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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. Th

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 7y 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 7y ago
  Yep, and if we need proof of that. See NBA COVID testing.
- jimmaswell 7y 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 7y ago
    If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.
    - hannasanarion 7y 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...
      - kortilla 7y ago
        And $20/roll would expedite the changeover pretty quickly.
        asdkjh345fd 7y ago
        Not if the producers believe that this is temporary and will go back to 50/50 again soon. It isn't worth the cost of making big changes just to have to change back again in a month.
        lukas099 7y ago
        It may incentivize them to invest in the ability to quickly change the ratio.
        Robin_Message 7y ago
        For a once every hundred years event? Probably not.
    - jimmaswell 7y ago
      And a lot of people would just have to go without, As opposed to everyone getting a little with price controlled rationing.
  - alexmingoia 7y ago
    The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."
    - kaitai 7y ago
      Only if you have to think about money. What you point to is that poor and maybe middle-class people have to 'redirect' their consumption to 'higher priority things', which in some cases is equivalent to just going without. Insulin, rent, or food? Ah, just prioritize, honey!
      - Kaiyou 7y ago
        If the problem is only poor people, maybe they should figure out how to, y'know, stop being poor. Or maybe the answer is for poor people to be pruned. Not sure what the incentives are for keeping poor people alive. If there aren't any, it's just irrational behavior.
    - SftwrSvior81 7y ago
      Defining "more important" this way seems limited to one actor. In your original post, you talk about multiple actors, namely hospitals and individual people. Different actors are going to have different budgets and preferences. Suppose you consider toilet paper to be an absolute necessity but at $20/roll, it is not affordable to you. I, on the other hand, don't value toilet paper as much but my budget is much bigger than yours so I can afford and am willing to pay $20/roll. When looking across both actors, could we still say that the "more important" need was met?
    - roywiggins 7y ago
      If many people can't afford TP, they will start flushing other things, which will block everyone else's toilets.
  - Camas 7y ago
    In real life the problem isn't Scrooge McDuck buying the entire supply. It's everyone who buys a few extra just to be safe that makes demand rocket.
  - asiachick 7y ago
    If I run out of TP and can't get any more at a reasonable price I will just use cloth towels and wash them right after use. Many people still use cloth diapers with their babies. Running out of TP is a first world problem.
- quotemstr 7y ago
  > High prices will redirect scarce resources to those who have the means and desire to pay for them. That's true. Don't you think it's also true that those who need a good more have a greater desire to pay for that good? I understand that not everyone has the same ability to pay, but we can't crucify the market on the cross of equity. History shows that when you try to allocate goods based on feelings (some random official's idea of "need") and not prices (which reflect true preferences), you create shortages, black markets, and misery. Command economies just don't work. There are ways of addressing monetary inequality (e.g., a stipend) in an emergency that don't break the fundamental resource allocation function of the market.
  - numbsafari 7y ago
    It is both immoral and incorrect to measure need based on who has the most liquidity.
    - arcticbull 7y ago
      Or as we call it 'the US healthcare system'
    - quotemstr 7y ago
      No it isn't. Are you against the idea of prices and money generally? If yes, that's been tried. Doesn't work. If no, why are you carving out a special case in your general acceptance of the price mechanism for this particular family of goods? Why is it okay to charge for food?
      - hannasanarion 7y ago
        The opinion that charging people out the nose for basic necessities is a bad way to allocate resources isn't the same as being "opposed to money"
        numbsafari 7y ago
        100% Correct. Money is still really important, but it’s dishonest and counterfactual to argue that mere access to liquidity can determine the clearing price for a market. We know it doesn’t. That’s why we have the Fed.
- megous 7y ago
  While true, that doesn't really matter. Higher price attracts new producers to setup manfuacture for the now scarce and expensive product more quickly. These more wealthy buyers just end up paying for a quick rampup in manufacture. There's 0 financial reason to ramp up supply if the price is the same, and you're now suddenly in a heavily controlled market. It's risky by itself to ramp up production, because you may end up hiring 100 people and having to fire them 3 months later, which is not exactly pleasant for anyone.
  - hannasanarion 7y ago
    If ramping up production were as simple as hiring 100 more people, it would have been done even if there weren't a crisis. Capacity for manufacture is not infinite and it cannot be changed at a moments notice. It takes months or years to establish supply chains, facilities, machinery, and expertise needed to increase manufacture, and by that time the crisis is over and the extra demand is gone.
    - zo1 7y ago
