No, We Are Not Running Out of Food and Toilet Paper
U.S. Department of Agriculture [Public domain]
Little did I know that all of America had the same idea. The store where I shopped, one of the busiest in the supermarket chain where I work, was busier than I had ever seen. Lines were longer than when a blizzard was expected. People seem to be grabbing anything that was still left on the shelf, though I didn’t really see anyone who was hoarding too much of any particular product.
As someone who helps manage a supermarket, I probably should have known better and done my shopping before. Sales had been going up steadily in the weeks prior. In the town where I work, I was seeing people shop who I had never seen before. Hand sanitizer, masks, and rubbing alcohol are sold the minute they come in (when they do come in). But almost all products were still on the shelf until Thursday when everyone went to the store in response to Trump’s address to the nation and the NBA shutting down the day before.
When you go to your local supermarket or grocery store, you might notice that many products are running low or entirely out of stock. Chances are, most of the frozen fruit and vegetables are gone, along with frozen pizza and waffles. Same with many products in the center of the store like canned vegetables, pasta, pasta sauce, and rice. Your favorite kind of bread is sold out and you have to buy the generic. In the meat department, you’ll probably see beef but maybe not pork or chicken. Depending on when you go to the store, they might not have milk or eggs. And there’s probably no toilet paper.
The good news is, it’s not because the country is running out of food or toilet paper. When we get deliveries, all of these products do come in, in large amounts, though not all varieties for everything. There’s no indication that we will be running out of these products any time soon. So why are so many shelves empty?
There are two reasons. One is that the things you want to buy are the same things everyone else wants to buy. For example, if you go to the canned vegetables section, there’s probably very little corn, peas, and green beans, but all the beets and sauerkraut are still there. Stores do use more space for more popular products, but the relationship is not linear (you can’t have a fourth of a row of sauerkraut), so when demand suddenly spikes the most popular products are always going to be gone first.
The bigger problem is getting all that product from warehouses and factories to the store. There are only so many people who work at the warehouses packing the product, and so much space for them to work in. Everyone is working overtime, but it’s not as if they can suddenly hire more people in the course of days. And once everything is palletized, they need to go from the warehouse to the store. Again, there are only so many trucks and drivers, and in this case, there are rules on how many hours drivers can work.
With certain products, the delivery schedule is also an issue. Some products are delivered every day. Others might be delivered only twice a week. This schedule works in normal times, but not during a once-in-a-lifetime event. If eggs come in on Monday, and you go to the store on Tuesday and it’s already empty, well…better ask a clerk when the next delivery will come in.
To sum up, there is still plenty of food and toilet paper, just short term problems with getting all that product to the stores to meet demand. What can you do to help? Try as much as possible to buy only what you need. No, you do not need four packages of toilet paper; one will last you for ten days. No, you do not need to get that jar of peanut butter “just in case” when you haven’t had a peanut butter sandwich in ten years. When everyone’s shopping behavior goes back to normal, your local grocery stores will return to normal too.
Excellent article covering many of the basic logistics issues we are facing. I used to work logistics for a big box retailer and the distro centers will have plenty of room available, but turning on a dime from the preset patterns of buying, stocking and shipping in a just-in-time world is very difficult. Right now many of them were starting on fall special products.Report
I saw a lovely picture earlier today showing a sign at Costco saying “We will not allow returns of: Toilet Paper, Paper Towels, Rice, Cleaning Supplies, or Sanitizing Wipes”.
One of the things that was a safe bet a few days ago was “we can buy 25 packs of TP, and sell 24 of them on Craigslist for a hefty profit! If we don’t sell them all, we can return the rest and all it cost us was the gas it took to drive to the store!”
Now people will have to think “wait… what am I going to do with 25 packs of 48 rolls of TP if I can’t sell them?”
So maybe that’ll slow some of the more hoardy people out there down.Report
Here’s a story with some pictures. Hope you like it as much as I did.
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This is the real solution. Stores should have the ability to set limits on what people buy and refuse returns. Makes sense.Report
Our local Dollar Store has done this. Not before they were cleaned out but nonetheless…Report
A better solution would be stores being able to detect a run and start setting surge pricing. There are smart algorithms out there that could watch the POS machines and can do that, the trick is deciding what parameters constitute a run on stock, and what limits and surging to set.Report
The OP is right, of course. Unfortunately, I choose to do my own share of panic buying. I mostly stuck to things I use regularly, but I bought more than I need. For example, I got two jars of peanut butter instead of one. (To be clear, I actually eat a lot peanut butter, but it’s hard to say I “need” it.) In my pantry I now have 6 cans of diced tomatoes whereas I usually only keep two (or four at the most).
The weird thing about this scarcity mentality is that more is never enough. I have three half gallons of milk in the fridge. (I normally keep three, because we go through it pretty quickly.) But I want a fourth. If I had a fourth, I’d probably want a fifth half gallon. I bought evaporated milk, which I almost never do, but I can (and will) use it in my coffee. But I bought a second can of evaporated milk, too.
It is sometimes interesting the things that don’t sell out. For some reason (at least at my grocery store), chips are still in plentiful supply. I realize they’re not the healthiest item, but I would have thought people would stock up. Olives, too, for some reason are in massive supply (again, at my grocery store….others may be different).
I do realize that at least speaking for myself, I’m fortunate to be affluent enough to afford everything I need and almost everything I want. I realize others are really hurting. Such is greed. If we (if I) choose to indulge it, there will never be enough layers of supply. Greed (in the sense of “layers of supply = security”) is always with us. For those of us, like me, lucky enough to live in a well-supplied society and lucky enough to have the resources to take advantage of that supply, greed is hidden. But it’s always there. Times like these remind me of that fact.Report
But that is not panic buying. That is not greed. That is what people SHOULD do. Buy slightly more of things they will use up anyway. The last thing, the very last thing the government needs in an emergency like this is people who are valiantly trying not to “hoard” who end up having to keep going to the store. Every time you set out to get something you run the risk of catching/spreading the virus. And if you were to get sick, or have to shelter in place, and you run out of food, then what?? Someone has to get and bring you food, again, risking you catching the virus, risking them catching it from you if you had it. Multiply that by several thousand times and it’s clear that 2 jars of PB and 6 cans of tomatoes may actually save lives in the end.
IMO you have done exactly the right thing and are being perfectly sensible.Report
Again, there are only so many trucks and drivers, and in this case, there are rules on how many hours drivers can work.
The Federal Motor Carrier Safety Administration (FMCSA) has suspended hours of service (HOS) rules for trucks hauling relief supplies, which has been defined to include groceries as well as medical stuff. And frankly, with so much other retail shutting down we can use the freight.
We got this.Report
Do you have an Amazon Wishlist or a Wendy’s Gift Card that needs refilling?
I realize that I’d like to buy you (and a handful of your colleagues) a cheeseburger or something.Report
I appreciate the thought JB. It is sorta weird going from “@#!& truck in my way!” to being seen as some sort of effing heroes for doing the same thing we’ve been doing all along. Same deal for the low-paid folks working the grocery stores and such.
