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Comment by __blockcipher__ | Hacker News Reader

Not GP, but banning short sales is known to be absurd by pretty much any economist or financial expert out there. Distorting true price always leads to negative effects.

Now people investing in french companies will pay unfairly high prices for their shares.

Switching to nationalization, it’s pretty clear that that removes the incentive to take on risk and found a company since you are always at risk of the government stealing your assets.

Sorry I didn’t include citations but I would really encourage you to read about rational pricing and healthy market dynamics. Those that think you can just artificially decide the price of a security rather than let the price discovery mechanism play out are doomed to repeat the same problem we see in communist countries: you can buy bread for a “fair” price, but there’s no bread to buy because the price was too low.

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Government price fixing always leads to some combination of:

1. shortages

2. gluts

3. black markets

Price regulation works effectively for water and car insurance and hasn’t led to black markets (at least that I’m aware of).

And it doesn't work for housing and about a million other goods and services that have been subject to price controls.

Just look at California's water shortage issues. Water prices are basically fixed so huge farms suck up all the water to irrigate a desert while ordinary people are told to stop bathing. Seems like an externality of price regulation, no?

Car insurance is price regulated? In what country (or countries)? I'd be surprised if it is where I live...

All of the US, each state has a department of insurance

edit: wouldn’t let me reply, I know they regulate existing product prices and that new products need to be filed and that states have different laws regarding coverage limits and litigation details

Do they regulate prices? Or just coverages?

Price regulation of water has resulted in rationing and shortages. Car insurance prices aren't regulated around here.

It’s not perfect but it prevents a scenario where Fortune 500 companies buy up as much as possible and use their position as a source of profit growth.

What country do you live in?

If prices are allowed to float, Fortune 500 companies can only buy up supply if they will be willing to pay the market price.

What about a bimodal model, people have a right to a reasonable volume of water. Companies have to both pay for the water (at the price-fixed rate) and have to acquire a right (like a ration token) to have water. People then would always be able to afford to buy enough water to sate them, but companies need to buy their tokens in order to get water. Most people would probably sell their tokens back to the water company, who would sell them on at a profit. But equally you could save them for times of water crisis when the token price soars and pay off your own water bills.

Tell me why this is stupid.

That proposal is just a complicated and inefficient bureaucratic reinvention of a supply & demand marketplace. Just let S&D do its thing and take its course, and people will get water.

Some people will get water. And some will get priced out of the market.

Higher prices INCREASE the supply. I.e. MORE people get water.

Or same people get more water.

We have seen each of these in the past 2 weeks without any government price fixing needed!

To be fair, price gouging laws prevent companies from increasing prices of goods like, say, toiletpaper, such that they remain in supply. Thus the shortages.

In other words, we already have “soft” price-fixing.

Please stop spreading misinformation. The price gouging laws allow prices to increase without limit to pay for increased wages or costs: https://oag.ca.gov/consumers/pricegougingduringdisasters#8C

> The price gouging laws allow prices to increase without limit to pay for increased wages or costs

Higher profits from gouging is what motivates people to increase the supply. Altruism only goes so far. Profit motive to provide needed supplies is far more effective.

Remove the profit motive, relying on the government and altruism, is a very poor substitute.

The flip side is that in times of crisis, poor and vulnerable populations are literally priced out of essential goods.

No availability at all is worse than availability at a high price.

The availability is the same, though. If you manage to prevent reselling, then the choice is rather easy:

* 100 rolls of toilet paper sold to whoever comes first

* 100 rolls of toiler paper sold to whoever bids highest

> The availability is the same, though

The point is, gouging creates MORE availability. Remember those hurricanes? People outside the devastated zones promptly filled jerry cans with gas, drove into the disaster area, and sold gas out of the back of their pickup trucks for high prices.

That is, until the government made it illegal to do that. The next disaster meant people had no gas until the government got around (days later) to bringing some in and rationing it.

TP is not quite the inelastic situation you posit it is. For example, there's been a boom in sales of bidet toilet attachments. High prices for tp make it very attractive to switch, thus making tp available for others. High prices mean people who already have more tp than they need will be tempted to sell it. High prices mean TP makers will ramp up production as fast as possible. High prices mean people will be motivated to make & sell TP alternatives. High prices mean people have no reason to hoard TP.