      On a side note, one could argue that if we didn't have these sorts of "anti price-gauging" price-controls, the market would more readily keep itself open and malleable to quickly ramping up production to items whose price is spiking. I.e. if there is money to be had by jumping on "hot" production items, then there is utility in spending money on being able to jump on it when needed. So perhaps right now the supply chain isn't able to do this, but that doesn't mean it can't move towards it.
    - imtringued 7y ago
      That's only true because nobody can make a profit off extra capacity. If there was a way to make it profitable then the factories would have slack capacity built into them.
    - tomp 7y ago
      How do you know that? What if there was a factory running at less than 100% physically capacity? You could in theory ramp up production very quickly simply by hiring more people, but you won’t, because doing so incures costs (training them, giving them PPE, ...) and you can’t be sure about your income (price rises are banned, exporting is outlawed, your product might even be confiscated).
- CryptoPunk 7y ago
  It doesn't map to desire perfectly, but it does generally. If anyone truly needs a mask, (e.g. a delivery driver delivering packages to customers, a doctor, a nurse), that represents an economic need for whatever service they provide. Their employer will be able to charge a high price for their service, and afford to pay a high price for PPE for them. Even when the mapping is imperfect, the fact that the rich guy was able to afford a mask while others weren't does some social good: it increases the reward for being wealthy, which promotes more productive behaviour from society at large.
  - schoen 7y ago
    The issue about how much the rewards for being wealthy promote productive behavior reminds me of the remark by David D. Friedman that > My imaginary capitalist has capital because he worked hard clearing part of the boundless forest while his employee to be was being lazy and living on what he could gather--so it is entirely just that the capitalist gets part of the output of his land and his employee's labor. But the leftist doesn't like that hypothetical. His imaginary capitalist inherited his capital from a father who stole it. I don't like that hypothetical. http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_of_Oughts.html http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_o... I often suspect Friedman is right that a lot of normative disagreements boil down to different intuitions about what people typically do to become wealthier.
    - CryptoPunk 7y ago
      Yes, agreed on the different intuitions on the source of wealth. The fact that market economies so vastly outperform non-market ones is a pretty clear indication that wealth-generation in market economies generally has positive economic externalities, and as such is socially beneficial on the balance.
  - michaelmrose 7y ago
    >which promotes more productive behavior from society at large. Greed is good is an ideology for the morally impaired with limited attention span. A relatively small differential in wealth and large differential in social standing is arguably enough to achieve maximum "productive" behavior after which diminishing returns are had. As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.
- Kaiyou 7y ago
  Willingness to pay is a pretty good indicator of importance, I think. Where this falls apart is ability to pay. But that's life. If you can't pay, you won't get what you want, no matter how important it may be. Expecting other people to cover for you is called entitlement.
  - XorNot 7y ago
    What do you call it when you expect to be able to screw over your fellow man, and have the state's monopoly on violence protect you for it?
    - Kaiyou 7y ago
      Reasonable.
- deleted 7y ago
  [deleted]
- Nasrudith 7y ago
  It sort of works long term but with an alien detached long term point of view. A bit more third order causes. Essentially if they can afford to pay higher prices continually then it implies some sort of sustained utility. If their decisions are foolish they would start losing said capability squandering it and give it to the "sources" one way or another. That doesn't say anything about the morality, sanity, or time pressures but I can see some truth to it.
bpodgursky 7y ago
https://www.dallasnews.com/news/watchdog/2020/04/03/if-you-imagine-that-a-local-business-making-surgical-face-masks-is-working-247-guess-again/ https://www.dallasnews.com/news/watchdog/2020/04/03/if-you-i... > “Last time he geared up and went three shifts a day working his tail off,” the mayor recalled. “As soon as the issue died, he didn’t have any sales. He had to pay unemployment for all these people, and he had to gear down.” It's not a "physical limit" problem, it's that the costs incurred by rapid ramp-up for a temporary spike in production outweigh the payout -- you're asking businesses to bankrupt themselves to spike production which will fall off in four months... and they're stuck with equipment that hasn't paid itself off, and employees which cost unemployment and benefits. There needs to be an increase in prices NOW (or some other explicit subsidy) to possibly justify the cost.
perl4ever 7y ago
I was able to get kleenex and paper towels saturday because the grocery store is now limiting people to one purchase per day. I am sure there are people who need more than that, and any system of rationing should allow for exceptions. But when people insist that a "free" market is inherently correct, it's no different from insisting that your OS scheduler is perfect even though some processes never get to run https://en.wikipedia.org/wiki/Starvation_(computer_science) https://en.wikipedia.org/wiki/Starvation_(computer_science)
- alexmingoia 7y ago
  The article and my comment are not about rationing. The article is about anti-"price gouging" laws.
  - perl4ever 7y ago
