$5000 per violation of price-gouging in CA
caloes.ca.gov
caloes.ca.gov
This is not a case of toilet paper suddenly costing more to produce. The price gouging law is not bringing toilet paper to levels where the producer of the product is taking some kind of operating loss or even reduction in profit of any kind. This is a case of consumers attempting to create small niches of artificial scarcity so that they can profit.
The free market arguments being made here are baffling, and willfully ignoring the aforementioned truths of this specific set of circumstances that have driven these specific laws. Have we lost all sense of humanity for the sake of our ideology?
We would be doing our entire society a severe disservice if our solution to this problem is simply "create so much toilet paper that people can't hoard it." The fuck are we going to do with that much toilet paper.
Both of those parties are equally incentivized to produce stock and sell it if the price goes up. From the point of view of a potential buyer, toilet paper straight from the factory, and toilet paper from the guy next door who bought some ahead of time are equally good.
> This is a case of consumers attempting to create small niches of artificial scarcity so that they can profit.
To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important!
> The price gouging law is not bringing toilet paper to levels where the producer of the product is taking some kind of operating loss or even reduction in profit of any kind.
This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner.
Here's the crux of the issue: when supply is judged to be sufficient, nobody will hoard. When the supply of an item in the short term is in doubt, one of three things happen:
0) The price does not change, but the item goes out of stock. Some proportion of people are unable to procure the item, independently of their need for it.
1) Hoarders step in and cause the price of an item to rise. The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. The hoarding profits are a charge to the rest of society for a more efficient distribution of the item compared to 0.
What bothers people here primarily is that hoarders made money while everyone else is suffering.
2) The government steps in and does the distribution directly, e.g. via rationing. Here, the government decides who needs the item the most.
> What bothers people here primarily is that hoarders made money while everyone else is suffering.
No, what bothers me is the assumption that "higher desire" means "more willingness [and ability] to pay," and that "more efficient" means "assigned to the people with higher desire." For reasons of life and death (which I, personally, find more important than the principle of a free market), I think a "more efficient" tool should be one that distributes to people with higher need, and need is generally not correlated with ability to pay. It may even be inversely correlated: I as a tech worker can just stay home for weeks, and I haven't needed a drop of hand sanitizer. Someone who drives buses or makes hamburgers can't do that and must be out in the world for their job, and their jobs pay them a lot less than my job does.
So, government rationing would be an "efficient" solution in my definition, yes, but there's a milder option here: use the government's influence to artificially prevent the price of the product from rising. Then there's no incentive for people to buy large quantities with the purpose of reselling it, and it's more likely that everyone will buy the small amount that they need.
How would that work? If Dollar Tree were fully stocked with hand sanitizer, I would go there right now and buy 10 bottles. But so would 99 other people. So we 100 would get all the 1000 bottles, and everyone else would be SOL.
Are you afraid they're going to run out? Why? (Put another way, why aren't you buying 10 bottles of drain cleaner right now?)
One of my local pharmacies had hand sanitizer in stock for $3 and no obvious limit on purchases. I bought one, because I needed one, and I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it. But it kind of lasts for a long while.
"I expected that (because my locality had announced anti-price-gouging laws) I could go back and buy another one if I needed it"
Anti-price-gouging laws might stop people selling at high prices near you, but they don't stop people buying up all local supply, and re-routing it to places without such laws.
https://www.marketwatch.com/story/tennessee-man-sitting-on-a...
Are you sure? https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
"Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic."
> This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner.
How will they make more product sooner? By expanding their businesses - making new factories, procuring new manufacturing machinery, hiring new workers? What happens when demand reduces, and they're back to not only having a normal amount of demand, but having that further reduced by the glut of supply - supply of a nonperishable good in particular?
We have certainly fallen back on rationing during times of emergency in our society - even here in America. If it comes to that, I know many people will find it distasteful, but your point of:
> The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it.
Is unfortunately the truth (though it's interesting that you chose to phrase "ability to pay" as "willingness to pay" - that discounts the fact that many people have a high desire for these items, but could be forced to choose between them and other items needed for basic survival), and left unchecked it will result in a pretty quick reversal of the "rising tide lifts all boats" argument for Capitalism if this situation continues long enough. It'll be pretty hard to argue that the free markets help all Americans when only people who can afford to do so can wipe their ass, or have access to basic health necessities.
This is pure ideology. Do you have any evidence that a single person buying 10,000 masks from every hardware store in an entire state has no marginal impact on the scarcity of a product? Basic math would suggest this is not the case.
And if there are, it's too soon to feel the impacts.
And who knows how long it takes for TP to switch from commercial/industrial sales to residential sales. People are spending far more time at home instead of work/school/malls/restaurants/vacations.
But if Chinese pollution studies are to be believed, we could be feeling a lot of shortages over the coming months.
I'm not worried TP, but I am about pharma APIs.
If people want that much toilet paper, the only solution that's going to satisfy them is producing all the toilet paper they want. Society is just an aggregate of people, and if enough of them want for whatever reason a shit-tonne of toilet paper, it would be doing them a disservice to stop the market from giving them what they want.
It doesn't expire? People just use it up, and don't buy more until they've used all their store.
>What becomes of the companies that had to scale production, create new factories, hire new workers etc... when the existing glut of supply is not only so much that those new facilities are hurting them, but also that it has decreased the demand for their product even with normal production capabilities?
They only would have made the decision to scale production if they estimated the profit from filling this short-term demand would make up for the cost of having to eventually scale back the temporary investment. It's not exactly hard to predict that the demand won't last forever.
Ultimately the amount of toilet paper bought/consumed isn't going to change significantly, just the purchase dates will cluster together.
So what you're saying is, they wouldn't have scaled production, so your entire proposition about why the price increase would be an effective means to alleviate the problem was false.
Scaling production is not a binary yes/no thing; they wouldn't scale it so much that scaling back hurt them more than the profit they made from scaling gained them. Or to look at it another way, only the producers who could scale without "too much" cost would scale.
It sounds like this is built under an assumption that there is extra capacity available without significant or permanent costs. I don't know the level of capacity at which they are currently producing, but rationally speaking the mere fact that the shelves are empty due to demand would mean that intelligent companies would already have ramped up that capacity in response. So if the shelves remain empty, is that a sign that we've reached the level of demand where the cost of additional supply becomes more expensive/ongoing?
Also, price-gouging laws do not "stop the market from giving them what they want." If anything, price gouging does - if someone who has $100 in savings wants a year's worth of toilet paper, they're less able to successfully get it if the market can run unchecked. It's true that an unregulated free market is good at getting products sold at the best price for the sellers - that's very different from giving people what they want.
This is missing the original point: the rise in price incentivises the market to produce more of the product / incentivises more producers to enter the market. This means more product is produced, so that in the end more people have it than they would otherwise. Without that, whether the guy with $100 worth of toilet paper gets what he wants is just determined by how fast he is to get to the store.
I really don't see evidence that it does. Remember that there are two steps here: production and retail sale. It certainly incentivizes price-gouging resellers to collect more of the product and incentivizes people to become resellers - see the various folks who are "hustling" by buying out their local Costco and reselling online for a markup. I haven't seen evidence that e.g. Charmin is saying, "Thanks to higher prices, we're able to see more toilet paper" or "We're limited in supply, we're going to have to raise prices."
That was the original point. At the top of the thread you're replying to:
> These products are being made in sufficient quantity for everyone. There is not a significant decrease in production. There is a significant increase in hoarding, and in many cases it is for the explicit purpose of creating artificial scarcity to increase the price of a product.
If you disagree with that, please present evidence of decreases in production / insufficient production / etc. There's been plenty of evidence in this comment section about the existence of profiteers.
(Perhaps the confusion here is whether price-gouging laws prevent your local corner store from selling more expensive toilet paper if their actual wholesale cost goes up? I would think they don't, and I would in fact agree that they should not and such a law would be a bad thing. It should prevent them from charging more markup, and either it should prevent them from buying from opportunistic intermediaries who are charging them more or it should apply to such intermediaries directly.)
Do you honestly believe that manufacturers are currently at 100% capacity, and have been at 100% capacity for years?
That's ridiculous.
Manufacturers always have spare capacity. One simple solution is that they can increase hours that the factory runs (ex, by giving overtime pay). Or they can delay upgrades/maintenance to keep things running longer, or any number of things.
> If you disagree with that, please present evidence of decreases in production
You are the one who is making the claim that manufacturers have somehow been in a perpetual state of 100% capacity. That is an insanely strong claim to make.
The idea that it is impossibility for manufacturers to take any action at all to increase capacity is the actual claim that would require evidence.
You are also ignoring things such as the amount of supply that manufacturers have stocked up. If demand temporarily increases, then they can sell that stocked up supply, that is in warehouses, until they increase capacity.
The world is not running out of toilet paper. Instead, what we are seeing, is temporary, local shortages, at stores, until the next shipment comes in.
Those stores will just increase the number of shipments.
I'm claiming (or more specifically, the person I quoted is claiming) that there isn't an underlying genuine shortage (i.e., that any inability to buy things in practice are caused by things other than "the product you want to buy literally hasn't been produced yet"), and so whether a manufacturer is at 100% capacity or 20%, they're still producing enough. That is, I think, the same claim you're making - that the world is not running out of toilet paper and all we have is local shortages.
