Sure, it keeps prices down, but by artificially lowering prices when under high demand, it incentivizes hoarding and exploitation. It also decreases the incentive for increased supply. When local prices increase drastically, it gives incentive for non-local suppliers to enter the market, increasing the quantity of supply.

If the product wasn’t in demand it wouldn’t go up in price. By artificially forcing a low price it guarantees there’s going to be shortages.

By allowing the price to go up it will also enforce people use water wisely. That is they won’t start taking showers or watering plants with bottled water as it will be expensive.

+ Some people in need are priced-out, which is very bad. + Many for whom the price isn't really a problem given it's become a 'health issue' will stock up dramatically, further driving prices up and hoarding from others.

The 'shortage' FYI is probably inherent in a flood type situation.

By far a better solution is rationing, which is exactly what is done in these situations and has been for quite some time. Rationing can be enforced at the point of sale i.e. 'Max 3 per household', definitely through social conditioning, i.e. making sure community members are aware of the need to do this, much like mask-wearing and social distancing, and possibly through more specific measures, i.e. 'ration cards'.

The immediate problem with rationing maybe 'lineups' which is the visual epitome that many people like to point to from the Soviet Era as an example of 'bad economics' from centrally planned economies, and it surely is in the long run, but in the short-run, i.e. in disaster type scenarios, rationing is often a very obvious and useful strategy.

>>>> First - we 100% can draw the line between 'essential goods'.

We already do, we've been doing it long before the pandemic and we continue to do it. We classify all sorts of goods, for all sorts of reasons.

Just because at any given time, the hard-line in the sand may be a little fuzzy, does not mean that we can't still continue to reasonably category goods.

Depending on your country, things like food, drugs, healthcare, dental, water, childcare service, tobacco, cigarettes, alcohol, luxuries - are taxed differently due to their different meaning to society. And yes, there are always fuzzy areas where the lines are drawn.

In trade agreements, we make all sorts of distinctions for a variety of reasons.

Anyone who believes in 'Socialized Medicine' to any extent must grasp the obvious - that this is a social recognition of a separate class of services that are going to be managed differently.

Literally, if you support even Medicare, then you need to grasp this is what happening.

>>>> Second - stopping 'gouging' is absolutely beneficial to people and society at large.

'Price gouging' is bad captialism.

Understand what price gouging is, and that it's different from normal market conditions. Price-gouging happens when events cause a spike in supply or demand that's typically much faster than the systems to support supply (or demand) can manage effectively. A factory cannot 'product and ship barbells' on a dime. Over months, yes, but immediately no.

The negative effects to the system of price-gouging can definitely be bad, and we should try to stop it where it makes sense.

A simple example would be 'bottled water during a flood'. The local store could very well charge such vastly high prices that people would be seriously inconvenienced, or worse - not be able to afford it, while the wealthier people stockpile. The 'free market' (really not in any real sense, just the sense some HN commenters here think) is utterly dysfunctional in that sense, as pooling swaths of capital in the hands of the owner of the 'service station' because he just happened to be sitting on something that became a hyper valuable commodity ... is absolutely, positively, in no way beneficial for anyone in the long run.

The 'local store' gouging people during a flood is in fact one of the better examples of 'bad capitalism' and how in certain circumstances, capitalism completely fails to be an intelligent means to manage goods and services, if fact, at least at that moment, it's maybe the absolute worst kind of system.

Consider a more extreme example of market imperfection related to, but not precisely 'price gouging': Company ABC develops a COVID vaccine. The spent $1B developing it (doesn't matter), and they determine that the 'profit-maximizing price' for their vaccine is $1000 per person, and they'll sell it on credit, i.e. people pay it off $50 a month. They don't care that most of planet earth cannot afford it, because that's not part of the equation.

More nefariously, the company literally does not want large swaths of the world to get it also because they literally want COVID to keep spreading, thereby keeping the demand for their vaccine high.

This example is obviously extreme, but these kinds of dynamics are absolutely already at play, all over the world, in many markets - especially in healthcare, and especially with respect to vaccine development.

On the whole, price-gouging is bad. That it's sometimes a little grey means we have to wade through the subject intelligently.

> That it's sometimes a little grey means we have to wade through the subject intelligently.

I see all too often in threads here this all or nothing thinking. I have no idea if it's more prevalent in technical people, but for some reason people seem to think that unless we can come up with an absolute rule that can be applied blindly in all circumstances, then we shouldn't even try. Human society and human activity aren't like that in practice, and we have a grey, fuzzy, ponderous set of laws governing our society because we keep learning as we go along, and we think and debate our way through grey areas.

I think it's technical people. It's like we're all on the 'autism spectrum' a little bit and have serious difficulty with ambiguity and want to see the 'outcome of the equation, exactly'. Like an obsession with perfection.

There is really no such thing as a purely free market in the end, because everything is deeply dependent on externalities such as education, military, government intervention, investment, trade between nations which is not free, legal asymmetries. We have a 'context' in which a 'free market' exist, but that context is a big deal.

Everyone is demanding that workers get extra hazard pay and additional expenses like PPE, which they absolutely should, but where's that money going to come from?

Chances are, what they were doing was illegal, especially if there was a formal state of emergency declared.

Did you report it to your state attorney general? They're usually pretty good about enforcement and handing out fines when these things are brought to their attention.

I've done quite a few wilderness expeditions lasting up to 3 weeks. You couldn't bring enough bottled water with you. Sometimes I was filter-pumping water from clear streams, other times we had to remove solids from muddy water, boil it, let it settle, filter it, then bleach it.

Under the sorts of circumstances where most people would seriously consider using bleach to render water safe to drink (i.e. highly abnormal ones), bottled water is a luxury. Bleach allows us to meet a biological need starting with water people in the developed world would consider unsafe for drinking.

Bottled water meets the same biological need at greatly increased distribution and packaging costs; that makes it a luxury. Under normal circumstances, there's sufficient capacity in our logistical systems that we don't see those costs. Under abnormal circumstances, bottled water rightly should be one of the first things to be shed from the supply chain given available water that can be made potable with bleach.

On a thru-hike the last link in the supply chain is your back, and as the GP points out there much more important things to carry than bottled water given the ability to purify water found along the way.

As an aside, most of us don't use bleach. Polar Pure has long been my favorite (it's cheap and extremely robust), AquaMira is extremely popular (at higher cost per liter), filters are quite popular on the PCT, particularly the Sawyer Squeeze, and UV solutions (Steripen) also have their adherents. Basically nobody uses Potable Aqua. I'm not even sure why they still make that stuff; clearly it sells.

Are you able to acquire Polar Pure anymore? I thought they stopped making it since the DEA classified crystalized iodine as a meth precursor.

https://www.polarpurewater.com/

More details here:

https://www.polarpurewater.com/new-page

Would you shop at a store where a bottle of soda cost $1 but every hundredth bottle of the same stuff, or on Tuesdays at 4pm, was marked as $5?

but it's not "no water available", but that the seller knows the value of water has grown due to an unavoidable problem (e.g., natural disaster). And without state intervention, the freemarket is gonna cause the price to skyrocket.

As a society, people have decided that it's wrong for price gauging.

But here's the thing: storing that excess water isn't free. Water is already commoditized, which means it's low-margin. If you as a private business, stockpile water for an emergency but can't charge more, you're probably selling at a loss. Which means, it's not economically sustainable to stockpile -- which means, absent the government planning ahead, shortages are going to be pretty bad.