Not to get overly political but what the hell do these billionaire hedge fund managers really do for anybody anyway?Report
I saw a statement earlier that I totally agreed with: When the government screws up the bailouts to banks/corporations, and screw up the bailouts they will, it will make Occupy Wall Street look like a tea party.Report
I think it says so much about modern American governance that the President of the United States said “write a check for $2000 to everybody in America” and somehow it wasn’t possible for that to just happen.Report
Indeed. Others have pointed out that it’s likely more costly to need-test this sort of thing than the amount wasted sending checks to millionaires.
As well, they’re basing these payments on 2018 tax returns which often won’t reflect 2019 incomes (in both directions), much less current needs. They can’t use 2019 numbers because lots of people haven’t filed yet (including me FWIW) and now they’ve decided to extend the deadline!
So a good, simple idea turned into a clusterfish.Report
Everybody in the government thinks that money shouldn’t go to People Who Don’t Deserve It. They just disagree about who doesn’t deserve it.Report
There seem to a lot of people in gov saying “just give everybody a damn check” see Katie Porter.Report
Others have pointed out that it’s likely more costly to need-test this sort of thing than the amount wasted sending checks to millionaires.
The issue isn’t just millionaires; it’s all the people who are still getting their regular paychecks, i.e. most of us.Report
Then make the money taxable and claw it back next April. Don’t make the decision based on 2018’s tax data.Report
Base any claw back based on 2020 tax data. People who did fine can pay it back next year.Report
Why is the unemployment system not a good way to address this? Make claims this month (and future months, as appropriate) not count against employers for premium purposes, or against time limits for workers, and increase the percentage of monthly income that it will replace.Report
Because of shit like this:
If we could rely on the corporations that will be asking for bailouts to act in good faith, maybe that’d be on the table.
They ain’t.
It ain’t.Report
Again, this seems like an issue that can be resolved through temporary adjustments to the unemployment system. We know which people are working. We know how many hours people on zero-hours contracts are working, because employers report payroll data.
Classical stimulus is simply the wrong tool for this situation. The government is going to be running up huge deficits this year, and it doesn’t need to aggravate the situation by sending money to 100% of the population to deal with the 15% (or whatever) who are out of work.Report
and it doesn’t need to aggravate the situation by sending money to 100% of the population to deal with the 15% (or whatever) who are out of work.
You know more about economics than I do, but my suspicion is that a ~15% drop in consumer spending over period of a couple weeks constitutes a shock to the economic system which will send every sector into freefall, and requires more than tweaks to how unemployment insurance is processed to fix/prevent.
I mean, I can’t cite hard data for this, but our last recession was caused by a collapse in a tiny slice of the credit market and created ripple effects which took years to recover from. This crisis seems much, much bigger.Report
A key difference this time is that there’s a negative supply shock, particularly in the service sector. I think we want consumer spending to decline, because productive capacity has declined. We can’t have consumers continue spending at last year’s levels if we can’t produce enough to meet that demand.
Furthermore, it’s not clear how much sending money to people who still have jobs is going to do. They’re not going to go out and support service industries, because a) most of those are shut down, and b) they’re afraid/not allowed to leave their homes. So maybe they’ll buy some extra manufactured goods (mostly from China), but many/most will just save it in anticipation of the rough times ahead.
It seems to me that the focus should be on helping businesses and individuals to meet financial obligations and stay afloat. If a bunch of firms go out of business all at once, it will take a long time to recover from that. And money targeted to people who actually need it because they lost their jobs is going to do a lot more than a helicopter drop.
Then again, this situation is more or less uncharted territory. The last time we had a pandemic on this scale, the Federal Reserve was four years old, and we were still on the gold standard. So I suppose I could be wrong, but I don’t see how sending everyone an equal check is a cost-effective (or even that effective) way to deal with the problems we’re facing.Report
That was my thought. Right now money isn’t my issue; I’m still employed (and everyone’s telling me I’m an effing hero) and same deal for the missus. When we get whatever check we get I’m not sure how we even could spend it in a way that would help people in worse situations. My daughter is a techie that can work from home so she’s good. Her husband got laid off (restaurant) but then Colorado revamped their UI system for workers hit by this – no waiting period, no job search requirements, 75% of your normal take-home. Also his employer guaranteed his job for when this is over.
So really, we’re okay for now. I do anticipate freight volume will drop off after this resupply surge subdides. There’s a lot of normal freight that’s just not happening with so much retail shut down. So medium to long term, whatever that ends up meaning, I don’t anticipate losing my job but my income is likely to fall off. So my stimulus check is going into savings for now. Glad to have it but it’s not going to stimulate much.Report
Our plan is to hang onto it for now, and when (…if) they rescind the Close All The Shops orders, we’ll spend it then, because all those places will need to restart. All the favors they called in to get loan payments extended, all the breaks that landlords and creditors gave, all the tax deferrals they got from governments, all that’s gonna come due at one time (oh, and all the people coming in to use those gift cards they bought and caaaaaarefully tailoring their orders to be only a couple dollars over the gift card balance, which means that it wasn’t a gift so much as a no-interest loan that’s being called.)
Anyway. You’re right that the checks won’t help most people very much right now, but we also have to think about two months from now when they try to turn everything back on…Report
This leaves out independent contractors who may be similarly situated to the people you might believe deserve to be helped.Report
Yes and no, Duck.
If Trump said “write $100,000,000,000 checks to hotel chains” we’d probably be glad Congress didn’t make that happen. But when it’s a policy proposal every economist supports and advocates, the fact that our congress can’t/won’t do it is crystal clear evidence that they value internal party politics more than what’s good for the country.
Add: I blame the four Leaders over the two houses of congress more than the caucuses, myself. I know Pelosi and Schumer (and McConnell) will think about policy from the perspective of partisan politics *first*, and national-interest only secondarily.Report
In the future, it will be: “@#!& truck in my way!, hero.”
Any by future, I mean about for about three days after the quarantine.
On the plus side, Google maps tells me you can now drive right down the middle of a two lane highway.Report
Heh, I saw a photo on the book of faces of the 405 in LA completely empty. If you’re not familiar, that sucker is a 5 or 6 lane nightmare. It looks positively post-apocalyptic.Report
My husband (who used to drive long haul before he got his current gig) was upset by reports that you guys weren’t being allowed to use the bathrooms and that truck stops were being forced to close down. I hope those reports were overexaggerated. Thanks so much for what you do.Report
I’ve been running into shippers/receivers that are limiting contact with drivers, including not letting us use the restrooms, but there were always places like that. Honestly, I can’t blame them for wanting to protect their workers, and to be even more honest, I’m not anxious for any more contact with them than I have to have either.
