I feel like the market will automatically correct? Nobody buys this overpriced stuff?
The free market is not designed at all to do anything, let alone acts with a bolted-on moral load.
What the free market allows is that economic actors like the hospital are free to purchase their supplies from anyone at all from anywhere, and allows anyone who has any interest in producing said supplies to present their offering. That's it.
I live in a country where, when the demand for N95 masks started, had a few unrelated corporations quickly enter the market with their own product. I'm talking about companies ranging from office supplies to coffee makers. Hell, even beer producers quickly entered the hand sanitizer market. Consequently prices dropped drastically and not only is there no shortage of protective equipment but it's also affordable.
That's what happens in a free market.
How come you're talking about this sort of stuff not happening in your country, and still you talk about a free market?
Interesting, because IIRC there were global shortages of both hand sanitizer and N95 masks up to at least May. There were a lot of scammy products sold in between March and May, though. The problem with price gouging in large-scale emergencies is that companies just can't retool that quickly, especially when - as is the case with both hand sanitizer and N95 respirators - a complex supply chain is involved. That takes months, and through those months, you're dealing with extremely inefficient distribution of goods - from the humanitarian/life saving point of view.
Free market does what it does. For instance, price the poorest out. A well-known example of the free market at work was in the US, when some people drove a van around towns and villages in their state and bought out all hand sanitizer to resell it on-line (with significant markup), thus depriving less wealthy communities of access to hand sanitizer.
And that everyone has perfect infinite information, which is impossible.
And that externalities are irrelevant, which is false
And that all options are equally accessible, which doesn't exist.
And that people act in perfectly rational objective ways, which isn't how humans behave.
And that everyone instantaneously knows the utility maximization function of all potential transactions, which doesn't ever happen either.
And that firms will always prefer competition over cooperation, which is the exact opposite of reality.
And that any tricks such as cornering, price fixing, ramping, runs, pump and dumps, luring, spoofing, churning, pools, don't exist, which is also false.
The foundation it's built on is a fundamental fiction. Conclusions based on it occasionally resembling reality are exceedingly rare and merely coincidental - it's like a form of astrology with more equations and charts.
And the real clincher is the advocates are only interested in defending their ideological agenda like some kind of religious zealot.
When anyone walks in thinking they already have the answer before hearing any of the questions, watch out - especially if it's the same exact answer every time.
So, watch out for those religious zealots indeed.
The premise of your argument is incorrect because they are not real. The free market is an impossible theoretical intellectual exercise and nothing more.
Show me where all participants instantaneously knows the utility maximization function of all potential transactions and exercises individual maximization with friction free transfers based on perfect infinite information and we can more forward with your argument.
Otherwise you're simply attributing unspecific generalities to a fiction.
The task is still on you to demonstrate how the free market isn't a fiction.
I went into a small one this very morning, to buy some apples and eggs. Looked very real to me. And free: nobody told the sellers at which price to sell and nobody made me buy if I didn’t like it.
Free markets are a specific definition with specific conditions.
And they did that because they weren't 100% "free", but were regulated.
Imagine someone who said this: "Fire is good. It heats our homes, it cooks our food, it runs our cars and our industry and lets us travel quickly from one place to another. So let's get rid of all fire departments and all forest control services, and let fire be as efficient as it can be."
That's obviously a stupid position to take. Fire is neither good nor bad; it's a force that can be incredibly powerful when harnessed for good, and incredibly destructive when allowed to run rampant. And there are times when it's simply not the right tool for the job.
Markets are the same way. Talking about the "free market" is a bit silly: All markets have constraints, either natural or artificial, and they optimize based on those constraints. When appropriately channeled, they can be a powerful force for allocation of resources and experimentation. When not appropriately controlled, they can destroy environments and harm society. And sometimes it's simply not the right tool for the job.
During Soviet times, everybody could afford toilet paper but nobody could buy it...
