16 ms·

> What gouging does in an emergency is allocate the needed supplies to where they are needed the most This statement is disconnected from reality. The concept

> What gouging does in an emergency is allocate the needed supplies to where they are needed the most This statement is disconnected from reality. The concept you're thinking of is that the supplies will go to the people who will pay the most for them. Who will pay the most for them is unrelated to who needs them the most. It has more to do with who has disposable income. If everybody is panicking, then the goods go to the panicking people who have the most disposable income. This has absolutely nothing at all to do with where the goods are most needed. E.g. the ultra wealthy can easily outbid hospitals for PPE. You are free to argue that the ultra wealthy need PPE more than hospitals, but it's going to be a hard sell.

xyzzyz 6y ago
E.g. the ultra wealthy can easily outbid hospitals for PPE. Sure. Jeff Bezos could also purchase and set on fire entirety of this year's agricultural production of California. Will he? Unlikely, as he has no need for it. Same with PPE: if there are so few PPEs that the ultra wealthy can buy up all supply just to cover their needs, or even 10 times their needs, the hospitals are screwed either way, because 10 times the needs of ultra wealthy is a few days of needs of a single hospital.
- ssully 6y ago
  It doesn't have to be Jeff Bezos. At the start of the pandemic in the US there were plenty of stories of bad actors leveraging their credit to buy up high demands items (toilet paper, hand sanitizer, etc) all around their local area and selling it at a premium online.
  - xyzzyz 6y ago
    So the goalpost has been moved from ultra wealthy to anyone with a $2k limit credit card. There is actually an easy way to make it hard for anyone with a $2k credit card to buy up all the supplies: just allow supermarkets to raise the prices.
    - TeMPOraL 6y ago
      The goalpost was placed wrongly, likely by accident. It's rather obvious the problem are the people with a $2k credit card who want to profiteer off a crisis, of whom there's much more than the ultra-rich, and who have much stronger incentives to buy up the supply. > allow supermarkets to raise the prices. That would just price out anyone without $2k credit.
      - AnthonyMouse 6y ago
        > It's rather obvious the problem are the people with a $2k credit card who want to profiteer off a crisis If the store itself is allowed to raise prices then there is no opportunity for profiteering because they'd have to pay the store the market price to begin with. The arbitrage opportunity only exists as a result of the price controls. > That would just price out anyone without $2k credit. It would price them out of buying out the whole store, not price them out of buying a few for their own use.
        TeMPOraL 6y ago
        It's not the arbitrage that's the problem, it's the high prices - no matter whether it's the store or a speculator that sells them. The way I see it, distributing universally needed goods in a crisis is about flattening the distribution of wealth one has vs. amount of goods one can get. Usually competition provides a downward pressure, but I think this fails in times of sudden demand shifts. As long as either the shop or the reseller can expect the demand to be stronger tomorrow than it is today, they have every reason to hold onto their stock and keep rising prices. Eventually, a peak is reached, all those pent-up stock starts getting unloaded on the market, prices go down - but this evolution takes time, and throughout all this, a lot of people cannot afford to buy the good. So it seems better to me to prevent prices from going up, in order to prevent the least wealthy from being priced out of buying emergency supplies, and at the same time eliminate the main incentive for excessive hoarding: the ability to sell the hoard back later, at a profit.
        AnthonyMouse 6y ago
- yakireev 6y ago
  > Unlikely, as he has no need for it. Are you sure? PPE might be a bad example, but back in March rumours have been circulating in my home country about ultra-wealthy "private persons" buying ventilator equipment to be put in their homes. I don't know if those rumors were true, but they very well might have been - those ultra-wealthy used to fly to EU for treatments, but when the borders closed and they were faced with the reality of the medical care system they've built for "commoners"... "Better to buy a ventilator, just for me and for my family. Just in case, you know."
  - marshray 6y ago
    Shortages happen when demand exceeds production capacity, or if prices are artificially capped to make increased production unprofitable. Usually the more of a product is bought, the more get produced. If the world will need more ventilators over the coming months, the best thing is for everyone to buy as many as they can right away. There aren't that many "ultra-wealthy" people who are going to hoard ventilators. Even if they did buy them as an impulse, it would be an unusual scenario for them to sit unused in storage while the local hospital has patients going without them. Even the ultra-wealthy will value their friendly relations with the local ICU doctors more than that box gathering dust in the corner and donations will happen.