Truck stops are interesting. I read that the FMCSA has ordered truck stops to remain open to provide services for drivers. I’m unclear exactly what kind of jurisdiction/authority they would have over ts owners but there you go. It may well be more of a pressuring finger-wagging sort of thing. I haven’t seen any of them closing but they are taking mitigation efforts like closing off TV rooms and lounges and restaurants/cafes are closing or, more often, shifting to carryout only.
Honestly, my day-to-day life hasn’t really changed that much, just enough to give me some anxiety, like a feeling of impending doom.Report
If we let the market work and allowed prices to rise, then we would see less pointless hoarding and less people running out of toilet paper.
Since we’re not allowing “price gouging” in the face of sharply increased demand, we have shortages… also known as inefficient allocation of resources. If I’m totally out of toilet paper and need to spend many hours driving between stores, then that’s a larger problem and more costly than paying a few extra bucks.Report
We talked about this in another thread, and my response was that allowing prices to float freely only works in a world of infinite suppliers and infinite supply, where there’s always more providers available that can immediately come on-line as prices rise and they become profitable. If there’s a limited supply then prices stop being about the cost of provision and turn into a bidding war between buyers.
Like, it doesn’t matter how many people in the store want more toilet paper if the truck with toilet paper on it won’t arrive for another three days. There are not independent toilet-paper plants out there with full warehouses waiting for wildcat truckers and their chimpanzee copilots looking for that one big score that’ll put them over the top.
“If I’m totally out of toilet paper and need to spend many hours driving between stores…”
time is money, sir, therefore you’re complaining about high prices (upside-down-smiley)Report
This is simply untrue. In most situations we have neither infinite supply nor infinite demand.
Further what is the definition of “works” here?
Yes, and why is that a bad thing?Report
Further what is the definition of “works” here?
This.
This is the question.
Because while we sit around here and chew the fat about what is moral or immoral, right or wrong, the real question we are discussing is “How do we as citizens arrange our affairs”?
What laws or regulations do we have our representatives enact, and what are our end goals?
What do we want to end up with?
The difficulty is that these questions can’t be answered in isolation from each other. Our goals as citizens are complex and have relationships to each other.
We want an efficient allocation of resources yes, but also a high-trust high- cooperation society.
Its common for societies to adopt one set of rules for normal times, but change to a different set during emergencies.
Because the balance between individual freedom and collective action changes.
Its that whole “Liberty/ Order” thing I mentioned the other day.
Maybe in normal times a shortage on paper or plywood or sandbags would be a minor ripple, barely worthy of collective action.
But in times of a natural disaster, the levels of cooperation needed are severe.
The lifesaving rules, like evacuations or shelter in place are voluntary, and require a lot of goodwill and trust that everyone is thinking of the good of the community, not just themselves.
That’s why the news like those Senators dumping their stocks or people hoarding sanitizer are so disturbing; they erode our ability to function as a cohesive entity against a common enemy.
And in the end, there are plenty of ways to ensure a steady supply, other than prices.
Notice how during times of war governments both control prices to satisfy the needs of consumers, but also subsidize production to satisfy the needs of producers. Maybe not a good solution during normal times, but a proven solution during emergencies.Report
This is assuming what you should be proving.
When I look at the cartoons of WW2 and how the rich bad guy had things like sugar and tires, my impression is “satisfy the needs” wasn’t happening.
We have a long list of failures, both theoretical and real world, for price controls. Everything from the oil shortages of the 70’s to generators after a hurricane. We want, or at least should want, the market to adjust in the face of shocks because there aren’t good alternatives.Report
There are alternate sources of information than cartoons I think.
For the most part, the public need for scarce items WAS satisfied; There weren’t riots, and the public cooperation level for things like bond sales and paper drives and rubber drives was high.
So the goals- enough cooperation to meet the common enemy while ensuring both high levels of production and adequate distribution- were met.
And in fact, price controls for basic foodstuffs like milk lasted up until the 1970s, and there weren’t shortages.
Again, maybe it isn’t a good idea to do during non-emergency times, but price controls and subsidies are proven to be effective in emergencies.Report
lack of a riot is hardly a metric for measuring success, much less a measurement for the best economic outcome.
Mostly we these are political posturing and virtue signally in a way that’s totally removed from the underlying situation. The current empty shelves is a good example, that’s probably the worst possible outcome because anyone with desperate need has to go without.
Another example would be the “generator after a hurricane” thing. You pay $10k extra for a generator if your alternatives are worse, say if you own a store and have a million dollars of perishables that you don’t want to spoil. “Perishables” could mean food or medicine, both of which seem important in the aftermath of a hurricane. “No price gouging” means there are fewer generators around because the surrounding area doesn’t rush in with them to get outsized profits AND ALSO that the few generators that do show up aren’t used to save people in that situation.Report
You’re just reciting theory, and I’m providing real world data.
Food wasn’t unavailable during the war, the prices were stable, and production remained high.
And we have plenty of real world evidence of FEMA and the Red Cross and other agencies transporting food and water and generators after natural disasters.
I’m just saying that price rationing is only one form of allocating resources.
And given all the other goals that society has, it has some pretty severe consequences.Report
““No price gouging” means there are fewer generators around because the surrounding area doesn’t rush in with them to get outsized profits”
begging the question of whether “the surrounding area” would “rush in with them to get outsized profits”. Maybe you could provide some examples of this actually happening, and of people saying “good thing they didn’t institute anti-gouging laws because otherwise I wouldn’t have bothered”.Report
“In most situations we have neither infinite supply nor infinite demand.”
You are right, my friend, you are absolutely right, except that when you make statements like “If we let the market work and allowed prices to rise” you’re making a statement based on an assumption of infinite supply.
“Further what is the definition of “works” here?”
“works” being “the price accurately reflects both customers’ demand and suppliers’ cost of provision in a market where there exists infinite amounts of supply at a continuously-variable range of production cost”.
That is, if you want price to be the mechanism by which resources are allocated efficiently then you need a market very close to the theoretical perfect one, with infinite supply and infinite suppliers whose operations act at all ranges of cost and are willing to come online as demand increases.
This is not the case for a grocery store that only has twelve cases of toilet paper and they’re all on the shelf and they won’t get more before Tuesday.
“If there’s a limited supply then prices stop being about the cost of provision and turn into a bidding war between buyers.”
“Yes, and why is that a bad thing?”
idontknowhowtoexplaintoyouthatyoushouldcareaboutotherpeople.jpg
PS not gonna come back on that bit where you’re complaining about high prices? alrighty then!Report
“If I’m totally out of toilet paper and need to spend many hours driving between stores…”
time is money, sir, therefore you’re complaining about high prices (upside-down-smiley)
The key difference here is that high cash prices are zero-sum. If a package of toilet paper costs $10 instead of $5, then your loss is the retailer’s gain. No real resources are consumed as a result of the higher prices. If you spend two hours driving all over town to find toilet paper, that’s negative-sum. Nobody gets the time you wasted, nobody gets the gas you burned, and nobody’s car gets an extra 20 miles added to its useful life because of the 20 miles you put on your car. It’s pure waste.