I'm also claiming that if a manufacturer is not at sufficient capacity to meet demand, the cause is something other than a need for the per-unit price to go up. Generally, as production increases, the cost of production per item goes down. I certainly agree that manufacturers can take plenty of actions to increase capacity - I do not agree that those actions necessarily require them to raise prices.
Cool. So that means that manufactures have spare capacity which they can use to make more product.
So, there is no real problem here with everyone buying a bit of extra toilet paper. Manufacturers, will just use that spare capacity, to fulfill that demand.
> the cause is something other than a need for the per-unit price to go up.
Ah, here is the mistake. The extra capacity that I am talking about, still costs extra money to activate. IE, running the factory for longer hours requires overtime pay, as one example.
That is how the increase in price would cause capacity to be used more, and for the local shortages to be solved faster.
Marginal cost generally increases in the short term, as temporary, but expensive methods are used to reactive unused capacity.
In the long term, cost per unit goes down, because of economics of scale. But in the short term, you have to do things like pay overtime pay, ect.
The expensive short term costs are why the increase in price helps increase short term capacity.
You're claiming that both
a) not enough toilet paper exists to satisfy genuine demand
b) in order to meet that demand, they need to raise prices
I agree that it is theoretically possible that not enough toilet paper exists, and I agree that there exist ways to increase production that involve spending more money. Both of those are different from saying that in reality not enough toilet paper exists, and in reality manufacturers need (or even want) to increase capacity by increasing per-unit expenses. That's what my question is about.
More importantly, those seem like testable claims. Again - have any toilet paper (or hand sanitizer, or whatever) manufacturers raised prices? Have any of them said that they're unable to supply enough to meet demand? Have any of them said they could meet demand better if they could raise prices?
And back on topic, have any of them found themselves unable to raise prices because of price-gouging laws? I'm pretty sure that if a manufacturer raises prices, and if resellers pass that cost on to consumers (and do not disproportionately increase their margins), that isn't price gouging, and therefore resellers can actually charge more, and therefore they can actually accommodate manufacturers charging more, and so we have nothing to worry about. Do you disagree with that?
> b) in order to meet that demand, they need to raise prices
I am claiming that there is not enough local capacity to satisfy a very very short term local demand. And that an increase in prices can help satisfy the local capacity issue.
IE, if there is a bunch of supply in a different place, transporting that is possible, but costs money.
(I should have just talked about transportation, now that I think about it. The "problem" is actually way more short term than something where factory hours matter at all)
> Do you disagree with that?
My main argument that I attempted and failed to communicate is actually more that freaking out about "hoarders" is really silly, and that none of this is actually a big deal.
The amount of time that these local shortages last, is measured in days, before the next shipment arrives.
Which is why enforcement of this law is misguided. It is making a huge deal of an extremely minimal issue.
Worst case scenario, some people have to wait a couple days for the store to get the shipment in, or they have to travel a half hour to the nearest Costco. Not a big deal.
Ask yourself this question: if a TP manufacturer were to double their production effectively immediately, how long would it take for that extra product to reach the shelves? I don't know the answer specifically for toilet paper, but it's generally going to be in the region of a month or two for most consumer products.
Price gouging isn't a signal to manufacturers to produce more; it's opportunistic middlemen profiting off of the inability of the supply chain to absorb a temporary shifting of demand.
If the people want to hoard toilet paper, who are we to deny them?
Literally any exasperated parent who has to deal with little children having a tantrum because they can't get what they want.
Yes, that sounds harsh, but it's exactly how this works. Your statement is simply saying that society - you, me and everyone - should obediently and without criticizing enable those who can't cater to their own emotional needs; those who don't know how to deal with their own drive towards self-gratification; those who haven't learned to not indulge in their own irrational fears.
People don't need toilet paper, they need to talk and understand that hoarding is a dysfunctional way of approaching their own fears about the future. And that hoarding - ultimately - is a self fulfilling prophecy as it puts unnecessary pressure on supply chains and creates even more unrest and fear.
That's why your comment is not constructive nor even remotely funny.
>Yes, that sounds harsh, but it's exactly how this works. Your statement is simply saying that society - you, me and everyone - should obediently and without criticizing enable those who can't cater to their own emotional needs; those who don't know how to deal with their own drive towards self-gratification; those who haven't learned to not indulge in their own irrational fears.
So other people should do what you want, not what they want, because you know better than them? How would you feel if people compared you to "little children having a tantrum" just because your values differed from theirs?
>That's why your comment is not constructive nor even remotely funny.
Having so little respect for other human beings that you compare them to little children is not constructive foundation upon which to base policy making.
If one of those values is “society holds together during a crisis”, it’s a better value and I would feel deeply secure about my criticism.
What is the value of individual, civil rights (as opposed to social rights, like not being unnecessarily infected or starved through artificially manipulated markets) during a crisis like this?
Yes, I feel deeply secure about my criticisms thus far.
You seem to be opposed to policy making at all. So what's your point? Furthermore, reasoning from past experience and generalizing the approach to a population is at it's essence what cultures do.
>So other people should do what you want, not what they want, because you know better than them? How would you feel if people compared you to "little children having a tantrum" just because your values differed from theirs?
How one feels is unfortunately somewhat irrelevant in the face of an existential systemic crisis. Learning and internalizing this is part of becoming an adult, or managing any social unit larger than oneself. That the train is barreling down the tracks at you does not change just because you feel inconvenienced. You and everyone else in your community are on the tracks, and need to organize to get everyone safely off in the time you have left. Part of that may be coming to terms with the fact that not everyone can get what they want (getting off the track right now) if the means of doing so is constrained.
By all means though, if you wish to give the finger to your society that's actually trying to do the best it can for everyone; go ahead. Just don't be surprised if it turns out that the fact you did makes life difficult for you down the road.
You neglected to mention that demand is increased. If it wasn't, then people would be hoarding lysol wipes and reselling them year round. But they're not, because it only makes sense when demand has increased. The lack of correct pricing by the stores is incentivizing hoarders, because, given the increased demand, they can make a profit on the difference people will buy it at vs the difference that they can acquire it. The stores should be pricing in this increased demand.
If this is indeed a case of people "creating small niches of artificial scarcity so that they can profit", then I would like to hear your explanation as to why they aren't doing it with toilet paper all the time. Why can I ever buy tp in the stores? Shouldn't a hoarder have taken it all and is charging double somewhere online?
There's two kinds of hoarding happening here: fear-alleviating and profit-seeking, which allows the profit seeking form of acquisition to be possible. Several weeks ago, it wouldn't have been feasible for someone to scoop up the entire market. Profit-seeking acquisition is however both a self fulfilling prophecy for the fake headlines about insufficient production, and a means by which the people seeking these products to alleviate fear have their fears justified.
So is your solution "good on them, they're taking advantage of people's fears to help make the rumors true?" Just what price do you think toilet paper should be right now in stores?
My solution is we should do all that we can to decrease the latency that prices respond to supply and demand. It will help everyone.
>Just what price do you think toilet paper should be right now in stores?
That's not up to me to decide, because I don't presume to speak for the individual wants and needs for all participating suppliers and consumers, which is how a price is determined.
>I would much rather be able to buy one package of toilet paper for 50 dollars versus being able to buy zero for 5 dollars.
Yeah, because you have 50 dollars to spend on that. What's a person supposed to do who is only barely making ends meet? Do they forsake eating so they can wipe themselves? Underpay their rent? Go into debt so they can wipe their ass?
My point here is that this isn't an either/or situation. There's other alternatives, though some people won't like it.
Rationing - at least by stores if not by the government - is one that we don't like these days, but that has worked for us in historical times of trouble.
This law is meant to be another alternative. It's certainly not perfect - I'd have taken rationing initiated by stores over that - but it is an alternative to the "pay 50 for a roll or not have a roll at all" options.
AFAIK it's an anti-flamewar mechanism. Successively deeper comments require longer cooldowns before replies can be made.
So raising the price on something doesn't reduce the number of "normal people" purchasing it? Are you honestly telling me that you don't think they are fundamentally linked?
All stores had to do was limit quantities, but they didn't.
I hope it doesn't reach that.
After coming back from a trip to India, an old housemate of mine told me that a huge part of the world uses their hand to wipe, and he decided to adopt the practice himself. He then warned me not to drink out of a cup he'd left on the floor in the bathroom.
I'm also reminded of a story I'd heard about an American traveling on a train in the Middle East, who'd offered to share some tomatoes he'd brought with him and divided up at lunch, when everyone else in his train compartment was sharing their food. All the other people were happy to share their own food, but none would touch the tomato sliced he offered them. He couldn't figure out why, but in retrospect he realized that it was because he'd touched them with his left hand, which in that part of the world was commonly used to wipe. So everyone would only shake hands with and touch food with their right hand.
I'm not sure how common such practices still are in the modern world, but if paper and bidets wind up in short supply, they're something to think about.
And you promptly moved out of the house, right?
Worst case scenario I made too many products and I cut back on shifts next month and run a few less productions.
Where did I say they would charge the same as the hoarders? I simply said the prices should respond faster to the supply and demand. Yes that will make prices go up accordingly, and it will also decrease the incentive to hoard and resell.
Prices of goods are already set largely by this model. For you to think that the prices responding faster to supply/demand is insane is to also suggest that all prices set by supply/demand is insane.