On the other hand, if you know that you can charge 4x for a bottle of water during an emergency, then you might decide to stockpile, knowing you can make your money back when an emergency happens.

So which is worse -- "price gouging" but having the water available, or not having the water available at all?

Or to put it a different way: Stockpiling for emergencies is not free, and it's of value to society. Doesn't it make sense to compensate the people who do it?

These companies sell water at $X/bottle right now under normal circumstances, and they make a profit (otherwise they wouldn't be doing it).

During a disaster they can keep selling at $X/bottle and keep making a profit, only with the higher demand they can now sell a whole lot more of them.

So they can make a lot of money selling an in-demand item during a disaster WITHOUT price gouging.

But they can only sell what they have in stock, which is adjusted to normal times. In the disaster they simply sell out. GP is saying the high prices in a disaster are an incentive to make various investments which won't pay off in normal times.

> During a disaster they can keep selling at $X/bottle and keep making a profit

You ignored the point of the person you're replying to.

This applies to the entire supply chain, too. If there's any disruption (including increased demand), it's the stockpiles -- anyone that stores inventory beyond what they sell regularly -- that compensate. No one is obligated to do this, and there are significant carrying costs to store inventory (space, spoilage, capital tied up).

It's generally not considered the 'free market' in a healthy sense, because long-run/short-run economics are different. Something that costs massively more than the cost of production is usually just the representation of a severy asymmetry in power.

It's obviously not so bad for unessential items, but it's a thing. Most large businesses would not want to gauge because they are looking at the long term, they want to maintain relationships with customers etc..

When prices go up, people realize there's more money to be made. More sellers/manufacturers enter the marketplace in response, increasing the overall supply pool and eventually causing a price crash.

Conversely, limiting prices rewards hoarders as they can justify their actions. It also rewards antisocial actors by constraining supply an increasing the amount of time they can be profitable. Finally it delays the onset of the price crash keeping prices high and making sure the poor can't afford said goods.

Also keep in mind stuff like hand sanitizer, lysol wipes, and tp all have replacements. Soap has been shown to be more effective than hand sanitizer, and bleach on a reusable rag is more effective effective than lysol... And for the last one I'll just let you figure it out ;)

It's unethical in times of emergency, when the response needed is too short term for more capacity to be spun up to meet immediate needs. It allows the worried (wealthy) well to buy up supplies needed by petty, inconsequential bodies like health services.

So no, Amazon does not need to let prices rise.

It also doesn't really prevent gouging, it just moves it to a private market. I'm fairly confident I could get toilet paper at any time on eBay if I needed it and was willing to pay the prices.

The same people who cannot afford the gouged prices likely do not have a schedule flexible enough to constantly check whether the grocery store has toilet paper in stock. Meanwhile, those of us with cushy tech jobs can check out for 15 minutes to go check if there's toilet paper in the store.

I think the unfortunate reality is that nothing short of rationing adequately addresses the problem. Rationing has it's own set of issues.

No, it doesn't, especially when used in combination with controls on the amounts bought or who can buy.

Greed is not always good, however much you try to contort yourself to believe so.

Amazon could start posting “surge price” ratios ala early Uber, so users can realize what’s going on, but realistically we are in a fairly unusual circumstance at the moment.

Most gouging hasn’t lasted long for staples. There’s a bunch of off brand hand sanitizers/masks that have popped up in Seattle. The market has adjusted, and I’m not convinced gouging would have gotten us here faster. The toilet paper I bought is labelled in Korean, which is wacky, but it’s still TP.

Producers can read through the lines, and ramp up production. If it was worth doing fewer at a particular price, it’s almost certainly worth doing 2x more at that same price (or, even better, with small reasonable multiplier). If a producer starts charging too much, other brands will eventually pop up to eat their lunch, so I suspect they won’t get too greedy during a short term spike.

If I go to a marketplace in the real world, I don’t associate the vendor’s individual prices with the entity that runs the market.

In a real marketplace wouldn’t we expect a vendor to notice the price gouging and take advantage of the arbitrage opportunity? Maybe Amazon isn’t really a marketplace?

I was a longtime Prime member until last year, and spent a good amount of time discussing my concerns about the platform with family and friends before ultimately canceling. My impression from those conversations is that many folks just see Amazon as “Amazon” and have no real concept of who they’re actually buying from. A physical market in the real world makes it incredibly obvious who you’re shopping with, and that it’s independent of the marketplace itself. Amazon’s UI is clearly designed not to make this distinction, so marketplace seller behavior reflects more on the Amazon brand than it might otherwise.

Factories and producers do not react to 'spikes'. When the time required to tool/re-tool is considerably longer than market corrections, then this goes out the window.

Gouging is a thing, it's definitely not in Amazon's interest to allow it to happen, they make really not much more and the blow-back could be bad.

There are a lot of retro computer kits these days, I can imagine next up we'll see, "Vintage KIM-1 Computer kit, shipped using 500 N95 respirator masks as packing material to protect it in shipping, only $6,000"

With fixed prices, there is not enough profit in opening new production lines to balance the risk of entering a new market or spending more money on fast transportation methods. It makes the situation even worse because those with free distribution channels will buy all price-fixed products and leave nothing for Amazon customers.

Most emergencies are sufficiently short-term that they don't meaningfully reduce incentives for new producers to enter a market, because there's no time to adapt. E.g. an hour before a hurricane strikes, the price of water bottles and gas won't motivate new producers to enter a market, but there's a social interest to keep these prices stable.

The main problem here is a prolonged "emergency with default rules" that's happening now, because the default rules are targeted at short emergenices. It's reasonable to announce an emergency now and figure out the details later; but now it's been many months and the "later" should have already arrived with specific "pandemic laws" replacing the generic emergency laws, but that's been problematic in many areas.

> the price of water bottles and gas won't motivate new producers to enter a market

It absolutely does. Before the anti-gouging laws, when there was a hurricane, people outside the zone would fill up all their gas cans, get supplies, etc., then drive into the zone and sell them for high prices. After the laws were enacted, that put a stop to that - no gas until FEMA got around to showing up a few days later.

Anti-gouging laws produce shortages, hoarding, mis-allocation, and crime (black markets, theft, etc.).

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.

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.

If you're looking for a market-based solution to hoarding, there are others besides price gouging. Amazon's approach, at least in areas where they have complete control like their pantry, fresh, and whole foods services, can serve as an example: They want happy customers. Happy customers return and buy more stuff. Customers who can't buy what they need because it's sold out due to hoarding are not happy. Amazon institutes a policy for orders through fresh/pantry/whole foods that limit TP purchases to a single package. More customers get needed supplies, stay happy return to buy more, make Amazon more money in the long term.

Supply/Demand price curves & price elasticity are not the only rational market-based methods of price discovery. More subtle and long-term considerations breed other strategies.

On the other hand, a doubled price of TP means that hoarding 10,000 packages becomes far more expensive, and less profitable.

Think market forces can solve all economic problems? Fine. But don't let that blind you to the fact that they have not done it yet and large numbers of people live in poverty and misery at the bad end of the economic scale.

Nope not true - that award goes to communist China

>China lifting more than 800 million people out of poverty since the start of its economic reform is a "great story in human history", World Bank President Jim Yong Kim said today, underlining that there is "lessons to be learned" from this Chinese experience.

https://www.business-standard.com/article/international/chin...

