That is exactly what free market capitalism is. This guy provides information in the market that higher prices and thus more product is needed. He does so before any complete disappearances of these products occur in the hardest hit areas so production is ramped up before stores in the hardest hit areas have shelves which go bare. And that guy deserved to make some money, he provided a valuable service by transferring needed supplies from areas with little need to those areas with the most need.
The reason this didn’t work is that this is one guy who failed to take anti price gouging laws into account. Others with similar ideas were dissuaded from doing so because of these laws. Had the market been allowed to function as intended, this guy and hundreds of others would have done the same thing, been permitted to make a modest profit, and this shortage and price would have been reflected in the market months ago allowing the supply to increase.
And, as others have said and you have not addressed, it would have stopped hoarding in these areas. The fact that most people do not have unlimited funds is a good thing in markets because people have to make choices. Nobody is going to buy a pallet of toilet paper and hand sanitizer at inflated prices: you buy only what you need, leaving enough for everyone to have what they need. Sure, a Jeff Bezos may buy a pallet, but there aren’t that many Jeff Bezoses out there making such purchases statistical noise in the market.
The only objections to allowing the free market to work are the “what about the poor” arguments which have been disproven because a poor family of four is getting a $3,400 check soon. That’s enough to buy staple items, even at temporarily inflated prices. The only other objection is that to some people it is just “wrong” that someone somewhere is making money–the same tired socialist argument that had initial emotional appeal, but is shown to be without merit.
And ever since Charles Dickens wrote about it, having it with no limits is just a recipe for a disaster on top of other disasters. (notice that Dickens was not against capitalism, but against capitalists ignoring doing something against the bad outcomes it can cause)
Well, hard to counter that when the poor in an emergency can end up dead. Hard in the sense that when a customer is dead or very pissed it is not possible to convince the departed or the pissed one to change their mind about this. Because they are not just customers, but are usually voters too.
Geez, I know that the free market is inefficient, but even I would never claim that it was that inefficient. You’re seriously claiming that markets are so incompetent that they couldn’t figure out that there was a demand for hand sanitizer right now, without some jerk trying to kill a bunch of people over it?
Wouldn’t most problems be solved by allowing modest price increases (that then give added incentive for manufacturers to rev up their production and delivery) while also not pricing poor people out of the goods? Have anti-gouging laws that permit modest increases but punish anything that is considered a rapacious price increase, which can be subjectively determined by a jury/judge in court later on.
Uh, after reading a few of the current anti gouging laws in the states, it is clear that that is already the case. IMHO the big problem now is happening because for some reason regarding medical supplies, the administration and several states are attempting to maintain those as an exception to those laws when that is the worst decision that one can do in an emergency like the one we are going trough.
What about in Florida when there is a hurricane projected to make landfall in 4 days. Everyone is buying plywood to board up their windows, and bottled water for when the power and water gets shut off. Hardware stores like Lowes and Home Depot double the price of plywood and grocery stores double the price of bottled water.
Is this price gouging?
I say no. It is a price signal to incentivize stores/manufacturers in neighboring states to ship their plywood and water down to Florida where there is much higher demand insuring that people that need plywood and water can get it.
If the sales price didn’t increase, there is no economic incentive for producers to alter their shipping to Florida.
You chose an awful example scenario, because this is fantasy - pure and simple. The real world is not so fantastical. Consider, the supply chain doesn’t work that fast and you know it. Home depot isn’t going to order more because they know by the time it arrives, there will be no reason for people to buy at the inflated price. They’d have a bunch of unsellable stock sitting on their shelves for no reason. They’ll place the same order they always place, and at the same time.
No, they see an opportunity, blow the price into space, and then pocket the proceeds. No magical hand, or man in the sky moving the supply chain for you. This should be obvious, but you have a fantasy stuck in your head.
It’s not obvious, and it’s silly. With 4 days’ notice, Home Depots and other hardware stores could divert lots of plywood and other disaster goods from other stores outside the disaster area in a day or two. And if they knew they would be compensated for doing so by raising prices, they would.
