4 ms·

It’s not just laws, also social norms against “overcharging” and making profits from a crisis.

xphilter 6y ago
Again, I call bullshit. What social norm says a company can’t put together a business model of making n95 masks and trying to sell those? The only social norm is against re-selling for massive gains during a pandemic. Not manufacturing and making a profit.
- trentnix 6y ago
  “Massive gains” allow a quicker recoup of the massive investment almost certainly required to procure materials and manufacture masks. Obviously, the current need for masks is artificially high due to the pandemic. And when the pandemic eventually ends, the massive demand for masks will end along with it. Let’s say it takes 5 years to recoup that initial investment to procure materials and manufacture masks at current pricing. Most experts agree the pandemic will have run its course within a year or two. So common sense says getting into the mask business where it will take 5 years to recoup your losses is a bad bet. But if pricing was allowed to follow demand, there is more incentive for aspiring mask manufacturers to take those risks. Maybe the cost to ramp up production can be covered in a couple of years or maybe even a couple of months. That mitigates risk and given opportunity like that, existing mask manufacturers will be better incentivized to scale their production more rapidly. And then more masks get produced quickly, scarcity decreases, and pricing eventually finds equilibrium again. But because we don’t allow “gouging” (whether for legal or social reasons), the mask shortage will continue until existing manufacturers can produce enough to meet demand. And some people that need PPE won’t have it easily available until then, but we will feel awfully good about making sure nobody got gouged. After all, nobody gets gouged if there is nothing to buy.
  - MiroF 6y ago
    Why not just massive investment in making masks that everyone can afford, given historically low interest rates the government is basically spending with free money
    - trentnix 6y ago
      Those are still loans that must be paid back, they just don’t accrue interest as quickly as they would if interest rates were higher. TANSTAAFL
      - MiroF 6y ago
        > Those are still loans that must be paid back Yes, obviously - what did you think deficit spending was? But the point is the cost of fiscal expenditure is lower than it has been in the past, and it seems like we have a really useful thing we could be spending it on. To me, it seems like normal "propensity to consume + ability to pay" style distribution of masks won't help that much in a pandemic that disproportionately spreads among the poor and where the more people wearing the mask, the better.
      - bleepblorp 6y ago
        National government public debt, held by a government that borrows its own currency, is not the same as private debt. For all intents and purposes, it doesn't have to be paid back.
        trentnix 6y ago
        Then it's cronyism - the government gives free resources to one set of manufacturers and the rest are on their own. And do you think the government handed out that money based on merit? Or based on lobbying, political preferences, or name recognition? As Friedman famously asked - who are the angels that are supposed to make these wise, unbiased decisions on our behalf?
        MiroF 6y ago
        > Or based on lobbying, political preferences, or name recognition? Ah yes, as opposed to the rational private market of large capital investments to create new industries, which is apolitical and has no cronyism /s (never mind no price incentive to massively invest in large-scale manufacturing for a temporary pandemic)
  - xphilter 6y ago
    You missed my point; perhaps I wasn’t clear. Manufacturers can charge whatever price. Price gouging is only when you scoop up already made products to sell at a higher price, no value add.
trentnix 6y ago
But being able to “overcharge” provides immediate incentives for others to produce. And when production finds equilibrium with market demand, the price is back to normal (or even cheaper than before if there is too much product in the market). Artificially cheap prices also encourage hoarding and opportunistic buying by those willing to sell on the black market. And that just compounds the problem. So while your desire to prevent gouging is admirable, it is also counterproductive.
- jschwartzi 6y ago
  > And when production finds equilibrium with market demand, the price is back to normal (or even cheaper than before if there is too much product in the market). Are you citing any data for this or are you just assuming this will happen? In my experience when production equals demand everyone continues selling at the ridiculously high prices for months. In a pandemic like this one that's months of watching the death toll climb. There is a very real cost of sticking to a free market ideology when people are dying.
  - trentnix 6y ago
    Data? It's literally the definition of supply and demand. And when there is competition in the marketplace, lower prices and accepting smaller margins is inevitably used to gain competitive advantage. If prices stay artificially high (and uniform) across multiple manufacturers after there is plenty of product in the marketplace, then there may be collusion. Collusion is illegal and should be prosecuted accordingly. And to address your alarmism: if people are dying, it's safe to assume that a lack of PPE contributes to that. And people don't have PPE because the free market isn't being allowed to produce it. That's the point. I'm not the one "sticking" to an ideology.
  - jiscariot 6y ago
    During a hurricane ("when people are dying"), which pricing model do you think keeps fuel re-suppliers taking on the associated risk to move gas in to the areas that most need it?