>Over the past three decades, China has successfully led the greatest poverty alleviation program in the history of the world. During that time, an estimated 500 million Chinese were lifted out of extreme poverty.

https://news.trust.org/item/20140408110950-ndf6e/

I'm sure I'll be downvoted for this for some reason or another

You can also calculate the situation for yourself. How much does a unit of toilet paper cost and how long does it last?

To me, the situation looks more like GP could be right and doubling the price of toilet paper doesn't kill people but rather stabilizes the situation. Besides, it's always possible to substitute the usage.

Before March I could always find TP with a ~40% discount. After March you couldn’t find a discount and the price was up about 10%.

I personally didn’t buy any because I already had plenty on hand since I had just bought it on sale. But it didn’t stop anyone else.

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.

No, it actually became hard to find quite rapidly, and remains so (with some relief as reopening progresses), because people stopped going out and using facilities that use commercial paper and therefore were using lots more home paper, and commercial and home-use toilet paper are different products with different supply chains, neither of which has much excess capacity above normal levels and which cannot easily shift to the other.

Hoarding was an overblown factor to which too much was attributed early on by observer’s who don't understand the relevant supply chain dynamics; higher prices would perhaps have reduced it (OTOH, they might not—rapidly rising prices often spur stockpiling-before-it-gets-higher the same way as anticipated or perceived unavailability), but it wouldn't have made a significant difference in the dynamics except that everyone who was able to get toilet paper would have paid even more.

When the panic buying started here in the UK, people were stocking up 2x or 3x the amounts they'd normally buy. You don't need that many customers hauling out multiple 24-roll bags to completely exhaust the in-store stock. Sure, the managers would be stocking up as fast as they could, but even with 80+ pallets per restocking round, customers going locust will have them wiped out in no time.

This resulted in the very predictable photos of empty supermarket shelves. Toilet paper shelves were particularly empty because they couldn't hold that many sales units in the first place.

No wonder the stores imposed limits on how many units of product, or even category, you could buy.

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)

It's premature to assume that the return of normal supply was due to crackdowns of reselling on online marketplaces. There were a bunch of other factors that changed in the same timeframe

* stores imposed per-customer limits

* prices went up (both in terms of absolute prices, and discounts disappearing)

* as hoarders stocked up, their demand also went down(if you just bought 18 month's supply, you'd be less inclined to buy more)

* people were being assured by the media that there won't be a TP shortage, which probably decreased the amount of panic buying

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.

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.

Consider the problem you're having. We'll stipulate this person isn't less important than you. But there isn't enough supply for both, so one of you will go without. If we use pricing to determine who it is, the result is arbitrary -- not based on importance. But if we sell at the non-shortage price until we run out, the result is still arbitrary -- you haven't improved it, it's still not based on importance and someone equally deserving still goes without. The arbitrary method used is different, but it's neither worse nor better.

Meanwhile the higher prices deter the person who was going to go in and buy out the entire store, because they can't afford to do that at the higher price, and then the supply is at least more evenly distributed even if it isn't perfectly evenly distributed.

Better yet, the person who had foresight and spent resources to create a stockpile ahead of time then has a large financial incentive to distribute it instead of continuing to hoard it, and people have a greater incentive to do that again next time (which is good).

Many of the supplies issues aren’t due to actual limited supply but due to behavior patterns that stem from either fearing that something would run out or people taking advantage of the situation buy all the toilet paper in town and set your own price on the black/grey market.

The problem isn’t people having the foresight to spend resources it’s people creating artificial shortages. This isn’t the type of behavior you want to encourage.

This is also not a free market, the free market doesn’t work at short time frames and emergency situations.

At which point you're assuming everybody has the same need, which is completely wrong. Someone walks into the store to buy on behalf of six dozen people because their ordinary supplier is out of stock and you won't give them any more than what you will a single individual. Requiring every individual to come into the store one by one is both highly inefficient and, in this context, the exact opposite of social distancing.

Meanwhile every individual who comes into the store for unrelated reasons then also buys the individual limit on the scarce good even when they don't need it, because the price is still low.

> Many of the supplies issues aren’t due to actual limited supply but due to behavior patterns that stem from either fearing that something would run out or people taking advantage of the situation buy all the toilet paper in town and set your own price on the black/grey market.

Which higher prices prevent, because hoarding large quantities is very expensive when the price is high, and arbitrage is unprofitable because you can't buy low and sell high if you have to buy at the higher price.

> The problem isn’t people having the foresight to spend resources it’s people creating artificial shortages. This isn’t the type of behavior you want to encourage.

You can't corner the market on a global commodity by buying out local stores. If it's selling for $50 where you are and $5 in other places then enterprising people will get in their cars and undercut you until the price is much closer to uniform.

Meanwhile to make money the hoarders would essentially need to act as a cartel (not selling in order to keep the prices even higher), but with uncoordinated actors everybody has the incentive to defect and sell as soon as the price is above fair market value. If you're keeping prices high by hoarding that means somebody is going to be left holding the bag because the price came back down before they unloaded their hoard, and everybody has the incentive to sell first and not be that guy. The hoarder's greatest risk is a container ship full of product comes into port and resolves the shortage overnight -- and the higher the price the more likely that happens.

> This is also not a free market, the free market doesn’t work at short time frames and emergency situations.

There is no evidence for this. The amount of time it takes for people to respond to price signals and arbitrage opportunities is measured in hours, not days or weeks.

The assumption that everyone has the same need is less wrong than a system that implicitly assumes need is proportional to disposable income. Someone walking into a retail store to buy on behalf of six dozen people is theoretically possible, but definitely is not common, and almost certainly less common than someone trying to hoard excess supplies for personal use.

But even if shopping on behalf of the entire neighborhood is common, is protecting that strategy more important than deterring hoarders and preserving the ability of underprivileged people to buy what they need for themselves?

It's easier to game, (eg. buy going to multiple stores or at different times of day) and it only solves the hoarding problem. Price increases solve hoarding, allocation, and encourage new production.

Next time your area is hit with a widespread electric outage and all the generators are sold out, call Home Depots 500 and 1000 miles away. Chances are they’ll have a normal supply on-hand. Maybe some of those will find their way into your area, but I can be pretty damn sure it would happen faster if they were selling at 1.5x the normal price in your area.

Covid made this very clear. Countries that limited price gouging had far less panic buying and far fewer actual shortages than countries that ignored it.

Far from "creating supply" price gouging is read as a signal that supplies are precarious and may run out at any moment. So buyers tend to stock up, just in case. The result is widespread shortages.

And of course generators are useless if they're >500 miles away. No affordable markup is going to get essential goods into an emergency zone if they have to be trucked a long way.

Bottom line is you're going to get much better results from organised community preparedness and intelligent collective response than from a few random spivs hoping to make some extra dollars.

Where I live (NYC) there was pretty extreme panic buying despite laws against gouging. It’s only recently become easy to find toilet paper, masks, etc.

Consider if there's a fixed supply X and Y people. (Y - X) people aren't going to get it. With rationing, the government is going to decide who is more deserving. Naturally, those government officials are going to decide that themselves are the most deserving.

This happens under every socialist system.

When the US government built nuclear shelters, who were they built for? Not you and me. They were built for government officials, and built with every luxury.

The next tier of the "deserving" will be the supporters of those government officials. Next will be the politically popular groups of people who will be more deserving.

Is that fair?

But without rationing, the supply of X will increase to the point where everyone can afford it.

