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Economists who defend disaster profiteers are wrong

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Re: Economists who defend disaster profiteers are wrong

#431

Post by lxmorj »

yawaramin wrote: post #134
nonidentified wrote: post #76

Speaking as an economist, I tend to get nervous when other economists talk about circumstances where "morality trumps economics." As a profession, we have a miserable track record on morality. Economists widely endorsed eugenics in the first half of the 20th century, for example. And many modern economists endorse a minimum wage, as eugenicists did then, but with even less regard for the harm it causes. Personally, I…

> 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…

Your penultimate point doesn't address that this isn't about expectations. It's asking companies to actively cause their own profits to fall. Raw material prices are being bid up - but even assuming you fix those prices somehow - you can't price fix labor prices while scaling up. Most production companies can't scale without running OT or hiring new employees, both of which will drive cost-per-unit up significantly. In a competitive industry, it's not crazy to think the difference between profitable and unprofitable is less than the increase cost of overtime pay.

3M may be large enough and have enough similar production lines that they can shift production around and still make a marginal profit on the scaled up production, but that's not a given. Smaller companies or more specialized ones would have to decide to increase production to their own detriment. Some might do that out of goodwill, but your last point correctly calls that out for the gamble it is.

Re: Economists who defend disaster profiteers are wrong

#432

Post by aianus »

hamandcheese wrote: post #42
jimmaswell wrote: post #18

Earlier quoted context omitted.

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.

Anecdotally, this fits with my observations at the grocery store in Canada.

All the regularly priced milk, chicken, and eggs were sold out around March 25th but the "organic" milk and chicken at double the price was still in stock as was the AAA steak and the expensive Omega-3 eggs.

It appears there is still a fair amount of price elasticity of demand even in a pandemic.

Re: Economists who defend disaster profiteers are wrong

#433

Post by viklove »

someguydave wrote: post #423
viklove wrote: post #421

Earlier quoted context omitted.

I think one of the facts many HNers struggle with is that the system that makes them wealthy is the same system that is starving people out and denying them access to healthcare. When you're a well-paid engineer you want to believe that you "earned" your position through hard work, but in reality its 90% luck. Some HNers even have their own successful business, and want to think that everyone below them is just lazy…

Please propose a system of distributing goods that is more "moral" or "fair" than the "highest bidder wins".

Provide a UBI so half the population isn't locked out of bidding entirely. The problem with capitalism is that 1% of the population ends up mega-wealthy, and 50% of the population ends up dirt poor, literally unable to afford food. When that happens, the 1% shouldn't get to decide who gets to eat and who gets to starve (by choosing which ones to employ). There should be some form of basic income to ensure everyone has access to some goods, and they can decide which ones to pay more for, and which ones to forego.

In the current situation, if a business owner decides to drop you on the ground, you're literally gonna starve to death in the next month.

Re: Economists who defend disaster profiteers are wrong

#434

Post by WalterBright »

wpietri wrote: post #364
WalterBright wrote: post #217

Earlier quoted context omitted.

> Neither do high prices. Sure they do. Look at what happens when an oil refinery blows up (happens now and then). Price for gas goes up until demand matches supply. Billionaires don't hoard gas. Gas prices fluctuate daily. This is all from matching supply with demand. The same goes for airline seats and the price of oranges. I don't think I ever pay the same price twice for oranges at the supermarket.

Gas and oranges are hard to hoard; airline seats are impossible. And your examples are all from normal times, not major disasters. None of what you say is relevant to disaster profiteering.

> Gas and oranges are hard to hoard

During the 1970's gas shortages (due to Nixon's price fixing policies) people hoarded gas by keeping their car tanks topped up. There were a number of newspaper stories about people waiting in line for hours for gas to add one gallon to their already nearly full tank.

Re: Economists who defend disaster profiteers are wrong

#435

Post by Consultant32452 »

jcranmer wrote: post #430
Consultant32452 wrote: post #420

Earlier quoted context omitted.