    Don't they go hand in hand? If you can't charge as much as you want, that is an obvious incentive to ration.
- chillacy 7y ago
  Makes sense, in the short term if you have a fixed quantity of a good and demand which exceeds supply then the solution markets will find is to allocate to those with the most resources. At that point the markets are not a particularly fair allocator. In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again.
  - TeMPOraL 7y ago
    > In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again. Except the demand is going to fall back down in the future, and your hypervisor is sentient and realizes there's no point in spending its own resources to provision more vCPUs if they're going to be running idle by the time they're activated.
quotemstr 7y ago
Right. High prices serve as a production signal and a rationing mechanism. There is nothing wrong with rationing access to scarce goods via the price mechanism. The alternative is waste.
- andrewmutz 7y ago
  Your right of course, and Economists agree with you by large margins. But the man on the street finds this offensive, and you can see that in the downvotes your comment is receiving.
  - logicchains 7y ago
    Maybe in this case the men in the street will get their comeuppance when they find themselves left jobless by the indiscriminately economically destructive lockdown policies they cheered on.
  - someguydave 7y ago
    It does demonstrate the degree of historical and economic literacy here on this supposed forum of SV intelligentsia.
weare138 7y ago
> 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. The problem is that doesn't seem to reflect the reality of the situation. Why are hospitals still experiencing shortages? What stops manufacturers and sellers from limiting supply to drive up prices? This is why governments are stepping in and forcing medical supplies to go to healthcare. They wouldn't get there otherwise.
- arcticbull 7y ago
  Not to mention, charging hospitals at the front-line of saving us all exorbitant rates (just to stop masks from going to randos on the street who don't need them) is grotesque. You're gouging our first responders just so people who don't need masks don't get them? Are you kidding me? There must be a more effective answer in a pandemic. This has to be one of the most late-stage capitalist things I've heard all pandemic.
  - AnthonyMouse 7y ago
    The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.
    - arcticbull 7y ago
      > The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. Yeah, that's grotesque. Everyone who works on the front lines of providing care to COVID patients is a first responder, and whether they or their employers pay, is irrelevant. It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later. Not to mention, I've always said we need more expensive health insurance in America. > If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse. That's not true, the government can learn from this catastrophe and not disband the entire pandemic preparedness department a few months before a pandemic. It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices. As they have done with oil. And helium. And raisins.
duxup 7y ago
Would toilet paper only being affordable to the wealthy be "more important uses"? That would seem to be the likely end result if it were greatly restricted. We've already seen that with healthcare in the US. It is expensive, so is it used on more important people?
- alexmingoia 7y ago
  You misunderstand what I'm saying. The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."
  - duxup 7y ago
    Are there alternatives to everything / healthcare?
- Kaiyou 7y ago
  Willingness to spend reflects how important it is for you. Ability to spend puts a cap on that to incentivize people to create more wealth. People with the ability to create wealth are more important to a society than people without this ability. Thus, it follows that people with more money are more important.
  - duxup 7y ago
    How do you measure how much someone creates wealth? If I give a wealthy person $100, and a poor person $100... the poor person will spend it, the rich person generally will not. This plays out in economic stimulus studies time and again.
    - Kaiyou 7y ago
      By his ability to earn money, generally speaking. It's not a perfect translation, but it's the method we currently have. Saving money is better than wasting it away on booze or whatever else the poor person would want to spend it on. Spending money on things you do not need or are expecting a return on is pissing money away. How you spend money makes a big difference.
wpietri 7y ago
> An important point the article didn’t address is that high prices direct resources to more important uses. Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each.
- droopyEyelids 7y ago
  In the absence of a law structuring the sale, money is the best proxy we have for importance. The law, in a system of democratic governance, is a big asterisk to that sentence! It's important too. But aside from that, price signaling is our most 'objective' way to determine importance.
  - dwohnitmok 7y ago
    > In the absence of a law structuring the sale, money is the best proxy we have for importance. I strongly disagree under these circumstances. Prices are one benchmark of importance/value and are often useful as such. But Goodhart's Law comes here in full force. In particular I would argue that when unusual things happen, the usual benchmarks and proxies we have deserve extra scrutiny, since often any discrepancy between a measure and what is being measured is magnified in abnormal times. And right now times are quite abnormal. Now is exactly when traditional benchmarks of value should be re-evaluated to see if they are still useful under present circumstances.
  - adrianN 7y ago