  - sjf 6y ago
    I personally know a couple of very wealthy individuals who bought ventilators.
  - xyzzyz 6y ago
    So they bought ventilators. Did hospitals run out of ventilators? No. Did they even get to use the ventilators they bought? No. What's the problem then?
    - yakireev 6y ago
      Actually, yes, there was a lack of ventilators in hospitals in my home country at some point. Luckily, not for long, as it's one of the countries which produces them. I can imagine that some of the neighbouring countries had it worse.
- tombert 6y ago
  I think the GP post was a bit overzealous when they said "ultra wealthy", because even the more-or-less middle class (I'm assuming virtually everyone posting on HN) could afford to pay the ridiculous rates for hand sanitizer and toilet paper. I would complain about the prices but it wouldn't bankrupt me. However, imagine a single parent who just lost their job because of COVID, and thus living on a very restricted income. Is this person less important than me? I don't think so, the world needs service workers a lot more than they need yuppie software engineers like me, but I'm still more likely to be able to afford the necessities. This is always my problem with people who defend price gauging; there's always this hidden implication that a rich person is more deserving of something vital than a poor person. You are entitled to that opinion, but I fundamentally and completely disagree with you.
  - marshray 6y ago
    For any system, one can always construct scenarios where resources are allocated sub-optimally or unfairly. We don't have to like capitalism, sometimes even its proponents refer to it "the worst system except for all the others." But usually the alternative to capitalism isn't perfection, it's something worse. Like a political boss who abuses his power to seize the goods and hand them out as political favors. The big mistake with COVID-19 was telling individuals to boycott masks and that it was wrong to buy or wear them. We could have opened whole new factories for producing them by now, if only demand had been encouraged rather than suppressed.
    - tombert 6y ago
      I'm not a socialist, I more or less support capitalism, but there's a reasonable middle ground between Laissez-faire capitalism and Stalin-esque socialism. It's not like I found this really obscure edge case. Almost 30% of America has lost their job in some capacity; this isn't just some weird contrived example, and it's dishonest to act like it is. Service workers, at least in the US (I haven't lived anywhere else) are pretty damn vital to the US economy, but are also less likely to be able to afford price-gauged supplies like masks and hand-sanitizer than a yuppie like me. If we don't have some form of regulation to stop price guaging, we are sending a signal to 30% of America that they are simply less deserving of life than the yuppies that depend on them. I don't particularly care about people hiking up the price of bread machines and video games and whatnot, but I cannot in good conscience defend people who do things that will lead to poor people dying. EDIT: A few typos.
- varenc 6y ago
  Ultra wealthy aside, what about the slightly wealthy? In CA the bottom 1/4 of households make $35,000 a year. Without price controls, will they ever be able to afford PPE in an emergency when they have to compete with the 15% of people making $150,000 a year?
WalterBright 6y ago
> Who will pay the most for them is unrelated to who needs them the most. This doesn't pass the sniff test. I can afford to pay $100 per roll of TP, but there's no way I need TP that bad. You're basically claiming that supply&demand doesn't work.
- coder543 6y ago
  Not only does it actually pass the sniff test, but allowing price gouging creates a market incentive for people to hoard supplies until they think prices are at their highest, then try to sell their stock for maximum price: https://www.timesfreepress.com/news/local/story/2020/mar/14/he-has-17700-bottles-hand-sanitizer-and-nowhere-sell-them-amid-coronavirus-outbreak/518190/ https://www.timesfreepress.com/news/local/story/2020/mar/14/... Hoarding artificially drives up the prices and keeps emergency supplies out of the hands of those who need it most. When you disallow price gouging, you remove one of the worst incentives for hoarding of critical supplies. You still get some people who think anti-price-gouging laws don't apply to them, or who have never heard of such laws, but that doesn't mean allowing price gouging would improve the situation by any means. On the contrary, more people would hoard for longer, because they see the available supply constricting even faster (due to more people hoarding), driving prices even higher, making their own hoard of supplies seem even more likely to be their ticket to wealth, and if it's perfectly legal, nothing is going to rain on their early retirement. In the above case of someone hoarding 17,700 bottles of hand sanitizer, they ended up donating the entire stock to avoid being fined for price gouging, which seems like an example of the system working correctly to disincentivize hoarding during an emergency: https://www.nytimes.com/2020/04/22/us/hand-sanitizer-matt-colvin-noah-coronavirus.html https://www.nytimes.com/2020/04/22/us/hand-sanitizer-matt-co...