People driving from store to store trying to find out-of-stock items is a bad outcome, and a perfect example of why price controls are bad.Report
“If you spend two hours driving all over town to find toilet paper, that’s negative-sum.”
time is money, sir, therefore you’re complaining about high prices (upside-down-smiley)Report
The argument against price gouging is that it allows those with money to hoard while preventing those without money from buying necessary supplies because they can’t afford it. The assumption is that price gouging will simply cause everybody to engage in more rational buying than hoarding. But a person making mid six figures is going to feel less of sting on an increased price of toilet paper than somebody making in the mid five figures. In order to prevent hoarding among the more affluent, you need to raise prices to where even the less affluent can’t afford a reasonable amount. Rationing is a better solution because it can be imposed equally.Report
At the moment we’re allowing everyone to hoard, resulting in empty shelves.
Not “everyone”, but enough.
We don’t need to prevent hoarding by everyone.
We don’t have “rationing”, that implies there’s some way to allow everyone to have some (or the same) amount of some resource.
What we have is “shortages”, where people who might seriously need something have nothing.Report
FYI, there’s a very strong expert consensus that so-called “price gouging” laws are a bad idea.Report
Panic-buying makes a little more sense when you’re in California and they’ve issued a Shelter In Place order for most of the state. It’s not that the store will run out of things, it’s that I won’t be allowed or able to get there…Report
Here in California businesses that sell food, shelter and “essential” services are allowed to remain open, as are gas stations, and daycare centers.
So even though we are sheltering in place its still possible to go to the grocery store for essentials.Report
Oh and great piece BTW!Report
“If we let the market work and allowed prices to rise, then we would see less pointless hoarding and less people running out of toilet paper.”
Counter-argument: we would see exactly the same hoarding, except the distribution of who is out of toilet paper would be less random (first come first served) and more proportional by income. Price rise is normally a valuable signal to draw additional resources to the affected area, but not particularly useful in the current context since the shortages are effectively nationwide and the constraint isn’t so much production (there really is enough TP manufactured to meet the physical need for it) as transportation capacity to meet this temporary surge in demand. By the time trucking can scale up sufficiently, the surge in demand is likely to be ending anyway. The smarter fix here would have been temporary rationing (x units of product per customer) which would actually reduce the number of people running out. Price gouging on TP wouldn’t accomplish anything more than an unnecessary wealth transfer up the income scale (demand for TP has a hard floor since even poor people can’t readily substitute or do without).Report
My assumption is the rich are already hoarding to the same level as the poor.
Reducing the level of hoarding would therefore reduce the level of hoarding.Report
“My assumption is the rich are already hoarding to the same level as the poor.”
I doubt it, but I’ll accept that assumption for sake of this debate. Nonetheless, my counter-argument was that price gouging would NOT reduce the level of hoarding. The rich and poor both hoarding is bad, agreed, but the rich hoarding while the poor go without would be even worse. You simply can’t raise the price of a necessity like TP enough to matter to the upper class without completely pricing the poor out of the market. I.E. If it was a food shortage, the rich people used to paying $50 a meal for imported Kobe steak or whatever wouldn’t blink twice at a 10x price increase forcing them to eat formerly $5 fast food value meals instead, but the poor people used to living on those $5 value meals certainly couldn’t afford to pay the new $50 price and would thereby starve. The better answer in such (temporary) circumstances is enforced rationing, not price gouging.Report
You seem to be assuming that, with everyone trying to get an extra two months’ worth of TP, that if we raise prices the rich will take up the slack and hoard several more years worth. That seems doubtful.
Further one of the big things driving the hoarding at the moment is empty shelves. Raise the price enough that there is less hoarding and the shelves will have some which will drive down hoarding even more.
True, but irrelevant. There aren’t enough rich people to matter.
That at least is a solution which attempts to make sense, but we don’t have that. What we have is price controls without rationing.
For your food example, rather than let some people pay more for food which would make poor people starve, we’ve decided that the suppliers of food and transporters of food can’t be allowed to benefit from this so random people need to starve.
My expectation is in that example “rich” and “poor” wouldn’t be a binary thing and “desperate enough to pay 10x for food” would often track well with “desperate for food”, which implies random is actually a lot worse than money even in that case.Report
“You seem to be assuming that, with everyone trying to get an extra two months’ worth of TP, that if we raise prices the rich will take up the slack and hoard several more years worth. That seems doubtful…. There aren’t enough rich people to matter.”
This is where we disagree. I’m assuming that even many of the rich were caught off guard by the panic buying (e.g. the super-rich can just fly elsewhere or otherwise sidestep the usual supply chains, but the more common upper-middle class kind of rich can’t afford using a private jet just for TP, so they’re still stuck with empty shelves like the rest of us until the next shipment comes in). I’m not betting that those guys already got their 2mo supply and would soak up cost increases to make it a 2yr supply, I’m betting that if price raises forced the poor not to hoard there’s enough not-poor people who don’t yet have a 2mo supply to still empty the shelves (for now). For the price range TP could possibly top out at and still be even possible for poor people to buy, there ARE enough rich people to matter.
“That at least is a solution which attempts to make sense, but we don’t have that. What we have is price controls without rationing.”
Which is neither here nor there, we don’t have price gouging either. I’m not defending the current half-ass too-late measures, I’m debating what the response “should” have been, which is local rationing and price control. Once the minimum need is met you could auction or lottery the remainder of the supply for all I care. If this were going to be a long-term issue, sure, some price rises might make sense, but they don’t when the rate of consumption hasn’t changed and isn’t going to change significantly. Eventually everyone who wants a 2mo supply is going to have it even under price controls.
“For your food example, rather than let some people pay more for food which would make poor people starve, we’ve decided that the suppliers of food and transporters of food can’t be allowed to benefit from this so random people need to starve.”
Last I heard grocery workers and truckers didn’t get a pay raise and aren’t likely to, so when you say “supplier/transporters of food” all I’m hearing is “food company shareholders”, not the workers. I’m unclear how you think a scenario where the exact same number of people die is made any better rather than worse by transferring more wealth from the survivors to people who did nothing different than business as usual. Price gouging is only useful when it incentivizes an increase in supply to meet the demand, but that isn’t possible in the given situation and timescale because available supply chain and transportation capacity is already maxed out and neither the demand spike or possible profit margins (even with price gouging) are high enough to cover the capital investment that would be necessary to do something long-term like buy more rigs. Price gouging wouldn’t work and the outcome of the attempt would be less morally acceptable than that under rationing or price controls.Report
I disagree. Make tp 4x the cost and you have to wonder what you’re paying for, that would certainly make me wonder if I really need it. The thing about the current situation is there’s no opportunity cost. I got a 2 month supply, if it sits on a shelf then it sits on a shelf. Ditto the $150 in cans of tuna. Double or triple those prices and you’d be making me pay for my insecurities.
And mostly the rich didn’t get rich by being foolish with money.
