4 ms·

I heard it explained this way: in a war zone or disaster area it's risky to even have a market, so prices will rise very high. This is good. If prices were kept

I heard it explained this way: in a war zone or disaster area it's risky to even have a market, so prices will rise very high. This is good. If prices were kept artificially low, by price-gouging laws for example, then there would be no market at all, as the risk would not be worth it High prices during the pandemic slows hoarding, and is a signal to producers that there is high demand. When production ramps up to meet demand, prices will lower. This is the situation now. Price-gouging laws encourage hoarding: the first person in line gets to buy everything at artificially low prices. Now they have to make other laws to limit purchases. Now people who need to buy for a large family or community can't buy enough. Now the needs to be another law allowing exceptions....

newsbinator 6y ago
It's possible to prevent price gauging and mitigate hoarding. Say by tying purchases to your ID, so each individual pays a fair price but only gets to purchase n items per t time.
- rocqua 6y ago
  That still doesn't encourage supply to increase much. I would advocate for both. Let prices rise, and ration items
  - wtallis 6y ago
    > That still doesn't encourage supply to increase much. If you aren't sufficiently incentivized to increase production by knowing you're now guaranteed that every piece you produce will sell at the everyday price, as quickly as you can ship it, then it doesn't seem like your everyday price was rational to begin with. In such circumstances, I don't think it's safe to assume that adding steep price gouging will produce any marginal increase in the likelihood of a producer increasing production, on top of whatever production increases are already going to happen just as a result of instantly selling out of all existing stock. But all that is assuming the gouging happens at the production end of the supply chain. If the gouging is happening at the penultimate step of the supply chain and the profits mostly don't make it back to the manufacturer, then price gouging can't do much to incentivize higher production.
    - TeMPOraL 6y ago
      > If the gouging is happening at the penultimate step of the supply chain and the profits mostly don't make it back to the manufacturer, then price gouging can't do much to incentivize higher production. And that was, in fact, the problem with price gouging of PPEs in this pandemic. The manufacturers didn't raise prices, the stores didn't rise prices - it's the middle-men who swooped in, bought all the stock at retailers and wholesalers, and resold at inflated prices. None of the pricing signal made it back to manufacturers.
    - sokoloff 6y ago
      If you have tuned your production to use your capital equipment and manufacturing staff optimally, the next 10% of production is likely to cost you more not less than the last 10% you were making previously. You might need to run overtime. You might need to buy more capital equipment. You might need to light up or rent more warehouse/logistics space. You risk over-producing at a higher cost and hurting your future results. The price signal helps cover those costs and risks, not just telling you to make more, but by making it plainly economical to spend the money to do so. Otherwise, “screw it; I’ll keep making at the tuned level rather than doing all this extra effort to make less margin-% and maybe less free cash flow.”
      - wtallis 6y ago
        > You risk over-producing at a higher cost and hurting your future results. That was very obviously not going to be a risk with this pandemic.
    - rocqua 6y ago
      Take the example of a hurricane in texas. With prices going up, people are incentivized to buy diesel generators in Maine, load 'em up in their flat bed trucks, and just drive 'em down to texas to sell there. The extra price just needs to cover gas and some time. In the case of PPE, the extra price might be enough to pay for totally disrupting base material pipelines away from other products and into the PPE pipeline. There might be production limits that cannot respond quickly. But there are many limits that still can. Over-hours, material acquisition, moving stock around long distance. Normally, these things are un-economical and also bad ideas. In the case of an emergency, these things become good ideas. It makes sense to also make them economical then. Or at the very least, if people are willing to do these things, don't force them to make hugely un-economical decisions out of the goodness of their hearts.
- trhway 6y ago
  what you describe is USSR about 1990-1992. Such measures only make the situation worse and prolong the misery.
  - ClumsyPilot 6y ago
    There is a really famous photo of protesters with a slogan "Race mixing is Communism". This comparison is about as accurate.
    - rendall 6y ago
      ClumsyPilot, I'm not seeing how this doesn't contravene at least these guidelines: Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community. Comments should get more thoughtful and substantive, not less, as a topic gets more divisive. Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something.
      - ClumsyPilot 6y ago
        Perhaps I did not express myself in the best way possible, but I was trying to summarise the following two points at once: I do think that comparing emergency pandemic responce with Soviet Union as a whole is very poor taste and logically flawed. I also wanted to point out that a lot of things happened in Soviet Union, including race mixing, so perhaps one should be careful when drawing conclusions.
- rendall 6y ago
  I don't really see how that helps: * people who don't have ID? * people who genuinely need more supplies? * who decides "fair price"? * who stops a producer from deciding the price isn't worth their time? * prevent corruption, the ID administrator getting more for their friends & family for instance?
ClumsyPilot 6y ago
"is a signal to producers that there is high demand" Otherwise they might have missed it, it's not like they have sales fogures and know about the gloval pandemic. You do not even demonstrate that price gouging is superior to demand-limiting and price controls, which is the entire point of your last paragraph. On what basis or by what metric?
- rendall 6y ago
  I'm not really sure what you're asking, here. "You do not even demonstrate that price gouging is superior to demand-limiting and price controls" I'm not even trying to demonstrate anything. I'm sharing information. If you have better information, make your case!
- imtringued 6y ago
  If you invest in more manufacturing capacity and demand doesn't materialize you're just losing money. So what happens is that manufacturers try to make their company as lean as possible because they assume an unpredictable event like a pandemic will never happen and only produce exactly as many units as needed since there is no benefit to overproduce even a little bit. Once demand starts to explode during the epidemic there is no headroom to produce more masks.