    You can have a democratic system of government and still ration goods during a crisis. Democracy and economic policy are orthogonal things.
- AnthonyMouse 7y ago
  > A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each. Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because by then either demand will be lower or production will be higher. So nobody would be buying a million masks to hoard in a bunker right now. The people buying them would be the people who intend to use them. Then you need to differentiate who needs them the most, but there is no way to do that efficiently from the top of a tower. And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity. A software engineer isn't going to pay a high price for a thousand masks they don't need any more than the billionaire is going to buy a million. But a doctor's office might very well pay a high price for a thousand masks they do need, which is exactly what you want to see because it causes them to get what they need.
opo 7y ago
>...An important point the article didn’t address is that high prices direct resources to more important uses. That is a good point. Another point is (as Paul Romer mentioned in an interview), high profits during a shortage 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. 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 on things that are more likely to get votes. (We've now seen that all the talk of the national stockpile was greatly exaggerated.) A majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/ http://www.igmchicago.org/surveys/price-gouging/
pmorici 7y ago
That kind of assumes the only way to increase production is to add more machines but there is an alternative, higher utilization of existing lines. In normal times it might not be economically feasible to run 24/7 and weekends because of over time laws. During a crises if you can increase production by 180% but you have to increase prices by 100% to cover extra costs of operating nights weekends and over time is that not a good thing?
ruytlm 7y ago
> If prices are very high then hospitals may be the only ones who can afford them, versus people on the street. Every extra dollar spent on those high prices is a dollar that could have been spent providing better care in some other way. Increasing prices does not increase hospitals' budgets for PPE; it only means something else must be cut.
roenxi 7y ago
The buyers aren't really the important part of the story. In a crisis there is a desperate need for producers to produce more of the goods that are in shortage. Blocking crisis profiteering means that whoever is getting the benefits of arbitraging the shortage the only people with no opportunity to benefit are the producers. Ie, the only action that gets blocked is consumers formally allocating more resources to production using money. From that frame it is a bizarre strategic blunder to implement pricing restrictions in a crisis. The problem won't get solved at any hurried speed if it is only a little bit profitable to solve it. Market theory suggests the pre-crisis prices were optimised to minimise profits; they really need to go up to get a response from marginal producers.
deleted 7y ago
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speleding 7y ago
Another point the article misses is that time limited price increases are a good way to dis-incentivise hoarders: "This week only, toilet paper is 100% more expensive". To me that seems like a very reasonable policy to make sure people who need it can still get it, while at the same time sending a strong signal to only buy as much as you need. That the seller profits from the policy is just a side effect.
WalterBright 7y ago
Manufacturing can't ramp up overnight, but supply can increase overnight due to gouging because: 1. people won't buy what they don't really need, leaving more for others 2. people will become motivated to sell their surplus supply rather than hoarding it Further helping things is demand will be reduced due to gouging because people: 1. will not be motivated to buy and hoard 2. will not buy for frivolous purposes Trying to force companies to produce more at a fixed price is less effective than enticing them to via making more money. An economy cannot be run on altruistic impulses.
PunchTornado 7y ago
maybe in the US where hospitals have an infinite amount of money, but certainly not true in other parts of the world where hospitals have a severe cash flow problem now.
wccrawford 7y ago
Actually, there was a post on HN from a guy who makes medical masks that isn't ramping up production as much as he can. The article's headline was basically just that, trying to get as many clicks as possible. 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.
- polskibus 7y ago
  So the 8c is the price of economic independence from China and stability in times of crisis, could be subsidized just like agriculture is in many countries.
  - ed_balls 7y ago
    A repost from my other comment: 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.
- goatinaboat 7y ago
  His masks cost 10c where Chinese-made masks cost 2c. 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.
jmcqk6 7y ago
>An important point the article didn’t address is that high prices direct resources to more important uses. I think it's important to recognize in this case that "important" is being passed off as the same as "ability to pay." >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. This is such a non-sequitur, it almost feels disingenuous. If you remove controls, you're just going to guarantee that the masks go to the people with the highest ability to pay. And that may or may not be doctors and medical personal. In fact, I don't see any evidence anywhere that it would actually lead to more medical personal actually getting these supplies at all.

