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Economists who defend disaster profiteers are wrong

201 points by chwolfe 6y ago

neonate 6y ago
https://archive.md/Op2DB https://archive.md/Op2DB
- donio 6y ago
  Thanks. Economists who defend posting paywalled articles are wrong too.
- SftwrSvior81 6y ago
  Also, your local library might have an online subscription to The Economist. Take advantage of it :)
  - choward 6y ago
    Yeah, that's real convenient... Either information is free or it isn't. I'm not going to look for some asinine way to access every piece of information I am linked to.
    - SftwrSvior81 6y ago
      I wasn't suggesting you should do it just for this article. My library has a really good selection of newspapers and magazines that they make available online and I use it frequently. I figured some people may not know about that but would find it useful if they knew about it.
alexmingoia 6y ago
Increased production doesn’t occur because the economics don’t work, it doesn’t occur because there’s just no way to physically ramp up production that fast. That’s not really a critique of the economics. If production could be increased that fast the manufacturers would. An important point the article didn’t address is that high prices direct resources to more important uses. If prices are very high then hospitals may be the only ones who can afford them, versus people on the street. 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. That’s why governments are forcing masks to go to healthcare, regardless of price.
- SftwrSvior81 6y ago
  > high prices direct resources to more important uses 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.
  - vlan0 6y ago
    Yep, and if we need proof of that. See NBA COVID testing.
  - jimmaswell 6y ago
    Exactly this. Why is Scrooge McDuck buying the entire supply of something somehow better than evenly distributing it? I can't believe people actually think making toilet paper $20 a roll is the correct outcome instead of rationing with price controls. Maybe it's the Ferengi mentality of people seeing themselves as the exploiters.
    - hamandcheese 6y ago
      If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.
      - hannasanarion 6y ago
        Hoarding isn't the (entire) problem, a bigger issue is the sudden shift in consumption from commercial to consumer. Nobody is pooping in office buildings, schools, or shopping centers anymore, everyone is doing it at home. Producers that uses to sell 50/50 consumer to commercial are now selling 90/10 in favor of consumer and they can't reconfigure their production lines fast enough. https://marker.medium.com/what-everyones-getting-wrong-about-the-toilet-paper-shortage-c812e1358fe0?utm_source=pocket-newtab https://marker.medium.com/what-everyones-getting-wrong-about...
im3w1l 6y ago
It's complicated. On the one hand stockpiling in times of plenty and releasing it in times of scarcity is good. On the other hand, cornering the market for an essential good when there isn't even an underlying production issue is bad. And increasing production of scarce goods is a good thing.
olliej 6y ago
By the logic of economists slavery and indentured service, etc are good ideas. Because by economist logic anything that produces more money is better, irrespective of the cost accrued by others. Slavery, and follow on policies of indentured service, crop sharing, etc are the only reasons the pro-slavery states maintained economic relevance as long as they did.
- modsWork4appl 6y ago
  I could see indentured servitude being acceptable. Btw, is debt different?
  - pjkundert 6y ago
    The best indentured servant is the one who thinks they are free. Debt is the money of slaves.
  - olliej 6y ago
    Debt is. Indentured servitude is widely understood as being a variation of slavery. Essentially you've got a large debt. You're only allowed to work for the person who you owe that debt to. That person gets to choose your interest rates and your pay rate. For many it is made impossible to ever repay that debt, even if they pay it many times over. Note they can't go somewhere else to get a higher paying job, because to do that they have to pay off their debt.
- creddit 6y ago
  This is a ridiculous strawman: "Because by economist logic anything that produces more money is better". Almost literally no economist says this.
- roenxi 6y ago
  That isn't true. Highly educated employees at a modern firm effortlessly outperform slaves. That is why pro-slavery states generally got crushed by their opponents. There isn't a good mechanism to educate slaves; a key plank of the modern economy is letting people sort themselves into the role they can be most productive in. You can't find an example in the last century of an economy of slaves outperforming an economy made up of the free. Economists would uniformly disagree with you; your ideas of what make most economic sense are unprofitable vs a no-slavery economic policy.
barney54 6y ago
Here's an alternative perspective: https://russroberts.info/price-gouging/ https://russroberts.info/price-gouging/
aaron695 6y ago
This article is garbage, we had hospitals wasting supplies at the start because they assumed their price fixed PPE supply would last forever. Now they use plastic bags. And we have a Texas factory saying if the government will just pay for a long contract they will ramp up supply. https://www.washingtonpost.com/business/2020/02/15/coronavirus-mask-shortage-texas-manufacturing/ https://www.washingtonpost.com/business/2020/02/15/coronavir... So this is not about disaster profiteers. This is about total and utter incompetence of hospitals planning ahead. Which happens every day, just it's happening to a lot of people at once compared to your grandmother who died last year of a preventable issue because the bureaucrats in the hospital didn't care and doctors are to specialised to know about the world around them.
- mieses 6y ago
  your comment will get downvoted but this article will never get flagged.
patmcc 6y ago
It's very interesting to me that (nearly) everyone agrees that reselling disaster supplies like masks, hand sanitizer, etc. for a large profit is terrible, but somehow selling literal essentials like food, housing, and healthcare for profit is just fine.