I have to say that would be better than what we have now, and I’d be good with it in the context of an emergency… however I’m not sure if I should be. There are arguments that rationing is simply an emotional reaction and is both a sub-standard outcome and a misuse of gov power. As much as this may feel like a “limited spots on the lifeboat” situation, it’s not. And given how easily and poorly politicians virtue signal with this authority I question whether or not they should have it.
This argument totally fails when I try to apply it to the more obvious and serious short term imbalances, say the drug store which needs a $10k generator to stop a million dollars worth of product from going bad. It comes down to “sure, he loses a million dollars worth of product but our politicians get to virtue signal and besides, we’re all in this together”.
My expectation is during an emergency having efficient distribution of scarce resources is more important, not less.
And your point is what? That companies that are unexpectedly important shouldn’t make money? That we don’t want them to be able to hire more workers (or replace ones who are sick) or expand? That we don’t want them to capture outsized profits because that might lure other individuals/companies into this space?
Inefficient allocation of resources is a good way to have more people die.
This is silly wrong on the face of it. Let’s go back to the whole generators-after-a-hurricane thing. With no power everyone wants a generator, but everyone doesn’t benefit equally from one. The guy who would benefit the most is the one trying to save his stock of food/drugs/whatever and needs to keep his refrigerators running.
No price gouging means first come first served, i.e. shortages, and it’s making a bad situation worse because that guy’s stock spoils.Report
This whole discussion is occurring in an airless vacuum of hypotheticals and theory, proceeding from “expectations” ,creedal ideology and assuming a false dilemma, i.e., “shortage” vs “price gouging”, as if other options aren’t in place and used regularly already.
At the federal, state, and local levels, there are emergency planning and management organizations that are able to respond immediately to move supplies and personnel to the areas affected by natural disasters.
This isn’t a theory, or hypothetical construct; Its an actual thing that happens and can be measured and evaluated.
And we’ve seen real world evidence of both successes and failures (Heckuva job Brownie).
What the real world evidence shows is that emergencies demand forward planning and preparation above all. The time to think about generators is long before the hurricane; the time to stockpile water is before an earthquake.
And above all else, success or failure depends on logistics; Managing the flows of information and people and materials, which demands a centralized, coordinated, top down command and control model.
This is proven time and again by the military. There is no decentralized crowdsourced entrepreneurial model for emergency logistics.Report
This is very true…
We’re having this discussion because in many places the shelves are currently empty.Report
Why are the shelves empty?
Were the stores not able to increase prices?
Why, yes they were!
The stores could easily have chosen to raise prices to astronomical levels if they wanted to.
And I suppose the shelves would still have some rolls of toilet paper.
But…would the supply be larger?
Not even by a single roll, because the suppliers haven’t changed to meet the sudden demand.
Would people who need toilet paper be without it?
Yes, yes they would!
So I’m struggling to see how price is the solution here.
You aren’t describing a scenario by which goods are allocated better than they are now. In both the status quo, and your price gouging scenario, the end result is the same, where some people have it, and some people don’t.
The only difference is that in the status quo, the people who have it are the clever ones who rushed out faster than everyone else;
In your scenario, the people who have it are the ones with money.
I’m not seeing why either scenario is the one we should find satisfactory.Report
Actually no, they were not, not without opening themselves up to being arrested by the state because “price gouging” is illegal.
The word “need” is doing a LOT of heavy lifting here.
If someone is desperate enough to pay 3x the normal price because they currently have none, then at the moment they can’t. However most of the people who are currently buying paper are NOT that desperate.
True, the supply would not be larger, but presumably it would be more efficiently distributed. That means less runs on stock, less panic buying, less shortages, and that desperate person who has nonething would be able to pay 3x and actually get his.
Actually I am. Markets and letting prices rise is how goods are efficiently allocated. We’ve spent multiple centuries figuring this out, it’s extremely well established and researched.
That would be me btw. When I realized shortages were comming I stocked up.
In my scenario there would still be product on the shelves.
That’s because you reflexively don’t like markets or see their use.Report
No, no one was afraid of “being arrested” over price increases.
But you are absolutely correct, “need” is doing all the work here.
What you’re doing is taking a sensible idea- that people’s willingness to pay reflects their need- and extending it out in all directions beyond any absurd limit.
This idea is perfectly reasonable, but only within limits.
If I refuse to pay a bit extra for a soda, its reasonable to think its because I don’t want one very much;
It’s reasonable to say that the goods in this case are allocated efficiently.
But- if a rural hospital refuses to pay a million dollars for a ventilator, and it gets purchased by a Russian billionaire “just in case”, it isn’t because the hospital doesn’t want one badly, its that they don’t have a million dollars.
In this case it would be ludicrous to say that the goods are allocated efficiently.Report
Are you seriously claiming “price gouging” isn’t illegal?
What you are doing is trying to claim limits based on imaginatary situations that don’t “feel” right without presenting better alteratives.
A better example would be the lifeboat classic, i.e. the ship is going down and the lifeboat can only save half. However our current reality seems to be more of a market being poorly regulated by the gov than a life boat.
Sure, for this individual transaction which is carefully cherry picked and fictional and seems to have a foreign McDuck as the villian of the piece. However in the real world efficiency is measured by looking at the total market, not individual transactions.
And what is your alternative, an omnipresence omniscient omnibenevolent state agency that will carefully review every transaction to make sure it “feels” ok? If that’s what you want then your fictional example of well connected insiders taking advantage is WAY closer to typical in the real world examples we have than in anything close to a market.Report
Well, first:
https://www.themoscowtimes.com/2020/03/21/exclusive-rich-russians-are-hoarding-ventilators-to-protect-themselves-against-the-coronavirus-a69703
But really, you aren’t familiar with the ways that various emergency entities- everything from FEMA to the National Guard, from the Red Cross to state and local emergency response teams- all act in the aftermath of disaster to provide things like food, shelter, generators and water?Report
RE: Russians
You’re pointing to a country where the ruling elite have dismantled the market and use the gov to maintain their power via their insider connections. So your solution is what… to dismantle the market and trust that our gov won’t do the same?
First, these groups are to be applauded for their efforts. They’re the first line of defense and for the most part they do a good job. However if they’re really doing their jobs then there won’t be a market for 10k generators and the like, and there won’t be empty shelves and the like.
Now where are you going with this? Are you suggesting we don’t need to worry about empty shelves and 10k generators because these groups will prevent it from happening?
If that’s the case then there’s no need to pass laws against or discourage price gouging, becuase the later would only happen if these organizations drop the ball or aren’t up to the task or something.Report
“… a country where the ruling elite have dismantled the market and use the gov to maintain their power via their insider connections.”
Uh…was that meant to be sarcastic?
But you raise a good point, that if emergency agencies are doing their jobs right, the need for price gouging would be reduced or eliminated.
