Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each.
Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because by then either demand will be lower or production will be higher.
So nobody would be buying a million masks to hoard in a bunker right now. The people buying them would be the people who intend to use them.
Then you need to differentiate who needs them the most, but there is no way to do that efficiently from the top of a tower. And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity. A software engineer isn't going to pay a high price for a thousand masks they don't need any more than the billionaire is going to buy a million. But a doctor's office might very well pay a high price for a thousand masks they do need, which is exactly what you want to see because it causes them to get what they need.
There are 18.6 million millionaires in the US. If each of them bought 10 n95 masks just in case, or for themselves + family + friends, that's 186 million masks. They could easily pay $20 / mask (that's only $200 per millionaire), which would significantly push up the cost to hospitals of acquiring masks.
Hospitals might not even be able to afford the masks they need. They are having budget shortfalls due to the ban on elective surgery. Cuomo was complaining about paying $7/mask, and NY state is going to have budget shortfalls as well due to the recession.
But the most annoying thing about this thread is how it has turned into some kind of let's-forecast-the-markets game, instead of dealing with the underlying reality - that the markets failed to provide an essential good when it was needed, resulting in a significant number of avoidable deaths.
There should be a special word for the moral delusion that markets exist in an abstract philosophical vacuum and price signals are somehow more important than people's lives.
Please cite evidence that this was "millions of millionaires" buying masks.
When an oil refinery blows up and gas prices rise, that isn't evidence of millionaires hoarding, either. It's evidence of supply and demand at work.
From my perspective, there should be some word for the delusion that equitable distribution of a smaller, price-fixed supply is better than prioritized distribution of a larger, price-gouging supply. The lack of masks that not allowing higher prices causes is going to kill people, and you want to restrict the supply available to everyone in order to not be unfair to the poor?
In the real world, which recently has provided an ample sufficiency of evidence that manufacturers can do no such thing because the process depends on specialized machinery that takes considerable time to manufacture in its own right, such an argument can most kindly be described as struggling to achieve relevance.
Somewhat less kindly, one might note that such an argument equates to saying that, well, actually you can produce a baby in one month by getting nine women pregnant, as long as you pay all the women enough.
No, that's correct, because you can't (profitably) buy a million masks to hoard them right now.
If you'd done it on January 1 though, you'd have been able to buy as many masks as you liked.
Selling them now? Is this the height of the crisis? Perhaps.
> Real people don't behave like this.
They do, but most people don't have millions of dollars to fuck around with.
But if they think they can make a quick buck, they'll happily empty shelves in the local stores of masks, hand sanitiser, toilet paper, etc, and then turn around and try selling it on for a huge markup.
This is why I've not seen a roll of toilet paper on shelves in my local supermarkets or stores for three months now. Nor a bottle of hand santitiser, nor masks of any kind. But hey, I jump on local buy&sell sites and there's heaps of it there, at 10-100x markups.
For most of these folks, it is/was fairly low risk - they had the free cash, and they thought they could always return it. Some of them are stuck with supplies they now can't sell on, or return - so they now have a few years worth of toilet paper and hand sanitiser, but hey - it's not a huge loss for them.
Whereas my local Costco has had continuous stock of massive piles of toilet paper available for over 2 weeks now. That's an arbitrage opportunity that's not being exploited because of the difficulty travelling.
Three months ago was January 14th. Perhaps you are being a mite hyperbolic?
Mid February is when Toilet Paper, Kitchen Towels, Facial Tissues, and Hand Sanitiser disappeared. My understanding is that masks went earlier, but I don't have direct knowledge of those.
There were no purchase limits then, and now every time they're restocked there's a pile of people buying up every single one of them in record time. There's video from my local supermarket of a whole pallet stacked high with toiletpaper being delivered, and disappearing in minutes.
I don't understand why people aren't talking about how disposable PPE defies this point at the low end. Hoarding a million masks doesn't make you better off than buying a thousand, but buying ten N95 masks is as good as buying zero. Masks, gloves, even hand sanitizer are consumables, so getting a little bit of them for everyone is as good as just throwing them into a hole and setting on fire. They work only when concentrated in bulk. Like a thousand of masks per household, or a million per hospital. Enough hand sanitizer that you can actually disinfect your hands every time you accidentally touch something outside. Etc.