Well, no. People manufacturing masks still have a choice as to whether to make masks at the price-controlled price or not. If it's not cost-effective, they won't make any. If it's adequately cost-effective, they'll make the normal amount. If the price controls are still fairly lucrative, they'll be encouraged to make more product.
On the other hand, the knowledge that there will be no limits on "surge pricing" might encourage people to build up stockpiles to smooth out shocks in supply or demand; whereas, the knowledge that there will be limits on "surge pricing" might discourage people from building up stockpiles, thus making shocks in supply or demand worse.
In both cases, "the market" is still doing what the market does: optimizing for the particular inputs it's given. The question is, which outcome do we prefer?
EDIT: And, is the market actually the right tool for this particular job?
For instance, in the case of vital medical equipment such as N95 masks, maybe it makes sense to have the government stockpile reserves, rather than relying on the market to do it.
No other subsequent oil crises had the same disastrous effect, because the market was allowed to solve the problem.
How much was the market, and how much was the government?
https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...
An abundance of commodities disrupts the conditions for the creation of profits. Nobody really disputes the overproduction phenomena and consequences. At the macro-scale this can have a contagion effect and cause what's called a "general glut" identified by both Smith and Ricardo.
We saw that in the shale oil bust just recently. Price controls and making the government the buyer of last resort (for instance, the Commodity Credit Corporation) are remedies for fixing this flaw. They are there because of a fundamental flaw in market economics.
I still remember entering a supermarket in the west after the fall of the Berlin Wall. The shock at all that choice... is indescribable.
Simply acknowledging an economic phenomena doesn't make someone a soviet communist.
Some really ardent neo-classicalists say they don't exist but I haven't read their evidence carefully enough to speak to it (here's an intro by Rothbard if you're interested: https://mises.org/library/says-law-markets)
I personally think some of the most notable Austrians had a bad habit of using arguments of convenience to defend the financial interests of the wealthy benefactors who funded their institutions and reversed their arguments when expedient but that's a separate conversation.
The majority of people are workers. You're telling me the "risk" an entrepreneur takes is being on equal footing with their (former) employees? Man, you're making a great argument against capitalism, if that's what you're saying.
Entrepreneurs also risk their time which employees usually prefer to sell at guaranteed return. But some choose middle ground by accepting a mixed (cash + stock) compensation.
I believe we, as a society, would gain more if more people would "risk" the entrepreneurial path.
The risk narrative is the current preferred reason to justify gross inequality caused by power imbalances.
It ignores that every participant is taking a risk. It's just some manufactured narrative designed so that we'd think "well alright" and not question the unjustifiable disproportionate gross inequity of all the reward going to those with the smallest risk because of how structural power works.
The lowest wage worker living paycheck to paycheck has wayyyy more risk exposure than someone like me who has skated by trivially without a paycheck for over a year. The idea that my investment portfolio entitles me to the profits because of some immense risk I'm taking is clearly totally manufactured bullshit that's used to shape public opinion.
I could lose every penny without affecting my quality of life at all. Literally zero effect. The risk is purely abstract. It's not material in the slightest
You believe this despite 1000's of years of history proving centrally planned economies fail every time?
Even with in the COVID crisis we have example after example of governments in the US, and out of the US, State level, and Federal level making the exactly wrong choices.
We also have many examples of the market opening up avenues of innovation and surplus in PPE and Testing
I am sure the obvious thing to you is "just elect better" but that is akin to your statement about "the real clincher is the advocates are only interested in defending their ideological agenda" or even "When anyone walks in thinking they already have the answer before hearing any of the questions, watch out -" where the answer to all questions is "more Government Regulations"
The Free Market is not perfect, but it is the best model we know of, replacing it with Centrally planned economy and high government regulations has proven time and time again to produce worse economic outputs and often times costs millions of lives
Systems that have tried to work toward it are extremely centrally planned and heavily regulated such as the NYSE.
Retail plans to have a free market exchange, say of healthcare providers, say, in the affordable care act, also have lots of central planning and government regulation.