Which I suppose is a good rationale for a robust and well managed emergency system.Report
We have that in 36 states, where hospitals can’t add beds or ventilators without state or local approval (a “certificate of need”) so that hospitals don’t face too much competition or end up with overcapacity.
I mean, if the hospitals bought ventilators they didn’t really need, then it stands to reason that the patients will end up having to pay extra for them, and “that’s just not right.”Report
A wonderful example of the lack of markets in the HC system.Report
This whole discussion is occurring in an airless vacuum of hypotheticals and theory
Maybe you and some like-minded individuals can petition the school board to have an “supply and demand is just a theory” sticker added to every economics textbook.Report
Wait wut? Do people think hospitals would have been spending millions on adding all sorts of tech/beds as surge capacity in case of pandemic. That is bizarre. They are businesses and don’t have extra giant piles of money around for that. There is a crit of C of N and supply and demand is just fine, but this ain’t it. Where is there any evidence hospitals would have piled up everything needed to prepare for this kind of situation if not Cof N. This is beyond what businesses can be prepared for. S and D is not a simplistic explanation for everything. It matters but it far from explaining all the dynamics of most things and a case like this.Report
You are trying to argue the market can’t possibly work, presumably you’re heading for “the gov needs to step in”.
I’m going to quote George here:
The current reality is the gov has created this situation.
When we look at parts of the medical HC industry where the gov has less influence (lasik, plastic), the supply tends to be much higher and the price much lower.Report
I saw the quote. I see resonable crits of C of A. I said that. Markets aren’t magic. They are good at somethings less so at others. I cannot see any rationale for businesses, private or non profit, spending huge amounts of money on gear/supplies for every possible emergence situation. Hosps do some already but do you really think they will have prepared for having all the extra ventilators for something like this. That makes no sense at all if you look at as a business. Hosptials manage themselves. Gov is there to look at the big picture. We could have a Fed gov shifting supplies to areas that are being hit the hardest.
Yeah gov has a role since it is there job to look at governing the country not meeting profit margins. They can stock up or make preps.
Okay market you say. There is an act trump called on but so far has done anything about. It would empower teh Gov to spend and buy gigantic quantities of medical gear. Is that supply and demand? Is that gov doing something? Can two great tastes combine to make one even better taste? Well aside from a reeses peanut butter cup.
Markets are good things. It is the biggest fans of them who think they solve every single problem that create the most unrealistic expectations about them. But then again it seems like markets can never fail unless we don’t hold enough pure faith in them.Report
I guess this is why I balk at the ideological usage of “markets” and “government” as if they are universal terms, undifferentiated and producing the same results throughout time and place.
But as Russia and China show, governments and markets produce radically different results depending on where they operate.
Markets in those countries have helped lift a billion people out of poverty, but they also don’t operate with anywhere near the efficiency or effectiveness of the ones in Europe and America.
And not coincidentally, neither do the governments.
So I would suggest that both markets and governments are only as efficient and effective as the society in which they operate.
If the society is riven with corruption and incompetence, so also will be the markets and governments.Report
It depends. This is a conversation I have, professionally, maybe every quarter.
Detroit Automakers exist at one extreme. VERY large sales and throughput. Very low margins. “Just in time” manufacturing means very low inventory.
Every few years we get some inventory manager from this sector/mindset and they try to “save” money by reducing inventory a lot. …which works up until we have a disruption and then we get hurt.
At the other extreme are companies are the opposite of all that. High margins. Low sales. Low redundancy of manufacturing.
If that’s your world then it makes a lot of sense to plan for surges and disruptions and to keep a lot of inventory on hand. The guy who runs inventory can save pennies by running it very lean, the company as a whole will lose millions if we can’t ship product.
As for hospitals, my intuition is they’re a lot closer than us than to Detroit Auto. An empty hospital bed generates no profit, but the overhead on it is also very low and the profit you get when it’s full should more than make up the times when it’s empty.
These anti-create-surge-beds regulations exist for a reason, and that reason is this reasoning would leds to hospitals trying to create more beds than they can use to deal with surges, and then they try to fill those beds by stealing patents from other hospitals. So in other words, those regulations exist to prevent competition.
Well then there is no problem. The all knowing, all benevolent government will simply handle it because clearly they can plan beyond the next election. The good news is they already largely run the HC system, so they should have already put in surge beds for this situation rather than outlawing them. The bad news is the whole “all knowing all benevolent” part which is needed to make this work well doesn’t seem to exist.
Markets can most certainly fail. Figuring out why, how and what to do about it gets interesting and informative.
However here we’re looking at a lack of surge resources in combo with gov regs in most states saying black letter you’re not allowed to put in surge resources. The “failure” here seems obvious.Report
The current reality is the gov has created this situation.
This comment reminds me of all the libertarianish who argued – strenuously! – that government was the sole cause of the 2007 MBS collapse.Report
So according to that quote 36 states have CON regulations and 14 don’t. Be a fucking free-market hero and statistically compare the readiness of those two groups. Should be a no-brainer but I have yet to see such a comparison.Report
No, 36 states make it extremely obvious to the point of black letter.
Our expectation should be that we don’t have anything like a functioning free market in any of them, and level of gov intrusion and micromanagement in all of them is beyond the point of absurdity.Report
“And above all else, success or failure depends on logistics; Managing the flows of information and people and materials, which demands a centralized, coordinated, top down command and control model.
This is proven time and again by the military. There is no decentralized crowdsourced entrepreneurial model for emergency logistics.”
This is generally true here, but not absolutely true. The usual “the neighborhood comes together in a time of crisis” story newspapers are so fond of is a common working example of “decentralized crowdsourced entrepreneurial model for emergency logistics”. It actually works faster and more efficiently than centralized models if the social trust/cooperation is high enough, information flow is adequate, and sufficient local resources are available. It simply doesn’t scale well in the absence of those factors, which is why it’s more often seen in tribal societies with strong extended family/clan structures than individualist societies like ours.
Another exception is hybrid solutions with partial centralization, like GoFundMe, where the information is centralized and the response decentralized. I.E. The complaint earlier about driving around looking for stores that aren’t sold out doesn’t require centralized control of the supply to avoid, merely better information flow (.e.g. being able to check the websites or an app to see current store inventories before driving anywhere).
None of which is to diss our military or emergency responders, for whom I have the highest respect, but simply to note that their organizational strength is usually more due to superior resources (time to plan and train in advance and capacity to stockpile) rather than necessarily any advantage in information or efficiency.Report
This is very true, and the examples of spontaneous small community action is in its own way, a refutation of the effectiveness of price gouging as a method of distributing resources.Report
“I disagree…Double or triple those prices and you’d be making me pay for my insecurities. And mostly the rich didn’t get rich by being foolish with money.”
Shrug. Then we aren’t going to agree on this point and I doubt we can find the RW data to settle it objectively anytime soon. See, I don’t consider it “foolish”, the rich don’t stay rich if they don’t hedge against negative events and even at 3x or 4x that’s an easy shift in disposable funds since most of the usual uses for excess cash just dropped off the table (fine dining, movies, sports tickets, etc).