- hartator 6y ago
  Maybe free circulation of good and services are a good thing.
  - deleted 6y ago
    [deleted]
  - stronglikedan 6y ago
    But it's never truly free, since someone will have paid for it at some point. Essential goods and services should be made freely available to those who need them, and are in a lot of places.
- Alkhwarizmi 6y ago
  You just said the keyword...”resell” vs “well”! The difference between immoral opportunist and opportunists is vast.
- duxup 6y ago
  Is the bar "large profit" or is there more too it? I think there is more than "large profit" at work here when people talk about disaster profiteers.
  - adventured 6y ago
    > I think there is more than "large profit" at work here when people talk about disaster profiteers. There is a critical other element: some reasonable equality of distribution of supplies in emergencies. The persons selling at a large profit are distributing gear to those who can pay the most, which inherently leaves those to drown that can't compete on price. In an emergency like this, ideally per capita NYC should get the same supplies as Buffalo NY (or Detroit, or Baltimore), assuming they are hit similarly per capita by the virus, despite NYC being far wealthier and able to outbid on gear. Properly in an emergency like this, a life in Detroit should have the same value as one in NYC. Rich vs poor distribution is questionable in a game like Major League Baseball, big market teams vs small market teams, and it's morally horrendous to observe when it's poorer people (and healthcare systems) in Buffalo competing versus richer people in NYC for medical gear (not meant to represent an actual scenario playing out now). That's of course very hard to level as a playing field, unless it's the Federal Government stepping in and doing the leveling to ensure some equality of supplies.
quotemstr 6y ago
To lots of people, so-called "price gouging" feels wrong, so it must be wrong. Disaster pricing can't just be morally wrong: it has to be economically wrong too. We must make the science fit our intuition, the braying crowd says, and not the other way around. Reality doesn't work that way. The trouble is that when we want something to be true, we find all sorts of specious ways of demonstrating this truth, and in the process, fall afoul of confirmation bias, sampling bias, various statistical errors, and good old-fashioned wishful thinking. Consequently, whenever I see a paper that goes with the grain of internet outrage activism, I apply a very high standard of evidence. It's too easy to believe something that tells people what they want to hear.
- mywittyname 6y ago
  Price gouging is wrong because not helpful at all. 1) it doesn't increase the supply of goods. Everyone is very aware that there's a shortage and they are working hard to produce more. Jacking up the price does not achieve this goal. 2) it encourages hording of critical supplies. People don't want to sell now in hopes of getting a better price tomorrow. They continue to do so until the next batch of supplies come onto the market and finally drive the prices back down 3) it makes people angry. When a group of people see someone with a bunch of something they need to live, and they can't afford it, they might decide to take it by force. This has the potential to cause needless bloodshed. There's literally no benefit to price gouging, but a huge cost to life and social stability. This is why so many people think it feels wrong: when something causes only harm with no benefit, most people would call that wrong. In fact, one of the definitions of wrong is an action or conduct inflicting harm without due provocation or just cause.
  - quotemstr 6y ago
    Re #1: yes it does. For example, during Katrina, high prices encouraged people to drive long distances to bring supplies from other states. Re #2: low prices, not high prices, encourage hoarding. Why not buy 20 multi-packs of toilet paper if it's cheap? If toilet paper is expensive, you buy what you need. The alternative to price gouging isn't everyone getting what he needs: that's a fantasy. The actual alternative is empty shelves and black markets. Re #3: emotion is no basis for public policy. The state has a responsibility to maintain law and order during an emergency. In some situations, intuition serves us well, but economics is not prone to these situations. It really is a good thing for prices to rise in times of scarcity. Thousands and thousands and thousands of years of history tell us that price controls only ever make things worse.
hartator 6y ago
Well just signed up to the Economist today for their coverage of bug governments. Time to unsubscribe now.
- EdwardDiego 6y ago
  Why?
bo1024 6y ago
The article starts by focusing on hoarders, but this is talking past economists focusing on actual producers. I'd strongly agree that it's economically harmful for people to collect rents without providing any new value, by accident of being in the right place. Problematic, but murkier, is the case where someone happens to own a mask factory and was previously happy to sell at $0.1, sees that supply is down and demand up, and raises prices to $1. The factory owner is capturing a lot of the surplus, and one could argue this is basically a rent for being in the right business at the right time rather than any sort of economic incentive to act efficiently. But a capitalist would argue this is reaping the rewards of foresight to invest in mask factories, and the chance of this event helped price and incentivize that investment in the first place. Anyway, on the other side of the market, it's not clear that high prices are helping allocate efficiently if places that need supplies most do not necessarily have the most money available to bid high. The article does get into some arguments about the most interesting case, where actual changes to production and distribution happen because of the crisis and prices' roles in mediating these changes. I like some of what the article says here, but it more argues that the current system is a problem than price-caps are a good solution -- and they have to be combined with other more draconian measures like seizing and redirecting supplies. Maybe a better solution is the government subsidizing all supply purchases massively, and letting prices go wild. (This wouldn't work in isolation either though, we still need some method for mediating between places who gets what.)