I'm in China and have sold over 30,000 masks to the US (not for profit, but I don't have the cash to just donate them). We've sold to hundreds of different individuals at this point, and none of them are using the buying patterns you describe. The only people buying more than a hundred or so are buying for employees, hospitals, or doing a good job of lying about their intentions. Everyone is buying just a few and making them last.
So far I've personally taken one 10-pack of KN95s from our stock (of which I use 4 so far, on rotation. the other 6 are still in the pack), and about 5 surgical masks. There are strategies for extending the life if you do a little research.
The vast majority of regular people just aren't currently using PPE in the way you describe. After reading up on it, personally I think there's a useful middle ground between throwing away masks like you would in an ICU and completely doing without.
Sanitizer and gloves I know less about. But we do sell gloves and nobody is ordering more than a few boxes of those, either.
Depends on the situation. N95 masks can be decontaminated and reused pretty easily (IIRC 150C for 10 minutes). If you're only using them once or twice per week, letting the mask sit for 3-4 days is enough for most of the viral material to be destroyed by exposure to the normal environment.
And even taking your clinic example, you see the same issues there. If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.
But then they're not price-insensitive billionaires, so if the price goes up it deters them from hoarding (and gives them a financial motive to unload their existing hoard), which is exactly what you want.
> It's 18 months or so before we get a vaccine. There's plenty of incentive to hoard PPE.
It's 18 months or so before we get a vaccine, but not before anybody can start manufacturing more PPE, which is already starting to happen and will only increase if demand doesn't subside. And if demand does subside, same result.
> If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.
What allocation process are you proposing that would avoid things like that happening? The same one we use to allocate tax dollars to bailouts doesn't feel like a strong candidate.
> but not before anybody can start manufacturing more PPE
I think you really aren't coming to grips with how people think and behave differently in crises. Possibly having more PPE in a few months is only valuable for reducing hoarding and profiteering now to the extent that people are confident that will happen.
> What allocation process are you proposing that would avoid things like that happening?
Letting local and state public health officials allocate scarce medical supplies is the obvious start. Point-of-sale purchase controls are another one that's easy to implement. In the long term, transparent rationing where needed. Fining, arresting, and imprisoning disaster profiteers are all excellent options when it's severe.
If we set up a dog-eat-dog world where only money matters, why would a billionaire hoard unneeded masks? They know that they can just buy what they need when the need it. The only people with incentive to hoard are poor and vulnerable people because they know they won't be able to afford masks when they run out. Entrepreneurial types looking for arbitrage will probably cause weird things to happen in the short term, but after a month or two things will rebound sharply to whatever the new normal is going to look like.
If this crisis has taught me anything, it was a mistake not to hoard. I assumed I would be able to buy what I needed at outrageous prices, instead I ran the risk of running out of toilet paper because prices stayed unreasonably low.
If bankrupting hoarders with high prices is going to be unacceptable, I'm going to become a hoarder out of necessity next time I see a crisis inbound. I'll stock up on much more toilet paper than I need because I can't predict when governments/major supermarkets/public at large will let me buy the stuff at market price; which is clearly a bit higher than what the supermarkets are charging.
TP selling for 200% that is headed to 400% shortly is a smarter buy than most stocks.
Since people can't actually store infinite TP wouldn't all hoarders end up with the max TP they are willing to hold in a reasonable time frame after which more supply becomes available for everyone else. In the mean time most buyers haven't been wiping with leaves they expected more effort to visit more stores and ultimately settled on buying some inferior TP. It's not even clear that your suggestion would bring equilibrium faster.
If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.
There isn't an alternative. If you assume people behave irrationally you may as well send the army in straight away. People are often stupid but rarely irrational given what they can understand. There is pretty solid evidence that people with money are the ones who spend it rationally.
And besides a private buyer's opinion of what is rational is just as valid as anyone else's.
> If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.
Yes? I'd like to live in a world where I can go to the store and buy toilet paper. Just like everyone else. This is not an unreasonable demand.
