NYT Article about the state of buying medical supplies from China right now.
Let’s count how many people made that argument. There’s you, just now, then . . . oh that’s it.
Evolution exists to . . .
Traffic exists to . . .
Grammar exists to . . .
The economy exists to . . .
All fit in the same category. They do not actually advance the following or proceeding argument. They tell the informed reader that they are not experiencing an informed writer. Although I think the first three have been plagiarized less than the last one.
Shalmanese already explained why this is wrong. Cost per unit includes amortized CAPEX. If the bubble pops, your denominator shrinks. Scaling hurdles include leasing or buying space, hiring and firing expenses (see the lack of full-time non-temp jobs in France). Tooling is a big one for some of the companies I deal with. If demands for supplies is going up, you can expect their prices to go up as well.
Scaling slow? Maybe you can self-fund that. Scaling fast? Now you have to buy money.
Etc. Etc.
Right now, anti price gouging laws ARE the safety net for those poor people.
Right now we have large numbers of poor people subsisting on UI income only. If we allow price gouging, or “anti-hoarding prices”, these people will simply not be able to afford the staple goods that are hoardable. Until you actually have this safety net you believe we shouldn’t not have, using high prices to manage distribution is irresponsible.
I also feel compelled to note that anti price gouging laws should only be applied to items that are staple goods or directly needed for response to a declared state of emergency, and would not be advisable during normal variations of supply and demand, such as with the video card example.
Absurd why? Last weekend my gf stopped to check on our neighbors, a couple in their late seventies who we hadn’t seen since the virus. She took them six eggs from our hens. Turns out they are well, but haven’t left their house in two weeks and the eggs were a huge bright spot. They gave us two pounds of frozen ground beef, which they said they’ll never eat, and some frozen bacon.
Bartering is a great thing IMO. I’ve traded my services for goods often, mostly in a very informal way.
Anti price gouging laws cause shortages. How are poor people helped by shortages? Is the idea is that it is better for everyone to go without rather for just poor people?
These shortages can be managed by purchase limits on selected staple goods, a routine method of managing predicted excessive demand.
That way, the burden of managing emergency driven demand doesn’t fall entirely on the poor.
The basis of any economy is the ability to use money as a medium of exchange. Having to rely on a barter system for staple items represents a complete failure of a modern economy.
If you happen to have things you want to barter as in your situation, then that is great, but when I have to trade beers for toilet paper, the market has failed.
This rationing has already been debunked by prior posts and not just by me. I can have a month’s worth of toilet paper in my supply closet, yet still go and buy the last two rolls just before you who is completely out of toilet paper. If prices were allowed to increase naturally, I wouldn’t add to my stock at inflated prices and you could get the two rolls you need.
Further, your prior statement about not wanting these laws to apply in non-emergency, non-staple item situations really is telling. You see the impropriety of these laws, but want them to apply when they hurt the most.
And again about the poor. We do and are providing for them. They are getting $1200 checks from you and I taxpayers. That will pay the premium on staple items and get those items in stores.
But this “What about the poor?” could be used for justification to invade every free market, including in normal times. Why ever let milk increase in price? Bill Gates gets his, but the poor are hit in the wallet. Surely those companies can cut management salaries and dividends to wealthy stock holders instead of raising milk prices.
All the bartering I’ve done has been voluntarily done by both sides. There are tax savings to boot.
The costs to shift over manufacturing lines and the like decrease the flexibility of manufacturers, but they don’t reduce it to zero. Such costs will decrease the number of additional products that can be made, but there will still be some, even with anti-gouging laws. It is simply false to say that no manufacturer will increase their production of anything, absent price gouging.
On simple example: Suppose that there’s a company that makes both webcams and other products. Because of the costs of shifting their production lines, they make what they anticipate to be the entire year’s demand of webcams, and then shift their lines to producing their other products. For that company to make more webcams doesn’t require that they do any additional re-tooling; it just requires that they do their re-tooling at a different time. Given the known, predictable increase in the demand for webcams, they’re absolutely going to do that.
They can even increase the price of their webcams by a modest amount. There’s no anti-gouging law on the books that prohibits all price increases of any amount.
Price sensitivity going down as disposable income goes up effects more than the super rich. The reason Starbucks charges $1 for drip coffee and $5 for fancy drinks isn’t that they cost $4 more to make (or $3.5 to keep the profit margin even), it is that they want to capture extra money from the people who are relatively price inelastic for small purchases really care that their coffee costs a bit more - if that were only the super rich, it wouldn’t be worth it. Admittedly, web cams are probably outside the range where most upper middle class are price inelastic to them, but I don’t really consider webcams or video cards as price gouging as they are already luxury products - the upper middle class are probably inelastic on the needs based price gouging like gas, bottled water, toilet paper.