osrec 6y ago
Often disasters are also capitalised upon by politicians, who use the ongoing distraction to grab more power or take away certain liberties. They truly are master disaster profiteers.
mbostleman 6y ago
Show me a price "gouger" and I'll show you someone that is about to make their last few sales and have no inventory for an unknown period of time. Everyone always wants the other guy to commit to constraints to shield themselves from risk.
- loopz 6y ago
  Had to scroll down nearly to bottom to find this gem. The failure is systemic.
nonidentified 6y ago
Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics." As a profession, we have a miserable track record on morality. Economists widely endorsed eugenics in the first half of the 20th century, for example. And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes. Personally, I find it hard to entertain an economist's morality argument unless it goes something like, "We shouldn't do that because it could harm people." In this article, The Economist is telling governments to force companies to produce "large supplies at fixed prices". Even if governments had that kind of authority in free countries, and they probably don't, that sounds like a policy that could easily cause harm. Companies can't just push one lever to maximum and expect nothing else to change. But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent. As The Economist pointed out, "3M, one of the world’s biggest manufacturers of high-end masks ... has stuck to its list prices and doubled its production." So there's not very good empirical or theoretical support for this idea. But there's hope for economists - "more than half" of economists surveyed about this idea criticized it.
- theschmed 6y ago
  Is there another kind of argument from morality EXCEPT those that go, "We shouldn't do that because it could harm people?" Hard to take someone seriously who blithely compares genocide to a minimum wage....
  - AnthonyMouse 6y ago
    > Is there another kind of argument from morality EXCEPT those that go, "We shouldn't do that because it could harm people?" The argument in this case appears to be exactly that, i.e. we shouldn't do that because those people would make too much money. > Hard to take someone seriously who blithely compares genocide to a minimum wage.... There was a lot more to dislike about eugenics than genocide. You play the same game from the other side and you get to claim that Stalin's purges are attributable to the minimum wage because minimum wage is a communist policy and therefore responsible for all the things the communists did. Eugenics is a much more mundane stupidity than that, like purposely trying to breed a lack of genetic diversity independent of "race" -- and we still do this with crops and livestock to our peril -- but back then they did it with people. This has obvious parallels to minimum wage, where people are messing with something they don't fully understand based on simplistic assumptions. And then you do things like make it harder for young people to get internships because they can't pay a living wage even though that was never their purpose to begin with, or subject desperate people to really terrible jobs with longer commutes or less flexibility or otherwise higher real costs that actually really messes up their lives because you decreed that they couldn't accept a better job that pays less. Which have serious and long-term effects on large numbers of people.
xapata 6y ago
Monopoly pricing causes a lower supply quantity than competitive pricing. The issue is the monopoly, not the price. The government should address the underlying issue: Why does someone have a de-facto monopoly in some markets? When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency goods.
- dahart 6y ago
  > Why does someone have a de-facto monopoly in some markets? In this case, and in the case of any disaster, that question has an answer, and there’s no problem that a government or anyone can solve. People who happened to make masks and sanitizers, or happened have them in stock, by luck, suddenly became de-facto monopolies. And it will just as suddenly go away. > When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency good. In this case, and in the case of any disaster, new competition cannot appear fast enough to meet the demand before the demand goes away. The demand is inherently unstable. Even if competition arrives, the demand will drop, so someone’s going out of business. This free market belief that things will settle at the right place depends on the assumption that there’s infinite time for the market to settle, it doesn’t really address the fact that without some regulation you can sometimes end up in situations where both producers and consumers lose, where there is only economic loss. If the demand changes too quickly, price gouging costs consumers, too many people got sick from lack of supplies due to price gouging, suppliers ramp up production only to have demand vanish, and they suffer loss of demand at the same time they’re stuck with warehouses of oversupply. Sometimes nobody wins if there’s nothing to hold back reactionary behavior.
  - CryptoPunk 6y ago
    What the free market does is incentivize the correct degree of stockpiling behaviour, by maximizing profits for those who stockpiled a correct amount of the correct goods. Sufficient stockpiles equates to sufficient supply during emergencies, which is exactly what society needs. When prices for goods during a crisis are astronomical, that indicates that the market did not work effectively in producing stockpiles, either because there was a general lack of awareness that a particular good could see a spike in demand, or because anti-price-gouging laws prevented profit-motivated individuals from acting on their awareness. A lack of laws against price-gouging incentivizes the behaviour of identifying potential future demand spikes, and acting on that information, both of which are socially beneficial.