Indeed, at that point I think rationing - either by the companies selling the product, or by the government (as we have done in times of crisis in the past) is in order. Would people be yelling about free markets like this if World War 2 happened today, and there was the kind of rationing we saw in those times? What would have happened to our country if people were so selfish back then?
Existence is not the Market, and the Market does not take place in a void. You cannot reduce the world to a bunch of economic models, because at the end of the day, people will get tired of your Quant's BS and do something that generally doesn't end well for the person who ignores human nature.
As a bonus, we all have a series of examples of what not to be that have soared into the limelight to remind us all that even if we are stuck in a pandemic, at least we weren't horrible enough to have to figure out what to do with more stock than we can feasibly sell or distribute for more than it cost to consolidate it into a single location because we were intending to pull one over on everyone else.
Win/win. Supply goes home. Everyone reminded not to be a dick, and a few people have learned a very valuable lesson about logistics, society, the economy, and what not to do during an international fucking pandemic. Maybe no one else has to deal with the damage caused by asshole speculators.
Why do you prefer that? Why do you think that individuals have no ability to adjust their personal spending such that they can purchase TP or hand sanitizer even at 2x, 3x or even 5x price points.
The shelves are getting fully restocked every single morning. Go to your local Target/Walmart/Grocery store when they open if you don't believe me. Stores, suppliers, and producers have already begun rationing and metering out goods onto shelves explicitly because of people hoarding. The shelves being empty are a result of idiots running around trying to buy up everything they can, and stores reacting properly. The "free market" is already acting in response to those hoarders, they're discouraging it, and preventing it on a grand scale pretty effectively.
Your complaint about "not allowing the price to float" is a complete non sequitur even if you're still the type to swallow free market ideology hook, line, sinker, because people buying in surplus isn't demand. It's just, well, hoarding. Coronavirus isn't going to cause people to be thirstier, hungrier, or need to wipe their ass more. People are just buying in advance. Without people fearing for a worldwide pandemic nobody would be willing to pay increased prices for these goods. So it's not actually about demand, it's about artificial scarcity driven by a global pandemic. Thus, price gouging tickets.
But even if you don't buy any of that, the vast majority of our supply lines are JIT, so "empty shelves" aren't really a thing... what we'd really see is a dwindling of supply over a period of time. Which isn't happening.
Of course it is demand. You may also call it "hoarding" those aren't mutually exclusive concepts.
Does this double, triple or quadruple costs? Likely not. Yet costs do increase, unless the manufacturer does not increase production capacity to match demand. In which case supply dwindles to zero, with predictable consequences.
The point is: No factory or service provider operates with 10x production capacity they can turn on at a moments notice, that would bankrupt any business instantly.
Perhaps the law we need is one to control hoarding behavior or the rate of change. With that you avoid shocking businesses with unreasonable step changes in demand.
Aside from an authoritarian system of governance where all purchases are tracked, and one must only purchase their "allotted" amount of goods, how exactly would one control hoarding?
i hope you are not proposing such a dystopian future.
The idea that people are hoarding right now simply because they want to resell the goods to others is moronic on many levels
People are hoarding right now because they believe they may be months with out a supply of the good, so they are buying in multiples of normal levels fully expecting they will use it themselves, not reselling
1. https://www.reddit.com/r/australia/comments/fiag4b/handing_o...
2. https://www.reddit.com/r/gifs/comments/fiajl0/props_to_this_...
https://en.wikipedia.org/wiki/Rationing_in_the_United_Kingdo...
Not just in the U.K., rationing was also introduced in the United States during wartime:
https://en.wikipedia.org/wiki/Rationing_in_the_United_States
So it seems you are infact proposing authoritarianism as a solution to the problem
Give up freedom for safety... wonderful. I see alot of that right now it is very sad
I don't buy into it necessarily; temporary rationing seems an appropriate response so long as it is guaranteed to be temporary.
I can sympathize with his concern of embracing authoritarianism in exchange for safety; I do abhor the practice, but in this environment, rationing is by far the least intrusive measure in ensuring the widest swath of people maintain access to a minimum reasonable level of supplies.
If people want more, let them negotiate with the manufacturer for additional output after existing orders have been met.
A self-imposed limit per customer enforced by retailers should be sufficient. No need to start getting the government into the business of looking for hoarders.
That is NOT what people are calling for in this thread, I am fine with that
People are calling for Government imposed rationing and price controls
I am not.
I don’t know how one might implement something like this or if it is even possible. Not an easy problem.
https://i.imgur.com/m0Efz3E.gifv
There are obvious ways to cheat it, but it still means more people end up with TP. You don't have to go full police state to make the distribution of goods more even.
It is perfectly fine for a business to choose to only sell 1 package per customer
It is not fine for government to mandate a business only sell 1 package per customer.
This was my entire point, people here are advocating for GOVERNMENT action when none is needed
You know what would control hoarding? Higher prices.
I am most definitely a free market person, yet one has to recognize controls are important in order to deal with degenerate or corner cases. One such case is when panic sets in.
I don’t know the answer. Not an easy problem.
I don't understand people who advocate for policies that almost guarantee empty shelves instead of a policy that would avoid shortages but at a higher price temporarily.
In my mind the higher price followed by a return to normalcy is a much better outcome for rich and poor alike than a complete shortage with nothing on the shelves.
B: Price controls, at least some distrubution of everyone gets some, less incentive to hoard, stores still allowed to raise prices a little (just not a predatory amount detached from real costs) when the manufacturer does when ramping up production.
The shelves are empty in either case, the difference being a nonzero amount going to poorer people in B.
So you are forcing a false choice between your A and B scenarios.
Why are you throwing up straw man arguments? I'm not in favor of $100 toilet paper. I'm in favor of letting market mechanisms resolve supply and demand imbalances. Anyone who thinks that restricting price increases is required to prevent $100 toilet paper really doesn't have a clue as to how the market works.
People hoarding aren't trying to create artificial scarcity. They are buying because they anticipate scarcity, and want to either (i) be prepared, or (ii) profit from resale.
Hoarding has caused shortages which, in turn, justify the original hoarding. This is a sad situation, but capping prices isn't a solution. If anything, I would expect higher prices would discourage hoarding, resulting in a more even allocation of TP/whatever between people.
https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
> On March 1, the day after the first coronavirus death in the United States was announced, brothers Matt and Noah Colvin set out in a silver S.U.V. to pick up some hand sanitizer. Driving around Chattanooga, Tenn., they hit a Dollar Tree, then a Walmart, a Staples and a Home Depot. At each store, they cleaned out the shelves. Over the next three days, Noah Colvin took a 1,300-mile road trip across Tennessee and into Kentucky, filling a U-Haul truck with thousands of bottles of hand sanitizer and thousands of packs of antibacterial wipes, mostly from “little hole-in-the-wall dollar stores in the backwoods,” his brother said. “The major metro areas were cleaned out.”
https://www.thestar.com/news/canada/2020/03/13/amazon-blocks...
> Ranga said that a six-pack of wipes, which might sell for $20 at Costco, could fetch four times that online, representing a “big opportunity.” He said the couple had spent about $70,000 on Lysol wipes and liquid cleaners over the past few weeks
I don't think someone buying $70k of Lysol is doing it because they're worried they'll run of enough for themselves!
And nobody would buy from them if there was stock remaining at Costco.
Edit -- but apparently that's not enough to deter some from trying:
https://www.reddit.com/r/vancouver/comments/fimz9k/was_leavi...
If a million people normally buy one pack per month spread out evenly on weekends, but all of them think hey, maybe it's a good idea to get two packs this weekend, that's 2M packs where they had stocked for typical sales of 1M / (52 / 12) = 230K.
How would (ii) be a profitable activity if buying in bulk wasn't creating artificial scarcity? I mean, I guess you could argue that the scarcity isn't "artificial", but like, when someone is literally buying more hand sanitizer than they could possibly want to actual use themselves, that seems pretty artificial to me.
smallnamespace's made the same point as I made in the portion you quoted, but made it much more clearly:
"To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important!"
The situation in practice is dead simple: widespread hoarding is creating ongoing shortages of various products, and some of these hoarders are using that temporary scarcity to profit from other peoples' desperation. This is entirely predictable and uncomplicated, and it's both ridiculous and irrelevant to quibble over whether the profiteers are "trying to drive" the artificial scarcity to which they're contributing. I honestly don't even know what you're arguing about.
Someone who is trying to understand their motivation (what they're trying to do).
'it's both ridiculous and irrelevant to quibble over whether the profiteers are "trying to drive" the artificial scarcity to which they're contributing'
It's not irrelevant. I responded directly to a claim in the comment to which I replied. No tangent.
'I honestly don't even know what you're arguing about.'
I'm really interested to know why some folks (not you) are so insistent that the hoarders/profiteers are trying to create a situation (rig the game) rather than just being players in it. I thought the logic of my original point was pretty obvious and, as you say, it's not even that interesting compared with the wider point about the collective effects of the individual actions. So why are people so interested in this small point?
And, in any case, you ignored the point made myself and others in this thread, that any individual's actions have ~zero impact on whether there is a shortage. It's the collective result of many individual actions.
This is false. We are seeing artificial shortages due to hoarding that has already occurred. Higher prices would encourage hoarders to profit from their hoarding. I think it’s fair for people to stock up on a few weeks to a month’s worth of food and toiletries to avoid unnecessary trips to the store until they need to stock back up again, but if a hoarder bought way more than they’ll ever need and they can’t profit by selling their wares at higher prices, then they might as well just give them to those in need, or be left with a lifetime supply of toilet paper occupying their guest room.