What you are saying I am saying has so little to do with what I said that I’m not sure how to untangle what I said from it, but my attempt would be that without price gouging laws, of course there might not be shortages, but the same number of people are unhappy that they can’t get the product. Is amount of money you are willing to pay a better indication of need than the willingness to get to the store by 6 am to get your 2 per customer? Possibly, but both have flaws, and I’ve only seen bald assertions that it’s a better measure.
Sorry, I rewrote that a few too many times, it should read - The reason Starbucks charges $1 for drip coffee and $5 for fancy drinks isn’t that they cost $4 more to make (or $3.5 to keep the profit margin even), it is that they want to capture extra money from the people who are relatively price inelastic for small purchases
Let’s take another example: Katrina. After New Orleans lost power, there was huge demand for generators. Not just for hospitals, but any business with frozen goods would lose their entire inventory if they couldn’t keep the goods frozen. Then there were people who were trying to pump water out of their property, and many other uses. Plus, there were all the people panicking and buying generators despite little need.
Note that this kind of problem can’t be solved with ‘one per customer’ rules or anything like that. There weren’t nearly enough generators for everyone who claimed they needed one. Somehow, those generators had to be allocated to those with the most need, but the people doing the allocating had no idea how to sort that out besides the obvious choice of giving them to hospitals first.
In the meantime, the street price of generators doubled. Note that this isn’t a ‘rich vs poor’ problem, as we are talking about numerous businesses who were perfectly willing to pay what it took to keep their products from spoiling.
Because street prices of generators and other good were climbing, Convoys of out-of-state merchants saw the opportunity for profit, and started filling cars, trucks and vans with essential goods and driving to Louisiana. It would have reduced the strain in supplies in New Orleans substantially, but they were stopped by police, citing anti-gouging laws, and most were turned away and some had their goods confiscated.
One man brought down a truckload of 19 generators to sell. He was arrested, his generators were put in police storage, and none of them made it into New Orleans at all. Once people learned the fate of the people trying to import goods, the caravans stopped.
People can be ingenious when there is profit to be had. This is a tremendous resource in a free economy, so long as you let people negotiate with each other. In these cases, the impulse by authorities to control everything and be the decision-makers allocating resources cripples one of the best features of a market economy - the ability to adjust quickly and self-organize to solve problems. Key to that ability is letting prices float with demand.
So because of those anti-gouging laws, some people went without generators. And without the anti-gouging laws, others would have gone without generators, because they wouldn’t have been able to afford the ones that were there. No matter how you slice it, the government had to decide who got generators and who didn’t.
What? Please don’t put words in my mouth. What I clearly said was that without anti-gouging law enforcement, goods were flowing into the disaster area. As soon as the law was enforced, the flow of goods stopped.
Also, it’s clear from what I said that without anti-gouging laws, there would have been at least 19 MORE generators available. And that was just from one business. Had those sales been allowed, no doubt many more would have been incentivized to bring in generators and other necessary goods.
As for not being able to afford them, again you apparently didn’t read what I wrote. This was not a case of lack of affordability, since it was generally businesses, hospitals, etc. And the price of generators only doubled - they didn’t go up by a factor of a hundred or so. Affordability for businesses wasn’t the issue, except for those that didn’t really need them much but bought them ‘just in case’, or as a spare, when others couldn’t find them at all.
This isn’t a crazy right-wing thing, btw. The consensus of economists is that price gouging laws are counterproductive.
In the interest of dueling anecdotes, we have the guy who bought up thousands of dollars of sanitizer and wipes with the purpose of price gouging when the shit hit the fan. Price gouging in this case didn’t add supply to the retail market, it subtracted supply, and exacerbated the problem.
Anti gouging laws ensured that this market parasite didn’t profit from the act and encourage even more people to do the same either during this crisis or the next.
That only affects goods that are being hoarded, not goods that have had increasing demand. Rationing does not spur more goods being created. Only increased pricing does that.
The most famous example of that was the guy in Tennessee who bought all the hand sanitizer in the area and was selling them for a lot more online. The part of the country he was in was not particularly hard hit in the beginning and many of the people buying them were probably from harder hit areas. Thus he helps the hand sanitizer go to where it is needed most.
He also bought earlier than every one else which would have caused the stores he bought from to order more and the factory making them to ramp up production a little earlier.
Where, where it is needed most and to who can actually afford to pay his price miraculously always overlap.
CMC fnord!
supply unavailable to the stores in harder hit areas.
The reason this guy didn’t actually help is because there was an existing supply chain that would get the sanitizer to where it is needed most. Stores in those areas would sell out and tap the factory/warehouse system for more, which would work as intended to route supplies there. He shortcut that supply chain, removed 20,000 bottles of product, with the intention of re-inserting it into the supply chain at inflated prices.