Again, I call bullshit. What social norm says a company can’t put together a business model of making n95 masks and trying to sell those? The only social norm is against re-selling for massive gains during a pandemic. Not manufacturing and making a profit.

trentnix 6y ago
“Massive gains” allow a quicker recoup of the massive investment almost certainly required to procure materials and manufacture masks. Obviously, the current need for masks is artificially high due to the pandemic. And when the pandemic eventually ends, the massive demand for masks will end along with it. Let’s say it takes 5 years to recoup that initial investment to procure materials and manufacture masks at current pricing. Most experts agree the pandemic will have run its course within a year or two. So common sense says getting into the mask business where it will take 5 years to recoup your losses is a bad bet. But if pricing was allowed to follow demand, there is more incentive for aspiring mask manufacturers to take those risks. Maybe the cost to ramp up production can be covered in a couple of years or maybe even a couple of months. That mitigates risk and given opportunity like that, existing mask manufacturers will be better incentivized to scale their production more rapidly. And then more masks get produced quickly, scarcity decreases, and pricing eventually finds equilibrium again. But because we don’t allow “gouging” (whether for legal or social reasons), the mask shortage will continue until existing manufacturers can produce enough to meet demand. And some people that need PPE won’t have it easily available until then, but we will feel awfully good about making sure nobody got gouged. After all, nobody gets gouged if there is nothing to buy.
- MiroF 6y ago
  Why not just massive investment in making masks that everyone can afford, given historically low interest rates the government is basically spending with free money
  - trentnix 6y ago
    Those are still loans that must be paid back, they just don’t accrue interest as quickly as they would if interest rates were higher. TANSTAAFL
    - MiroF 6y ago
      > Those are still loans that must be paid back Yes, obviously - what did you think deficit spending was? But the point is the cost of fiscal expenditure is lower than it has been in the past, and it seems like we have a really useful thing we could be spending it on. To me, it seems like normal "propensity to consume + ability to pay" style distribution of masks won't help that much in a pandemic that disproportionately spreads among the poor and where the more people wearing the mask, the better.
    - bleepblorp 6y ago
      National government public debt, held by a government that borrows its own currency, is not the same as private debt. For all intents and purposes, it doesn't have to be paid back.
      - trentnix 6y ago
        Then it's cronyism - the government gives free resources to one set of manufacturers and the rest are on their own. And do you think the government handed out that money based on merit? Or based on lobbying, political preferences, or name recognition? As Friedman famously asked - who are the angels that are supposed to make these wise, unbiased decisions on our behalf?
        MiroF 6y ago
        > Or based on lobbying, political preferences, or name recognition? Ah yes, as opposed to the rational private market of large capital investments to create new industries, which is apolitical and has no cronyism /s (never mind no price incentive to massively invest in large-scale manufacturing for a temporary pandemic)
- xphilter 6y ago
  You missed my point; perhaps I wasn’t clear. Manufacturers can charge whatever price. Price gouging is only when you scoop up already made products to sell at a higher price, no value add.

trentnix 6y ago

But being able to “overcharge” provides immediate incentives for others to produce. And when production finds equilibrium with market demand, the price is back to normal (or even cheaper than before if there is too much product in the market). Artificially cheap prices also encourage hoarding and opportunistic buying by those willing to sell on the black market. And that just compounds the problem. So while your desire to prevent gouging is admirable, it is also counterproductive.

jschwartzi 6y ago
> And when production finds equilibrium with market demand, the price is back to normal (or even cheaper than before if there is too much product in the market). Are you citing any data for this or are you just assuming this will happen? In my experience when production equals demand everyone continues selling at the ridiculously high prices for months. In a pandemic like this one that's months of watching the death toll climb. There is a very real cost of sticking to a free market ideology when people are dying.
- trentnix 6y ago
  Data? It's literally the definition of supply and demand. And when there is competition in the marketplace, lower prices and accepting smaller margins is inevitably used to gain competitive advantage. If prices stay artificially high (and uniform) across multiple manufacturers after there is plenty of product in the marketplace, then there may be collusion. Collusion is illegal and should be prosecuted accordingly. And to address your alarmism: if people are dying, it's safe to assume that a lack of PPE contributes to that. And people don't have PPE because the free market isn't being allowed to produce it. That's the point. I'm not the one "sticking" to an ideology.
- jiscariot 6y ago
  During a hurricane ("when people are dying"), which pricing model do you think keeps fuel re-suppliers taking on the associated risk to move gas in to the areas that most need it?