And here I thought they were built for everyone. Oh wait, that was on the Soviet side, where you could expect to find a shelter in any given neighborhood (at least in larger cities). They likely weren't anywhere near as luxury, though.

> But without rationing, the supply of X will increase to the point where everyone can afford it.

That's an assumption that works long-term. In an emergency, you can consider supply as fixed. Ramping up production takes many weeks at best, and producers are unwilling to invest in it anyway, unless they can expect the emergency to last for all these weeks. There's no point in upgrading your manufacturing capacity if, by the time you're done, the demand will be back to normal. It's a point that was explicitly raised by at least one US medical supplies manufacturer in the last two months (probably many more, but I remember that one interview).

In an emergency, your choices are to either a) ration the goods, b) let speculators hoard all the supply and make it unavailable until pretty much the last minute (and a big chunk of it not even then), or c) freeze prices, preventing hoarders from speculating on them while still maintaining basic market mechanisms.

You could, but that would be a mistake.

Consider gas rationing. Everyone gets 5 gallons. But everyone's utility for gas is different. Some need 10 gallons, some need 1 gallon. This reduces availability of gas, because the 1 gallon person is going to hoard the extra 4 "just in case".

Don't believe me? Check out gas rationing in the US in WW2.

Letting the price float means gas is reallocated from the least useful to the most useful uses, effectively increasing the supposedly "fixed" supply. (Hoarding is the least useful of the least useful uses, even if you're just hoarding the part of your ration you don't need.)

As for the Soviet Union, it was notorious for housing shortages. I bet if the supply of air raid shelters had been tested in an emergency, you and I both know it would be insufficient for those who weren't Party members.

> speculators hoard all the supply and make it unavailable

Speculators don't profit if they don't make it available.

Need to read up on that. I'd assume you'd get your allotment in form of a token, which you could trade for something else if you didn't need it. While this wouldn't solve the problem of the price gougers, it would at least ensure a baseline minimum for everyone.

> Speculators don't profit if they don't make it available.

Speculators profit best when they make it available at the point when they can command the highest price, not at the point where it could do most good to mitigate the crisis that's driving the prices up.

Black market gasoline was illegal, but of course that didn't stop a black market from happening, and at much higher prices than the market price would have been.

> Speculators profit best when they make it available at the point when they can command the highest price, not at the point where it could do most good to mitigate the crisis that's driving the prices up.

Those two points are the same.

Classic market economics in a vacuum.

Without the suppression of masks, mass chaos and social unrest would have ensued. The societal fear and unease was easily diverted towards non-essentials (TP, hand sanitizer) - proper public health advice could be given long after shelter-in-place, and thus societal order was established. People would have died had authorities came out the gate stating masks were critical to one’s health.

So many people forget that you have to control the population in times of exceptional fear and anxiety or at any stage you risk a partial or complete societal collapse.

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.

While Americans were being told not to buy them, organized groups were buy them out of American supply channels and shipping them to mainland China.

It would have been better if Americans had bought them and kept them around. They could have been used here by individuals, donated to care providers, or even (horrors) sold for a profit.

They didn't tell people to "boycott" masks, they said that they weren't effective at stopping COVID and that people in hospitals needed them more than the average citizen.

The initial research for masks indicated that they weren't helpful, due to Coronaviruses showing up on the outside of the masks after asking an infected person to cough. It wasn't until a few weeks later when they noticed that the petri dishes that the patients had coughed into had substantially more virus reproduction without masks than with the masks. The people doing the research weren't lying, it was a very logical sequence of events. Sometimes initial research implies an incorrect conclusion, that's why it's called "initial research" and not "conclusive research", which is why they "changed their minds" afterward. This is well documented and is not controversial [0]. The way you frame it, and the use of the word "boycott" is incredibly disrespectful to the people studying this.

[0] https://www.acpjournals.org/doi/10.7326/M20-1342

One cannot claim that both A) masks are "not effective at stopping COVID" and B) "people in hospitals needed them more than the average citizen". It's a laughably obvious contradiction.

This is a lie (sorry, yeah, it is) pushed by people who wanted to bully individuals out of their own PPE in a misguided attempt to make up for the failure to plan by the larger organizations (government, healthcare orgs) that were responsible for doing so.

The reality is that masks are effective in stopping the transmission of coronaviruses and every country in Asia knew this from experience with SARS-1.

EDIT: If this isn't urging a boycott, what is? https://twitter.com/Surgeon_General/status/12337257852839321...

It's not a complete contradiction. Masks are required by hospitals for many reasons other than Covid. The initial logic was if everyone bought out masks there may not be a supply for even these other cases.

Though, I agree this was needed because of their failure to plan. If there was better planning the mask supply would be a lot better. I personally believe they held off on recommending the general public to wear masks because they knew they didn't have supply for medical staff.

Also, come on, don't taunt people to downvote you. That's really not productive. It's also against the HN guidelines.

One can claim that N95 masks are effective at reducing infection rate of hospital staff when properly fitted, changed regularly and worn by people who are trained not to move them around, touch their faces etc etc.

One can also claim that masks which are not well fitted, worn by untrained individuals, who may wear them wrong and who may touch their faces more as a result of wearing them, could cause more harm than good.

No inconsistency there.

Of course you can, and it's not a contradiction. It's true for surgical masks, whose purpose is to prevent the wearer from spreading the infection around; you can apply social distancing in lieu of these masks, which is not possible for medical staff. It's also true for respirators, which require specialized training to be worn correctly, which is something the medical staff has, and regular citizens don't. And again, most people can use social distancing as a substitute.

The problem with masks was always that there just wasn't, and isn't, enough of them available to equip everyone. So governments had to prioritize, and healthcare workers need PPE more than most people not in healthcare. That doesn't justify downplaying the actual effectiveness; if it were up to me, I'd just say that yes, they're effective if properly used, and refocus the propaganda efforts on guilt-tripping society into donating all the hoarded PPEs to hospitals and clinics.

This isn't an argument that they're ineffective for stopping transmission. It's an argument that there are alternatives. And many people aren't/weren't able to fully social distance either, which is why masks were (and are) still useful. Recommending against N95 use while encouraging the use of cloth barriers was an easy, obvious step to take that our structurally incompetent public health agencies failed to do (among many, many other failings).

> It's also true for respirators, which require specialized training to be worn correctly, which is something the medical staff has, and regular citizens don't.

A California study showed that 65%[0] of healthcare workers apply respirators incorrectly; the population baseline is 72%. Your argument proves too much, unless you think that respirators are useless for doctors and all the complaints about PPE shortages were pointless whining.

The point here is that the evidence we had in February and early March was more than enough to make a sane decision on masks, reducing spread and individual risk while not exacerbating hospital shortages (in and of itself a symptom of institutional incompetence). It's beyond me why people are bending over backwards to avoid admitting the institutional stupidity the early days of the pandemic were wracked with.

[0] https://pubmed.ncbi.nlm.nih.gov/10656351/

I don't think it does. Even the stats you quoted show that respirators will be more effective, on average, for doctors, than they will be for general population. At the same time, protecting a medical worker will give you "more bang for your buck" than protecting a random citizen. You should also count in the probability of actual exposure to the virus, which for general population is low, and for the hospitals (both the workers and the hospitalized) is absurdly high. All of this points towards strongly prioritizing PPE supply for medical facilities.

