Comment by roenxi | Hacker News Reader

Comment by roenxi | Hacker News Reader

Parent Full thread

Mr. Mouse has a good take on this but there is a second perspective that is worth considering:

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.

This assumes that people actually behave rationally. Do we have actual numbers on rich people buying TP during the present crisis? If most people including the rich are going to hoard anyway a rising price just transfers more money to sellers when many need it most. Worse it incentivizes people to buy for resale if the price is trending upward.

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.

> This assumes that people actually behave rationally.

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.

People are actually usually irrational. Predicting how people behave always involves building an elaborate mental model of the exact way that their own model diverges wildly from observable reality. The fact that they are rational by their own model doesn't mean they even kind of are objectively.

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?

When prices of a thing go up, people buy less of that thing. If that were not true, I think somebody would have noticed by now.

There is an alternative to assumming people behave rationally, which is to model behaviors based on large scale evidence, not clean ideals. This is pretty much why Sociology and Anthropology exist and are fairly complicated subjects.

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.)

> ... poor people are often spending money rationally ...

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.

> 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.

The whole point of marketing, which often account for over 50% of products' budget, is direct appeal to emotional/irrational aspect of human nature.

Average person doesnt buy iphone because they need a new phone, or coke to quench their thirst.

> If you assume people behave irrationally you may as well send the army in straight away.

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.

> There isn't an alternative.

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 isn't an alternative.

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.

>On aggregate people tend to behave a lot more rationally than individuals do.

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.

I don't think you're quite grasping what "distributing the wealth" would look like. I have in mind something like a Universal Basic Income. Reducing the involvement of large organisations (including governments, non-profits and corporations), as well at high-net worth individuals is entirely the point.

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.

Why would you redistribute wealth into the hands of irrational people?

Because there are no other kinds of people, so that's the only option. Time and time again it has been shown that distributing power leads to better outcomes, and money is nothing but economic power.

Not really, individuals may make mistakes, but it's nothing to the insanity a mass of people is capable of. (Source: Mass Psychology, by Gustave LeBon)

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.

The idea that wealth inequality is just due to it going to "capable hands" is a hell of an unsupported assertion.

"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.

Investment drives growth, not consumption.

Investment requires returns, which mean people have to consume the resulting product, be it goods or services.

Yes, one can't exist without the other, but economically speaking, it's impossible to consume your way to prosperity. You must increase productivity, and this is done through investment.

We tried consuming our way to prosperity during the housing bubble in the early 2000s. That turned out how you might expect.

And small investments tend to have better returns.

Buying booze and drinking it isn't an investment.

No, but starting a small business is.

Everyone can start a small business right now, what's your point?

Buying stuff doesn't facilitate growth. Look at all the toilet paper people buy recently. Where's your growth?

I'm sure toilet paper manufacturers are doing OK right now.

The growth in that sector is swallowed up by the overall hard-stop of the entire economy.

They were doing okay before, but they cannot grow, since the increase in demand will not be sustained.

This assumes that people actually behave rationally.

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.

Buying for resale by definition means that more TP is available for purchase.

Buying for resale doesn't magically create TP. The amount of TP available to consumers is the same, the amount of money made by TP producers is the same. But consumers have to spend more money, because there's a parasitic layer of resellers introducing friction into the system.

I would rather people buy to resell, than buy to hoard "just in case". The former does increase the amount available to consumers.

I would rather people neither buy to resell, nor buy to hoard "just in case."

"Buying for resale" could include buying up now-useless stocks of institutional TP/hand sanitizer and re-packaging it for consumer purchase. Supply increased and value added.

Given that poor people can't afford to hoard because of the cost of storage (especially in cities) and financing, isn't it better that rich people are encouraged to hoard when supply is plentiful?

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.

> isn't it better that rich people are encouraged to hoard when supply is plentiful?

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.

> I'm not going to hoard in good times because I'm not crazy; I know I can't be ready for everything.

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.

>People aren't shitting more than before.

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.

Anti-gouging laws cause sensible people to hoard at the first sign of trouble.

They also arguably make people hoard less. If you can't resell for a large profit, there's no point in buying more than what you feel hedges your risk. So you'll buy 200 masks instead of 20 000.

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.

> They also arguably make people hoard less.

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...

Fear of gouging causes (some, whether sensible or not) people to hoard at the first sign of trouble.

The 1970s gas lines stopped immediately after Reagan, as his first act as President, signed an Executive Order eliminating oil & gas price controls.

Literally overnight. And they never returned since.

Plenty of poor people are hoarding, at least here in the US. They make room.

Reply on news.ycombinator.com