The stores will restock. This is not a shortage due to production deficits. This is just people taking everything off the shelves as soon as they are restocked. These stores are just going to keep restocking and the panic buying will subside.
It's not like it goes bad (on a meaningful timescale); it'll get used eventually.
This situation is just as bad for the manufacturer as it is for the consumer.
Stock it somewhere, and release it gradually over the following months, perhaps at a loss. Some hoarders will actually stock it as a reserve for the next emergency and brief price spike, which is socially beneficial behavior. Think of it as a kind of insurance.
This would be more of a problem if we were talking about perishable products, but we're not. Toilet paper and personal protective equipment (masks) are not perishable. Canned food and lysol are only mildly perishable.
Production and logistics have gotten more expensive. That has happened economy-wide, and will only get worse as the pandemic exponentiates. They’ve also become less reliable, which is why we have hoarding.
The purpose of price spikes is to incentivise production, to create slack in the system. (It also reduces the quantity demanded. Toilet paper at a 100% premium doesn’t do much to someone purchasing a normal amount. But it is material at hoarding volumes.)
One could say “we don’t want more price discrimination.” But that is a choice to prefer shortages over price increases. (Which is fair.) If I have a warehouse of toilet paper, I am incentivised to ship it to Texas or New York over California. (Counterpoint: low income consumers there are going to face pressure to use alternatives.)
Bottom line: these are not costless policies. (That doesn’t make them bad per se.)
In places more severely affected, delivery/handling workers may be unavailable to work.
At present TP demand is simply higher than normal (from panic) and manufacturers are having to scale up. This is all avoidable.
https://www.forbes.com/sites/amyfeldman/2020/03/12/how-kochs...
Except we're not really limited to only two options. Rationing might be an unpopular option, but it works just fine.
This only makes sense if no refund policy was posted ahead of time. I don't know about the situation in Australia, but most stores in my area have their return policies printed on the receipt, and nearly all of them have them posted in-store or online.
How can toilet paper become worthless? You're always going to need to use it yourself even.
It's expensive to tool up your production line for extra production when you'll just have to shut it down again a few weeks later as the surplus makes its way through the system. Why would a toilet paper plant operator do that? They know that average consumption of toilet paper hasn't increased whatsoever.
A good example of this is in a related thread: https://news.ycombinator.com/item?id=22576225
The article describes how a couple of guys drove from store to store all across their state, buying up all of the antiseptic supplies in stock, and then trying to resell them online for as much money as they could possibly get.
https://abc14news.com/2020/03/14/canadian-couple-make-more-t...
If that's the way the world is then why should anyone be expected to behave any differently? It's not right to vilify these people while we give a free pass to everyone else doing equally unethical things.
Who is this "we" you speak of?
Let me see if I understand your argument: because there is someone out there who will "give a free pass" to big pharma, the rest of us should politely shut up about disaster profiteers? We should all just say "oh well, pharma co's do it, so no biggie". Is that about right?
And the argument is correct. You cannot keep teaching people unlimited greed and profiteering is okay because "it's free market" and then expect them to behave ethically. You have to change what is acceptable and tolerated. The current situation is an excellent starting point, but we shouldn't stop here.
> It's not right to vilify these people while we give a free pass to everyone else doing equally unethical things.
Seems to say, we should stop criticizing these scumbag disaster profiteers, simply because there exist equally loathsome corporate profiteers.
Taken at face value, this is quintessential whataboutist bullshit. Now maybe I misinterpreted, which is why I asked, but your new goal posts have not answered my question.
> It's not right to vilify these people while we give a free pass to everyone else doing equally unethical things.
If "A and not B" is not right, you can conclude that we should stop A, or that we should start B. You interpreted it as the former, I interpreted it as the latter. I guess we have different biases.
Regardless of whether the goal posts have moved or have always been in the same place, I'm not sure which of your questions remains unanswered. If it's "who is this 'we' you speak of", the answer is "look around you". If the majority were truly intolerant of the behavior OP describes, then we would have a lot more social unrest than we do.
So are you suggesting:
- I create a toilet paper cartel with all my buddies
- we hit surrounding area grocery stores with surgical TP buying
- Hoard til prices rise
- dump on muppet consumers
- profit??
this is ridiculous
https://abc14news.com/2020/03/14/canadian-couple-make-more-t...
And I have one anecdatum: I was going to buy TP myself -- not because I hear "pandemic" and my thoughts immediately turn to my anus, but simply because it was getting to be time to reorder the ol' 48-roll brick. But because of this situation, my usual seller was out of stock, and everyone else was in fact, price gouging. So I'm just going to wait. I'll wipe my ass with my hand before I pay those prices. That's the thing, we're not talking penicillin here - you could permanently do without TP. I'll spare you the specific details of how. But one of the things you would need is bleach, which come to think of it, is probably also covered under this anti-price-gouging order, so hey, thumbs-up emoji!
There has been a lot of strict adherence to ideology in spite of critical thinking and logic going around lately.
What options do they have? Hiring new employees requires training, and that takes time. Meeting demand quickly requires a significant increase in payroll per unit produced, so why shouldn't they be able to charge more? What incentive do they have to increase their costs for a diminished return?
[1]https://www.tsheets.com/resources/overtime-laws-california
So it seems from reporting that n95 masks are NOT being made in sufficient quantity for healthcare workers - let alone everyone.
http://www.startribune.com/3m-can-t-confirm-pence-comments-a...
https://www.cnbc.com/2020/02/28/us-mulls-using-sweeping-powe...
It's the just-in-time nature of distribution. Demand doubles from "normal" and all of the sudden nothing is sitting on the shelf.
However, while no sales tax on hand sanitizers is hardly going to be of a measurable impact for an individual, when you're hoarding to squeeze people in crisis, no sales tax makes for a nice 'bulk discount'.
"He quickly sold all 2,000 of the 50-packs of masks on eBay, pricing them from $40 to $50 each, and sometimes higher. He declined to disclose his profit on the record but said it was substantial."
$100,000 gross revenue ($50 each), let's say shipping, fees, and price variance were 25%. That's still $75,000 for a $7,000 investment. 10x returns.
When I sold on Amazon, every so often I'd be able to 10X my money on a product, but it was rare and balanced out by the many more times that I would lose money on a product or have to write off completely because it didn't sell.
I think if there'd be no price gouging laws and everyone expected to be allowed to sell on Amazon, people would end up pricing lower and there'd be more supply and competition.
There's also uncertainty because when Amazon was banning for price gouging they never made it clear what price level counted as gouging. Wholesale prices shot up, and it was unclear whether selling at a reasonable margin, but based on a higher cost, would be considered gouging.
Also, Amazon this week banned all offers, not just ones that were deemed to be price gouging. eBay did the same already more than a week ago.
You can still try to argue that it's economically reasonable to reward people for being in the right place at the right time (to incentivize people to ship goods around etc.), but that's a very different argument from whether companies are able to fund increases of production.
If the buyer is giving the factory an extra 19x the price, the factory is incentivized to produce more, the buyer is substantially more likely to be able to buy more then next time they want to. Averaged over society the buyer is much more likely to be able to buy whatever they need the next time they need to buy anything.
If it's Joe Schmoe Markup Inc getting the extra 19x the price, there is no benefit to society or the buyer. Joe Schmoe is just an asshole profiting off of making other people worse off. That should be criminal.
Markets are a way of managing information. That's why things like "the stock market went up" or "the stock market went down" matter: it communicates what people believe about whether things are underpriced or overpriced. In turn, those beliefs are only worth paying attention to if participants have some reasonable information about the things they're buying and selling. While my individual purchase of a $50 bottle of hand sanitizer is a small drop in a bucket of information, it is conveying information, and everyone else paying for it absolutely does influence the market. When we communicate that we're willing to pay $50 for a bottle of hand sanitizer even if the cost of production has not gone up, it tells resellers that they should start hoarding. A clever reseller will stop selling their reserves entirely and wait for discovered prices to max out. That does matter quite a bit to me as a buyer!
The day congress declares war on Iran, if you significantly raise fuel prices at your gas station but the wholesale supply hasn't changed, you're generally trying to take advantage of the consumer's fear.
We're for some reason cool with this in the financial markets, but for tangible consumer goods like food and fuel it's (rightly) considered predatory and criminally anti-social. Unchecked gouging can lead to real and dangerous social destabilization.
What does end up happening is something (like a outbreak or natural disaster) causes a regional shortage of a good, which is often extended because there is no real incentive to divert goods to fill the shortage.
Today that if often mitigated because of large national companies like CVS, Walmart, Lowes, Home Dept, etc who will move their supplies around based on normal prices
But in some situations Mr. Bill that owns the local store may have an excess supply of Good X, and would be incentivized to move them to an area of shortage if the price was higher. With Price gouging laws he will not bother.
Further Increasing in prices also in some ways allows for people with the greatest NEED for the items to actually get them, and discouraging hoarding.
The other issue is people, like in the article, just buying up a bunch of stuff so that other people literally can only buy from the opportunist. Consider the battle for concert tickets, which the band might sell for $20 but a scalper would buy and try to resell for $100. Yes it’s technically possible, but it’s fine for a society to determine it’s better for everyone if you’re not allowed to take advantage of people’s needs or vulnerabilities like that (when it comes to health supplies, for example).