> The point here is that the evidence we had in February and early March was more than enough to make a sane decision on masks, reducing spread and individual risk while not exacerbating hospital shortages

The evidence I saw directly late February/early March was that hospitals around the world were complaining that they have days' worth of PPE supplies and started to cancel elective procedures to conserve them, while the PPE market pretty much entirely dried up (beyond the price gougers offering their hoards on-line). Why hospitals didn't have stockpiles is another matter (and IMO has a lot to do with optimizing costs, and - in countries with public healthcare - cries for leaner governments, cutting out fat, making things more market-driven). But my point is, there was never enough PPE on the market for everyone; there was barely enough for medical workers and industrial use, both of which had predictable demand around which the whole supply chain stabilized. So some kind of action that prevents general population from buying up all PPE on the market was warranted - though I don't like the one taken, which was lying to people about the effectiveness.

Preventing general population buying up all PPE does not necessary require lying about its effectiveness.

This lie has second level effects because now many people think that wearing mask is not effective and it is difficult to implement mask wearing practice.

I know that it has been impossible at least in one country to get people to wear masks because of this.

From your link:

> This experiment did not include N95 masks and does not reflect the actual transmission of infection from patients with COVID-19 wearing different types of masks. We do not know whether masks shorten the travel distance of droplets during coughing. Further study is needed to recommend whether face masks decrease transmission of virus from asymptomatic individuals or those with suspected COVID-19 who are not coughing.

Masks aren't some cutting-edge, space-age drug that may cause cancer. They're a piece of material placed across the nose and mouth, and have been in use for literally thousands of years. We have strong priors on their value in preventing the spread of respiratory diseases in general, and in the absence of proof of their ineffectiveness at doing so for Sars-CoV2, recommending their use was obviously the prudent course of action.

None of the available information, including the study you link, made it a good idea to recommend strongly and repeatedly against wearing masks, up to and including the Surgeon General exhorting "Seriously, people - STOP BUYING MASKS".

The midwit religious adherence to scientism on parts of the left has been one of the biggest cultural failures of the pandemic, a mirror image to parts of the right's knee-jerk distrust of experts. The scientific method is the greatest knowledge-generation engine that's ever existed, but it doesn't mean forfeiting our inability to reason about anything until there's a micro-targeted peer-reviewed trial. Reasoning under uncertainty is difficult, but our public health authorities have proven themselves to be incapable of fairly basic critical thinking. The idea that this is a "logical sequence of events" is beyond laughable.

> allow supermarkets to raise the prices.

That would just price out anyone without $2k credit.

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.

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.

The price controls actually make the price higher, because then the normal channels run out of supply and if you need it you have to turn to the black market. The black market prices are higher both because the people who didn't need it very much but lucked into official supply weren't deterred by pricing (wasting supply) and because the black market operators can collect a risk premium for breaking the rules.

> 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.

If they expect the price to be higher tomorrow then all they have to do is demand that price today. You can still get it from them.

And that's what you want, because if the shortage is going to get worse rather than better over time then you want the higher prices immediately to induce rationing and avoid an even worse shortage in the near future.

> 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

The assumption is that this actually happens.

If the price of a mask triples from $1.50 to $4.50, even someone making minimum wage can afford a mask, or even ten masks, if they really need them. If they don't really need them then they may be deterred by the price, but that's the whole point.

> and at the same time eliminate the main incentive for excessive hoarding: the ability to sell the hoard back later, at a profit.

Which the high prices do by themselves. Paying an extra $30 for ten masks is one thing, but the hoarder who had been intent on buying ten thousand then has to pay a premium of $30,000, which leaves them with all risk and no profit.

That assumes the price is stable or near the peak. But if the price curve is rising, that's no different than a stock that's going up, is it?

You're still buying low and selling high. If the price goes up $10/week for 30 masks, you're making money by hoarding them.

Opportunist speculators who buy up all of supermarket's stock aren't going to be in it for a long term: it's super high risk. They want to buy it cheaper than it should be, and sell for it for what the price should actually be. Holding onto product for long is very risky.

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?

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."

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.

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.

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-co...

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....

> On March 1, the day after the first coronavirus death in the United States, brothers Matt and Noah Colvin set out in a silver SUV to pick up some hand sanitizer. Driving around Chattanooga, Tennessee, they hit a Dollar Tree, then a Walmart, a Staples and a Home Depot. At each store, they cleaned out the shelves.

These people did not buy hand sanitizer in an area with high supply with an intention of getting it to people in need. They recognized that the value of hand sanitizer was about to go up, so they acted faster than everyone else to scoop up as much stock as they could, with the intention of charging people much more than they paid for it.

This had nothing to do with supply chain inefficiency, where supply is sometimes available in the wrong geographic location. They acted before the pandemic was a major national issue, in anticipation that it would become such a thing, in order that they would stand to profit from it without actually bringing any additional value to anyone.

Here's a hypothetical: Imagine that instead of those stores having hand sanitizer for him to buy, they'd taken it off their shelves and sold it online at market prices (much higher than the price a few weeks before). The end effect would be the same, except without him as a middle-man. Would you prefer that the police go to those stores and "encourage" them to "donate" the supplies? In this hypothetical there's no middle-man, making it purely a distribution issue. So if you still have qualms about this hypothetical, then it's the price mechanism that bothers you and not the middle-men.

People love to hate on middle-men and claim they're not creating any value. But large companies are often too sclerotic to do things like arbitrage a couple products in their inventory for a short time. If not for the middle-men, many more people would have to endure shortages. That's the value they create.

You didn’t respond to anything I wrote. Why should I continue this discussion? It wasn’t a supply chain inefficiency issue. Period.

Nationwide chains are perfectly capable of recalling stock from stores that aren’t selling much of something, and moving it to stores that are running low on those supplies.

Local chains are capable of selling those products online, but there’s no need for them to massively mark up the prices to be incentivized to do so. Unless the product is intended to be a loss leader, they already have a profit margin factored in.

Hoarders create an artificial shortage, often in hopes of jacking up the price.

But prices aren't arbitrary. If the price of a good rises, it's because people bought all the ones being sold for lower prices. If people are buying hand sanitizer at $20 per bottle, it's because they can't find any for $19 or $18, let alone for $2 per bottle. The only reason this guy could sell hand sanitizer at such a price was because nobody else was selling it for cheaper.

Now the typical response to this point is that the prices wouldn't be high if we stopped middle-men from buying up all the supply. There's one solution that eliminates middle-men: Stores could raise prices. Then arbitrage wouldn't be possible. Sadly, stores tend not to raise prices because they're worried about violating price-gouging laws. It seems their fears are warranted.

But even in this situation, middle-men don't cause shortages. There aren't massive amounts of hand sanitizer sitting in peoples' garages. These middle-men want to sell their stock and they want to sell it quickly. They know manufacturing will ramp up. They know people will discover or build substitutes. If they wait a couple months to sell, they'll end up losing money. (Especially once you count shipping, storage, and hazardous materials costs. Hand sanitizer is flammable and requires special shipping & insurance.) These middle-men don't destroy any hand sanitizer. They don't hoard it in storage for months. It's the same amount of hand sanitizer, but it goes to desperate people in New York and New Jersey instead of people in a county in Tennessee with only one confirmed infection (at the time).

The main reason for these price spikes and shortages wasn't hoarders or middle-men. It's because demand for hand sanitizer skyrocketed. Every public venue, every workplace, every household wanted it. There simply wasn't enough to go around. This was especially true in New York and New Jersey which were experiencing the brunt of the disease. It was less true in Tennessee where many stores had shelves full of un-utilized supplies. With price caps, people in Tennessee would have bought more bottles of hand sanitizer "just to be sure" and it would likely have been un-utilized or underutilized in their homes. Meanwhile, people in the epicenter of the infection would go without.

