money while everyone else is suffering. No, what bothers me is the assumption that "higher desire" means "more willingness [and ability] to pay," and that "more efficient" means "assigned to the people with higher desire." For reasons of life and death (which I, personally, find more important than the principle of a free market), I think a "more efficient" tool should be one that distributes to people with higher need, and need is generally not correlated with ability to pay. It may even be inversely correlated: I as a tech worker can just stay home for weeks, and I haven't needed a drop of hand sanitizer. Someone who drives buses or makes hamburgers can't do that and must be out in the world for their job, and their jobs pay them a lot less than my job does. So, government rationing would be an "efficient" solution in my definition, yes, but there's a milder option here: use the government's influence to artificially prevent the price of the product from rising. Then there's no incentive for people to buy large quantities with the purpose of reselling it, and it's more likely that everyone will buy the small amount that they need.

rahimnathwani 7y ago
"use the government's influence to artificially prevent the price of the product from rising" How would that work? If Dollar Tree were fully stocked with hand sanitizer, I would go there right now and buy 10 bottles. But so would 99 other people. So we 100 would get all the 1000 bottles, and everyone else would be SOL.
- geofft 7y ago
  Why would you buy 10 bottles? What are you going to do with them? Are you afraid they're going to run out? Why? (Put another way, why aren't you buying 10 bottles of drain cleaner right now?) One of my local pharmacies had hand sanitizer in stock for $3 and no obvious limit on purchases. I bought one, because I needed one, and I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it. But it kind of lasts for a long while.
  - rahimnathwani 7y ago
    I would buy 10 because that would last me 2 months (current expectation) to a year (normal usage), so I don't need to think about it for a wbile and, yes, I would not need to worry that they would run out. "I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it" Anti-price-gouging laws might stop people selling at high prices near you, but they don't stop people buying up all local supply, and re-routing it to places without such laws.
    - KyleJune 7y ago
      That's why we need rationing in addition to anti price gouging laws. Anti price gouging laws make it riskier for people to buy large quantities with the intent to just sell it for a profit. If there was a high risk of punishment, people like the guys who went around Tennessee buying all of the available local supply of hand sanitizer with the intent to price gouge wouldn't have done so. Then rationing(like limits on how much of an item can be purchase at a time) would make it harder for individuals to buy more than they need. When there is a massive line of people just to get toilet paper and other basic necessities like we have seen at stores the past few days, people would be less likely to go through the hassle of finding the items and going through line again. Without a purchase limit, some people will completely fill up their carts leaving those who were not quick enough with less. The fear of people bulk buying the whole supply and the knowledge that people will do it to price gouge just increase the amount of panic and make more people feel the urge to go and buy in bulk. https://www.marketwatch.com/story/tennessee-man-sitting-on-almost-18000-bottles-of-hand-sanitizer-says-hes-doing-a-public-service-2020-03-14 https://www.marketwatch.com/story/tennessee-man-sitting-on-a...

rahimnathwani 7y ago

Even with #2, I worry that people who are short of money would sell their allocated hand sanitizer to pay for more urgent needs (rent, food, fuel), so we'd end up with an allocation similar to #1, but with higher transaction cost.

EdgarVerona 7y ago

> To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important! Are you sure? https://www.nytimes.com/2020/03/14/technology/coronavirus-purell-wipes-amazon-sellers.html https://www.nytimes.com/2020/03/14/technology/coronavirus-pu... "Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic." > This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner. How will they make more product sooner? By expanding their businesses - making new factories, procuring new manufacturing machinery, hiring new workers? What happens when demand reduces, and they're back to not only having a normal amount of demand, but having that further reduced by the glut of supply - supply of a nonperishable good in particular? We have certainly fallen back on rationing during times of emergency in our society - even here in America. If it comes to that, I know many people will find it distasteful, but your point of: > The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. Is unfortunately the truth (though it's interesting that you chose to phrase "ability to pay" as "willingness to pay" - that discounts the fact that many people have a high desire for these items, but could be forced to choose between them and other items needed for basic survival), and left unchecked it will result in a pretty quick reversal of the "rising tide lifts all boats" argument for Capitalism if this situation continues long enough. It'll be pretty hard to argue that the free markets help all Americans when only people who can afford to do so can wipe their ass, or have access to basic health necessities.

cadlin 7y ago

>To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. This is pure ideology. Do you have any evidence that a single person buying 10,000 masks from every hardware store in an entire state has no marginal impact on the scarcity of a product? Basic math would suggest this is not the case.

ggreer 7y ago
Do you have evidence that someone has bought 10,000 masks from every hardware store in a state? Otherwise you're arguing from fiction.
- jamespollack 7y ago
  https://www.nytimes.com/2020/03/14/technology/coronavirus-purell-wipes-amazon-sellers.html https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
  - ggreer 7y ago
    He bought most of the masks from a single liquidation company a month ago, and he bought the hand sanitizer from some stores in Kentucky & Tennessee, but not in large enough quantities to cause shortages there. He definitely didn't buy from every hardware store in the state. Not even close.