steve76 6y ago
When faced with oblivion, the Beaker people went into a frenzied overdrive, doing only what they knew what to do, stack stones. Invading barbarians took a look or two, then just walked around it and killed them all. If anything, stacking stones impeded their escape and walled them in. On 60 Minutes, they talked to an unemployed worker who was going to be broke in a month. On PBS they talked to the first responder without health insurance. A sad fact of the world is a job and health insurance is just a really complex hug. You are one wrong move from being broke forever job or jobless, or being dead insured or uncovered. What are the real needs? Not getting sick. Stay at home. Reject the world for quiet study. It's really not that difficult once you learn the language. What I want to see? Cosmos Live. Open up the research and let people just watch. Management class needs more knowledge workers.
lazylizard 6y ago
Cant read, paywalled. I'm only curious how to set the price. Like. How to define price gouging. And then how to decide how to allocate the product in question. Lottery? First come first serve? My friends and family first? Why not make everything free and distrbute fairly?
gorgoiler 6y ago
If TP costs $1 a roll to make and is currently selling at $10 a roll, the store selling for $9 wins the game. Then the store selling for $8, ...$7, etc. all the way down to the point where no one is left who is willing to compromise their living standards by dropping their profit margin below a certain percentage. The rules of the game are that: (1) If you collude to keep prices up you go to jail. (2) Citizens must be allowed to move about freely to find the cheapest TP. (3) It’s also cheating if you own such massive amounts of the economy that what you lose in TP profits you gouge back in cell phone bills. (4) A basic standard of living has to be upheld by society to stop the TP manufacturers from only hiring 20 somethings, and contriving a social world that venerates business, hustle and money above all else such that their workers have to live with housemates well into their 30s in tiny apartments without gardens which cost them 65% of their salary in rent to landlords whose debt is owned by the TP companies financing subsidiary ok I need a cup of tea and a back rub now.
- rndmio 6y ago
  When demand outstrips supply by a large margin (and supply cannot be increased) there is no need for collusion for prices to be high, and no incentive to lower your own prices to compete because you can't sell any more of a good you've sold out of.
1996 6y ago
Anti price gouging has worked, as everyone can see with the well stocked hand sanitizer and toilet paper aisles of most supermarkets. We certainly don't have empty shelves reminiscent of USSR. Joke aside, the only things anti price gouging laws have protected are feelings: the feeling that governments control work, and the overall feeling of moral superiority people like to have. Personally, I'm frightened by the next wave of "feels good" legislation that will ride on that, blind to the real world consequences of destroying free market, in the worst times since 1929
Proven 6y ago
First, there's no disaster profiteering in free market. It's business as usual, but with higher prices due to higher demand. Second, if you want to complain about inappropriate and outright fraudulent behavior, take a look at the Covid-related healthcare-rationing "guidelines" in Spain and Canada that withdraw supply to paying customers based on their age. That's not only immoral but it violates commitments to those who were forced into these contracts with the State. If I raise the price of face masks that you can still buy (or not, up to you), that's nothing but goodness. On the other hand when the state kills off the supply of healthcare after charging you for it according to prices and conditions you hadn't even agreed to, that is the worst form of profiteering
brodouevencode 6y ago
> With price gouging, morality trumps economics Click link. Hit paywall. In other words "someone might be ripping you off but unless you pay us we're not going to tell you how". And yes, forced sign ups are a type of paywall.
Symmetry 6y ago
Price controls might work within the US but we can't enforce them internationally and they've already been a big problem for US firms making purchases abroad where they're competing with others willing to bid up the prices of masks. https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent-a-day-in-the-coronavirus-driven-feeding-frenzy-of-n95-mask-sellers-and-buyers-and-this-is-what-i-learned https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent...
- emodendroket 6y ago
  In that care it seems like international coordination is called for
aww_dang 6y ago
A popular domain which specializes in Austrian economics has printed dissenting opinions on this topic. Predictably, that domain is repeatedly flagged by HN. Reading through the comments here, all of the objections to 'price gouging' have been addressed in those articles. I have a hard time squaring HN's mission statement of 'promoting intellectual curiosity' with this contradiction.
treyfitty 6y ago
Don't hospitals + drug companies price things based on need? The relative demand for healthcare related goods are price inelastic (buyers traditionally are willing to pay more because they have no choice). For example, something as simple as one capsule of Tylenol can cost more than $5 at the hospital, while you're captive to the bed. Why doesn't anyone mention this aspect of "price gouging?" It's the same underlying phenomenon of supply and demand, except this time regular people are using it to their advantage rather than hospitals.
dpc_pw 6y ago
Why would anyone stockpile emergency stuff, if in case they are needed, they will be called "profiteers" and taken advantage off? People that rush buy this stuff to make a profit, are actually helpful in promptly preserving the limited supply from running out.

