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Economists who defend disaster profiteers are wrong

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Re: Economists who defend disaster profiteers are wrong

#191

Post by roenxi »

alexmingoia wrote: post #4

Increased production doesn’t occur because the economics don’t work, it doesn’t occur because there’s just no way to physically ramp up production that fast. That’s not really a critique of the economics. If production could be increased that fast the manufacturers would. An important point the article didn’t address is that high prices direct resources to more important uses. If prices are very high then hospitals m…

The buyers aren't really the important part of the story.

In a crisis there is a desperate need for producers to produce more of the goods that are in shortage. Blocking crisis profiteering means that whoever is getting the benefits of arbitraging the shortage the only people with no opportunity to benefit are the producers. Ie, the only action that gets blocked is consumers formally allocating more resources to production using money.

From that frame it is a bizarre strategic blunder to implement pricing restrictions in a crisis. The problem won't get solved at any hurried speed if it is only a little bit profitable to solve it. Market theory suggests the pre-crisis prices were optimised to minimise profits; they really need to go up to get a response from marginal producers.

Re: Economists who defend disaster profiteers are wrong

#192

Post by zo1 »

hannasanarion wrote: post #64
megous wrote: post #54

Earlier quoted context omitted.

While true, that doesn't really matter. Higher price attracts new producers to setup manfuacture for the now scarce and expensive product more quickly. These more wealthy buyers just end up paying for a quick rampup in manufacture. There's 0 financial reason to ramp up supply if the price is the same, and you're now suddenly in a heavily controlled market. It's risky by itself to ramp up production, because you may e…

If ramping up production were as simple as hiring 100 more people, it would have been done even if there weren't a crisis. Capacity for manufacture is not infinite and it cannot be changed at a moments notice. It takes months or years to establish supply chains, facilities, machinery, and expertise needed to increase manufacture, and by that time the crisis is over and the extra demand is gone.

On a side note, one could argue that if we didn't have these sorts of "anti price-gauging" price-controls, the market would more readily keep itself open and malleable to quickly ramping up production to items whose price is spiking. I.e. if there is money to be had by jumping on "hot" production items, then there is utility in spending money on being able to jump on it when needed.

So perhaps right now the supply chain isn't able to do this, but that doesn't mean it can't move towards it.

Re: Economists who defend disaster profiteers are wrong

#193

Post by paranoidrobot »

AnthonyMouse wrote: post #103
wpietri wrote: post #45

Earlier quoted context omitted.

> An important point the article didn’t address is that high prices direct resources to more important uses. Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor…

> A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each. Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because…

> nobody would be buying a million masks to hoard in a bunker right now.

No, that's correct, because you can't (profitably) buy a million masks to hoard them right now.

If you'd done it on January 1 though, you'd have been able to buy as many masks as you liked.

Selling them now? Is this the height of the crisis? Perhaps.

> Real people don't behave like this.

They do, but most people don't have millions of dollars to fuck around with.

But if they think they can make a quick buck, they'll happily empty shelves in the local stores of masks, hand sanitiser, toilet paper, etc, and then turn around and try selling it on for a huge markup.

This is why I've not seen a roll of toilet paper on shelves in my local supermarkets or stores for three months now. Nor a bottle of hand santitiser, nor masks of any kind. But hey, I jump on local buy&sell sites and there's heaps of it there, at 10-100x markups.

For most of these folks, it is/was fairly low risk - they had the free cash, and they thought they could always return it. Some of them are stuck with supplies they now can't sell on, or return - so they now have a few years worth of toilet paper and hand sanitiser, but hey - it's not a huge loss for them.

Re: Economists who defend disaster profiteers are wrong

#194

Post by roenxi »

notauser wrote: post #188
roenxi wrote: post #179

Earlier quoted context omitted.

Mr. Mouse has a good take on this but there is a second perspective that is worth considering: If we set up a dog-eat-dog world where only money matters, why would a billionaire hoard unneeded masks? They know that they can just buy what they need when the need it. The only people with incentive to hoard are poor and vulnerable people because they know they won't be able to afford masks when they run out. Entrepreneu…

Given that poor people can't afford to hoard because of the cost of storage (especially in cities) and financing, isn't it better that rich people are encouraged to hoard when supply is plentiful? The problem arises when rich people start hoarding at times when supply is constrained, because they can do it so much more rapidly and create a much greater shock to the system. It was notable in London that severe shortag…

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

The market signal that would make rich people hoard masks in the good times would be ... an expectation that if an unexpected crisis arose then prices would rise to extreme values. Nothing else is going to make that happen. Not even most governments manage to resist economising and running down their medical supplies after the last health scare they faced.

I'm not going to hoard in good times because I'm not crazy; I know I can't be ready for everything. I'm just going to try and preempt everyone else at the start of a crisis. It won't work every time but that is the strategy that makes sense if the crisis response is includes 'stopping price-gouging'.

If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.

Re: Economists who defend disaster profiteers are wrong

#195

Post by ianleeclark »

nostromo wrote: post #151
wpietri wrote: post #45

Earlier quoted context omitted.

