Economists who defend disaster profiteers are wrong

The problem with this oft-used dogmatic argument is that it’s pure claim and no evidence. It’s a specious theory, it sounds great on paper but only comes true once in a blue moon. I happen to work for a company that got stuck with a stockpile after a bubble, a company that actually tried not to get caught up in oversupply, and it was not “socially beneficial”.

Your explicitly stated assumption in your argument above is that you have to be lucky enough to have guessed exactly the right amount to stockpile, which almost never happens in reality, and is pure luck. There is no way to see the future and know the “correct amount” for an unforeseen emergency.

There are multiple ways that stockpiling behavior can back-fire and turn into economic loss, and in reality these actually happen routinely. One is that you stockpile and the need never arises, which is not only economic waste, it’s also externalized environmental waste. Another is too many people stockpiling, and they lose money when sudden demand occurs. A third is over-stockpiling and losing income when demand drops too quickly. And there are more.

It’s a huge and unrealistic assumption to think that we can stockpile the “correct” amounts in advance of a crisis.

You’re also conflating money with well being. “Socially beneficial” is exaggerating the idea of market balance, the benefit you’re talking about is economic benefit, and fails to take into health, safety, or happiness of actual people. This whole theory that the unrestrained market will be optimal depends on having enough time to reach that state, it has never properly considered global disease pandemics. Neither Adam Smith not any economist since him has tried to claim that the free market balance happens instantly or always, nor that it can’t cause economic loss when the conditions for free market prosperity aren’t there.

> When prices for goods during a crisis are astronomical, that indicates that the market did not work effectively in producing stockpiles, either because there was a general lack of awareness that a particular good could see a spike in demand, or because anti-price-gouging laws prevented profit-motivated individuals from acting on their awareness.

I’m with you on the first part... it’s true by definition that a crisis brings demand for things that there was no awareness of. The second part doesn’t make sense, you said prices are astronomical because anti-price-gouging laws are in effect? What do you mean, why would anti-price-gouging laws cause price gouging?

> but buying ten N95 masks is as good as buying zero

Depends on the situation. N95 masks can be decontaminated and reused pretty easily (IIRC 150C for 10 minutes). If you're only using them once or twice per week, letting the mask sit for 3-4 days is enough for most of the viral material to be destroyed by exposure to the normal environment.

> If the government wants to prevent you from getting a job that pays less than minimum wage it has to provide you with a job that actually does pay minimum wage.

I like this way of putting it. I'll use it in the future.

Similarly here, if the government wants to make it illegal to sell hand sanitizer at $5/bottle, they should provide hand sanitizer at $1/bottle.

I don't think anyone defends front-running. It's illegal in various forms for good reasons.

A _manufacturer_ charging more is not _front-running_.

>>The problem with this oft-used dogmatic argument is that it’s pure claim and no evidence.

The anti-money position you're espousing is the one that's dogmatic. It ignores what a century of economic scholarship says about how prices work to measure shortages and direct resources to alleviate them.

It belies an anti-profit cognitive bias:

https://digest.bps.org.uk/2017/08/04/we-have-an-ingrained-an...

>>The problem with this oft-used dogmatic argument is that it’s pure claim and no evidence.

The theory that price controls harm the functioning of the economy is overwhelmingly supported by the empirical evidence.

There is plenty of evidence showing the detrimental effects of price controls on post-disaster situations (aka anti-price-gouging laws) specifically as well, e.g.

https://scholarworks.montana.edu/xmlui/bitstream/handle/1/90...

>>It’s a huge and unrealistic assumption to think that we can stockpile the “correct” amounts in advance of a crisis.

We can get closer to the correct amount when people are incentivized to calculate the correct amount, and the corrective feedback loops of the market work to reward good allocators of capital (those who are good at making predictions on the supply excesses and shortages, and acting of them) with more capital, and poor allocators of capital with less. Overtime, this leads to an economy that allocates resources more effectively. Profit/loss produces this outcome spontaneously and naturally, as a very consequence of the behaviour that leads to profit, versus that which leads to losses.

Most knowledge is diffused widely across society, and it only comes to bear when people are financially incentivized to act on it. Many have specialized domains of expertise owing not from PhDs and theory, but from mundane experience. The economy is too complex to govern using theory, which is why we need bottom-up processes, like capital allocation through emergent phenomena like markets, to tap this vast ocean of knowledge, in order to govern it.

Prices work. That's what evidence shows. You will not find the economic scholarship supporting your canned anti-money/profit talking points.

>>The second part doesn’t make sense, you said prices are astronomical because anti-price-gouging laws are in effect? What do you mean, why would anti-price-gouging laws cause price gouging?

I meant the grey/black market price. It's astronomical due to extreme shortages during crises, due in turn to stockpiling not sufficiently being incentivized, owing to anti-price-gouging laws.

Price caps paradoxically lead to higher prices.