201 points by chwolfe 6y ago

neonate 6y ago

https://archive.md/Op2DB https://archive.md/Op2DB

donio 6y ago
Thanks. Economists who defend posting paywalled articles are wrong too.
SftwrSvior81 6y ago
Also, your local library might have an online subscription to The Economist. Take advantage of it :)
- choward 6y ago
  Yeah, that's real convenient... Either information is free or it isn't. I'm not going to look for some asinine way to access every piece of information I am linked to.
  - SftwrSvior81 6y ago
    I wasn't suggesting you should do it just for this article. My library has a really good selection of newspapers and magazines that they make available online and I use it frequently. I figured some people may not know about that but would find it useful if they knew about it.

alexmingoia 6y ago

Increased production doesn’t occur because the economics don’t work, it doesn’t occur because there’s just no way to physically ramp up production that fast. That’s not really a critique of the economics. If production could be increased that fast the manufacturers would. An important point the article didn’t address is that high prices direct resources to more important uses. If prices are very high then hospitals may be the only ones who can afford them, versus people on the street. 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. That’s why governments are forcing masks to go to healthcare, regardless of price.

SftwrSvior81 6y ago
> high prices direct resources to more important uses 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.
- vlan0 6y ago
  Yep, and if we need proof of that. See NBA COVID testing.
- jimmaswell 6y ago
  Exactly this. Why is Scrooge McDuck buying the entire supply of something somehow better than evenly distributing it? I can't believe people actually think making toilet paper $20 a roll is the correct outcome instead of rationing with price controls. Maybe it's the Ferengi mentality of people seeing themselves as the exploiters.
  - hamandcheese 6y ago
    If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.
    - hannasanarion 6y ago
      Hoarding isn't the (entire) problem, a bigger issue is the sudden shift in consumption from commercial to consumer. Nobody is pooping in office buildings, schools, or shopping centers anymore, everyone is doing it at home. Producers that uses to sell 50/50 consumer to commercial are now selling 90/10 in favor of consumer and they can't reconfigure their production lines fast enough. https://marker.medium.com/what-everyones-getting-wrong-about-the-toilet-paper-shortage-c812e1358fe0?utm_source=pocket-newtab https://marker.medium.com/what-everyones-getting-wrong-about...

im3w1l 6y ago

It's complicated. On the one hand stockpiling in times of plenty and releasing it in times of scarcity is good. On the other hand, cornering the market for an essential good when there isn't even an underlying production issue is bad. And increasing production of scarce goods is a good thing.

olliej 6y ago

By the logic of economists slavery and indentured service, etc are good ideas. Because by economist logic anything that produces more money is better, irrespective of the cost accrued by others. Slavery, and follow on policies of indentured service, crop sharing, etc are the only reasons the pro-slavery states maintained economic relevance as long as they did.

modsWork4appl 6y ago
I could see indentured servitude being acceptable. Btw, is debt different?
- pjkundert 6y ago
  The best indentured servant is the one who thinks they are free. Debt is the money of slaves.
- olliej 6y ago
  Debt is. Indentured servitude is widely understood as being a variation of slavery. Essentially you've got a large debt. You're only allowed to work for the person who you owe that debt to. That person gets to choose your interest rates and your pay rate. For many it is made impossible to ever repay that debt, even if they pay it many times over. Note they can't go somewhere else to get a higher paying job, because to do that they have to pay off their debt.
creddit 6y ago
This is a ridiculous strawman: "Because by economist logic anything that produces more money is better". Almost literally no economist says this.
roenxi 6y ago
That isn't true. Highly educated employees at a modern firm effortlessly outperform slaves. That is why pro-slavery states generally got crushed by their opponents. There isn't a good mechanism to educate slaves; a key plank of the modern economy is letting people sort themselves into the role they can be most productive in. You can't find an example in the last century of an economy of slaves outperforming an economy made up of the free. Economists would uniformly disagree with you; your ideas of what make most economic sense are unprofitable vs a no-slavery economic policy.

barney54 6y ago

Here's an alternative perspective: https://russroberts.info/price-gouging/ https://russroberts.info/price-gouging/

aaron695 6y ago

This article is garbage, we had hospitals wasting supplies at the start because they assumed their price fixed PPE supply would last forever. Now they use plastic bags. And we have a Texas factory saying if the government will just pay for a long contract they will ramp up supply. https://www.washingtonpost.com/business/2020/02/15/coronavirus-mask-shortage-texas-manufacturing/ https://www.washingtonpost.com/business/2020/02/15/coronavir... So this is not about disaster profiteers. This is about total and utter incompetence of hospitals planning ahead. Which happens every day, just it's happening to a lot of people at once compared to your grandmother who died last year of a preventable issue because the bureaucrats in the hospital didn't care and doctors are to specialised to know about the world around them.