SftwrSvior81 7y 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 7y ago
Yep, and if we need proof of that. See NBA COVID testing.
jimmaswell 7y 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 7y ago
  If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.
  - hannasanarion 7y 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...
    - kortilla 7y ago
      And $20/roll would expedite the changeover pretty quickly.
      - asdkjh345fd 7y ago
        Not if the producers believe that this is temporary and will go back to 50/50 again soon. It isn't worth the cost of making big changes just to have to change back again in a month.
        lukas099 7y ago
        It may incentivize them to invest in the ability to quickly change the ratio.
        Robin_Message 7y ago
        For a once every hundred years event? Probably not.
  - jimmaswell 7y ago
    And a lot of people would just have to go without, As opposed to everyone getting a little with price controlled rationing.
- alexmingoia 7y ago
  The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."
  - kaitai 7y ago
    Only if you have to think about money. What you point to is that poor and maybe middle-class people have to 'redirect' their consumption to 'higher priority things', which in some cases is equivalent to just going without. Insulin, rent, or food? Ah, just prioritize, honey!
    - Kaiyou 7y ago
      If the problem is only poor people, maybe they should figure out how to, y'know, stop being poor. Or maybe the answer is for poor people to be pruned. Not sure what the incentives are for keeping poor people alive. If there aren't any, it's just irrational behavior.
  - SftwrSvior81 7y ago
    Defining "more important" this way seems limited to one actor. In your original post, you talk about multiple actors, namely hospitals and individual people. Different actors are going to have different budgets and preferences. Suppose you consider toilet paper to be an absolute necessity but at $20/roll, it is not affordable to you. I, on the other hand, don't value toilet paper as much but my budget is much bigger than yours so I can afford and am willing to pay $20/roll. When looking across both actors, could we still say that the "more important" need was met?
  - roywiggins 7y ago
    If many people can't afford TP, they will start flushing other things, which will block everyone else's toilets.
- Camas 7y ago
  In real life the problem isn't Scrooge McDuck buying the entire supply. It's everyone who buys a few extra just to be safe that makes demand rocket.
- asiachick 7y ago
  If I run out of TP and can't get any more at a reasonable price I will just use cloth towels and wash them right after use. Many people still use cloth diapers with their babies. Running out of TP is a first world problem.
quotemstr 7y ago
> High prices will redirect scarce resources to those who have the means and desire to pay for them. That's true. Don't you think it's also true that those who need a good more have a greater desire to pay for that good? I understand that not everyone has the same ability to pay, but we can't crucify the market on the cross of equity. History shows that when you try to allocate goods based on feelings (some random official's idea of "need") and not prices (which reflect true preferences), you create shortages, black markets, and misery. Command economies just don't work. There are ways of addressing monetary inequality (e.g., a stipend) in an emergency that don't break the fundamental resource allocation function of the market.
- numbsafari 7y ago
  It is both immoral and incorrect to measure need based on who has the most liquidity.
  - arcticbull 7y ago
    Or as we call it 'the US healthcare system'
  - quotemstr 7y ago
    No it isn't. Are you against the idea of prices and money generally? If yes, that's been tried. Doesn't work. If no, why are you carving out a special case in your general acceptance of the price mechanism for this particular family of goods? Why is it okay to charge for food?
    - hannasanarion 7y ago
      The opinion that charging people out the nose for basic necessities is a bad way to allocate resources isn't the same as being "opposed to money"
      - numbsafari 7y ago
        100% Correct. Money is still really important, but it’s dishonest and counterfactual to argue that mere access to liquidity can determine the clearing price for a market. We know it doesn’t. That’s why we have the Fed.
megous 7y ago
While true, that doesn't really matter. Higher price attracts new producers to setup manfuacture for the now scarce and expensive product more quickly. These more wealthy buyers just end up paying for a quick rampup in manufacture. There's 0 financial reason to ramp up supply if the price is the same, and you're now suddenly in a heavily controlled market. It's risky by itself to ramp up production, because you may end up hiring 100 people and having to fire them 3 months later, which is not exactly pleasant for anyone.
