Economists who defend disaster profiteers are wrong • Hacker News Board

Re: Economists who defend disaster profiteers are wrong

#251

Post by 1996 » Tue, Apr 14, 2020, 10:34 AM UTC

Anti price gouging has worked, as everyone can see with the well stocked hand sanitizer and toilet paper aisles of most supermarkets.

We certainly don't have empty shelves reminiscent of USSR.

Joke aside, the only things anti price gouging laws have protected are feelings: the feeling that governments control work, and the overall feeling of moral superiority people like to have.

Personally, I'm frightened by the next wave of "feels good" legislation that will ride on that, blind to the real world consequences of destroying free market, in the worst times since 1929

Re: Economists who defend disaster profiteers are wrong

#252

Post by PunchTornado » Tue, Apr 14, 2020, 10:34 AM UTC

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…

maybe in the US where hospitals have an infinite amount of money, but certainly not true in other parts of the world where hospitals have a severe cash flow problem now.

Re: Economists who defend disaster profiteers are wrong

#253

Post by jrumbut » Tue, Apr 14, 2020, 10:34 AM UTC

CryptoPunk wrote: post #156

jrumbut wrote: post #89

Earlier quoted context omitted.

We will all suffer if masks and basic hygiene products aren't allocated well. There is not enough time to solve the coordination problem (or, more accurately, we solved it in advance). The government elected by most market participants steps in (or threatens to step in) to help maintain order. This seems like a less crazy idea than seeing how many nurses will pay $500 for a mask.

Market participants are unable to deliberate on every policy position of every candidate that they have to choose from in elections. Elections as currently administered are highly limited in their ability to produce good collective judgments, so the fact that politicians support sonething is no indication that it's socially beneficial. If the democratic process produced socially optimal governance decisions, no democ…

The non-market solution doesn't solve the fundamental problem it prevents the problem from doing maximal damage in a time sensitive situation.

It takes time to build and staff and supply a mask factory, meanwhile you risk the scarce (in the best of times), skilled clinicians getting sick en masse or abandoning their jobs.

Market solutions work when there is no coercion besides price, unfortunately viruses won't take checks, nor will people who are fearful or desperate.

Re: Economists who defend disaster profiteers are wrong

#254

Post by agent008t » Tue, Apr 14, 2020, 10:36 AM UTC

TeMPOraL wrote: post #249

agent008t wrote: post #243

Earlier quoted context omitted.

Buying for resale by definition means that more TP is available for purchase.

Buying for resale doesn't magically create TP. The amount of TP available to consumers is the same, the amount of money made by TP producers is the same. But consumers have to spend more money, because there's a parasitic layer of resellers introducing friction into the system.

I would rather people buy to resell, than buy to hoard "just in case". The former does increase the amount available to consumers.

Re: Economists who defend disaster profiteers are wrong

#255

Post by TeMPOraL » Tue, Apr 14, 2020, 10:37 AM UTC

WalterBright wrote: post #219

notauser wrote: post #188

Earlier quoted context omitted.

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…

Anti-gouging laws cause sensible people to hoard at the first sign of trouble.

They also arguably make people hoard less. If you can't resell for a large profit, there's no point in buying more than what you feel hedges your risk. So you'll buy 200 masks instead of 20 000.

Disposable PPE is also funny in a way that it makes no sense to buy it unless you buy in bulk. If you can get 200 N95 masks for $20, it's OK. If you can buy 2 masks for $20, then you'd better spend $1000 or don't buy at all. A lot of people buying few masks each just wastes a whole supply of masks that could all go to one place (e.g. a hospital) where they would make a difference because there would be enough of them to be used properly.

Re: Economists who defend disaster profiteers are wrong

#256

Post by yqx » Tue, Apr 14, 2020, 10:38 AM UTC

nickff wrote: post #167

yawaramin wrote: post #134

Earlier quoted context omitted.

> Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics." Some examples where morality trumps economics that might help to calm you: - Child labour is illegal in the civilized world - Slavery is illegal in all or most countries (despite slave labour being more, um, economical than paid labour) - Emergency services like fire, police, paramedics…

In many countries, child labor wasn't banned because of moral reasons, it was banned as an anti-competitive measure against un-mechanized factories. Slavery was enforced (and subsidized) by many governments; it wasn't exactly a creature of the free market. Segregation was similar. Indentured servitude may be a different matter, though it brings up some more complicated questions. "Not demanding payment up front" has…

> Slavery was enforced (and subsidized) by many governments; it wasn't exactly a creature of the free market.

Chicken or egg. You can make this argument either way. The fact is that slavery has been around for a lot longer than the governments that "enforced" it and it eventually took governments to abolish it completely.