> An important point the article didn’t address is that high prices direct resources to more important uses. Neither do high prices. Those direct them to people with more money to spend. Confusing "richer" with "more important" is always a bad idea, but especially so with goods like medical supplies. A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor…

Isn't your comment a critique of all free markets? Food is largely a free market in the US. A billionaire could buy a billion dollars worth of beef tomorrow. But they don't, because why would they? And in fact, markets have done a better job of feeding people than any centralized planning system has. I don't see why masks would be any different.

> Food is largely a free market in the US.

No country in which there are corn subsidies is there a "free market."

Re: Economists who defend disaster profiteers are wrong

#196

Post by imtringued »

hannasanarion wrote: post #64
megous wrote: post #54

Earlier quoted context omitted.

While true, that doesn't really matter. Higher price attracts new producers to setup manfuacture for the now scarce and expensive product more quickly. These more wealthy buyers just end up paying for a quick rampup in manufacture. There's 0 financial reason to ramp up supply if the price is the same, and you're now suddenly in a heavily controlled market. It's risky by itself to ramp up production, because you may e…

If ramping up production were as simple as hiring 100 more people, it would have been done even if there weren't a crisis. Capacity for manufacture is not infinite and it cannot be changed at a moments notice. It takes months or years to establish supply chains, facilities, machinery, and expertise needed to increase manufacture, and by that time the crisis is over and the extra demand is gone.

That's only true because nobody can make a profit off extra capacity. If there was a way to make it profitable then the factories would have slack capacity built into them.

Re: Economists who defend disaster profiteers are wrong

#197

Post by WillPostForFood »

arcticbull wrote: post #180
AnthonyMouse wrote: post #81

Earlier quoted context omitted.

The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. If you just start confiscating them then anyone who did something we very much would like them to have done right…

> The point isn't for "first responders" to be paying for masks out of their own pockets, it's for the healthcare system (i.e. ultimately insurance companies) to pay higher prices so that more masks are made available to first responders, either by stimulating new production or reallocating existing masks. Yeah, that's grotesque. Everyone who works on the front lines of providing care to COVID patients is a first res…

No, the White House didn’t ‘dissolve’ its pandemic response office.

https://www.washingtonpost.com/opinions/2020/03/16/no-white-...

Re: Economists who defend disaster profiteers are wrong

#198

Post by Barrin92 »

patmcc wrote: post #15

It's very interesting to me that (nearly) everyone agrees that reselling disaster supplies like masks, hand sanitizer, etc. for a large profit is terrible, but somehow selling literal essentials like food, housing, and healthcare for profit is just fine.

Policies on for-profit healthcare vary widely. if anything the consensus among the developed world is socialized or non-profit systems with private markets playing a supplemental rather than primary role. Housing is more mixed, but some of the most liveable places like Vienna or Singapore have heavily regulated or socialised housing sectors.

So I think there is more variance on essential goods than you imply.

The general advantage of markets is rational distribution of goods through the mechanism of the price signal. in emergency situations, there isn't really a lot of price finding we need to do. We know where markets need to go (hospitals) and we need to produce significantly more than we realistically even can right now.

Re: Economists who defend disaster profiteers are wrong

#199

Post by AnthonyMouse »

wpietri wrote: post #160
AnthonyMouse wrote: post #103

Earlier quoted context omitted.

> A billionaire who wants to stockpile a million masks just in case definitely not "more important" than a million poor people getting 1 mask each. Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because…

My hyperbole aside, real people do behave like this. Look at the guys buying up all the hand sanitizer. Look at all the hoarding and panic buying that went on. It's 18 months or so before we get a vaccine. There's plenty of incentive to hoard PPE. And even taking your clinic example, you see the same issues there. If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor pla…

> My hyperbole aside, real people do behave like this. Look at the guys buying up all the hand sanitizer. Look at all the hoarding and panic buying that went on.

But then they're not price-insensitive billionaires, so if the price goes up it deters them from hoarding (and gives them a financial motive to unload their existing hoard), which is exactly what you want.

> It's 18 months or so before we get a vaccine. There's plenty of incentive to hoard PPE.

It's 18 months or so before we get a vaccine, but not before anybody can start manufacturing more PPE, which is already starting to happen and will only increase if demand doesn't subside. And if demand does subside, same result.

> If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.

What allocation process are you proposing that would avoid things like that happening? The same one we use to allocate tax dollars to bailouts doesn't feel like a strong candidate.

Re: Economists who defend disaster profiteers are wrong

#200

Post by scooble »

patmcc wrote: post #15

It's very interesting to me that (nearly) everyone agrees that reselling disaster supplies like masks, hand sanitizer, etc. for a large profit is terrible, but somehow selling literal essentials like food, housing, and healthcare for profit is just fine.

It is also interesting how morality scales. Presumably, when things get back to normal it will still be moral to exploit one family's crisis for profit (or 100, or 1000). But now we've hit a certain number of families the same activity becomes morally wrong.
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