This is basic supply and demand stuff. Not even econ 101, but what you should have been taught in high school. I already posted real world examples of how anti-gouging laws limited disaster supplies in New Orleans.
And the same is true for other price controls, like rent control. Prices are emergent properties that tell market participants (producers and buyers) how much demand there is, how much relative value people put on goods, etc. Fix prices, and all that information is lost and NO ONE can make informed decisions around production and allocation.
Sam, Home Depot ALREADY diverts lots of plywood and other disaster goods into areas threatened by hurricanes. Without having to double the price of plywood. This is because they make money selling plywood, and they also make money by having respectful relationships with their customer base.
Here is a paywalled article on exactly how they do it. In 2017, prior to hurricane Irma, they shipped an extra 200 truckloads of plywood to South Florida in 3 days.
Here’s another paywalled one suggesting that their response to a storm in Texas was to freeze prices and send 700 truckloads of goods in 3 days. They also note that Lowes also sent in around 700 truckloads of goods to their stores.
It’s the people who have no customer base who gouge desperate people during emergencies. The rando who buys a handful of generators looking to sell them for 3x what they’re worth, the guy buying up hand sanitizer to sell online. These are people who are not an active part of the local economy, they are transient profit seekers who do not serve the larger economic purpose of creating an efficient market. Preventing their gouging is not going to break the economy.
Nobody has argued for unrestricted free market capitalism. What has been pointed out is that anti price gouging laws do tremendous harm.
Once again: have a social safety net for the poor, but don’t restrict the market’s ability to allocate goods and services efficiently.
As has been said many times, sure manufacturers know that there is a peak in demand for these items right now. But as they are not allowed to sell them for increased prices, they are not going to retool or reallocate factory resources for something that is temporarily.
That solves 1/2 of the problem. How could I get away with selling something at a “rapacious” price if Walmart is selling it for 3X the previous price?
It is sad that people do not understand this very simple principle and simply follow the bland emotional argument that someone should not profit during an emergency. They should profit during an emergency because they are providing valuable goods and services at the time when people need them the most and those people are incurring additional costs in doing so.
You picked one example where the free market worked in spite of, not because of, anti price gouging laws. A large company like Home Depot was able to transfer these supplies. And you are talking about a limited period where plywood would be valuable (4 days) not the month’s long continual crisis we are facing. On Thursday, I bought the first pack of toilet paper I have seen in a month. Get rid of anti price gouging laws and the shelves would be stocked full.
Likewise this is a situation where everyone needs “plywood.” You cannot divert toilet paper from one part of the country to another because we all need it.
These randos are not making a difference in the economy because they are one offs who are in violation of the current law. They are so unusual that news stories are made about them. If you legalize the behavior, and hundreds or thousands do it, the market gets the basic information needed in a market: the demand and what people are willing to pay.
It comes down to a choice. Would you rather have no toilet paper at all or an option to buy it at a temporarily inflated price.
I didn’t pick the example. Sam Stone picked the example, and I simply told him that the actual behavior of Home Depot was the exact opposite of what he suggested. It works because successful retailers don’t try to antagonize their customers and rob them blind during their most difficult times. It’s the very nature of competition, it’s a differentiator, one company treats you like family, the other like a bag of money with legs. Where are you going to go when you need to rebuild after a storm?
Under normal circumstances I’d agree with you. During a declared emergency, it is not clear at all that gougers provide information to the market. The guy buying up sanitizer didn’t inform the market, he bought up retail stock in areas that didn’t “need” more stock, telling the market to divert supplies to the wrong areas. Make it explicitly legal, and you’ll have entrepreneurs buying up retail stock in areas that DO need that stock, creating a wholly artificial shortage.
I’d rather have the option to buy it at the normal price. It’s already been explained that purchase limits do actually function to prevent over-buying, you’re not listening, but that’s on you.
Also, I don’t actually know anyone who has run out of TP. I mean, for all the TP panic going on, I don’t know that there is any significant portion of the population who has actually run out of TP and needed to use some other way of wiping their asses.