“There are arguments that rationing is simply an emotional reaction and is both a sub-standard outcome and a misuse of gov power.”
So what are those arguments? I’m leery of gov power and political virtue signalling too, but that doesn’t change the underlying logic here.
“drug store generator…My expectation is during an emergency having efficient distribution of scarce resources is more important, not less….Inefficient allocation of resources is a good way to have more people die.”
Begging the question. You haven’t actually made a case that price gouging is the most efficient distribution of scarce resources. It’s just as easy to point out that relying on price means the rich suburb nearby buys up all the generators and the drug store still doesn’t get one. Those who need a thing the most are not necessarily those who can afford to pay the most. Price gouging “may” discourage hoarding, rationing always prevents it.
“And your point is what? That companies that are unexpectedly important shouldn’t make money?”
They are already making money. No company selling TP has LOST money constantly selling out of product as fast as they can get it on the shelves. The moral argument for price gouging is that it maintains a profit incentive while covering the additional costs for producing more/shipping further, neither of which apply in this situation.
“That we don’t want them to be able to hire more workers (or replace ones who are sick) or expand?”
They are quite capable of doing that within their usual profit margin, especially when their sales volume is already maximized.
“That we don’t want them to capture outsized profits because that might lure other individuals/companies into this space?”
Into the space of “Toilet Paper Supplier”? Not possible. The
potential added profits are quite limited in both time and scope, certainly not enough to justify the capital investment necessary for additional rigs or production facilities. Nor is this shortage a locally concentrated phenomena, so there’s no excess capacity out of the affected area to lure in, the “affected area” is everywhere.
“The guy who would benefit the most is the one trying to save his stock of food/drugs/whatever and needs to keep his refrigerators running.”
Price gouging doesn’t guarantee he gets it either. Frankly, nothing short of gov seizing the generator supply and doling them out directly guarantees a particular recipient gets one, but neither of us are arguing for that.
“No price gouging means first come first served, i.e. shortages,”
To borrow your own phrase, “This is silly wrong on the face of it.”. Rationing expressly limits shortages as much as possible by spreading the supply as widely as possible, price gouging merely shifts who gets to hoard up the income scale, it doesn’t necessarily prevent hoarding or shortages.
A nationwide TP shortage due to a temporary spike in demand to hoard is fundamentally unlike a hurricane disaster response in every relevant specific.Report
One of the reasons arguments about price gouging tend to go in circles is that the libertarian argument that Dark Matter is using here has a different set of premises and definitions than those used by conservatives and liberals.
Here, the libertarian definition of “efficient allocation of resources” is used in it narrowest economic sense, where the “need” for something is synonymous with “economic demand” , i.e., price.
So the guy who pays ten dollars has a greater “need” than the guy who is only willing to pay five. Therefore, the goods are allocated efficiently according to the greatest “need”.
But for the rest of us, this definition of “need” is absurd.
The first guy may be buying it for frivolous reasons, while the second guy may die without it but from an economic standpoint, those concerns are irrelevant.
The equating of “need” with willingness to pay means that it doesn’t matter who the buyer is, or what their motivation.
An example might be if the government steps in and buys up all of the resource, using the massive power of its public purse, then hoards the resource for government officials and cronies.
From an economic standpoint, this is no different than a rich oligarch doing the same thing.Report
So the 2nd guy WILL DIE without this but is only willing to pay five dollars, and he’s priced out of the market at ten dollars, and the first guy doesn’t actually need it.
And this because this market isn’t working correctly(?), we’re supposed to reach for the better alternative, which is… someone in authority will decide who gets what according to ethical standards?
It does however avoid needing telepathy or an all knowing entity to figure out who should be allowed to buy what.
It also avoids needing an ethical gut check (which varies from person to person) on every transaction.
It also has a ton of theoretical backing (and RL observation) in terms of maximizing human good, minimizing transaction overhead and so forth.
If the only thing you have going for your argument is the purity of your motivation and the impurity of the other guy’s motivation, then maybe it’s because you don’t have an argument.Report
Well, to my example, if the government just cleared the market by outbidding everyone else and bought every single generator, would that be an “efficient” allocation of resources?
Because whats interesting is that this definition of “efficient” doesn’t have any variable as to how the generators are used.
Presumably, once they are purchased, they are allocated efficiently, whether they create power or just sit in a warehouse.Report
“One of the reasons arguments about price gouging tend to go in circles is that the libertarian argument that Dark Matter is using here has a different set of premises and definitions than those used by conservatives and liberals.”
Thanks Chip. I thought some weird equivocation was going on. That definition of “efficient” doesn’t even match the “generator for the drug store” example since the store owner’s willingness to pay higher prices to avoid massive losses from spoiled stock still runs into the practical limit of his available funds, which is to say that while anyone might theoretically be willing to pay an infinite amount for a necessity of life, how much each actually can pay is a variable independent of “need”. The spendthrift millionaire who just wants to keep his AC running can still outbid the drug store owner, but I don’t see how letting millions in drug store stock spoil for lack of a generator meets even the most narrow definition of “economic efficiency”. It’s a flawed argument even on its own terms.Report
What you’re saying here is that because clearly markets don’t work and especially don’t promote efficiency, markets must not work and not efficiency.
The problem with all this “what if” counter examples is that for the most part it’s not a thing in the big picture, nor do you have a better way to handle this sort of thing.Report
“What you’re saying here is that because clearly markets don’t work and especially don’t promote efficiency, markets must not work and not efficiency.”
Uh, what? I’m not discussing a big picture. AFAICT you and I are generally in the same ballpark on big picture economic questions. I’m mostly happy with free markets. Heck, even most of the lefties around here are pretty cool with “free” markets, such that our disagreements are more about “whether” a given market is currently “free” and therefore whether a given proposed intervention has a net effect of greater freedom vs less freedom (they usually want more intervention and I want less). So I think you’re projecting a greater difference of opinion on me than we actually have.
That said, “price” still != “economic efficiency”. It’s a generally useful proxy/signal in most contexts, but it’s not the thing itself. E.G. asset bubbles reflect a temporary disconnect in the market between current price and actual economic value; this is in fact a characteristic of durable goods with potentially higher resale value, which under the current context would include TP and certain foodstuffs. One reason why emergencies often require a change from default free market behavior is that the circumstances temporarily change the relevant category of certain goods (i.e. TP rolls and foodstuffs do not have a potentially higher resale value under normal conditions so they do not need to be treated as assets subject to appreciation under normal conditions,
whereas necessities do function as appreciating assets during an emergency shortage, so they need to be treated as such for the duration in order to avoid bubbles (which are inherently economically inefficient). You see price gouging here as a market correction, I see it as a market distortion (bubble), hence our disagreement as to whether preventing it increases or decreases efficiency.