  - ggreer 6y ago
    That man bought a good in a place where there was high supply and low demand. He wanted to sell it in a place that had low supply and high demand. There were people who were desperate for hand sanitizer in coastal urban areas. They were willing to pay this man for it. Had he been left alone, at the end of the day everyone would have been better off. The people who sold him the hand sanitizer are better off (otherwise why are they selling hand sanitizer?). The people who most wanted hand sanitizer would have gotten it, and this man would have been compensated for his foresight and scrappiness. All voluntary transactions with no coercion. Instead the local government sent men with guns to his home and "encouraged" him to "donate" his hand sanitizer. Then it sat in a church until it was eventually distributed to local firemen, policemen, and medics... in a county that (at the time) had a total of 1 confirmed case of coronavirus. Now he's poorer and potentially facing jail time. And thousands of people in places like New York and New Jersey went without hand sanitizer and were more likely to spread the disease. I'm guessing at least a few people died because of this. My go-to story of price-gouging laws causing more problems is Michael Munger's They Clapped: Can Price-Gouging Laws Prohibit Scarcity?[1], which details the effect these laws had after Hurricane Fran struck Raleigh, NC. It's yet another instance of a well-intentioned law that makes people worse-off. 1. https://www.econlib.org/library/Columns/y2007/Mungergouging.html https://www.econlib.org/library/Columns/y2007/Mungergouging....
renewiltord 6y ago
Something seems odd about this. Hypothetical Bezos buys everything if it’s at a high price but avoids buying everything if it’s a lower price? Why wouldn’t he just despatch hordes of people to buy up everything for cheap instead. Also clearly the price controls did not solve the “who needs them the most” or no one would be complaining about “hoarding”.
crazy1van 6y ago
> If everybody is panicking, then the goods go to the panicking people who have the most disposable income. Higher prices often discourage people from over-buying an item. For example, at the beginning of the pandemic, people sensed toilet paper might soon become hard to find. Its not perishable, so when they found it at a normal price, they stocked up. Why not? They know they'll use it eventually and they don't want to be hunting for it a month later. You don't need to be a super wealthy person to pre-purchase a years worth of TP. But, if TP had been selling for double the normal price, they would have bought less. There's no need to pay pandemic prices for TP that you'll be using next year.
- perl4ever 6y ago
  "if TP had been selling for double the normal price, they would have bought less" When people are panicking, I think the price elasticity of demand sharply declines, and the price elasticity of supply is small in the short run. Which in turn means that the time value of money skyrockets. This seems like it might be a clue as to why allocating stuff by price in crises is a bad idea.
- bb88 6y ago
  > Higher prices often discourage people from over-buying an item. Sure if prices are stable. But prices lie on a curve over time. And because prices are on a curve, the price itself is not what the market sees, but instead the curve of the change in price over time. Price hikes cause FOMO. If you need something, and you're worried about the price going up, you're going to buy it now. This has most commonly happened with gasoline. During 9/11, the government had to tell gas stations, e.g., to not hike their prices, because that would cause even more panic -- there was no supply shortage. The second aspect is those that can afford the risk see the sudden spike as an investment opportunity. One of our neighbors in the development used it to buy toilet paper and sell it at $5/roll. They're expecting the price to continue to rise. This is not much different than buying stock when the price of a stock is rising. So yes, in if a market is rational and prices are stable (but high), then you're right. But lately, price spikes seem to be causing fear -- which, btw, people seem to like to game. (Edited for clarity)
- ineedasername 6y ago
Camas 6y ago
>If everybody is panicking, then the goods go to the panicking people who have the most disposable income. This has absolutely nothing at all to do with where the goods are most needed. But banning gouging only exacerbates that