I'd like to see everything go back to normal as fast as possible, thanks. Policies that make it irrational to return to that happy equilibrium are not in my interests. We need producers and companies involved in consumer logistics to change their behaviors. Money is the fastest tool to do that.
Besides, seriously, why do you think people earn money if not to get first dibs on stuff they want? What do you think money is for? It isn't like everyone is going to get what they want, there is a massive shortage. Someone is going to have to do without. If someone has to do without we use money to figure out who. That is how life works in this era, and the eras before dating back to the invention of money. Price controls aren't going to win a war with the economy. It is more likely to take down the government than stop wealthy people getting what they want.
The point is not that you desire to be able to buy TP its that you are willing to sacrifice the general well being for your own convenience.
Hoarding of some non emergency items is self limiting and self correcting in a way that doesn't rob the poor of the ability to wipe their asses. It's a problem that doesn't need solving beyond the simple expedient of not allowing one person to buy too much of it to give other buys a chance.
Your solution by contrast is actually more likely to shift whose hoarding it and why then solve the problem.
If your position was apt then surely you can give one example of such a system working?
Economic modelling often fails because they assume a small number of rational and logic rules. But people are highly variable and rational for one person is irrational for another, depending upon experience and situations.
Your claim that people with money spend it rationally is countered by evidence that poor people are often spending money rationally, given their situation, needs and income. Different situations lead to very different definitions of rational and "common sense". (Mental stress & fatigue also becomes a decision making factor at low income levels.)
I claimed that most people spent their money rationally. You're not countering me with that point, we're agreeing. If wealthy people make a habit of spending irrationally they go broke.
This just isn't the case. Unless they're spending irrationally AND a large proportion of their wealth then spending irrationally is unlikely to make them go broke. And unfortunately some people have so much wealth that they can spend market-distorting amounts of money that are still a tiny fraction of their overall wealth.
Average person doesnt buy iphone because they need a new phone, or coke to quench their thirst.
This is false, as well as being a false dichotomy. We know people act at least somewhat irrationally. That's why we have laws on gambling. It doesn't mean sending in the military.
Of course there is - look at how people actually behave given various stimuli, rather than presuming enlightened rationality.
Enlightened rationality does not govern real actions, we know this, we have ample evidence of this, and making economic forecasts on this basis has been repeatedly exposed as a fools game.
There is an alternative: distribute wealth. On aggregate people tend to behave a lot more rationally than individuals do. So if you spread the buying power as widely as possible then you get a more rational market.
Just delegating responsibility for resource allocation to groups of people is not a silver bullet.
"Aggregate people" tasked with distributing wealth (or taking wealth and converting it to some resource and distributing that) seems to be highly succeptable to holding onto more and more of that wealth over time for trickle down distribution within it's own organization.
Large nonprofits regularly come under fire for using too much of their income on their leadership and luxury fluff for themselves. Governments routinely spend their income paying themselves and paying for pork for their friends and paying for fluff instead of making people's lives good. Religions tend to amass more and more wealth until some sub-group tells them to shove it and historically this results in violence. You could fill libraries with the volume of work written about all the ways organizations become corrupted and self serving and fail to achieve their goal.
It's basically democracy for economic power. And you're right, it's not a silver bullet. But I believe it could be a significant improvement on the status quo.
Distributing wealth is self-destructive behavior. Generally, you want wealth in capable hands, who can use this wealth to create more wealth. You don't just want to piss it away.
"Pissing it away" is also known as buying things, which drives economic growth. The poor spend every penny they make, and this is generally considered good for the economy.
We tried consuming our way to prosperity during the housing bubble in the early 2000s. That turned out how you might expect.
The growth in that sector is swallowed up by the overall hard-stop of the entire economy.
Indeed. Just the idea that TP is the topic of interest and not, say, food or medicine proves this. You don't need TP. A lot of the world don't even use TP. You can, instead, wash.
But there's not much you can do to replace eating.
The problem arises when rich people start hoarding at times when supply is constrained, because they can do it so much more rapidly and create a much greater shock to the system.
It was notable in London that severe shortages only really existed at stores you can drive to. Stores that you can only walk to have been much better stocked.