Had this man been allowed to sell his goods, and had he sold them at a lower price, he would have run out sooner and they wouldn't have been utilized as efficiently. The lucky people who first found out about it would have bought more "just in case" since, well, supply is scarce. And when someone else showed up an hour later, so desperate that they'd be willing to pay $20/bottle, they'd be out of luck.

Whether or not this guy makes a huge profit is insignificant compared to whether or not supplies get to the people who are most desperate for them. That's what price mechanisms encourage. It's certainly not perfect, but it's a damn sight better than price caps.

Yet the only way he could have profited is if there was a shortage somewhere, a.k.a a supply chain inefficiency. Either the supply chain is imbalanced and he gets an opportunity to make money or it’s not. You can’t have it both ways.

> Nationwide chains are perfectly capable of recalling stock from stores that aren’t selling much of something, and moving it to stores that are running low on those supplies.

Not efficiently. Recalling inventory from stores is a very slow process that doesn’t fit their normal model. Also, the inventories don’t come from a grand central warehouse so moving stock from a Walmart in California to a Walmart in New York isn’t really something that the infrastructure can support.

> but there’s no need for them to massively mark up the prices to be incentivized to do so. Unless the product is intended to be a loss leader, they already have a profit margin factored in.

That’s incompetence on the local chains, not that they don’t like more profit. Managers have no incentives to monitor prices and redistribute to higher priced markets so the local chains sell at bad prices.

> Hoarders create an artificial shortage, in hopes of jacking up the price.

No, hoarders do not create shortages. They try to profit during shortages. It’s a critical distinction. Hoarders did not account for the toilet paper shortage, the massive change from commercial to private TP consumption did that.

I recommend reading up on how markets get cornered to gain an understanding of what is required to artificially create a shortage. You’ll quickly realize that it takes an obscene amount of purchasing to meaningfully move a market.

Otherwise we’d have monthly occurrences of people cornering bottled water markets without there being an impending storm.

TLDR; shortages exist because everyone is buying more. People just don’t like price gouging because they are emotional and don’t like paying more when there is a shortage despite this being the mechanism that drives markets around the globe every day (energy, grain, beef, pork, currency, etc).

But they can, because supply chains can actually run in both directions. GP explicitly mentioned the concept of recalling the stock. And while the supply flowing in reverse isn't moving as efficiently as it normally is, it's still likely much more efficient than a guy fedexing packages to random people across the country.

> it's still likely much more efficient than a guy fedexing packages to random people across the country.

Not from the time perspective of someone who needs things quickly. I want something in 3 days, not 3 weeks.

The supply chain has no incentive to redirect resources in the absence of a proper price signal.

It’s much more likely that anti-hoarding laws are passed in order to prosecute people who are planning to price gouge but haven’t been caught in the act.

Would you care to explain why lots of people would hoard when it’s both unprofitable and unnecessary to do so?

Once you have a supply of toilet paper, most people are not going to buy a ten year supply of toilet paper just because it isn’t exorbitantly priced.

People who think they can make a profit absolutely will buy a ten year supply of toilet paper.

Let me stop you there. The TP shortage was because of normal people buying enough toilet paper to stay at home full time. That’s it.

About half of the TP production goes to giant commercial rolls that go in businesses. The other half for home brands. The commercial factories need to be retooled for smaller rolls and new supply chains need to be setup for commercial to fill the home demand.

With absolutely no hoarding, the home demand would increase at least a 1/4. Then throw in people just buying multiple packs to make it 2 weeks without shopping and you’ve already wiped out the supply.

> People who think they can make a profit absolutely will

Good. I would rather have the option to pay twice the normal price than to wipe my ass with a rock because my government rationed supply ran out.

Finally, anti price gouging behavior encourages poor planning by the population at large. Maybe paying $50 for a flat of water bottles will teach you to fucking think ahead and spend $150 on a critical supplies kit.

Yes, most economists would agree that there are cases when supply and demand do not allocate resources most efficiently. The economics 101 idea your repeating requires that all actors be rational. We know that isn't the case, both in simple cases like this one and in more complex cases, like those that led to the financial crisis.

As soon as you introduce irrational actors, it isn't unreasonable for governments to step in and prevent irrational actors from harming the otherwise reasonable processes.

Price gouging, in fact, encourages this kind of irrational behavior. A rational actor would have realized that we weren't going to run out of toilet paper, and that stocking up on hundreds of rolls wasn't helpful. A rational actor would have continued buying toilet paper at their normal rate, maybe purchasing an extra roll or two.

The people who bought pallets of toilet paper were not acting rationally. And to prevent the issues irrational actors cause, regulations like per-customer limits lead to better allocation of resources.

Society as a whole is better off when everyone has access to toilet paper (or PPE or hand sanitizer). Reducing access only to those who are willing to pay 100x the normal price is not rational. It is a failure of the market.

It does not require people to be rational. I don't know who you took Econ 101 from, but you should ask for your money back.

What it does do is provide incentives for rational behavior.

> Reducing access only to those who are willing to pay 100x the normal price is not rational. It is a failure of the market.

It does not reduce access at all. A sanitizer hoard only has value if it can be sold to people who use it. The hoarder would also know that supply will increase, and he'll have to sell it fast in order to realize a profit. Furthermore, the higher prices encourage only the best use of the sanitizers are made, and encourage more supply.

Yes, and when/if enough actors do act irrationally, the efficient allocation of resources breaks down.

> A sanitizer hoard only has value if it can be sold to people who use it. The hoarder would also know that supply will increase, and he'll have to sell it fast in order to realize a profit.

Only if individuals are acting rationally. If I am panicking due to a pandemic that I believe hand sanitizer will protect me from, I will be willing to purchase a lot for personal consumption. If enough people do this, it prevents others who have need from getting their own hand sanitizer.

That is not "where they are needed the most". A middle class family who can afford to stay home does not need hand sanitizer more than a frontline worker or a hospital, in fact it's likely better for that family if the frontline worker gets the sanitizer instead. But acting in a panic, and acting irrationally, one can purchase enough hand sanitizer that the price rises enough to prevent those with greater need from accessing it.

> Furthermore, the higher prices encourage only the best use of the sanitizers are made

Except they don't, as we just demonstrated. Hospitals and frontline workers are rationally the best places for a limited supply of hand sanitizer. Increasing the prices does not result in those people getting the hand sanitizer, but instead it results in wealthy individuals getting it.

Hospitals don't have the funding to compete on price with panicked upper class people who believe that hand sanitizer will save their lives. Purchasing quotas are a much better solution, since there is value in as many people as possible having some hand sanitizer for personal use. And if you institute quotas, you don't need to increase price to limit demand, so the only reason to increase price would be to profiteer.

... eventually. A smart hoarder will just keep their hoard until extra manufacturing is about to start, and dump their hoard then. Because of that, the sanitizer is the least available precisely at the time it's needed the most.

To use an absurdly simplified example, imagine if access to sanitizer reduces effective reproduction number (Re) of the virus, in a way proportional to the amount of people that have this access. Every day the virus spreads, the probability of an individual getting infected grows, so the need to have the sanitizer grows as well.