While I am sure there are opportunists as you call them, that is not the primary reason people are buying up the stocks of goods. Most people are not bulk buying with the intent on reselling.
>>Consider the battle for concert tickets, which the band might sell for $20 but a scalper would buy and try to resell for $100.
That is not what is happening right now, and personally i have no issues with scalpers but I am also anti-social and never attend events for which a scalper would be able profit from. The solution to scalping is not price gouging laws, but non-transferable tickets, or individually named tickets. Many events are already doing that because the practice of scalping hurts attendance and the fan base. No government intervention is needed to resolve that issue
>but it’s fine for a society to determine it’s better for everyone
This will be our deviation point in philosophy, I am an individualist, holding the individual rights are in fact more important thank what society determines to be "better"
It is this attitude that creates these opportunities. If we collectively understood that allow "surge" pricing is the fastest way to respond to a spike in demand and to quickly return to a more normal market equilibrium we would have fewer and shorter situations like this.
There's a pretty prevalent model for Risk Communication that compares the actual hazard (how bad something will be if it happens) against a person's outrage (how bad a person thinks a thing will be).
When the prevalent authority communicates risk in a way that lowers a person's outrage too low you can get inaction (like a president saying "don't worry" or “I think that whole situation will start working out.")
When the prevalent authority communicates risk in a way that raises a person's outrage (like surprising a population who were told to ignore a situation by then banning travel, closing borders and telling people we don't have testing capacity) you can get very strong reactions.
It's good when outrage matches hazard, that's where we want to be. But when hazard is, say, in the middle, and outrage is raised above that, you can end up with people feeling like they desperately need things.
At this point, they throw whatever money they have to at the things in order to mitigate their perceived hazard, and that's where opportunists and gougers come in. These people aren't acting rationally (they're perceiving a higher hazard than is real) and are vulnerable to ignoring market conditions in that "a free market works when both parties have perfect knowledge" sort of way.
So understanding this, we take actions that kneecap the unrestricted free market, because it doesn't have compassion and we want to be compassionate toward our neighbors that got too freaked out for their own good.
No one should try and take advantage of a vulnerable party, and it's a good thing to have safeguards against that.
No thanks. I'd prefer inflicting a social cost to disincentivize the behavior in light of the taint on one's reputation for doing it.
You are choosing to create shortages and encourage irrational purchasing behavior because it is better to "inflict a social cost". I just don't understand that tradeoff.
If you cannot understand why this type of middleman profit-taking centric arbitrage by which no product is created but merely has it's destination altered via people looking to move the supply to the highest bidder, I don't know what to say to you other than you are clearly not thinking with the best interests of those where you're raiding that stock from. There was no shortage until these speculators created it. And no, the production, was fine, or would have been less problematic without their intervention.
Information does not magically propagate. The manufacturer has to receive orders through their customer's acquisition processes; which is triggered through the data that feeds them. In order to have an accurate forecast of what real affordable growth they can manage to fund or pull off goes into their (the supplier's) calculation of backlog time and CapEx to satisfy demand for new equipment or hiring, which influences what they can commit to, which then feeds back intopurchasing decisions by retailers, as well as requiring them to forward the orders to their suppliers, and so on and so forth. None of that gets done lightly or pivots on a dime, rendering disruptive arbitrage transactions as a highly destabilizing occurrence to the supply chain that only ends up being made obvious through careful analysis of data exterior to the in-place logistical chain. Something no directly involved actors tend to specialize at doing, seeing as they are the typical supplier. Furthermore, seeing as these people failed to make arrangements in the sense of properly batching their shipping, the energy cost per delivered goes through the damn roof.
If you want to solve increased demand, you go to the supplier directly, and get in line. You don't arbitrarily make the decision for an entire town that they don't need those supplies their demand facilitated the staging of at the local Dollar Store, and schluff them off elsewhere because you want an effing 3.5 to 7x profit factor. Not when everyone everywhere needs it at the same time. This isn't a case of statistical multiplexing. There is no "well they don't need it as much as we/they do."
When probability is unity, you spread your finite supply of mitigation of new viral spread as far and thin as you can in order to slow the viral propagation as much as possible, and damp it's intensity as low as you can overall; the more "holes" you create by arbitrage buying, the more vulnerable and intense will be the resulting propagation of the disease through the locale.
It isn't my fault these people can't seem to grok higher order consequences well enough to realize they should have left well enough a-damn-lone. Nor is it my fault you seem to think the laws of physics can be bent by throwing enough money around. It's a bloody crisis man. Information and supplies being where they need to be saves lives. Not sticking your %;&_ in everyone else's slice of the bloody logistical pie!
These aren't securities! These aren't "potential value". These are physical lots on which people's lives will be dependent upon. There should be a damn social cost to this destabilizing behavior, because it's like being a damn agitator in an already on the brink confrontation. We cannot afford for everyone to engage in this type of behavior throwing off everyone else's capability to plan and smoothly execute a bloody response which doesn't upset the overall allocation of finite human capital too disruptively.
You want to engage in arbitrage and play "the Free Market cures all ills"? You do that with your own community. Don't go and start ransacking everyone else's supplies, and expect everyone else to clap you on the back and say "Good on you, lad! Making all that profit! Hell, I'll miss Gram/Mom/Dad and I'll have to figure out how to pay Little Johnny's/Jane's/my wife's emergency room bill due to not getting my hands on some sanitizer/masks for them, but I'm pleased as punch you managed to eke so much more profit selling that product that we through our purchasing habits managed to keep stocked at a local business we fund as a support to the logistical needs of our own community. Bloody genius move!"
I'm not the one encouraging irrational behavior. You are, by applying magical thinking to just how all that signalling has to get translated before any meaningful intervention can take place.
I know what these systems look like. I know as much gets done as it is within the capability of the people making up the chain can manage to sift through, and I damn well know how disruptive particularly egregious acts of greed can change the logistical landscape because of the long-cycle nature of the signalling and pattern recognition. Thankfully, we have this wonderful communication network, and mechanisms for modifying human behavior through social pressure and legal processes to be able to short-circuit these malevolent practices before things get too chaotic or too much damage is done!
Free market is already solving this problem. I was at my local store today and they were restocking the shelves with TP and paper towels. There was no line.
You seem to have completely missed my point that the price surge should have been happening in the regular stores. By not raising their prices, the stores enable the hoarding, speculation and secondary market nonsense you are blabbering about. By threatening to fine vendors when they raise prices, the government enables these arbitrage schemes. By arguing as vociferously as you are that the market can't solve these problems you also enable these schemes because this attitude changes the nature of the regular market in favor of these ad-hoc markets.
You and many like you seem to think that being in favor of price surges is the same thing as being in favor of the hoarding and speculation. But that is not true. I also am not arguing against sellers choosing to limit quantities, that is their prerogative. I'm arguing against government intervention when the market will address this all on its own. The Mayor of New York City seems to be in your club. He is arguing for the nationalization of industries to solve the shortages (https://townhall.com/tipsheet/bethbaumann/2020/03/14/de-blas...).
> Thankfully, we have this wonderful communication network, and mechanisms for modifying human behavior through social pressure and legal processes to be able to short-circuit these malevolent practices before things get too chaotic or too much damage is done!
> Information does not magically propagate. The manufacturer has to receive orders through their customer's acquisition processes; which is triggered through the data that feeds them.
Which is it? Information does or doesn't propagate quickly?
> I'm not the one encouraging irrational behavior. You are, by applying magical thinking to just how all that signalling has to get translated before any meaningful intervention can take place.
https://www.forbes.com/sites/amyfeldman/2020/03/12/how-kochs...
https://www.wsj.com/articles/one-companys-hands-on-effort-to...
Prices going up does not achieve the goal of enabling universal access to current supply in order to damp the strain on the currently existing medical/distribution infrastructure, which is the primary goal to be achieved in a global pandemic situation. By looking at the problem through a primarily economic lens, the resulting world does not accurately reflect those meddlesome details that economists handwave. Like the fact that there are portions of the population that won't be able to make the tradeoff of paying higher prices for these goods, and still get other necessities. That trade-off, more shock to the medical infrastructure before we have effective mitigation/treatment is not the kind of thing we can just handwave through more money.
Furthermore, it isn't price hiking that is so much an issue as unconscionable price-hiking facilitated by sub-optimal logistics, or outright greed. The end problem is getting supplier output to an area where people in need can get it. Any unnecessary obstacles in that chain for the express purpose of profit-taking are the problem.
>You and many like you seem to think that being in favor is the same thing as being in favor of the hoarding and speculation. But that is not true.
Saying that is is easy, but it doesn't make it true. People interpret the baseline increase of price as being an externally imposed privation. This degenerates to a man v. society response encouraging an every-man-for-themselves attitude which doesn't result in an optimal outcome, and instead encourages the type of half-thought out environment where you'll find desperate secondary market buyers, and secondary market suppliers creating a self-reinforcing disruption created by seeking sources of dwindling supply to reroute everywhere else willy-nilly. The system thrashes, in short. A non-price surge mediated response however aims at enabling access to the resource across the board, and degenerates down to a logistics problem of getting product from here to there and matching replacement rates with consumption rates in lock-step. This approach doesn't inspire fear, but instead relies on wide-scale disciplined thinking, along with the ability to know with reasonable certainty that product earmarked for a particular geographical area is still there.
