Hacker News Reader

Comment by voodooranger | Hacker News Reader

Price ceilings cause shortages. Every time. Let’s not use Venezuelan-style economic illiteracy as a model for how to incentivize the flow of critical supplies to those who need it most during a crisis.

View on HN

> Price ceilings cause shortages. Every time.

No, not in the situation. The shortage exists regardless of price.

We're not in econ 101 territory, so lets not analyze the situation with econ 101 tools.

It's not hard to argue in favour of temporary emergency price controls using Econ 101. The field already makes a big distinction between the short-term and long-term, defining the later by the time required for new investments in production. That distinction is the crux of the shortage, so it seems it's with the bounds of what an introductory microeconomics course could handle.

No, this isn’t really true. Look at all the people hoarding toilet paper because the price is below market equilibrium. If the price were higher, there would be less hoarding, and more people could wipe themselves.

Not this BS again. For the nth time, the model of supply and demand you are familiar with depends on perfect competition, which involves transparency, substitutability, and frictionless entry and exit. When those conditions don't exist your idealized economic model will not operate efficiently and may not clear at all.

this is in every economics textbook and students are cautioned about differences between idealized models and real markets, but economic ideologues never seem to read that part.

I wonder how anyone can write a comment like this and think that our economic model is not completely broken for anything other than making one group richer.

leading a life insulated from the consequences of living in this economic model

Whether or not you think our model is broken, price controls of goods you want more of is a terrible policy.

If you want someone to open up a factory churning out PPE, which might only be needed for a few months, you need to let them charge a huge premium.

Wouldn't that cordon off these supplies only for the rich then? How can a regular person afford them following?

This is only true if you can’t make more. If you can high prices are a powerful incentive for entrepreneurs to make more. When something is needed really badly for public health reasons the government should either be paying top dollar for delivery as close as possible to right now or paying up front for later delivery at a premium to normal prices. That way the manufacturers of what you want don’t pass on the extra sales for fear of going bankrupt.

"Entrepeneurs"- ah those famed angels among us? Can't wait for them to show up

They can't - and that's simply because there's not enough of them and nothing can circumvent that fact quickly. Let's not pretend you can solve a public health crisis with monetary policy.

Regular people don’t need PPE right now, hospitals do. And they can all afford to pay 5X normal prices. They already are.

And when production gets high enough prices will fall.

If you price control, you’ll just push them all to black markets.

Masks are pretty damn cheap. You could 100x the price and regular people could still afford them.

What about price ceilings and purchase limits? You'd have to actually think about the purchase limits for different entities but it sounds doable.

Venezuela's problems come from international banking controls combined with hyperinflation and mandates to not increase prices. When you have a currency losing its value every week and the government mandating 10 cent gas with no way to transact with the outside world and escape your currency, things are going to get very distorted.

Venezuela has much bigger problems than price caps, it is not indicative of systemic ramifications either way here.

Reply on news.ycombinator.com