mieses 6y ago
your comment will get downvoted but this article will never get flagged.

patmcc 6y ago

It's very interesting to me that (nearly) everyone agrees that reselling disaster supplies like masks, hand sanitizer, etc. for a large profit is terrible, but somehow selling literal essentials like food, housing, and healthcare for profit is just fine.

hartator 6y ago
Maybe free circulation of good and services are a good thing.
- deleted 6y ago
  [deleted]
- stronglikedan 6y ago
  But it's never truly free, since someone will have paid for it at some point. Essential goods and services should be made freely available to those who need them, and are in a lot of places.
Alkhwarizmi 6y ago
You just said the keyword...”resell” vs “well”! The difference between immoral opportunist and opportunists is vast.
duxup 6y ago
Is the bar "large profit" or is there more too it? I think there is more than "large profit" at work here when people talk about disaster profiteers.
- adventured 6y ago
  > I think there is more than "large profit" at work here when people talk about disaster profiteers. There is a critical other element: some reasonable equality of distribution of supplies in emergencies. The persons selling at a large profit are distributing gear to those who can pay the most, which inherently leaves those to drown that can't compete on price. In an emergency like this, ideally per capita NYC should get the same supplies as Buffalo NY (or Detroit, or Baltimore), assuming they are hit similarly per capita by the virus, despite NYC being far wealthier and able to outbid on gear. Properly in an emergency like this, a life in Detroit should have the same value as one in NYC. Rich vs poor distribution is questionable in a game like Major League Baseball, big market teams vs small market teams, and it's morally horrendous to observe when it's poorer people (and healthcare systems) in Buffalo competing versus richer people in NYC for medical gear (not meant to represent an actual scenario playing out now). That's of course very hard to level as a playing field, unless it's the Federal Government stepping in and doing the leveling to ensure some equality of supplies.

quotemstr 6y ago

To lots of people, so-called "price gouging" feels wrong, so it must be wrong. Disaster pricing can't just be morally wrong: it has to be economically wrong too. We must make the science fit our intuition, the braying crowd says, and not the other way around. Reality doesn't work that way. The trouble is that when we want something to be true, we find all sorts of specious ways of demonstrating this truth, and in the process, fall afoul of confirmation bias, sampling bias, various statistical errors, and good old-fashioned wishful thinking. Consequently, whenever I see a paper that goes with the grain of internet outrage activism, I apply a very high standard of evidence. It's too easy to believe something that tells people what they want to hear.

mywittyname 6y ago
Price gouging is wrong because not helpful at all. 1) it doesn't increase the supply of goods. Everyone is very aware that there's a shortage and they are working hard to produce more. Jacking up the price does not achieve this goal. 2) it encourages hording of critical supplies. People don't want to sell now in hopes of getting a better price tomorrow. They continue to do so until the next batch of supplies come onto the market and finally drive the prices back down 3) it makes people angry. When a group of people see someone with a bunch of something they need to live, and they can't afford it, they might decide to take it by force. This has the potential to cause needless bloodshed. There's literally no benefit to price gouging, but a huge cost to life and social stability. This is why so many people think it feels wrong: when something causes only harm with no benefit, most people would call that wrong. In fact, one of the definitions of wrong is an action or conduct inflicting harm without due provocation or just cause.
- quotemstr 6y ago
  Re #1: yes it does. For example, during Katrina, high prices encouraged people to drive long distances to bring supplies from other states. Re #2: low prices, not high prices, encourage hoarding. Why not buy 20 multi-packs of toilet paper if it's cheap? If toilet paper is expensive, you buy what you need. The alternative to price gouging isn't everyone getting what he needs: that's a fantasy. The actual alternative is empty shelves and black markets. Re #3: emotion is no basis for public policy. The state has a responsibility to maintain law and order during an emergency. In some situations, intuition serves us well, but economics is not prone to these situations. It really is a good thing for prices to rise in times of scarcity. Thousands and thousands and thousands of years of history tell us that price controls only ever make things worse.

hartator 6y ago

Well just signed up to the Economist today for their coverage of bug governments. Time to unsubscribe now.

EdwardDiego 6y ago
Why?

bo1024 6y ago

The article starts by focusing on hoarders, but this is talking past economists focusing on actual producers. I'd strongly agree that it's economically harmful for people to collect rents without providing any new value, by accident of being in the right place. Problematic, but murkier, is the case where someone happens to own a mask factory and was previously happy to sell at $0.1, sees that supply is down and demand up, and raises prices to $1. The factory owner is capturing a lot of the surplus, and one could argue this is basically a rent for being in the right business at the right time rather than any sort of economic incentive to act efficiently. But a capitalist would argue this is reaping the rewards of foresight to invest in mask factories, and the chance of this event helped price and incentivize that investment in the first place. Anyway, on the other side of the market, it's not clear that high prices are helping allocate efficiently if places that need supplies most do not necessarily have the most money available to bid high. The article does get into some arguments about the most interesting case, where actual changes to production and distribution happen because of the crisis and prices' roles in mediating these changes. I like some of what the article says here, but it more argues that the current system is a problem than price-caps are a good solution -- and they have to be combined with other more draconian measures like seizing and redirecting supplies. Maybe a better solution is the government subsidizing all supply purchases massively, and letting prices go wild. (This wouldn't work in isolation either though, we still need some method for mediating between places who gets what.)