xyzzyz 6y ago

E.g. the ultra wealthy can easily outbid hospitals for PPE. Sure. Jeff Bezos could also purchase and set on fire entirety of this year's agricultural production of California. Will he? Unlikely, as he has no need for it. Same with PPE: if there are so few PPEs that the ultra wealthy can buy up all supply just to cover their needs, or even 10 times their needs, the hospitals are screwed either way, because 10 times the needs of ultra wealthy is a few days of needs of a single hospital.

ssully 6y ago
It doesn't have to be Jeff Bezos. At the start of the pandemic in the US there were plenty of stories of bad actors leveraging their credit to buy up high demands items (toilet paper, hand sanitizer, etc) all around their local area and selling it at a premium online.
- xyzzyz 6y ago
  So the goalpost has been moved from ultra wealthy to anyone with a $2k limit credit card. There is actually an easy way to make it hard for anyone with a $2k credit card to buy up all the supplies: just allow supermarkets to raise the prices.
  - TeMPOraL 6y ago
    The goalpost was placed wrongly, likely by accident. It's rather obvious the problem are the people with a $2k credit card who want to profiteer off a crisis, of whom there's much more than the ultra-rich, and who have much stronger incentives to buy up the supply. > allow supermarkets to raise the prices. That would just price out anyone without $2k credit.
    - AnthonyMouse 6y ago
      > It's rather obvious the problem are the people with a $2k credit card who want to profiteer off a crisis If the store itself is allowed to raise prices then there is no opportunity for profiteering because they'd have to pay the store the market price to begin with. The arbitrage opportunity only exists as a result of the price controls. > That would just price out anyone without $2k credit. It would price them out of buying out the whole store, not price them out of buying a few for their own use.
      - TeMPOraL 6y ago
        It's not the arbitrage that's the problem, it's the high prices - no matter whether it's the store or a speculator that sells them. The way I see it, distributing universally needed goods in a crisis is about flattening the distribution of wealth one has vs. amount of goods one can get. Usually competition provides a downward pressure, but I think this fails in times of sudden demand shifts. As long as either the shop or the reseller can expect the demand to be stronger tomorrow than it is today, they have every reason to hold onto their stock and keep rising prices. Eventually, a peak is reached, all those pent-up stock starts getting unloaded on the market, prices go down - but this evolution takes time, and throughout all this, a lot of people cannot afford to buy the good. So it seems better to me to prevent prices from going up, in order to prevent the least wealthy from being priced out of buying emergency supplies, and at the same time eliminate the main incentive for excessive hoarding: the ability to sell the hoard back later, at a profit.
        AnthonyMouse 6y ago
yakireev 6y ago
> Unlikely, as he has no need for it. Are you sure? PPE might be a bad example, but back in March rumours have been circulating in my home country about ultra-wealthy "private persons" buying ventilator equipment to be put in their homes. I don't know if those rumors were true, but they very well might have been - those ultra-wealthy used to fly to EU for treatments, but when the borders closed and they were faced with the reality of the medical care system they've built for "commoners"... "Better to buy a ventilator, just for me and for my family. Just in case, you know."
- marshray 6y ago