> As we saw with toilet paper (and hand sanitizer), the average person will hoard anything they are afraid will not be available tomorrow. Companies have shown more restraint in this crisis and others.

Luckily in a well functioning democracy it would not be the toilet paper hoarders that'd be charged with coming up with ethical legislation.

It's not either or. Legislation doesn't solve everything, but neither does a completely free market (which doesn't and couldn't exist anyway).

Re: Economists who defend disaster profiteers are wrong

#257

Post by TeMPOraL » Tue, Apr 14, 2020, 10:41 AM UTC

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…

> And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity.

I don't understand why people aren't talking about how disposable PPE defies this point at the low end. Hoarding a million masks doesn't make you better off than buying a thousand, but buying ten N95 masks is as good as buying zero. Masks, gloves, even hand sanitizer are consumables, so getting a little bit of them for everyone is as good as just throwing them into a hole and setting on fire. They work only when concentrated in bulk. Like a thousand of masks per household, or a million per hospital. Enough hand sanitizer that you can actually disinfect your hands every time you accidentally touch something outside. Etc.

Re: Economists who defend disaster profiteers are wrong

#258

Post by nicoburns » Tue, Apr 14, 2020, 10:41 AM UTC

roenxi wrote: post #242

altacc wrote: post #238

Earlier quoted context omitted.

There is an alternative to assumming people behave rationally, which is to model behaviors based on large scale evidence, not clean ideals. This is pretty much why Sociology and Anthropology exist and are fairly complicated subjects. Economic modelling often fails because they assume a small number of rational and logic rules. But people are highly variable and rational for one person is irrational for another, depen…

> ... poor people are often spending money rationally ... I claimed that most people spent their money rationally. You're not countering me with that point, we're agreeing. If wealthy people make a habit of spending irrationally they go broke.

> If wealthy people make a habit of spending irrationally they go broke.

This just isn't the case. Unless they're spending irrationally AND a large proportion of their wealth then spending irrationally is unlikely to make them go broke. And unfortunately some people have so much wealth that they can spend market-distorting amounts of money that are still a tiny fraction of their overall wealth.

Re: Economists who defend disaster profiteers are wrong

#259

Post by roenxi » Tue, Apr 14, 2020, 10:42 AM UTC

Leherenn wrote: post #250

roenxi wrote: post #187

Earlier quoted context omitted.

Because they are running an enormous risk of a 50 crates of toilet paper being driven up in a hastily hired farm truck direct from a commercial factory at $19 a roll. Then they lose money per roll and that has a crippling effect on their finances because debt magnifies gains and losses. We know that the amount of toilet paper being produced matches how much is being consumed because it did pre-crisis and consumption/…

I think the issue here is that we are talking about toilet paper, which is not really vital. In this case, having people priced out for say 2 weeks before prices come down again is not the end of the world. If we were talking about something really vital like food, those same 2 weeks become unacceptable. It's a good thing that it did not happen at the same scale for food (supply is more elastic? demand is less elasti…

You're not considering what I feel to be the most important point here.

The immediate result of price signals is huge amounts of money will become available to anyone who is producing a scarce good. If something in your scenario (government, public pressure, whatever) interferes with the market then the people who produce food will no longer be awash with money and will not produce more anywhere near as fast.

Even if people are starving the solution is not to ban disaster profiteers or implement price controls. The solution is for the government to start buying food at market prices and distributing it evenly. Working with the price signalling system, not against it. It isn't efficient but if people are starving then sure efficiency isn't the single biggest problem. At least it keeps the incentives where they need to be.

Re: Economists who defend disaster profiteers are wrong

#260

Post by nicoburns » Tue, Apr 14, 2020, 10:43 AM UTC

roenxi wrote: post #227

michaelmrose wrote: post #218

Earlier quoted context omitted.

This assumes that people actually behave rationally. Do we have actual numbers on rich people buying TP during the present crisis? If most people including the rich are going to hoard anyway a rising price just transfers more money to sellers when many need it most. Worse it incentivizes people to buy for resale if the price is trending upward. TP selling for 200% that is headed to 400% shortly is a smarter buy than…

> This assumes that people actually behave rationally. There isn't an alternative. If you assume people behave irrationally you may as well send the army in straight away. People are often stupid but rarely irrational given what they can understand. There is pretty solid evidence that people with money are the ones who spend it rationally. And besides a private buyer's opinion of what is rational is just as valid as…

> There isn't an alternative.

There is an alternative: distribute wealth. On aggregate people tend to behave a lot more rationally than individuals do. So if you spread the buying power as widely as possible then you get a more rational market.