- hannasanarion 7y ago
  If ramping up production were as simple as hiring 100 more people, it would have been done even if there weren't a crisis. Capacity for manufacture is not infinite and it cannot be changed at a moments notice. It takes months or years to establish supply chains, facilities, machinery, and expertise needed to increase manufacture, and by that time the crisis is over and the extra demand is gone.
  - zo1 7y ago
    On a side note, one could argue that if we didn't have these sorts of "anti price-gauging" price-controls, the market would more readily keep itself open and malleable to quickly ramping up production to items whose price is spiking. I.e. if there is money to be had by jumping on "hot" production items, then there is utility in spending money on being able to jump on it when needed. So perhaps right now the supply chain isn't able to do this, but that doesn't mean it can't move towards it.
  - imtringued 7y ago
    That's only true because nobody can make a profit off extra capacity. If there was a way to make it profitable then the factories would have slack capacity built into them.
  - tomp 7y ago
    How do you know that? What if there was a factory running at less than 100% physically capacity? You could in theory ramp up production very quickly simply by hiring more people, but you won’t, because doing so incures costs (training them, giving them PPE, ...) and you can’t be sure about your income (price rises are banned, exporting is outlawed, your product might even be confiscated).
CryptoPunk 7y ago
It doesn't map to desire perfectly, but it does generally. If anyone truly needs a mask, (e.g. a delivery driver delivering packages to customers, a doctor, a nurse), that represents an economic need for whatever service they provide. Their employer will be able to charge a high price for their service, and afford to pay a high price for PPE for them. Even when the mapping is imperfect, the fact that the rich guy was able to afford a mask while others weren't does some social good: it increases the reward for being wealthy, which promotes more productive behaviour from society at large.
- schoen 7y ago
  The issue about how much the rewards for being wealthy promote productive behavior reminds me of the remark by David D. Friedman that > My imaginary capitalist has capital because he worked hard clearing part of the boundless forest while his employee to be was being lazy and living on what he could gather--so it is entirely just that the capitalist gets part of the output of his land and his employee's labor. But the leftist doesn't like that hypothetical. His imaginary capitalist inherited his capital from a father who stole it. I don't like that hypothetical. http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_of_Oughts.html http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_o... I often suspect Friedman is right that a lot of normative disagreements boil down to different intuitions about what people typically do to become wealthier.
  - CryptoPunk 7y ago
    Yes, agreed on the different intuitions on the source of wealth. The fact that market economies so vastly outperform non-market ones is a pretty clear indication that wealth-generation in market economies generally has positive economic externalities, and as such is socially beneficial on the balance.
- michaelmrose 7y ago
  >which promotes more productive behavior from society at large. Greed is good is an ideology for the morally impaired with limited attention span. A relatively small differential in wealth and large differential in social standing is arguably enough to achieve maximum "productive" behavior after which diminishing returns are had. As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.
Kaiyou 7y ago
Willingness to pay is a pretty good indicator of importance, I think. Where this falls apart is ability to pay. But that's life. If you can't pay, you won't get what you want, no matter how important it may be. Expecting other people to cover for you is called entitlement.
- XorNot 7y ago
  What do you call it when you expect to be able to screw over your fellow man, and have the state's monopoly on violence protect you for it?
  - Kaiyou 7y ago
    Reasonable.
deleted 7y ago
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Nasrudith 7y ago
It sort of works long term but with an alien detached long term point of view. A bit more third order causes. Essentially if they can afford to pay higher prices continually then it implies some sort of sustained utility. If their decisions are foolish they would start losing said capability squandering it and give it to the "sources" one way or another. That doesn't say anything about the morality, sanity, or time pressures but I can see some truth to it.

