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Economists who defend disaster profiteers are wrong

economist.com

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Re: Economists who defend disaster profiteers are wrong

#41

Post by bo1024 »

The article starts by focusing on hoarders, but this is talking past economists focusing on actual producers.

I'd strongly agree that it's economically harmful for people to collect rents without providing any new value, by accident of being in the right place.

Problematic, but murkier, is the case where someone happens to own a mask factory and was previously happy to sell at $0.1, sees that supply is down and demand up, and raises prices to $1. The factory owner is capturing a lot of the surplus, and one could argue this is basically a rent for being in the right business at the right time rather than any sort of economic incentive to act efficiently. But a capitalist would argue this is reaping the rewards of foresight to invest in mask factories, and the chance of this event helped price and incentivize that investment in the first place. Anyway, on the other side of the market, it's not clear that high prices are helping allocate efficiently if places that need supplies most do not necessarily have the most money available to bid high.

The article does get into some arguments about the most interesting case, where actual changes to production and distribution happen because of the crisis and prices' roles in mediating these changes. I like some of what the article says here, but it more argues that the current system is a problem than price-caps are a good solution -- and they have to be combined with other more draconian measures like seizing and redirecting supplies. Maybe a better solution is the government subsidizing all supply purchases massively, and letting prices go wild. (This wouldn't work in isolation either though, we still need some method for mediating between places who gets what.)

Re: Economists who defend disaster profiteers are wrong

#42

Post by hamandcheese »

jimmaswell wrote: post #18
SftwrSvior81 wrote: post #11

Earlier quoted context omitted.

> high prices direct resources to more important uses I don't think that that is always true. High prices will redirect scarce resources to those who have the means and desire to pay for them. That doesn't necessarily mean that those uses are more important, regardless of how one defines what it means for the resource usage to be important.

Exactly this. Why is Scrooge McDuck buying the entire supply of something somehow better than evenly distributing it? I can't believe people actually think making toilet paper $20 a roll is the correct outcome instead of rationing with price controls. Maybe it's the Ferengi mentality of people seeing themselves as the exploiters.

If toilet paper was $20/roll, people would think twice before hoarding, and would probably also use less squares overall.

Re: Economists who defend disaster profiteers are wrong

#43

Post by alexmingoia »

duxup wrote: post #33
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…

Would toilet paper only being affordable to the wealthy be "more important uses"? That would seem to be the likely end result if it were greatly restricted. We've already seen that with healthcare in the US. It is expensive, so is it used on more important people?

You misunderstand what I'm saying. The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."

Re: Economists who defend disaster profiteers are wrong

#44

Post by alexmingoia »

jimmaswell wrote: post #18
SftwrSvior81 wrote: post #11

Earlier quoted context omitted.

> high prices direct resources to more important uses I don't think that that is always true. High prices will redirect scarce resources to those who have the means and desire to pay for them. That doesn't necessarily mean that those uses are more important, regardless of how one defines what it means for the resource usage to be important.

Exactly this. Why is Scrooge McDuck buying the entire supply of something somehow better than evenly distributing it? I can't believe people actually think making toilet paper $20 a roll is the correct outcome instead of rationing with price controls. Maybe it's the Ferengi mentality of people seeing themselves as the exploiters.

The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."

Re: Economists who defend disaster profiteers are wrong

#45

Post by wpietri »

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…

> 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 people getting 1 mask each.

Re: Economists who defend disaster profiteers are wrong

#46

Post by quotemstr »

numbsafari wrote: post #38
quotemstr wrote: post #25

Earlier quoted context omitted.

> High prices will redirect scarce resources to those who have the means and desire to pay for them. That's true. Don't you think it's also true that those who need a good more have a greater desire to pay for that good? I understand that not everyone has the same ability to pay, but we can't crucify the market on the cross of equity. History shows that when you try to allocate goods based on feelings (some random of…

It is both immoral and incorrect to measure need based on who has the most liquidity.

No it isn't. Are you against the idea of prices and money generally? If yes, that's been tried. Doesn't work. If no, why are you carving out a special case in your general acceptance of the price mechanism for this particular family of goods? Why is it okay to charge for food?

Re: Economists who defend disaster profiteers are wrong

#47

Post by _2d30 »

olliej wrote: post #8

By the logic of economists slavery and indentured service, etc are good ideas. Because by economist logic anything that produces more money is better, irrespective of the cost accrued by others. Slavery, and follow on policies of indentured service, crop sharing, etc are the only reasons the pro-slavery states maintained economic relevance as long as they did.

This is a ridiculous strawman: "Because by economist logic anything that produces more money is better". Almost literally no economist says this.

Re: Economists who defend disaster profiteers are wrong

#48

Post by mywittyname »

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.

The economy needs to have good sold at a profit. It seems to be the best way to ensure that people, as a group, make and sell the things that need to be made and sold, and in appropriate quantities. It's not perfect, as there are plenty of inefficiencies, but it's a very good model.

There are a number of problems with price gouging. First, it isn't helpful, everyone already knows there's a shortage of critical supplies, and increasing the price by several multiples isn't going to help make more products faster.

Second, it encourages bubbles. People will begin to purchase items that are in short supply specifically to resell them later at a higher price. This actively prevents critical supplies from reaching people in a timely fashion, which can and does result in preventable deaths.

Third, it threatens social stability in stressful times. The people hording supplies are at risk of causing violent encounters with those who need them. And a shootout or riot is the last thing we need right now.

Overall, I think it's pretty easy to see why people oppose price gouging. I'm honestly surprised anyone would defend such actions.

Re: Economists who defend disaster profiteers are wrong

#49

Post by andrewmutz »

quotemstr wrote: post #22
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…

Right. High prices serve as a production signal and a rationing mechanism. There is nothing wrong with rationing access to scarce goods via the price mechanism. The alternative is waste.

Your right of course, and Economists agree with you by large margins.

But the man on the street finds this offensive, and you can see that in the downvotes your comment is receiving.

Re: Economists who defend disaster profiteers are wrong

#50

Post by duxup »

alexmingoia wrote: post #43
duxup wrote: post #33

Earlier quoted context omitted.

Would toilet paper only being affordable to the wealthy be "more important uses"? That would seem to be the likely end result if it were greatly restricted. We've already seen that with healthcare in the US. It is expensive, so is it used on more important people?

You misunderstand what I'm saying. The more you have to exchange for something, the more you're foregoing other forms of consumption. If toilet paper cost you your entire budget, you wouldn't buy toilet paper at all. You'd buy food instead. In that way, prices redirect your consumption to higher priority things. That's what is meant by "more important."

Are there alternatives to everything / healthcare?
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