>I also am not arguing against sellers choosing to limit quantities, that is their prerogative.
We are agreed somewhere!
>I'm arguing against government intervention when the market will address this all on its own. The Mayor of New York City seems to be in your club. He is arguing for the nationalization of industries to solve the shortages.
To be clear, the only "government intervention" I'm advocating for is for the prosecution of those that participate in widespread buying out of supply for arbitrage purposes in order to ensure the primary market with visibility is the primary means of distribution, and to minimize the level of chaos. I in no way endorse transition of manufacturer or distributor, or logistical mover to government control. Hence my advocation of The enactment of voluntary purchase limits by the end distributor. I'm not that hot on nationalization, nor do I believe we're at the point where things are severe enough for the overhead of having to legislate out the details involved in fully specifying the response. I'm just trying to make it clear that right now everyone is in the same boat, and the best way forward is to not let ourselves fall to the temptation to turn a universal crisis into a mint. The entire system can handle it as long as we give it the room to work while at the same time constraining it to work for the end goal of not enriching a few outrageously, but getting things where they need to be.
We may be somewhat talking passed each other for some reason. The only major difference I'm seeing in our approaches after a few re-reads and attempts at trying to coax out an alternate message from what you wrote is I'm coming at it from the grounds of a logistics problem, and you from the economic market side, where mine makes the implicit assumption the work must be done, and yours doesn't seem to account for that axiom in any way, or at least in a way explicit enough for my sensibilities.
>Which is it? Information does or doesn't propagate quickly?
It's both. Social signals such as shame or disapproval travel quickly and can facilitate rapid modification of individual behavior based on consistent responses to undesired behavior. Logistical signalling is not that. It requires existing relationships, confirmation that funding is staged properly, several stages of analysis and propagation through particular human actors who are still burdened with everything else that isn't the crisis as well. These are longer cycle signals that are more rigid, but most importantly, have exhaustive levels of in place infrastructure to increase the visibility of the overall signal; something lacking in secondary markets.
Again, to summarize:
>Not advocating nationalization.
>Am advocating intervention where purchasing for arbitrage purpose disrupts the smooth logistical flow of output (I.e. buying out the next town's supply to sell at a markup online)
>Universal access is the priority until the severity of the crisis is dampened sufficiently by developing herd immunity/vaccines/treatment
>Do not be a dick. If someone else you know is being a duck, make sure they know it; because now isn't the time for it.
>Stable logistical picture facilitates smooth Market based optimization without excessive distortions created by ghost supply flow.
>Don't Panic.
That's it.
The market is penalizing those people long before the government will get around to it. Shelves will soon be stocked again, there are alternatives to pretty much everything that is in short supply, the arbitragers have found themselves with stock that they can't easily get rid of without loosing money as well as finding themselves hated by the public in general. They made poor choices and the market is penalizing them.
The danger of your prosecutorial approach is that it is often applied to the wrong people. The current situation is somewhat unusual in that demand is increasing everywhere but these laws are often applied during localized disaster situations (hurricane, etc.) where it would be helpful for people to take unusual/more-expensive steps to get supply relocated. That involves extra costs and price controls work against those initiatives.
I think the biggest failure here is the media, whose terrible reporting caused people to believe that there would be a shortage of things like TP and also caused people to focus on hand-sanitizer as opposed to plain old soap, for example. The not-quite-panic buying is unwise and ill-conceived.\
* https://www.nytimes.com./2020/03/14/technology/coronavirus-p...
Manufacturers producing enough quantities to sell is not the issue. The assholes that swoop in and buy out all the stock in a store temporarily to quickly turn around and sell the items for much more are doing the gouging. It's like going to the gas station right after a refill with a big-rig tanker during a time of high demand, filling up all the gas from the station, and then sitting next to the now-empty gas station all day and charging people 500% more for gas.
That is why stores are now implementing quantity limits for certain supplies, so people don't just hoard them for profit and to deny everyone else access to buying the supplies.
In a shortage situation, I suspect they dial-up the production of the higher-margin product lines.
The house-brand manufacturing line won't be the one that gets the extra shifts or equipment installed.
https://leginfo.legislature.ca.gov/faces/codes_displaySectio...
"While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency or local emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited."
Emphasis mine. This definition still allows producers to pass on increased costs, as long as they are not excessive and unjustified.
They forget to mention that the marketplace is highly optimized at the foundation to make this bullshit.
There’s no open marketplace. The government protects concepts like inflation which is the deflation of buying power of the masses to prop up the power of aristocrats.
I have zero qualms with government stepping in to actually create some pricing competition.
Financial “value” is not a property of an objection reality. It’s a human ideology. No one in economics disputes this.
And somehow we’re convinced old gits dumber than us, outnumbered us have sold us on truth of markets.
They pray on confusing and controlling our innate behavior to model our future. “Oh guess my model will be these cube walls forever.”
And I’m talking specifically about the bulk producers of basic human needs, food, material supplies, medicine.
How shallow and self aggrandizing America as a culture is is on display right now.
A weak ass people who coddle old gits because they can’t source local TP, and toothpaste?
The people are so incapable of absorbing a true calamity in this nation is frightening.
Not subjective is exporting to Japan.
Case in point: I luckily found some hand gel still for sale online. Probably the very last one around here. So I stocked up - not resale quantities (thought it would have been trivial) but definitely more than I needed - something like 10 pieces. Why? Because the price was low and I'm doubtful I'll get to see any more this year.
If the price had been even slightly elastic, I wouldn't have bought 10 pcs for $10 each. I would have probably spent about the same, and gotten 2 or 3. Even better, I would probably still be able to get it from the groceries store, without any shortage - and buy just one as needed.
So we have two scenario: if the prices stay the same some people stock up early, and most are left without. If the prices go up proportionally, we end up spending a trivial amount more (let's be honest, spending an extra $7 on hand gel is not a tragedy) but we have no supply problems. First because there is much less stocking up, and then because everybody is incentivised to produce and sell more.
People are strange - the fact that there was a global pandemic coming at us was pretty obvious as of early march, but it was this weekend that everyone decided to panic? It's not as though this were a hurricane that just landed on us by surprise.
I fully support the price gouging laws - it discourages these yahoo's from buying up all of the supplies and sticking it in their garage and depriving people over the weekend who might need a container.
Then why do we need any price-gouging laws? Who is harmed without them, if the supply remains intact?
7-10 days is a long time to go without some things like food, cleaning supplies (particularly in time of pandemic), masks for those who actually need them like healthcare workers on the front lines, etc.
Allowing price gouging would not result in more of that stock being available on the shelves - responsible retailers and distributors know better, and behave better than that - they make all of their available stock, and when they run out - they run their factories at 100% to try and catch up.
Note - I have zero issue with ticket scalping - love the fact that there is a free market where people can buy and sell tickets at the price the market can bear. Also have zero issue with a free market in general - it encourages new suppliers to come in when prices go up, and consumers to find relative substitutes - things find an equilibrium.
What I have a problem with is people taking advantage of an emergency or shortage, in such a way that further increases the shortage of items that are critical to people's health and well being, people who may not be able to afford to go out an pay 10x prices on amazon for something like a mask or hand cleaner.
Human behavior doesn't make a lot of sense, but up until a few days ago, the media and the federal government in the US were completely downplaying the seriousness of Covid-19. Many of us who have been warning our close friends and family about this for weeks have been assumed to be paranoid or crazy, but actually we learned this week that the media and government were intentionally downplaying it.
If everyone does that at the same time, you'll have a shortage.
One thing that might limit the shortage is higher prices, as it makes people purchase less, and incentivizes production and delivery.
One thing that most definitely will not help the shortage is limiting the price increases (i.e. price gouging laws).
1) be pleased that we haven't let price-gougers achieve regulatory capture yet
2) be frustrated that the predatory hospital/insurance ghouls have not been displaced by Medicare For All or an equivalent like they have in most other civilized nations
The hospital has a legal team. Some jerk who's re-selling hand sanitizer at 5000% markup does not. They both deserve to be gone after but it should be obvious why the state prefers the latter.
In a pandemic, prices go up, rightly or wrongly, because there is an increased demand. This price scales as the difference between supply and demand grows, in order to decelerate how fast the shortage occurs relative to the speed of creating the good. The price ceiling just means the shortage happens immediately.
If prices are fixed, they may just wait until the normal trucks can make a delivery.
"Vancouver couple exploits pandemic by hoarding Lysol wipes and charging double to resell them."
https://www.thestar.com/news/canada/2020/03/12/were-hustlers...
They are not raising prices to produce more, but just hoarding and then reselling it at higher prices.
"Price Gouger Unable to Sell 17,700 Bottles of Hand Sanitizer after Amazon Crackdown"
https://www.nytimes.com./2020/03/14/technology/coronavirus-p...
Yes, that's a failing of the real free market we live. It already failed so I don't see why suggesting the status quo is useful. In the real world we're not all omniscient, rational actors. Protections like this are useful in the short term.
Explain how this "protection" will stop the stated problem of people hoarding and reselling. Since when have fines or punishment stopped black markets from existing?
>It already failed so I don't see why suggesting the status quo is useful.
"The car brakes couldn't decelerate the car fast enough, they failed, so I don't see why suggesting better brakes is useful." Decentralized, free market pricing is enormously robust and flexible and has allowed the global economy to flourish. But since it has failed you, what would you like to replace it with?