bpodgursky 7y ago

https://www.dallasnews.com/news/watchdog/2020/04/03/if-you-imagine-that-a-local-business-making-surgical-face-masks-is-working-247-guess-again/ https://www.dallasnews.com/news/watchdog/2020/04/03/if-you-i... > “Last time he geared up and went three shifts a day working his tail off,” the mayor recalled. “As soon as the issue died, he didn’t have any sales. He had to pay unemployment for all these people, and he had to gear down.” It's not a "physical limit" problem, it's that the costs incurred by rapid ramp-up for a temporary spike in production outweigh the payout -- you're asking businesses to bankrupt themselves to spike production which will fall off in four months... and they're stuck with equipment that hasn't paid itself off, and employees which cost unemployment and benefits. There needs to be an increase in prices NOW (or some other explicit subsidy) to possibly justify the cost.

perl4ever 7y ago

I was able to get kleenex and paper towels saturday because the grocery store is now limiting people to one purchase per day. I am sure there are people who need more than that, and any system of rationing should allow for exceptions. But when people insist that a "free" market is inherently correct, it's no different from insisting that your OS scheduler is perfect even though some processes never get to run https://en.wikipedia.org/wiki/Starvation_(computer_science) https://en.wikipedia.org/wiki/Starvation_(computer_science)

alexmingoia 7y ago
The article and my comment are not about rationing. The article is about anti-"price gouging" laws.
- perl4ever 7y ago
  Don't they go hand in hand? If you can't charge as much as you want, that is an obvious incentive to ration.
chillacy 7y ago
Makes sense, in the short term if you have a fixed quantity of a good and demand which exceeds supply then the solution markets will find is to allocate to those with the most resources. At that point the markets are not a particularly fair allocator. In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again.
- TeMPOraL 7y ago
  > In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again. Except the demand is going to fall back down in the future, and your hypervisor is sentient and realizes there's no point in spending its own resources to provision more vCPUs if they're going to be running idle by the time they're activated.

quotemstr 7y ago

Right. High prices serve as a production signal and a rationing mechanism. There is nothing wrong with rationing access to scarce goods via the price mechanism. The alternative is waste.

andrewmutz 7y ago
Your right of course, and Economists agree with you by large margins. But the man on the street finds this offensive, and you can see that in the downvotes your comment is receiving.
- logicchains 7y ago
  Maybe in this case the men in the street will get their comeuppance when they find themselves left jobless by the indiscriminately economically destructive lockdown policies they cheered on.
- someguydave 7y ago
  It does demonstrate the degree of historical and economic literacy here on this supposed forum of SV intelligentsia.

weare138 7y ago

> 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. The problem is that doesn't seem to reflect the reality of the situation. Why are hospitals still experiencing shortages? What stops manufacturers and sellers from limiting supply to drive up prices? This is why governments are stepping in and forcing medical supplies to go to healthcare. They wouldn't get there otherwise.

arcticbull 7y ago
Not to mention, charging hospitals at the front-line of saving us all exorbitant rates (just to stop masks from going to randos on the street who don't need them) is grotesque. You're gouging our first responders just so people who don't need masks don't get them? Are you kidding me? There must be a more effective answer in a pandemic. This has to be one of the most late-stage capitalist things I've heard all pandemic.
- AnthonyMouse 7y ago
  The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.
  - arcticbull 7y ago
    > The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. Yeah, that's grotesque. Everyone who works on the front lines of providing care to COVID patients is a first responder, and whether they or their employers pay, is irrelevant. It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later. Not to mention, I've always said we need more expensive health insurance in America. > If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse. That's not true, the government can learn from this catastrophe and not disband the entire pandemic preparedness department a few months before a pandemic. It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices. As they have done with oil. And helium. And raisins.

duxup 7y ago

Would toilet paper only being affordable to the wealthy be "more important uses"? That would seem to be the likely end result if it were greatly restricted. We've already seen that with healthcare in the US. It is expensive, so is it used on more important people?

alexmingoia 7y ago
You misunderstand what I'm saying. The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."
- duxup 7y ago
  Are there alternatives to everything / healthcare?
Kaiyou 7y ago
Willingness to spend reflects how important it is for you. Ability to spend puts a cap on that to incentivize people to create more wealth. People with the ability to create wealth are more important to a society than people without this ability. Thus, it follows that people with more money are more important.
- duxup 7y ago
  How do you measure how much someone creates wealth? If I give a wealthy person $100, and a poor person $100... the poor person will spend it, the rich person generally will not. This plays out in economic stimulus studies time and again.
  - Kaiyou 7y ago
    By his ability to earn money, generally speaking. It's not a perfect translation, but it's the method we currently have. Saving money is better than wasting it away on booze or whatever else the poor person would want to spend it on. Spending money on things you do not need or are expecting a return on is pissing money away. How you spend money makes a big difference.

wpietri 7y ago

> An important point the article didn’t address is that high prices direct resources to more important uses. Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each.

