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“Massive gains” allow a quicker recoup of the massive investment almost certainly required to procure materials and manufacture masks. Obviously, the current n

“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)
        trentnix 6y ago
        The market at least has a means of rewarding the rational and punishing the irrational. As you imply, cronyism is how irrational advantage is gained. And price controls are another form of cronyism, as they exclusively protect the entrenched in a market from competition.
        MiroF 6y ago
        There is no "the market." To some extent, I agree with you for publicly traded markets. I do not think it even remotely holds in the illiquid limit of massive-scale private capital investment markets. I would rather that power be wielded by actors exercising public power shaped by institutional constraints than by private actors who can wield it in an arbitrary manner, particularly in the context of a pandemic where there is a huge societal difference between 10 $10 masks and 100 $1 ones.
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.

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)
      - trentnix 6y ago
        The market at least has a means of rewarding the rational and punishing the irrational. As you imply, cronyism is how irrational advantage is gained. And price controls are another form of cronyism, as they exclusively protect the entrenched in a market from competition.
        MiroF 6y ago
        There is no "the market." To some extent, I agree with you for publicly traded markets. I do not think it even remotely holds in the illiquid limit of massive-scale private capital investment markets. I would rather that power be wielded by actors exercising public power shaped by institutional constraints than by private actors who can wield it in an arbitrary manner, particularly in the context of a pandemic where there is a huge societal difference between 10 $10 masks and 100 $1 ones.

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.