The efforts to get to a free market have been some of the most complexly planned and regulated government systems ever created.
It's necessary to try to secure the required guarantees. How are you going to get everyone to agree on the same way of informing a price? How are you going to get equal access to all options? How are you going to get a friction free transfer? Make sure firms stay competing and not carteling, collaborating, or colluding etc ... the answer is government government government. These things don't happen on their own.
What??? How in any way in a Centrally planned market a "free market exchange"?
Nothing in ACA is a free market, NOTHING. and NOTHING in ACA had a goal or desire to create a free market exchange, it was expressly anti-free market with the goal to be one step closer to Single Payer
>How are you going to get everyone to agree on the same way of informing a price?
I am not sure you understand what a free market is, or would look like if your are asking this question.
It's based on models by the Hudson Institute and the Heritage Foundation, free-market think tanks and is partially based on the Republican Massachusetts plan from 2006.
The inability of republicans to replace the plan over the past decade is because the plan as it stands was more or less the Free Market proposed alternative to a European style system by their leading advocacy groups circa 2009.
The Republicans are disowning the plan now because of optics. The Heritage foundation pulled their original document for instance, but you can find it in places like here https://www.scribd.com/doc/86911670/1989-Assuring-Affordable...
Free markets at their finest. In my understanding only countries implementing price controls still have supply problems...
Lots of people overpaid, and it went into the hands of some eBay armchair hoarders.
https://nypost.com/2020/03/30/brooklyn-man-arrested-for-hoar...
Back then I wrote my own auction house addon that would scan for glyphs below a certain price threshold, buy them, and re-list them in bulk for higher prices. It also scanned for raw materials and bought them too to help strangle the supply as much as possible. It was so easy that hitting the technical gold limit (something just over 200k IIRC) was a realistic problem to deal with.
The supply was limited enough that 2-3 people could monopolize an entire server. I recognized the other 1 or 2 people doing it on my server and it's something I would describe as tacit collusion. We never talked to each other, but we didn't compete with each other either.
The whole time _everyone_ complained about the price of glyphs, but there wasn't much they could do about it. If someone came in and tried to compete by undercutting you, you'd just buy out their supply and re-list it at your inflated prices.
It wasn't complex. You just needed to be willing to be a bit of a scumbag. The only thing that was moderately difficult was getting enough gold to start monopolizing that part of the market. IIRC it costed 5k gold to get a flying mount and most players had to save up for that, so being able to drop 5k at the auction house gave a lot of buying power.
Having a limited supply product that people _need_ means your profits are only limited by your ethics. Capitalism works really well for luxury products IMO, but less so for necessities.
In non-zero-sum real life, things are different. People didn't need antibiotics before they were invented just as people don't currently need to live to 200 years old since we don't have that technology either. I can't find a clear boundary between need and want. Need seems to be just "very want". Some people end up with less than others and the world keeps turning. We don't even need seemingly essential things like water because we can survive a few days without it. Just as seriously ill people can survive a few days without treatment (which may or may not have been invented yet), and normal healthy people can survive a few days when they're already 100 years old and we don't have anti-aging tech.
1) Retooling factories and setting up supply chains takes time. You can't just start pumping out PPEs out of a new plant in a week; it takes months to organize.
2) In an emergency, by the time the production is ramped up, the demand may be gone. Some mask manufacturers were reluctant to increase their capacity early this year, because they've been burned by this in the past: they've overproduced for SARS, only to see the demand evaporate as the pandemic subsided, and were left holding the bag.
The first definition (in Collins 2018) is "to be in want of", so in a sense you're right. However, one of the subsequent definitions is "distress or extremity", followed by "extreme poverty or destitution". "Need", then, is a want that's extreme enough to cause suffering if it's unfulfilled.
In that sense, people did need antibiotics. They might not have known it, but they did. In the same way, today we need treatments that we haven't discovered yet. "Being able to survive" isn't the bar. "Not suffering for the lack" is.