osrec 6y ago

Often disasters are also capitalised upon by politicians, who use the ongoing distraction to grab more power or take away certain liberties. They truly are master disaster profiteers.

mbostleman 6y ago

Show me a price "gouger" and I'll show you someone that is about to make their last few sales and have no inventory for an unknown period of time. Everyone always wants the other guy to commit to constraints to shield themselves from risk.

loopz 6y ago
Had to scroll down nearly to bottom to find this gem. The failure is systemic.

nonidentified 6y ago

Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics." As a profession, we have a miserable track record on morality. Economists widely endorsed eugenics in the first half of the 20th century, for example. And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes. Personally, I find it hard to entertain an economist's morality argument unless it goes something like, "We shouldn't do that because it could harm people." In this article, The Economist is telling governments to force companies to produce "large supplies at fixed prices". Even if governments had that kind of authority in free countries, and they probably don't, that sounds like a policy that could easily cause harm. Companies can't just push one lever to maximum and expect nothing else to change. But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent. As The Economist pointed out, "3M, one of the world’s biggest manufacturers of high-end masks ... has stuck to its list prices and doubled its production." So there's not very good empirical or theoretical support for this idea. But there's hope for economists - "more than half" of economists surveyed about this idea criticized it.

theschmed 6y ago
Is there another kind of argument from morality EXCEPT those that go, "We shouldn't do that because it could harm people?" Hard to take someone seriously who blithely compares genocide to a minimum wage....
- AnthonyMouse 6y ago
  > Is there another kind of argument from morality EXCEPT those that go, "We shouldn't do that because it could harm people?" The argument in this case appears to be exactly that, i.e. we shouldn't do that because those people would make too much money. > Hard to take someone seriously who blithely compares genocide to a minimum wage.... There was a lot more to dislike about eugenics than genocide. You play the same game from the other side and you get to claim that Stalin's purges are attributable to the minimum wage because minimum wage is a communist policy and therefore responsible for all the things the communists did. Eugenics is a much more mundane stupidity than that, like purposely trying to breed a lack of genetic diversity independent of "race" -- and we still do this with crops and livestock to our peril -- but back then they did it with people. This has obvious parallels to minimum wage, where people are messing with something they don't fully understand based on simplistic assumptions. And then you do things like make it harder for young people to get internships because they can't pay a living wage even though that was never their purpose to begin with, or subject desperate people to really terrible jobs with longer commutes or less flexibility or otherwise higher real costs that actually really messes up their lives because you decreed that they couldn't accept a better job that pays less. Which have serious and long-term effects on large numbers of people.

xapata 6y ago

Monopoly pricing causes a lower supply quantity than competitive pricing. The issue is the monopoly, not the price. The government should address the underlying issue: Why does someone have a de-facto monopoly in some markets? When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency goods.

dahart 6y ago
> Why does someone have a de-facto monopoly in some markets? In this case, and in the case of any disaster, that question has an answer, and there’s no problem that a government or anyone can solve. People who happened to make masks and sanitizers, or happened have them in stock, by luck, suddenly became de-facto monopolies. And it will just as suddenly go away. > When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency good. In this case, and in the case of any disaster, new competition cannot appear fast enough to meet the demand before the demand goes away. The demand is inherently unstable. Even if competition arrives, the demand will drop, so someone’s going out of business. This free market belief that things will settle at the right place depends on the assumption that there’s infinite time for the market to settle, it doesn’t really address the fact that without some regulation you can sometimes end up in situations where both producers and consumers lose, where there is only economic loss. If the demand changes too quickly, price gouging costs consumers, too many people got sick from lack of supplies due to price gouging, suppliers ramp up production only to have demand vanish, and they suffer loss of demand at the same time they’re stuck with warehouses of oversupply. Sometimes nobody wins if there’s nothing to hold back reactionary behavior.
- CryptoPunk 6y ago
  What the free market does is incentivize the correct degree of stockpiling behaviour, by maximizing profits for those who stockpiled a correct amount of the correct goods. Sufficient stockpiles equates to sufficient supply during emergencies, which is exactly what society needs. When prices for goods during a crisis are astronomical, that indicates that the market did not work effectively in producing stockpiles, either because there was a general lack of awareness that a particular good could see a spike in demand, or because anti-price-gouging laws prevented profit-motivated individuals from acting on their awareness. A lack of laws against price-gouging incentivizes the behaviour of identifying potential future demand spikes, and acting on that information, both of which are socially beneficial.