droopyEyelids 7y ago
In the absence of a law structuring the sale, money is the best proxy we have for importance. The law, in a system of democratic governance, is a big asterisk to that sentence! It's important too. But aside from that, price signaling is our most 'objective' way to determine importance.
- dwohnitmok 7y ago
  > In the absence of a law structuring the sale, money is the best proxy we have for importance. I strongly disagree under these circumstances. Prices are one benchmark of importance/value and are often useful as such. But Goodhart's Law comes here in full force. In particular I would argue that when unusual things happen, the usual benchmarks and proxies we have deserve extra scrutiny, since often any discrepancy between a measure and what is being measured is magnified in abnormal times. And right now times are quite abnormal. Now is exactly when traditional benchmarks of value should be re-evaluated to see if they are still useful under present circumstances.
- adrianN 7y ago
  You can have a democratic system of government and still ration goods during a crisis. Democracy and economic policy are orthogonal things.
AnthonyMouse 7y ago
> A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each. Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because by then either demand will be lower or production will be higher. So nobody would be buying a million masks to hoard in a bunker right now. The people buying them would be the people who intend to use them. Then you need to differentiate who needs them the most, but there is no way to do that efficiently from the top of a tower. And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity. A software engineer isn't going to pay a high price for a thousand masks they don't need any more than the billionaire is going to buy a million. But a doctor's office might very well pay a high price for a thousand masks they do need, which is exactly what you want to see because it causes them to get what they need.

opo 7y ago

>...An important point the article didn’t address is that high prices direct resources to more important uses. That is a good point. Another point is (as Paul Romer mentioned in an interview), high profits during a shortage 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. 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 on things that are more likely to get votes. (We've now seen that all the talk of the national stockpile was greatly exaggerated.) A majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/ http://www.igmchicago.org/surveys/price-gouging/

pmorici 7y ago

That kind of assumes the only way to increase production is to add more machines but there is an alternative, higher utilization of existing lines. In normal times it might not be economically feasible to run 24/7 and weekends because of over time laws. During a crises if you can increase production by 180% but you have to increase prices by 100% to cover extra costs of operating nights weekends and over time is that not a good thing?

ruytlm 7y ago

> If prices are very high then hospitals may be the only ones who can afford them, versus people on the street. Every extra dollar spent on those high prices is a dollar that could have been spent providing better care in some other way. Increasing prices does not increase hospitals' budgets for PPE; it only means something else must be cut.

roenxi 7y ago

The buyers aren't really the important part of the story. In a crisis there is a desperate need for producers to produce more of the goods that are in shortage. Blocking crisis profiteering means that whoever is getting the benefits of arbitraging the shortage the only people with no opportunity to benefit are the producers. Ie, the only action that gets blocked is consumers formally allocating more resources to production using money. From that frame it is a bizarre strategic blunder to implement pricing restrictions in a crisis. The problem won't get solved at any hurried speed if it is only a little bit profitable to solve it. Market theory suggests the pre-crisis prices were optimised to minimise profits; they really need to go up to get a response from marginal producers.

deleted 7y ago

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speleding 7y ago

Another point the article misses is that time limited price increases are a good way to dis-incentivise hoarders: "This week only, toilet paper is 100% more expensive". To me that seems like a very reasonable policy to make sure people who need it can still get it, while at the same time sending a strong signal to only buy as much as you need. That the seller profits from the policy is just a side effect.

WalterBright 7y ago

Manufacturing can't ramp up overnight, but supply can increase overnight due to gouging because: 1. people won't buy what they don't really need, leaving more for others 2. people will become motivated to sell their surplus supply rather than hoarding it Further helping things is demand will be reduced due to gouging because people: 1. will not be motivated to buy and hoard 2. will not buy for frivolous purposes Trying to force companies to produce more at a fixed price is less effective than enticing them to via making more money. An economy cannot be run on altruistic impulses.

PunchTornado 7y ago

maybe in the US where hospitals have an infinite amount of money, but certainly not true in other parts of the world where hospitals have a severe cash flow problem now.

wccrawford 7y ago

Actually, there was a post on HN from a guy who makes medical masks that isn't ramping up production as much as he can. The article's headline was basically just that, trying to get as many clicks as possible. 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.

polskibus 7y ago
So the 8c is the price of economic independence from China and stability in times of crisis, could be subsidized just like agriculture is in many countries.
- ed_balls 7y ago
  A repost from my other comment: 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.
goatinaboat 7y ago
His masks cost 10c where Chinese-made masks cost 2c. 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.

jmcqk6 7y ago

>An important point the article didn’t address is that high prices direct resources to more important uses. I think it's important to recognize in this case that "important" is being passed off as the same as "ability to pay." >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. This is such a non-sequitur, it almost feels disingenuous. If you remove controls, you're just going to guarantee that the masks go to the people with the highest ability to pay. And that may or may not be doctors and medical personal. In fact, I don't see any evidence anywhere that it would actually lead to more medical personal actually getting these supplies at all.