newsbinator 6y ago

It's possible to prevent price gauging and mitigate hoarding. Say by tying purchases to your ID, so each individual pays a fair price but only gets to purchase n items per t time.

rocqua 6y ago
That still doesn't encourage supply to increase much. I would advocate for both. Let prices rise, and ration items
- wtallis 6y ago
  > That still doesn't encourage supply to increase much. If you aren't sufficiently incentivized to increase production by knowing you're now guaranteed that every piece you produce will sell at the everyday price, as quickly as you can ship it, then it doesn't seem like your everyday price was rational to begin with. In such circumstances, I don't think it's safe to assume that adding steep price gouging will produce any marginal increase in the likelihood of a producer increasing production, on top of whatever production increases are already going to happen just as a result of instantly selling out of all existing stock. But all that is assuming the gouging happens at the production end of the supply chain. If the gouging is happening at the penultimate step of the supply chain and the profits mostly don't make it back to the manufacturer, then price gouging can't do much to incentivize higher production.
  - TeMPOraL 6y ago
    > If the gouging is happening at the penultimate step of the supply chain and the profits mostly don't make it back to the manufacturer, then price gouging can't do much to incentivize higher production. And that was, in fact, the problem with price gouging of PPEs in this pandemic. The manufacturers didn't raise prices, the stores didn't rise prices - it's the middle-men who swooped in, bought all the stock at retailers and wholesalers, and resold at inflated prices. None of the pricing signal made it back to manufacturers.
  - sokoloff 6y ago
    If you have tuned your production to use your capital equipment and manufacturing staff optimally, the next 10% of production is likely to cost you more not less than the last 10% you were making previously. You might need to run overtime. You might need to buy more capital equipment. You might need to light up or rent more warehouse/logistics space. You risk over-producing at a higher cost and hurting your future results. The price signal helps cover those costs and risks, not just telling you to make more, but by making it plainly economical to spend the money to do so. Otherwise, “screw it; I’ll keep making at the tuned level rather than doing all this extra effort to make less margin-% and maybe less free cash flow.”
    - wtallis 6y ago
      > You risk over-producing at a higher cost and hurting your future results. That was very obviously not going to be a risk with this pandemic.
  - rocqua 6y ago
    Take the example of a hurricane in texas. With prices going up, people are incentivized to buy diesel generators in Maine, load 'em up in their flat bed trucks, and just drive 'em down to texas to sell there. The extra price just needs to cover gas and some time. In the case of PPE, the extra price might be enough to pay for totally disrupting base material pipelines away from other products and into the PPE pipeline. There might be production limits that cannot respond quickly. But there are many limits that still can. Over-hours, material acquisition, moving stock around long distance. Normally, these things are un-economical and also bad ideas. In the case of an emergency, these things become good ideas. It makes sense to also make them economical then. Or at the very least, if people are willing to do these things, don't force them to make hugely un-economical decisions out of the goodness of their hearts.
trhway 6y ago
what you describe is USSR about 1990-1992. Such measures only make the situation worse and prolong the misery.
- ClumsyPilot 6y ago
  There is a really famous photo of protesters with a slogan "Race mixing is Communism". This comparison is about as accurate.
  - rendall 6y ago
    ClumsyPilot, I'm not seeing how this doesn't contravene at least these guidelines: Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community. Comments should get more thoughtful and substantive, not less, as a topic gets more divisive. Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something.
    - ClumsyPilot 6y ago
      Perhaps I did not express myself in the best way possible, but I was trying to summarise the following two points at once: I do think that comparing emergency pandemic responce with Soviet Union as a whole is very poor taste and logically flawed. I also wanted to point out that a lot of things happened in Soviet Union, including race mixing, so perhaps one should be careful when drawing conclusions.
rendall 6y ago
I don't really see how that helps: * people who don't have ID? * people who genuinely need more supplies? * who decides "fair price"? * who stops a producer from deciding the price isn't worth their time? * prevent corruption, the ID administrator getting more for their friends & family for instance?

ClumsyPilot 6y ago

"is a signal to producers that there is high demand" Otherwise they might have missed it, it's not like they have sales fogures and know about the gloval pandemic. You do not even demonstrate that price gouging is superior to demand-limiting and price controls, which is the entire point of your last paragraph. On what basis or by what metric?

rendall 6y ago
I'm not really sure what you're asking, here. "You do not even demonstrate that price gouging is superior to demand-limiting and price controls" I'm not even trying to demonstrate anything. I'm sharing information. If you have better information, make your case!
imtringued 6y ago
If you invest in more manufacturing capacity and demand doesn't materialize you're just losing money. So what happens is that manufacturers try to make their company as lean as possible because they assume an unpredictable event like a pandemic will never happen and only produce exactly as many units as needed since there is no benefit to overproduce even a little bit. Once demand starts to explode during the epidemic there is no headroom to produce more masks.