  Shortages happen when demand exceeds production capacity, or if prices are artificially capped to make increased production unprofitable. Usually the more of a product is bought, the more get produced. If the world will need more ventilators over the coming months, the best thing is for everyone to buy as many as they can right away. There aren't that many "ultra-wealthy" people who are going to hoard ventilators. Even if they did buy them as an impulse, it would be an unusual scenario for them to sit unused in storage while the local hospital has patients going without them. Even the ultra-wealthy will value their friendly relations with the local ICU doctors more than that box gathering dust in the corner and donations will happen.
- sjf 6y ago
  I personally know a couple of very wealthy individuals who bought ventilators.
- xyzzyz 6y ago
  So they bought ventilators. Did hospitals run out of ventilators? No. Did they even get to use the ventilators they bought? No. What's the problem then?
  - yakireev 6y ago
    Actually, yes, there was a lack of ventilators in hospitals in my home country at some point. Luckily, not for long, as it's one of the countries which produces them. I can imagine that some of the neighbouring countries had it worse.
tombert 6y ago
I think the GP post was a bit overzealous when they said "ultra wealthy", because even the more-or-less middle class (I'm assuming virtually everyone posting on HN) could afford to pay the ridiculous rates for hand sanitizer and toilet paper. I would complain about the prices but it wouldn't bankrupt me. However, imagine a single parent who just lost their job because of COVID, and thus living on a very restricted income. Is this person less important than me? I don't think so, the world needs service workers a lot more than they need yuppie software engineers like me, but I'm still more likely to be able to afford the necessities. This is always my problem with people who defend price gauging; there's always this hidden implication that a rich person is more deserving of something vital than a poor person. You are entitled to that opinion, but I fundamentally and completely disagree with you.
- marshray 6y ago
  For any system, one can always construct scenarios where resources are allocated sub-optimally or unfairly. We don't have to like capitalism, sometimes even its proponents refer to it "the worst system except for all the others." But usually the alternative to capitalism isn't perfection, it's something worse. Like a political boss who abuses his power to seize the goods and hand them out as political favors. The big mistake with COVID-19 was telling individuals to boycott masks and that it was wrong to buy or wear them. We could have opened whole new factories for producing them by now, if only demand had been encouraged rather than suppressed.
  - tombert 6y ago
    I'm not a socialist, I more or less support capitalism, but there's a reasonable middle ground between Laissez-faire capitalism and Stalin-esque socialism. It's not like I found this really obscure edge case. Almost 30% of America has lost their job in some capacity; this isn't just some weird contrived example, and it's dishonest to act like it is. Service workers, at least in the US (I haven't lived anywhere else) are pretty damn vital to the US economy, but are also less likely to be able to afford price-gauged supplies like masks and hand-sanitizer than a yuppie like me. If we don't have some form of regulation to stop price guaging, we are sending a signal to 30% of America that they are simply less deserving of life than the yuppies that depend on them. I don't particularly care about people hiking up the price of bread machines and video games and whatnot, but I cannot in good conscience defend people who do things that will lead to poor people dying. EDIT: A few typos.
varenc 6y ago
Ultra wealthy aside, what about the slightly wealthy? In CA the bottom 1/4 of households make $35,000 a year. Without price controls, will they ever be able to afford PPE in an emergency when they have to compete with the 15% of people making $150,000 a year?