The market signal that would make rich people hoard masks in the good times would be ... an expectation that if an unexpected crisis arose then prices would rise to extreme values. Nothing else is going to make that happen. Not even most governments manage to resist economising and running down their medical supplies after the last health scare they faced.
I'm not going to hoard in good times because I'm not crazy; I know I can't be ready for everything. I'm just going to try and preempt everyone else at the start of a crisis. It won't work every time but that is the strategy that makes sense if the crisis response is includes 'stopping price-gouging'.
If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.
We don't want anyone hoarding (or gouging). However keeping TP enough for 2 weeks when supply was ample, whould have prevented this ever being an issue, and no gouging needed. TP production has never been an issue, the system shock of people panic buying (too much) all at once was. People aren't shitting more than before.
I have about a month's supply of TP at home, and have only bought 10 rolls since this whole thing began. I am not a prepper nor a hoarder. I just like having a buffer of things I like not being without. There's a miniscule opportunity loss of storage and sunken cost, but I'm not spending any more than I would with just-in-time purchasing.
> If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.
Great argument for not allowing price gouging then.
Like bananas, this is an issue of commercial and residential supply chains. Most commercial bathrooms have totally different toilet paper than home paper - thin, and on a huge roll. People are using the bathroom at home far more than before, since they’re not using it at restaurants, work or other public areas.
Disposable PPE is also funny in a way that it makes no sense to buy it unless you buy in bulk. If you can get 200 N95 masks for $20, it's OK. If you can buy 2 masks for $20, then you'd better spend $1000 or don't buy at all. A lot of people buying few masks each just wastes a whole supply of masks that could all go to one place (e.g. a hospital) where they would make a difference because there would be enough of them to be used properly.
There's no need to theorize or argue, the historical evidence is that price fixing (anti-gouging) leads to shortages (or gluts).
https://www.amazon.com/Forty-Centuries-Wage-Price-Controls-e...
Literally overnight. And they never returned since.
Food is largely a free market in the US. A billionaire could buy a billion dollars worth of beef tomorrow. But they don't, because why would they?
And in fact, markets have done a better job of feeding people than any centralized planning system has. I don't see why masks would be any different.
There is no single system that does better universally, but there are plenty of narrow fixes that do fine. As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation...
Sure, I was not saying markets are perfect, I asked what system with no markets is better?
> There is no single system that does better universally, but there are plenty of narrow fixes that do fine.
Agreed.
> As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation....
And if you investigate it I'm sure you'll also find plenty of examples of failures in organ allocation.
That only is true if we ignore the organ black markets that many millionaires/billionaires have access to.
No country in which there are corn subsidies is there a "free market."
Sure they do. Look at what happens when an oil refinery blows up (happens now and then). Price for gas goes up until demand matches supply. Billionaires don't hoard gas.
Gas prices fluctuate daily. This is all from matching supply with demand. The same goes for airline seats and the price of oranges. I don't think I ever pay the same price twice for oranges at the supermarket.
During the 1970's gas shortages (due to Nixon's price fixing policies) people hoarded gas by keeping their car tanks topped up. There were a number of newspaper stories about people waiting in line for hours for gas to add one gallon to their already nearly full tank.
Personally I have mixed feelings: If the prices don't go up, the incentive to ramp up production is pretty weak. It does, though, seem inhumane that increased prices can have an outsized bad effect for the very poor in disaster situations.
This caused a huge hue and cry about how terrible it was. So the law clamped down on it.
Now people in a hurricane zone get no gas while they wait around for the government to provide some.
So, which is better:
1. gas at a higher price
2. no gas
?
Per Sowell, there is no cosmic justice, and pretending so just makes things worse.
The law, in a system of democratic governance, is a big asterisk to that sentence! It's important too. But aside from that, price signaling is our most 'objective' way to determine importance.
I strongly disagree under these circumstances. Prices are one benchmark of importance/value and are often useful as such. But Goodhart's Law comes here in full force.
In particular I would argue that when unusual things happen, the usual benchmarks and proxies we have deserve extra scrutiny, since often any discrepancy between a measure and what is being measured is magnified in abnormal times.
And right now times are quite abnormal. Now is exactly when traditional benchmarks of value should be re-evaluated to see if they are still useful under present circumstances.