Free markets work in the long term but as they say the market can stay irrational longer than you can stay solvent.
We don't live in a free market. Not even close.
I would argue that since these laws exist, commercial suppliers are unwilling to raise prices for fear of being penalized under this law. That prevents the market from working naturally, and allows these individual gougers to take advantage.
aren't they doing a public service here? I grew up in the shortage driven economy of USSR and have the hate to speculators and price gouging ingrained into my brain with the milk of the mother, yet hear me out - the consumption of the Lysol wipes has increased while the production stays pretty much the same, and the producer and big distributors and retailers aren't willing to increase the price while the price increase is really necessary to adjust/optimize for the new equilibrium between the new increased consumption and the same production levels, otherwise there will be shortages - similar to CAP theorem you can have either price control or availability (in my experience USSR with price control and total shortages and later, in 199x, Russia with freed prices and immediate availability of everything are direct experimental confirmation of that - you had to see how sausages and everything else magically appeared on Jan 1, 1992 in the just yesterday empty stores, granted it was 3x of the yesterday's fixed price, yet it was really available at that 3x price while yesterday at that nice 1x price it just wasn't there). Thus the price gougers like that couple de-facto do necessary job which the producers/distributors/retailers aren't willing to do.
Remember that the first priority of any government is to keep itself in power. Governments that don't accomplish this are no longer governments. Efficiently allocating goods is a secondary consideration that helps them achieve this, but if doing so means they end up with a revolution or rebellion anyway, it wasn't very effective.
In this case it's arguably something desirable, as the most at-risk group, the elderly, on average are much wealthier than young people. Someone over 80 is around 100x more likely to die from the virus than somebody under 40.
This is not an academic thought exercise, BTW - a lot of the social unrest of 2019 in Venezuela, Chile, Hong Kong, Zimbabwe, Iraq, etc. came from prices rising quickly enough that young people could not afford basic necessities.
There is absolutely zero risk of a violent overthrow of the California state government right now. Even if politicians were as craven as you suggest, you have already noticed how lame your argument is with regards to age groups: old people have far more power on Election Day.
The markets will respond far faster with supply than setting price ceilings and fining random opportunists will.
So few people question whether it will actually work in the real world before asking if in an ideal scenario it is an effective idea.
I mean what’s going to happen next time? Are they going to lock up all the TP and ration it out on first signs of any sort of epidemic or other causes or panic? Because that’s when the hoarders and grey market guys were already stocking up.
It crossed my mind, when news of the coronavirus first broke, that I could make a lot of money speculating in toilet paper, canned goods, rice, and beans in the near future. (I did all my prep shopping 3 weeks ago, but didn't buy more than we personally needed as a family.) I didn't because a.) a little voice in my head said "Do you really want to be that asshole?" and b.) it occurred to me that it was very likely that powers that be (governments and market platforms like Amazon) were going to crack down very hard on scalpers, and it was not worth going to jail for. Turns out I was right about that - people are not going to jail (in the U.S. at least, I heard they may be in Europe), but they're facing $5000 fines per item or eating the cost of buying & disposing of the items because Amazon revoked their seller license.
The point of highlighting laws like this is so that people aren't tempted next time there's emergency to do the same thing.
https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
Banning that is not going to have any effect on production.
And this is an order on gouging, not price fixing.
This may be due to the fact that the retailers are heavily threatened by government action, so they take no action to increase prices.
Contrast this with the must-have Christmas toy, which may otherwise be seeing similar unanticipated demand and suddenly the same retailers are incredible pricing experts.
The factories will need to maintain long-term relationships with these retailers and they may also have similar threats from government action.
More likely is that whatever slack there is in the supply chain will be exported to countries which have no such price control policies, because price-control policies do not address the underlying issues of supply and demand.
https://www.latimes.com/business/story/2020-03-14/coronaviru...
Really? How about longer shifts, double shifts, weekend shifts? If you could suddenly make twice the profit on your product you would figure that out pretty quick! If you can't make any extra profit, why bother?
These types of situations are textbook explanations for WAR PROFITEERING (except we are in a crisis instead of war).
So who's model accounts for hoarding behaviors like this?
Meh. I don't think it is the same thing at all. There is no shortage of raw materials or of labor (as in war time).
There is an increased demand (irrational or rational doesn't matter). Best way to decrease demand is to let prices rise. It isn't really any simpler than that.
If politeness or customs or laws prevent the price from rising while demand continues to rise then the outcome is 100% expected: shortages where the product isn't available for any price.
It is our own mis-placed disdain for surge pricing that is creating the shortages.
That is just an assertion with no justification that goes against all standard economic theory.
That philosophy is pretty darn right-wing on economic and social issues. You can't just slap "personal freedom" on top of that and claim it comes out smelling like a rose.
Baloney.
The problem is buffering. Normally, buffering happens within the supply chain -- the back rooms of stores, loaded in trucks, warehouses, distribution centers, and the factories themselves. Now, we are telling everyone "buffer at home so you don't need to go out so much". But the problem is, buffering is much less efficient at the end of the chain, so you need to buffer a lot more. That's causing a short-term strain on production and distribution.
Blaming selfishness or gouging probably doesn't do much to help this problem. My guess is that the biggest problem is the discrepancy between how much stuff would be needed to buffer within the supply chain versus how much stuff is needed to buffer at the end of the supply chain (i.e. at home).
Worse, because it's a temporary buffering problem and there's no real increase in consumption, there's little incentive for production to increase now to alleviate it. Any increased production/distribution now just means less demand later when people start to work through their caches at home (and stop buying for a while).
So the only way to alleviate this is to allow the prices (that manufacturers charge) to rise, which will give manufacturers a cushion against the inevitable slump in the future. That's not very popular and not worth the brand damage, so it won't happen.
The good news is that I don't think this will last more than another few weeks. Gougers will stop buying at some point because they don't want to get stuck with a huge supply of toilet paper and no channels to sell it. And the home caches will fill up.
EDIT: this analysis has nothing to do with things like facemasks, where consumption has dramatically risen.
But no increase over 10%? That gives producers very little margin to work with. (10% is the rate set in the law. See the link.)
Yes - this sucks for someone who really wanted toilet paper that day, but at the same time it ensures more conscientious spending where absolutely required. I usually don't check prices when I shop for groceries, but if TP was $20 per roll id probably actively decide to not buy any that day. Having this kind of damping from a price-demand perspective could really help to stabilize the availability of goods in retail environments. I can understand how customers might not like this, but if situations are dire, I think we should consider at least being able to throw some sort of switch to enable this mode of operation during emergencies.
As the price goes up, those people drop out one by one. It is those marginal consumers, not the one who needs TP the most, who are price sensitive. This ensures that the person with no TP, paper towels, or soap is always able to get the TP that they need now. Even if there's only one roll left. The price may have to rise to $100 a roll to distinguish between them and the next-most-marginal consumer (who also has no TP, paper towels, or soap, but is willing to hold their poop for a day to save $100). That's the most efficient outcome and markets are great at finding it.
https://www.econtalk.org/munger-on-price-gouging/
It’s very entertaining and enlightening.
There's a similar law in California that allows individuals to sue businesses who offer you a contract that forbids leaving negative feedback on review sites. We had a garage door company offer us a contract that included such a provision. We didn't sign it, went to court, and quickly got a judgement for $2,500, which they paid.
(Here's information on that law:)
https://racohenlawfirm.com/fines-for-trying-to-stop-bad-onli...
One reason they don't do this is because of the attitudes illustrated in the comments here. People irrationally believe that surge pricing in this case is wrong and the negative response by their customers outweighs the benefits of surge pricing. I believe that attitude about surge pricing is wrong and it is one reason why we end up with shortages. It is a terribly self-defeating attitude that exacerbates the situation.
The issue isn't manufacturers, and only retailers in that they failed to implement a purchase limit per customer given news of a pandemic.
You want the maximum number of people with enough supply to get by. Not to have large swathes of the population to go without because someone decided to usurp the logistics network in search of price gouging opportunities.
Much easier to raise the price then ask people to prove their need for a product.
And how are you going to prevent people from just having mom, dad, and each child purchase the items separately?
In order to do that, people will have to get cash. Cash has a far more tangible effect in terms of inspiring frugal spending, and it may not be a bad idea to get cash out of "the system" anyway.
If not, simply vet the card making the purchase. This isn't novel or groundbreaking. Way back when, you'd have a Government issued ration card I believe. Though I'd think a voluntary program implemented by The practice of private ledger keeping, while out of vogue, is still quite practicable. All you have to do is talk to people. Of course, if you went balls to the wall laying off cashier's, you may be in for a bit of a bad time, but hey, shareholder haircuts happen. Price of doing business.
This is not even the slightest bit untread territory.
https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
I'm sure in terms of overall numbers the vast majority of people who are panic buying aren't doing it to profit, but it only takes a couple of jackasses like the ones described in the article operating at the scale they did to cause real problems.
“However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency.”
I am glad they included this language, even though it is a bit sloppy. What I am referring to is that yes, costs can increase dramatically during an emergency, however, the “markup customarily applied” could also change in dramatic ways.
One of the aspects of the theory of pricing is to include in the equation variables to address support, business continuity, expansion, disruptions and other “nonlinear” factors.
In an emergency what might have been simple could become complex. This means it might be impossible for a vendor to maintain an ongoing supply or continue to offer services. And, given the current reality, if the consequence of providing the goods or services could be loosing your entire staff to a quarantine, your ability to maintain a supply might require a very different approach to pricing.