WalterBright 6y ago

> Who will pay the most for them is unrelated to who needs them the most. This doesn't pass the sniff test. I can afford to pay $100 per roll of TP, but there's no way I need TP that bad. You're basically claiming that supply&demand doesn't work.

coder543 6y ago
Not only does it actually pass the sniff test, but allowing price gouging creates a market incentive for people to hoard supplies until they think prices are at their highest, then try to sell their stock for maximum price: https://www.timesfreepress.com/news/local/story/2020/mar/14/he-has-17700-bottles-hand-sanitizer-and-nowhere-sell-them-amid-coronavirus-outbreak/518190/ https://www.timesfreepress.com/news/local/story/2020/mar/14/... Hoarding artificially drives up the prices and keeps emergency supplies out of the hands of those who need it most. When you disallow price gouging, you remove one of the worst incentives for hoarding of critical supplies. You still get some people who think anti-price-gouging laws don't apply to them, or who have never heard of such laws, but that doesn't mean allowing price gouging would improve the situation by any means. On the contrary, more people would hoard for longer, because they see the available supply constricting even faster (due to more people hoarding), driving prices even higher, making their own hoard of supplies seem even more likely to be their ticket to wealth, and if it's perfectly legal, nothing is going to rain on their early retirement. In the above case of someone hoarding 17,700 bottles of hand sanitizer, they ended up donating the entire stock to avoid being fined for price gouging, which seems like an example of the system working correctly to disincentivize hoarding during an emergency: https://www.nytimes.com/2020/04/22/us/hand-sanitizer-matt-colvin-noah-coronavirus.html https://www.nytimes.com/2020/04/22/us/hand-sanitizer-matt-co...
- ggreer 6y ago
  That man bought a good in a place where there was high supply and low demand. He wanted to sell it in a place that had low supply and high demand. There were people who were desperate for hand sanitizer in coastal urban areas. They were willing to pay this man for it. Had he been left alone, at the end of the day everyone would have been better off. The people who sold him the hand sanitizer are better off (otherwise why are they selling hand sanitizer?). The people who most wanted hand sanitizer would have gotten it, and this man would have been compensated for his foresight and scrappiness. All voluntary transactions with no coercion. Instead the local government sent men with guns to his home and "encouraged" him to "donate" his hand sanitizer. Then it sat in a church until it was eventually distributed to local firemen, policemen, and medics... in a county that (at the time) had a total of 1 confirmed case of coronavirus. Now he's poorer and potentially facing jail time. And thousands of people in places like New York and New Jersey went without hand sanitizer and were more likely to spread the disease. I'm guessing at least a few people died because of this. My go-to story of price-gouging laws causing more problems is Michael Munger's They Clapped: Can Price-Gouging Laws Prohibit Scarcity?[1], which details the effect these laws had after Hurricane Fran struck Raleigh, NC. It's yet another instance of a well-intentioned law that makes people worse-off. 1. https://www.econlib.org/library/Columns/y2007/Mungergouging.html https://www.econlib.org/library/Columns/y2007/Mungergouging....

renewiltord 6y ago

Something seems odd about this. Hypothetical Bezos buys everything if it’s at a high price but avoids buying everything if it’s a lower price? Why wouldn’t he just despatch hordes of people to buy up everything for cheap instead. Also clearly the price controls did not solve the “who needs them the most” or no one would be complaining about “hoarding”.

crazy1van 6y ago

> If everybody is panicking, then the goods go to the panicking people who have the most disposable income. Higher prices often discourage people from over-buying an item. For example, at the beginning of the pandemic, people sensed toilet paper might soon become hard to find. Its not perishable, so when they found it at a normal price, they stocked up. Why not? They know they'll use it eventually and they don't want to be hunting for it a month later. You don't need to be a super wealthy person to pre-purchase a years worth of TP. But, if TP had been selling for double the normal price, they would have bought less. There's no need to pay pandemic prices for TP that you'll be using next year.

perl4ever 6y ago
"if TP had been selling for double the normal price, they would have bought less" When people are panicking, I think the price elasticity of demand sharply declines, and the price elasticity of supply is small in the short run. Which in turn means that the time value of money skyrockets. This seems like it might be a clue as to why allocating stuff by price in crises is a bad idea.
bb88 6y ago
> Higher prices often discourage people from over-buying an item. Sure if prices are stable. But prices lie on a curve over time. And because prices are on a curve, the price itself is not what the market sees, but instead the curve of the change in price over time. Price hikes cause FOMO. If you need something, and you're worried about the price going up, you're going to buy it now. This has most commonly happened with gasoline. During 9/11, the government had to tell gas stations, e.g., to not hike their prices, because that would cause even more panic -- there was no supply shortage. The second aspect is those that can afford the risk see the sudden spike as an investment opportunity. One of our neighbors in the development used it to buy toilet paper and sell it at $5/roll. They're expecting the price to continue to rise. This is not much different than buying stock when the price of a stock is rising. So yes, in if a market is rational and prices are stable (but high), then you're right. But lately, price spikes seem to be causing fear -- which, btw, people seem to like to game. (Edited for clarity)
ineedasername 6y ago

Camas 6y ago

>If everybody is panicking, then the goods go to the panicking people who have the most disposable income. This has absolutely nothing at all to do with where the goods are most needed. But banning gouging only exacerbates that