steve76 6y ago

When faced with oblivion, the Beaker people went into a frenzied overdrive, doing only what they knew what to do, stack stones. Invading barbarians took a look or two, then just walked around it and killed them all. If anything, stacking stones impeded their escape and walled them in. On 60 Minutes, they talked to an unemployed worker who was going to be broke in a month. On PBS they talked to the first responder without health insurance. A sad fact of the world is a job and health insurance is just a really complex hug. You are one wrong move from being broke forever job or jobless, or being dead insured or uncovered. What are the real needs? Not getting sick. Stay at home. Reject the world for quiet study. It's really not that difficult once you learn the language. What I want to see? Cosmos Live. Open up the research and let people just watch. Management class needs more knowledge workers.

lazylizard 6y ago

Cant read, paywalled. I'm only curious how to set the price. Like. How to define price gouging. And then how to decide how to allocate the product in question. Lottery? First come first serve? My friends and family first? Why not make everything free and distrbute fairly?

gorgoiler 6y ago

If TP costs $1 a roll to make and is currently selling at $10 a roll, the store selling for $9 wins the game. Then the store selling for $8, ...$7, etc. all the way down to the point where no one is left who is willing to compromise their living standards by dropping their profit margin below a certain percentage. The rules of the game are that: (1) If you collude to keep prices up you go to jail. (2) Citizens must be allowed to move about freely to find the cheapest TP. (3) It’s also cheating if you own such massive amounts of the economy that what you lose in TP profits you gouge back in cell phone bills. (4) A basic standard of living has to be upheld by society to stop the TP manufacturers from only hiring 20 somethings, and contriving a social world that venerates business, hustle and money above all else such that their workers have to live with housemates well into their 30s in tiny apartments without gardens which cost them 65% of their salary in rent to landlords whose debt is owned by the TP companies financing subsidiary ok I need a cup of tea and a back rub now.

rndmio 6y ago
When demand outstrips supply by a large margin (and supply cannot be increased) there is no need for collusion for prices to be high, and no incentive to lower your own prices to compete because you can't sell any more of a good you've sold out of.

1996 6y ago

Anti price gouging has worked, as everyone can see with the well stocked hand sanitizer and toilet paper aisles of most supermarkets. We certainly don't have empty shelves reminiscent of USSR. Joke aside, the only things anti price gouging laws have protected are feelings: the feeling that governments control work, and the overall feeling of moral superiority people like to have. Personally, I'm frightened by the next wave of "feels good" legislation that will ride on that, blind to the real world consequences of destroying free market, in the worst times since 1929

Proven 6y ago

First, there's no disaster profiteering in free market. It's business as usual, but with higher prices due to higher demand. Second, if you want to complain about inappropriate and outright fraudulent behavior, take a look at the Covid-related healthcare-rationing "guidelines" in Spain and Canada that withdraw supply to paying customers based on their age. That's not only immoral but it violates commitments to those who were forced into these contracts with the State. If I raise the price of face masks that you can still buy (or not, up to you), that's nothing but goodness. On the other hand when the state kills off the supply of healthcare after charging you for it according to prices and conditions you hadn't even agreed to, that is the worst form of profiteering

brodouevencode 6y ago

> With price gouging, morality trumps economics Click link. Hit paywall. In other words "someone might be ripping you off but unless you pay us we're not going to tell you how". And yes, forced sign ups are a type of paywall.

Symmetry 6y ago

Price controls might work within the US but we can't enforce them internationally and they've already been a big problem for US firms making purchases abroad where they're competing with others willing to bid up the prices of masks. https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent-a-day-in-the-coronavirus-driven-feeding-frenzy-of-n95-mask-sellers-and-buyers-and-this-is-what-i-learned https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent...

emodendroket 6y ago
In that care it seems like international coordination is called for

aww_dang 6y ago

A popular domain which specializes in Austrian economics has printed dissenting opinions on this topic. Predictably, that domain is repeatedly flagged by HN. Reading through the comments here, all of the objections to 'price gouging' have been addressed in those articles. I have a hard time squaring HN's mission statement of 'promoting intellectual curiosity' with this contradiction.

treyfitty 6y ago

Don't hospitals + drug companies price things based on need? The relative demand for healthcare related goods are price inelastic (buyers traditionally are willing to pay more because they have no choice). For example, something as simple as one capsule of Tylenol can cost more than $5 at the hospital, while you're captive to the bed. Why doesn't anyone mention this aspect of "price gouging?" It's the same underlying phenomenon of supply and demand, except this time regular people are using it to their advantage rather than hospitals.

dpc_pw 6y ago

Why would anyone stockpile emergency stuff, if in case they are needed, they will be called "profiteers" and taken advantage off? People that rush buy this stuff to make a profit, are actually helpful in promptly preserving the limited supply from running out.