When that sanitizer is most needed is at the very, very beginning - where it could halt a pandemic in its tracks. But the "maximum need" as perceived by the hoarders will occur only at the point the pandemic is about to burn itself out anyway. Which is precisely when it'll do the least good. A savvy hoarder will sell then, and make a hefty profit. A less savvy hoarder will mistime that point, sell late, and make a smaller profit.

That said, I think it still doesn't matter because

1) You can substitute hand sanitizer with soap. In a way, hand sanitizer is a luxury item.

2) There is no monopoly on hand sanitizer. There are always less-savvy hoarders who sell their products so manufacturing the pandemic by hoarding doesn't work

3) Preventing the early spread of the virus requires state-level coordination to be successful or else the virus spreads anyway. So for the low reproduction number scenario, let's assume massive state intervention. In that case, containment is very likely and there is no future excessive demand for hand sanitizer, thus even savvy hoarders will sell their stock early on.

Regardless, my point is that sanitizer stored by the speculator waiting for the best price is sanitizer not available for those who would otherwise buy it from the store.

Also clearly the price controls did not solve the “who needs them the most” or no one would be complaining about “hoarding”.

But banning gouging only exacerbates that

Remember: The alternative isn't that poor people get supplies, the alternative is that very few people get supplies.

Of course, whether this situation is an emergency of that sort or not is up for debate.

We normally have some stock in the pantry but really stocked up around the 3rd week of Feb. Exiting this, we are likely to keep a deeper supply of certain shelf-stable items on hand, to reduce the risk of inconvenience next time. If we had strong price signals to support that behavior, I think there’s power in the whole public doing that.

The rich people's money is going to arbitrage, not being invested into making more supply

So why during the last 2.5 months I couldn't buy a plain bottle of ethyl alcohol at less than 5-10 times its retail price before the pandemic? Of course I didn't bow to the gougers; kept my only bottle (still have 1/2 of it so far) and plan to make it last until the emergency is over. I'd rather disinfect my guts with a bottle of whisky that would cost me less. Screw those bastards, sodium hypochlorite works damn well and is cheap and easy to dilute.

But to address your point: Allowing consensual trade between buyers and sellers doesn't limit usage to richer people, and there is no system that prioritizes goods by who "needs it the most" (which is an extremely subjective judgment). If you institute price caps, you simply prioritize people who are lucky enough to get there first. Moreover, those people tend to buy more than they actually need because they're worried about the good being scarce in the future, and the price is currently low. This creates more shortages since more of the scarce good sits unused in people's garages and pantries. At best, some of those goods are sold on the gray market at an even higher price than if the store had sold them at market rates.

There is no better way to ensure that a scarce resource is put to use than to let people make voluntary transactions. That incentivizes more manufacturing, more conservation, and more substitutes for the scarce good. In the best case, little harm is caused by command economy practices such as price caps, rationing, and first-come-first-serve. In a crisis they can be catastrophic, such as when entrepreneurs are arrested for selling ice after a hurricane: https://www.econlib.org/library/Columns/y2007/Mungergouging....

This kind if Econ 101 over-simplification is easy to disprove. There were people with stockpiles of N95 masks while medical workers couldn't get them, for example.

Unregulated markets don't care about need. Prices are a function of want (not just need), disposable income, and opportunity. That doesn't end up favoring the most needy.

They were arrested for their efforts: https://www.econlib.org/library/Columns/y2007/Mungergouging....

So now instead of letting incentives help them, people in disasters have to rely on charity and the state. (Both of which can do their job in addition to market incentives.) The end result tends to be more shortages rather than fewer.

That is simply wrong. Before all these price gouging laws, in natural disasters there used to be marginal producers (people with a pickup truck etc.) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is a bargain if that way you can keep your insulin chilled:

https://www.econlib.org/library/Columns/y2007/Mungergouging....

In the long run, high profits during a shortage also 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 (more than the storage costs). (Or will incentivize spending money to be more flexible in production in case demand increases for a short time.) 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 spending money on more immediate things that are more likely to get votes. (We've now seen that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.)

For these reasons, a majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/

It's a pretty racist approach really, since those people who aren't going to be able to afford the bump are likely to be black.

The same forces that push the government to not work on its stock pile affects companies just as much. You could be selling those things NOW for the current price rather than spending money to store them to maybe sell them at a higher price and maybe have to throw them out. When the emergency happens very infrequently like this one, private companies' stockpiles wont do any better than the government's did. The government has better means to think long term though since they don't need to continuously make larger short term profits

I guess you are claiming that someone who is buying insulin on a regular basis and has a refrigerator to store it, could come up with a couple of dollars to save their life, but not $12. (Oh and I guess you are implying that things like friends, family, neighbors, charities, churches, pawn shops, etc. etc. don't exist so they had no possibility to get $12.) In the article, there isn't any evidence that is why the police were called.

>It's a pretty racist approach really, since those people who aren't going to be able to afford the bump are likely to be black.

I imagine the economists who oppose price gouging laws would be very upset at your attempt to defame them. If you have an actual argument to make, make it.

>The same forces that push the government to not work on its stock pile affects companies just as much. ...

Companies try to maximize profit. For decades they have been removing inefficiency and making everything more lean - just in time delivery of their raw materials, only producing that they need, etc. So now when a supply shock happens during a pandemic, shortages happen and people die. High prices in a disaster are an incentive to make various investments which wouldn't pay off in normal times, but might have a large pay off later. A company in the US that makes protective gear almost went bankrupt after the SARS outbreak, because they had increased headcount and bought new equipment - he told both the Obama and Trump administrations that he wasn't going to be able to do that again. Both administrations ignored him.

>…The government has better means to think long term though since they don't need to continuously make larger short term profits

As I said before, if you want to make higher prices illegal, you better have a government be willing to spend its tax dollars on creating a stockpile (and excess productive capacity) rather than spending money on more immediate things that are more likely to get them votes. You can claim "government has better means to think long term" - but that obviously isn't what happened here - and considering the potential pandemics we've had in the last 20 years, you can't claim they didn't have enough warning.

I understand that people's sense of fairness is strong enough that some would rather have people die rather than someone make what they consider excess profit. So I understand when they simply ignore it when they read that economists (the ones who actually study the issue) are generally opposed to these kinds of laws. I think the majority of people who support price gouging laws though are not so dogmatic - they want large supplies of essential items available - they just don't understand the way to achieve that is to allow the price to go higher in times of emergency.

How is a Nintendo Switch related to the COVID-19 emergency? If it counts because "people are bored" then what wouldn't fall under related to COVID-19?

This doesn’t apply just to the Switch, but to everything.

I.e. the market, not a monopoly.

Tripling prices of TP so you don't hoard during a shortage seems less detrimental to society than locking generations of working class people from being able to ever join highly-productive areas.

This is why such attempts to corner the market fail. See Hunt Brothers.

I have my alerts at $99 for the webcam and $750 for the monitor. Their typical prices are $130 and $1150.

The prices of those right now are $199 and $1999 respectively if they're in stock anywhere. People are hoarding these and selling them on Ebay now for 50% markups.

I've even had to take to Ebay to buy Xbox controllers from Best Buy themselves.

Toilet paper shortages are caused by hoarders, since demand hasn't actually increased.

I can compare that to Poland, where we didn't really have much of a TP shortage. Here, from my observation, most businesses buy the same type/size of TP as regular consumers do, so I suspect our market isn't as strongly bifurcated, and so there was no problem shifting supply from businesses to the stores.