Anti-gouge laws lead directly to hoarding and no TP available.

Toilet paper makers already make large amounts of it - the limiting factor is how often supermarkets can restock shelves.

Gouging overcomes whatever the limiting factor happens to be. The profit motive is very powerful at moving around obstacles.

If you can't afford the price, there's no difference.

Hoarding toilet paper will not increase supply of it. The toilet paper manufacturers are not making any more of it, because this is a temporary blip on the demand side, and because they know that they aren't going to sell any more toilet paper in the long run.

Hoarding resources that we aren't globally in short of, actually makes the situation far worse. The demand spike is solely caused by hoarders and price gougers, to the detriment of everybody else.

Laws against gouging actually motivate people to hoard. Then come the laws against hoarding, which people do anyway, they just do it secretly.

Shortages motivate people to hoard. Gouging causes artificial shortages.

There are no shortages when gouging is allowed. Gouging disincentivizes hoarding. See my other posts in this thread.

Anti-gouging laws mean that you'll either do without or pay even higher prices for black market goods. The more you punish black marketeers, the higher go the prices you'll have to pay.

> There are no shortages when gouging is allowed.

There are when a bunch of people buy up the entire supply, and try to resell it at 5x the rate.

> Gouging disincentivizes hoarding.

Only after the gougers have hoarded everything they can.

The gougers in this case aren't making any more toilet paper appear in the world. The factories aren't making more of it, just because a few people bought it out, because the global demand for it is constant. They simply created an artificial shortage, and introduced themselves as a parasitic middleman.

> The gougers in this case aren't making any more toilet paper appear in the world.

Things don't happen in a vacuum. If the gougers create an artificial shortage, then there is money to be made by increasing the supply. In fact, there'll be plenty of money to be made selling to the would-be gougers. The supply is not fixed and gouging will increase the supply.

In a theoretical world, with instant market reactions, instant transportation, and perfect price and supply information, yes. In the real world, no.

1. The absolute supply of toilet paper on a long-term timescale will not increase.

2. The cost of increasing manufacturing capacity may not be worth the increased revenues from selling into a two-week shortage.

3. There's a lag time. By the time you increasing manufacturing capacity, and get paper into groceries, the demand curve would have flattened out.

4. There isn't an actual shortage, there are some very localized shortages, which will get smoothed out once supplies sitting in warehouses get to store shelves. Nobody in Mexico increases toilet paper manufacturing capacity because the corner store across my apartment is out. Nobody working in grocery logistics is going to be calling people in to work overtime to deal with this, either.

Your model still assumes that people will not change their behavior due to the price increase, despite having powerful incentives to.

I’m not spreading misinformation. On the contrary, your link validates what I said.

Countering misinformation is good, but please don’t call it misinformation if you don’t understand what the text you link says.

Prices need to be able to increase beyond just any cost increases from the TP manufacturer. Without freedom to set prices as desired, we will continue to have shortages.

The prices can increase for any labor or material costs for both manufacturing and transit. If you can prove that your increased prices are due to increased costs you can raise prices as much as you wish. The only thing this prevents is increased profit in times of crises.

Preventing increased profit means no increase in supply.

We see shortages of hand sanitizer, and at least one person facing criminal charges for charging high prices for them. And those charges are because the government is fixing prices with anti-gouging laws.

You are seriously oversimplifying reality to fit it into your world views, here.

__blockcypher__ at least gave some reasoning behind the expressed position. A fact-free, argument-free rebuttal does little to refute such a post, even if the post is wrong.

Could you give some evidence or argument or both to explain why you think __blockcypher__ is wrong?

From HN’s guidelines:

> Please don't post shallow dismissals, especially of other people's work. A good critical comment teaches us something.

In what way am I seriously oversimplifying reality?

Maybe I came off too hard, and lacking details didn't help either. My point is, this is a situation without precedent, unlikely to repeat very often, and not all private industry is being nationalised. Same goes for banning short sales. It won't last forever.

That is why I think you oversimplified. This is not a communist takeover of France.

Note: I did not, and wouldn't have downvoted you for your comment. Yours is a fair opinion to have.

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