In microeconomics, economic efficiency is, roughly speaking, a situation in which nothing can be improved without something else being hurt. If we’re going to simplify, I’d say that “efficiency” is more closely related to “productivity” than “price”. In your example, The Drug Store “should” get the generator instead of the millionaire because it will be used more productively there. Neither of our proposals guarantee that outcome though, because only coercive power could force it and neither of us are inclined to trust the judgement of anyone who might be given that coercive power.
“The problem with all this “what if” counter examples ”
??? I haven’t offered any “what if” counter examples. The whole “Hurricane Generator for the Drug Store” example was your contribution, not mine. I was just talking TP until you threw that in there and you already admitted that in the particular current context my suggestion is a better (or at least acceptable to you) way to handle that thing.Report
The argument is that markets are much better at efficient distribution of scarce resources than the alternatives. Our certainty of this is roughly the same certainty as for the law of gravity. If you’re trying to find a carve out situation where it doesn’t apply, then it’s on you to show there are situations where the law of gravity doesn’t work and not on me to show it does.
The arguments against markets working seem to be highly emotional and speculative. Needing to argue against the evil selfish rich who don’t really need something is a good example.
Yes, but the alternatives are “random”, “political connections”, and “rationing”. Rationing makes a lot of sense where the distribution of need is very well understood and the supply is large enough that it’s possible for everyone to get a little; So in the context of food and TP the arguments for rationing are stronger than normal, strong enough that I’d be fine with it in the current context.
However everyone can’t have a generator so “rationing” is impossible. The gov stepping in to prevent outsized profit is NOT imposing sanity, it’s just virtue signalling… at the cost of reducing the supply and making sure the existing supply is used inefficiently.
The entire supply chain is under huge pressure. Various transportation aspects are being asked to work overtime and so forth. Pointing to one part of that supply chain and self righteously proclaiming they can’t possibly use more money so the entire chain must not either doesn’t seem to be correct.
No? It’s impossible to hire drivers to home deliver TP or that there might be a lot more demand for home delivery? It’s impossible for a TP supplier to want to hire expensive new delivery systems to speed things up and deliver to places that have shortages? We’re totally sure we want them to keep using their previous low bidder and possibly slow carriers? And if this crisis lasts for months, we’re sure there aren’t factories making similar products which can be repurposed?
In the news on the radio was some company who is going to start making medical masks so clearly repurposing is a thing.
But if we’re totally sure no part of the supply chain will get sick and find themselves quarantined, or is under unusual stress, and we’re totally confident that having extra money to sidestep these sorts of issues won’t be useful, then sure by all means wave a wand and freeze the market. There’s no need to let the market adjust to anything.
Our example in that part of the conversation is generators. “Ration” implies everyone gets a little. How do you intend to “ration” generators?
In our example the price clearing generator sales price is $10k (this example was close to RL btw, we got some of these anti-gouging laws after the aftermath of a Florida hurricane and how generators where on “sale” for crazy high prices).
I’m not sure why “guarantee” is now in the conversation nor what it means in this context. If you have a system which is better than the market in this situation, put it on the table. It is certainly possible the high bidder is McDuck and he has no use for the generator other than to count his gold, but in the real world the odds are that it’s someone who has economic use for it. The moment you assume an economic use for the high priced generator we’re deep into “let the market work”.
Every aspect but legally. The laws that are stopping a price spike here were developed for natural disasters. We have a lot more hurricanes than we do pandemics.
I would be a lot happier with an exec order implementing rationing, but what we have is “no rationing” and “no price spikes”.Report
“If you’re trying to find a carve out situation where it doesn’t apply, then it’s on you to show there are situations where the law of gravity doesn’t work and not on me to show it does.”
I agree, but I’ve already done that and you’re still arguing. Unlike the usual natural disaster scenario the case of TP/food does not involve any actual destruction of existing supplies, the expected period of shortage is too short for repurposing/production upscaling to kick in in time, transportation is already temporarily maxed (or will adjust even at current prices since other business sectors have shut down, freeing up transportation capacity), and the global scope means that it’s not simply a matter of luring in out-of-area suppliers. I’m generally a free marketeer too, this is just a fairly unique situation and I’ve been repeatedly noting the specific constraints above that prevent rising price signals from having their usual effects. I am not arguing that price controlled rationing is always or even usually better than price rise (even in emergencies), merely that it is in this one specific unusual case.
“So in the context of food and TP the arguments for rationing are stronger than normal, strong enough that I’d be fine with it in the current context.”
Then we’ve reached agreement in principle. I’m not actually arguing anything but the current context.
“I would be a lot happier with an exec order implementing rationing, but what we have is “no rationing” and “no price spikes”.”
I haven’t read the exact text, but according to today’s headlines that seems to have just happened, though there’s still details to be worked out in implementation. https://thehill.com/homenews/administration/489125-trump-signs-executive-order-to-prevent-price-gouging-of-medical
Thanks for an interesting debate.Report
RE: Thanks for an interesting debate.
You’re welcome.Report
“So in the context of food and TP the arguments for rationing are stronger than normal, strong enough that I’d be fine with it in the current context.”
I think maybe this part here, where you agree with the rest of us, deserves a little bit more emphasis.Report
Bold? All Caps?
Although I guess quoting it does a lot so thanks for that.Report
“My assumption is the rich are already hoarding to the same level as the poor.”
The husband of a patient at my wife’s clinic accompanied his wife into the exam room and proceeded to open a briefcase packed full of the N95 masks (literally!) everyone in the world is clamoring for more of. My wife’s staff is currently limited to a total of one (1) mask not per-day, but which they have to re-use everyday.Report
Not sure why you addressed this reply to me rather than Dark Matter, it’s his assumption and I already stated I doubt it. I’m just letting it be in my debate with him because it’s not relevant to my argument that price gouging wouldn’t actually prevent the rich from hoarding. Thanks for the anecdote though, I was wondering whether they were hoarding more because they can afford it or less because they are less sensitive to perceived scarcity signals.Report
I addressed it to you because you said you “doubt” that rich people are hoarding as much as poor people. 🙂Report
They hoard money, why wouldn’t they hoard other shit?Report
Ah, now I see the confusion. What I mean was more “I doubt that the rich are hoarding THE SAME as poor people”. I wasn’t sure if it would be higher vs lower, but the rich and poor rarely have the same spending habits in any other time or way, so I don’t expect this to be the exception. Thank you for pointing out the ambiguity.Report
The rich are able to hoard on a whole different playing field.
Working class people can induce short term localized shortages of toilet paper and toothpaste and stuff, which last only until distribution figures out the logistics of keeping enough of those things in the back room. Working class people can only get involved in supply chain wars with other working class people.
Rich people can get involved in hoarding on a whole different playing field. They can get involved in supply chain wars with government and institutional purchasers. They can buy their own ventilators just in case someone in the mansion comes down with severe respiratory symptoms, removing them from the supply chain used by hospitals.Report
Real Clear Politics linked a good piece on the outbreak that had lots of data, along with plenty of discussion about what the data seems to indicate.Report