Yes, it will. It will motivate suppliers to find existing supplies of water and transport them to the affected area. If prices remain the same, then there's no incentive for additional sellers to do this. If prices float upwards, then a ton of sellers will enter the market and attempt to sell the products.

But it does reduce incentives to keep supplies of goods to be ready to sell them at a profit during the emergency.

Keeping a warehouse full of water bottles and generators doesn't cost much more than the interest on the capital costs. Ie. A few percent per annum.

If an emergency occurs more often than once every ~40 years, and you can sell for double the price, you walk away with a profit, and you seriously help a lot of people.

Can water in water bottles sit untreated for prolonged periods? If not, some inventory management would be required, possibly environment control costs, taxes on the property. I'm not seeing how this "doesn't cost much". Maybe if you're already in the storage business.

The article talks about fancy dumbbells, inflatable spa, and bread maker. None of them essential items in my book. You can exercise without fancy dumbbells, you can live without a spa, and you can make bread in a regular oven.

If it was about masks, hand sanitizers and other essential items, I would understand. But comfort items? Just pay or find comfort elsewhere. Despite the pandemic, there is no shortage of interesting and healthy things to do.

There may be other ways though. In cities where people have limited storage space, maybe consumers who want to be prepared would pay a subscription fee for the option to buy a disaster kit on short notice?

However, I think it's mainly that pretty much most gyms are closed in affected areas.

Thats the scenario price gouging laws are trying to stop. Unfortunately it also prevents things like temporarily increasing production or you from buying the plywood/water from town 8 hours away and selling it where is needed.

There's a couple good responses to this particular scenario.

a) The managers of the hardware stores are also astute business people with access to hurricane forecasts and may charge you more if you buy around the time of a hurricane as they know their supplies are limited.

b) other hurricane profiteers are likely to buy supplies from outside the path of the hurricane and bring them to the damaged areas to sell, if there's money in it. (this one doesn't work so well for a global crisis, but it may encourage people to warehouse goods that might be critical in a crisis)

Pretty much how your government was NOT ready and prepared for Covid-19.

The main thing we see are individuals hoarding a product, setting up a shop to profiteer from an unfortunate and temporary event.

The situation is temporary and it would be a lousy business model to start developing a "new" product based on the possibility of asking a high price for a short period of time. The incumbents increase in revenue comes from additional number of sales, not from the price hike. What happens when the demand surge goes down? Who is more likely to stay?

It doesn't help the world at all if only rich people are able to afford certain things like disinfectant and PPE; the virus is far more effectively controlled if everyone, no matter their socioeconomic class, has access to these things.

Prices don’t just discriminate between rich and poor, they discriminate between desperate needs and casual wants. Everyone agrees it’s a good thing for the poor to have access to things they desperately need, but price controls also ensure that wealthy people can buy lots of the available supply on a whim. Someone with a mold remediation business might be willing to stockpile thousands of N95’s if available at pre-COVID prices — storage is cheap, and they’ll be used eventually. But if they’re being sold at a 5x the normal price, they’re motivated to stretch their current supply through re-use and buy only what they immediately need.

That’s why price controls and rationing should always happen at the same time, and the severity of price controls is constrained by the effectiveness of rationing. If you can easily defeat rationing (e.g. ordering from multiple online stores) it’s as though it doesn’t exist. In those cases, market prices make more sense for ensuring availability.

Honestly, large manufacturers/retailers are probably the least likely to price gouge because, laws aside, any extra profit that, say, Home Depot can make by selling snow shovels for $50 before an unexpected early blizzard is 1.) Trivial for their overall bottom line and 2.) Likely to result in a very expensive reputational hit.

You also hoard whenever goods have storage costs associated with them and you have excess capacity. Hoarding is how you collect rent on your grain silos, warehouses, freezers, oil tanks, etc. You either hoard yourself, or you contract out the capacity to others who want to speculate without the capital expense of building their own storage.

My friend finally said you don't understand. I don't care what you have to do to get crème brûlée, and I will pay for it.

The waiter said I understand, and shortly came back with crème brûlée. He had ordered it from another restaurant and hired a taxi to go get it.

The waiter got a nice tip, and my friend's date enjoyed crème brûlée for dessert. Everyone was happy.

And that's how "shortages" work in the free market.

All the anecdotes about going down the street for homely puddings, have little to do with the larger markets in the modern world.

There are no shortages in free markets.

Perhaps your point is that, on a free market, the supply and demand will always meet at the right price point. Yes, that works long-term. Short-term, it doesn't, because sellers have every reason to look at the first and second derivative of the price - to hold off selling until they believe the demand for a product is about to reach its peak - and only then actually sell out their supply. This of course will cause the prices to go down, but by that time, the emergency may just be over, and a lot of people who needed the product then will have suffered and/or died.

The way I see it, this is literally the same mechanism stock trading is based on, and yet nobody here seems to have a problem understanding it there. Supply and demand, right? So if I know the demand tomorrow will be larger than today, I'll hold off selling my stocks, and I'll hold them until the point I see demand starting to fall back down.

Because farmers can easily breed beef and chicken; fishermen cannot easily breed their own fish - the fish have a nasty habit of not respecting imaginary property lines in water, and you can't just put fences in an ocean.

It's worth noting that the free market is precisely why fish are threatened with extinction. It's a textbook tragedy of the commons, for which the solution is regulatory in nature.

Fish farms are a real (and growing) thing.

> Fish farms are a real (and growing) thing.

Glad to hear that. This will enable the free market to work properly in this space.

The advantage of having higher prices is that only people who REALLY need an article will buy it, so limited supplies will go to them.

For instance, if FFP2 masks are in a limited supply and cost $0.01 each, then everyone is going to try to buy in lots of 1000, and they will run out immediately, with the supply going to random people who probably will not even use most of them.

But if FFP2 masks cost $100 each, then people will buy and use them only when strictly needed, and they will be available for those who absolutely need them and are thus willing to pay any amount of money.

The only problems are:

- People who irrationally try to price gouge when the price is already correct, costing themselves money and making the article unavailable

- The potential inability of people who are highly needy to obtain loans or have sufficient basic income to purchase high-priced supplies

The former is fixed by providing the forecasts that are used to set prices, thus providing a credible insight that there will be no shortage at current prices, while the latter by having better ways of ensuring that loans are repaid and generally making it easier to give out loans.

Take toilet paper; people hoarded it, because it wasn't more expensive than normal and people feared they wouldn't be able to buy more in the future.

If the price went up, people might only buy what they need, because there is an extra cost to buying more than you need now, when the price might return to normal in the future.

It's that they sell out, and no one can buy any.

But I believe the free market will handle it best.

The other reason for high prices beyond inducing more sellers is to be a form of rationing based on ability to pay. And in a crisis with necessities people do not like this method emotionally and prefer a more democratic method.

That is not rationing.

People misuse language all the time, such as using "literally" for emphasis rather than description, but when talking economics one should stick with what the economic terms actually mean.

For a more relevant example, "free markets" do not mean you can pickup things at the market at no cost.

I did as you suggested and got this:

> allow someone to have only (a fixed amount of a certain commodity).

So the definition does not specify the function by which resources are distributed. The "fixed amount" can be a schedule based on income and not violate the definition.

Price gouging only applies in circumstances where supply is fixed for all intents and purposes, so it's purely an act of taking advantage of people in a crisis because you can. Anyone who can ramp up production is already ramping up as much as they can.

In circumstances where it is accepted, it actually leads to bigger shortages since people benefit from hoarding.