Do you believe that, absent price gougers, I would be able to walk into Home Depot, CVS, Walmart, etc. and buy some N95 masks for my personal use? I don't think that's likely, so wherever you were heading with that is irrelevant. I want to be clear I'm intentionally separating two things. The gouger is making product available on the market where otherwise there would be none. The higher price discourages hoarders or…

What you're missing is that, in the timescales at issue with price-gouging, both supply and demand are inelastic. So at, say, $10, you'd have 100 units of supply and 200 units of demand, while at $20, you have... 100 units of supply and 200 units of demand. Higher prices don't discourage hoarders, because a fair fraction of the hoarders are going to be people who are planning on reselling them to desperate people, so…

I dismiss the idea that demand is inelastic. At $1/mask basically everyone wants an N95 mask. At $1k/mask most consumers are going to wear a bandana or alternative type of mask.

Re: Economists who defend disaster profiteers are wrong

#436

Post by Consultant32452 »

MisterBastahrd wrote: post #427
Consultant32452 wrote: post #419

Earlier quoted context omitted.

I think we're talking about two different things. I'm talking about whether or not a price gouger provides the service of making some product available on the market, albeit at a higher price. I feel that fact is indisputable and I personally find that valuable. You seem focused on whether or not you consider this action of making something available to me is moral/legal. That's a different question altogether. One w…

Your position is moot. Without the emergency, there would be no incentive for the gouger to source and acquire the product. By acquiring the product, the gouger removes the product from the market for those who are following ethical guidelines, so he's not providing a service at all. You can't disentangle the moral or legal aspects of this just when it suits your whim.

Your position is moot because gougers are not the only ones buying up supply they don't personally need. The gougers price the hoarders out of the market.

Re: Economists who defend disaster profiteers are wrong

#437

Post by jbay »

Consultant32452 wrote: post #420
jbay wrote: post #417

Earlier quoted context omitted.

Demand at the old price from people who bought them to resell at the new price?

Do you believe that, absent price gougers, I would be able to walk into Home Depot, CVS, Walmart, etc. and buy some N95 masks for my personal use? I don't think that's likely, so wherever you were heading with that is irrelevant. I want to be clear I'm intentionally separating two things. The gouger is making product available on the market where otherwise there would be none. The higher price discourages hoarders or…

> The higher price discourages hoarders or others with lower needs.

Others with lower means, you meant?

Re: Economists who defend disaster profiteers are wrong

#438

Post by jcranmer »

Consultant32452 wrote: post #435
jcranmer wrote: post #430

Earlier quoted context omitted.

What you're missing is that, in the timescales at issue with price-gouging, both supply and demand are inelastic. So at, say, $10, you'd have 100 units of supply and 200 units of demand, while at $20, you have... 100 units of supply and 200 units of demand. Higher prices don't discourage hoarders, because a fair fraction of the hoarders are going to be people who are planning on reselling them to desperate people, so…

I dismiss the idea that demand is inelastic. At $1/mask basically everyone wants an N95 mask. At $1k/mask most consumers are going to wear a bandana or alternative type of mask.

Sure, demand isn't perfectly inelastic. But at the price points we're talking about, the demand isn't dropping off fast enough to make the market look even close to equilibrium.

But I noticed you didn't even attempt to engage with the solution of enforcing purchasing quotas instead of allowing price gouging.

Re: Economists who defend disaster profiteers are wrong

#439

Post by Consultant32452 »

jcranmer wrote: post #438
Consultant32452 wrote: post #435

Earlier quoted context omitted.

I dismiss the idea that demand is inelastic. At $1/mask basically everyone wants an N95 mask. At $1k/mask most consumers are going to wear a bandana or alternative type of mask.

Sure, demand isn't perfectly inelastic. But at the price points we're talking about, the demand isn't dropping off fast enough to make the market look even close to equilibrium. But I noticed you didn't even attempt to engage with the solution of enforcing purchasing quotas instead of allowing price gouging.

Enforcing purchasing quotas does not allocate resources to where they're most needed.

Pricing (including gouging) may be imperfect, but it is better than central resource allocation, price fixing, etc. at leading to efficient allocation of resources.

Re: Economists who defend disaster profiteers are wrong

#440

Post by WalterBright »

Firadeoclus wrote: post #356
WalterBright wrote: post #219

Earlier quoted context omitted.

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

Fear of gouging causes (some, whether sensible or not) people to hoard at the first sign of trouble.

The 1970s gas lines stopped immediately after Reagan, as his first act as President, signed an Executive Order eliminating oil & gas price controls.

Literally overnight. And they never returned since.

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