Given the severe consequences, this language could cause vendors to avoid exposure for fear of being destroyed by an uninformed claim. Which means supply would contract and prices would explode.
That said, the guy buying water at Walmart for $1 to then sell it for $5 should get nailed to the wall with rusty nails.
By definition capitalism is about making a profit. Sell things for as much as you can, and win.
I find it fascinating how where there isn't a "crisis" then maximizing profit is just what we're all supposed to be doing, and we accept it but somehow in a "crisis" it's suddenly evil and horrible.
Suddenly capitalism itself starts to feel mighty immoral, doesn't it?
As with all moral issues, it is difficult to come up with an objective distinction between wrong and right. I tend to rely on Kant’s categorical imperative: Would society be harmed if everyone behaved in this way? In our situation where hoarders are attempting to profit from a crisis, I believe the answer is clear: It’s immoral.
Hospitals in the USA marking stuff up 500 or 1000% ARE harming society already.
If all shoe companies charged $400 for a $2 shoe, I believe society would be harmed, yes.
If every company hired people as part time only so they didn't have to pay benefits, again, society would be harmed.
The list goes on. Capitalism is already harming society badly.
Agreed, that needs to be fixed.
> If all shoe companies charged $400 for a $2 shoe, I believe society would be harmed, yes.
A competitor would step in, charge less, and win the business. It would only be immoral if competition was quashed or impossible, such as in a hoarding situation.
> If every company hired people as part time only so they didn't have to pay benefits, again, society would be harmed.
I don’t see why this is true. The only benefit of moral significance is medical, and there’s no law of the universe that states that must be paid by an employer.
Most developed countries consider maternity leave, sick leave and compassionate leave (carer's leave) basic rights.
But, here in CA, on the other hand, when a House (something far more crucial to people's lives), costs 800,000$ instead of 200,000$, that's okay (at least with the vast majority of voters).
I should mention the reason for 1 and the other are completely different. The soap, is merely due to the seller, wehreas the housing shortage is a political choice voters agreed to.
If, under normal market conditions, producers already make X amount (of , say, toilet paper) due to Y demand at price Z, when the demand spikes to 2Y, if you can produce and sell 2X goods at the same unit cost, you can double your profit without raising the price at all.
One might argue that in order to rapidly increase production capacity, the unit cost will rise as well. But that doesn't necessarily mean that you have to allow prices to rise. As long as the extra investment allows you to produce and sell enough units so that the extra profit is greater than your cost, the incentive is still there. And that's ignoring the fact that a price cap doesn't have to fix the price at current levels - it can limit the increase to a reasonable amount.
If that switch can be done for under the price cap, then the price should remain under the price cap anyway due to competition. If it cannot, then shortages will result.
This doesn't accurately reflect how the cost would scale. X isn't easily adjustable - it reflects annualized wages, depreciation of production line that is sized for production amount X, etc. Equipment sitting idle is wasted money, so production lines operate close to maximum production already (or at least nowhere near half capacity, that would allow 2X production)
Even though I stocked up myself, I feel like shortages of food and general supplies are going to be temporary. The immediate goal is to avoid having to go back to stores before everybody else figures out the new normal (eg don't fucking stand there coughing in the middle of the store).
Hand sanitizer/IPA seems easy to produce in industrial quantities, and it feels like that will sort itself out in a week or two.
Respirators/masks seem the only thing that are and will continue to be in short supply. But it feels like government (including health providers) is going to have to get them into everybody's hands eventually. But maybe that's overly optimistic.
What if I sell it to another middle man who also distributes and sells for 5% more?
>If the seller can prove that the increased price is directly attributable to increases in the cost of labor or materials needed to provide the good or service, the seller may not be liable under the statute.
It's right there on the linked page. This basically prohibits large markups while allowing for passing of costs.
I'm not sure how "pandemic" applies, either.
Everyone will also change their priorities. There seems to be this idea that there are millions upon millions of people who have a fixed budget and purchase plan that has no room for adjustment at all. I don't think that is true, it is a myth.
And in any case, if the preferred policy of not letting prices float results in a completely empty shelf in the grocery store, please explain to me how the poor, middle class, or rich are going to purchase anything from that empty shelf?
These are good points.
> There is little reason to outlaw price gouging save for humans have a disgust response to people who profit from tragic events.
There is at least one reason:
Setting a price ceiling means that the distribution of the good will be tilted more towards those with less financial capital than it would be if the price were allowed to climb further. I believe this is a point that many care about for a number of reasons.
I'm not arguing that it's better if you are optimizing solely for maximizing total utility received from the supply of the good, but I would question whether that is necessarily the right course of action.
In short, pick up a shovel, and get to work. The Market will continue when people stop fearing existential threats.
Whether or not an economist is happy with that state of affairs is beside the point. Economists don't run the country. People do. Contrary to popular belief, most people are fine leaving money on the table as long as it pays off in the long run in terms of not losing those they care about.
The gain is personal, the harm is social, this is ethics 101 and solipsistic pseudo-libertarion reasoning doesn't make it right.
Basic economics is solipsistic pseudo-liberation reasoning now?
Not every point on the supply/demand curve is a good place to be.
But the ability to increase price freely also decreases actual hoarding, because when stores see a massive increase in demand, they'll be incentivised to increase prices, which will deter unnecessary purchases.
You are basically saying "I am ok pricing limited necessary resources up to where only I and people as rich as me can afford them".
One scenario is that a few people have taken advantage of low prices to hoard unreasonable amounts.
A second scenario is that the number of people buying a reasonable amount exceeded the assumptions built into the distribution network.
In the latter scenario, high prices pretty much go in the pocket of the retailer (and so on), and availability is still low.
My intent isn't to try to characterize the second scenario as good or bad or okay or whatever, it's to point out a possibility that your comment doesn't address.
I think people are not rational to think that "oh its too expensive" - I think they will still try to hoard it and speculate on prices going up to 15x. And so on and on until the crises ends or they end up with no place willing to sell it.
Might work okay in China, where the government can e.g. command factories to switch to producing masks, but it means American factory owners won't have any incentive to switch over to producing them.
If the demand runs high enough for long enough, it wont be an emergency, and emergency measures don't apply.
Yes I do. If everybody is now sanitising their hands thoroughly and regularly throughout the day to prevent infection, this could easily be a 200x increase in hand sanitizer usage compared to what it was previously.
Price gouging is not an efficient market result for anyone - the goods aren't actually, in real terms, worth the temporary price (the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up) nor does their value represent efficient allocation of resources - the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty.
But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. After all, if we don't allow sudden plunges, what incentive will there be for investors to properly allocate their risk in the future?
But, no one's making that argument. Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.
This is not necessarily true, especially if we consider that the pandemic may continue for a few months, and people will be using orders of magnitude more hand sanitizer and masks than before.
> the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty.
He distributes supply over time. Instead of everyone panicking and buying up all the supply at time T, the scalper buys up some, and then gradually sells it at times T+1, T+2, T+3... Scalping is arbitrage between current demand and future demand, and ensures more supply is available when people need it in future.
>But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market.
This is comparing apples to oranges. A circuit breaker is not a price floor except in a very limited sense; the price is free to fall further the next day. I don't think many people would object to a rule like "the price of masks can only rise 10% per day".
Yes, you're basically right despite intending to be sarcastic. The circuit breakers are stupid and there's no real good reason for them to exist. Levine:
> The basic idea of stock-market circuit breakers is, like, some news happens, and the market reacts precipitously, and stocks fall 7%, and the market gets turned off for 15 minutes so that everyone can have some time to think and digest the news and see if they want to buy. On an average Tuesday afternoon, not everyone who might want to buy stocks is watching the market every minute. The computers are, sure, but some long-term investors are busy doing other things, reading 10-Ks or meeting with executives or whatever. Someone needs to call them up and say “hey not sure if you noticed but stocks are cheap now, you should buy some.”
> But you generally want to do this sort of thing through mechanical bright-line rules, and occasionally those rules get applied in kind of weird circumstances. The market did not fall 7% by 9:34 a.m. today because of shocking news that came out at 9:32! Investors had all weekend to ponder coronavirus news, and all of Sunday to ponder oil-price news, and they pondered it at their leisure, and futures traded limit-down, and then the stock market opened and investors applied their weekend’s worth of pondering to the market, with the result that the market shut down four minutes later. A weekend of pondering, four minutes of trading, 15 more minutes of pondering. I am not sure what you learned in the 15 minutes that you didn’t learn over the weekend.
Back to you:
> Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.
The government didn't do that. It loaned $1.5T over a very short term to banks. It was not targeted at the stock market and had no impact there.
But if the free market should be allowed to run unimpeded, why did the government need to intervene here, when apparently in the provision of basic necessities you are arguing this is going too far?
> when apparently in the provision of basic necessities you are arguing this is going too far?
I made no such argument.
I think this makes sense.
It would definitely stop people like this guy [1] going out and cleaning all the local stores/rural stores and mom and pop outlets of cleaning supplies, then selling the stuff on for a huge profit...
[1] https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...
Someone’s going to get it. I’d rather it go to those paying attention and willing to put in the work to get it to where it is most needed.
(I expect the goodwill would outweigh the costs and any "foregone" profit)
Not imposed by the government, not socialism, just good business.