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Comment by e5india | Hacker News Reader

How does that line of thinking work with something like baby formula? If I have a hungry baby now, what good does it do me if I have to wait two weeks because I'm priced out of baby formula today?

In emergency situations we pretty much already know what peoples needs generally are. We don't need price as a market mechanism to know people need access to food water etc.

Additionally, price gouging is sending artificial pricing signals. The rise in price is not the result of organic demand but people taking advantage of a short term supply constraint, so if I'm a manufacturer/distributor I can't react to this rise in prices the same way I would in a normally functioning economy. I may not even be able to.

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If your baby needs formula, and the supply is disrupted, the choices are generally, with price gouging, you wouldn't be able to feed your baby because the formula is too expensive, and without price gouging, you wouldn't be able to feed your baby, because you didn't get to the store while they still had it.

With feeding babies, there are other options to feeding formula for many babies. The question is which option gets more formula to babies that don't have good other options.

With price gouging, the parents of babies with options may have a threshold price, maybe they're willing to pay normal price but no higher, or 2x normal price or whatever. As prices rise, demand from this population will drop, but demand from babies without good other options is rather inelastic, so a lot of the formula will go to babies without good options.

With a fixed price, the demand can't be fulfilled because supply was disrupted, and distribution is essentially random. Some babies who didn't get formula have other good options and will be fine, other babies don't and will have a big problem.

You could probably design a better way to distribute the formula than either price based, or random based, but it would require a lot more coordination, and since you need to do it for lots of goods in a crisis, some of which are needed on a daily basis, it's hard to set that up.

> If your baby needs formula, and the supply is disrupted, the choices are generally, with price gouging, you wouldn't be able to feed your baby because the formula is too expensive, and without price gouging, you wouldn't be able to feed your baby, because you didn't get to the store while they still had it.

Not quite. With price gouging, even fewer people get formula because there is a strong incentive to hoard and withhold supply until the price creeps up. Supply can’t ramp up quickly enough in emergency situations. It’s too inelastic for such short time horizons.

So with protections against gouging, people with the supply are incentivized to get as much of it as they can and move it into people’s hands as fast as they can. Without such protections they’re incentivized to hold onto to whatever they can and trickle it out at a metered pace. You just end up creating a speculative bonanza, not any meaningful increases in supply.

A situation where everyone has an equal chance to get part of a limited supply is much preferable to a situation where the less fortunate are priced out of being able to buy.

Having more buying power does not make you more worthy to receive essential supplies in an emergency.

The rise in price is the result of the market thinking there will be future rise in organic demand. The price rises because the value rises. There's nothing artificial about it.

That tug-on-your-heartstrings argument works the other way around, too: If I have a hungry baby now, but despite whatever wealth I have I can't find any in stores because price controls have resulted in a chronic shortage, what good does it do me that some people can buy baby formula at an artificially reduced price?

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