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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

#61

Post by kaitai »

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.

Yep.

The flaws of that system are becoming clearer and clearer, not that you'd see it from the responses you're getting.

"If people can't pay for housing, they deserve to be homeless! If people can't pay for healthcare, they deserve to be sick and die! Without a profit motive, we cannot do anything for our fellow man! It would be immoral to serve without profit, or to look for the greater profit to society!" Housing first strategies in homelessness have been shown to save money on emergency services and healthcare, but we believe, in the US, that it's immoral to help people who can't pay up. We know the cost of everything and the value of nothing.

Re: Economists who defend disaster profiteers are wrong

#62

Post by logicchains »

andrewmutz wrote: post #49
quotemstr wrote: post #22

Earlier quoted context omitted.

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.

Maybe in this case the men in the street will get their comeuppance when they find themselves left jobless by the indiscriminately economically destructive lockdown policies they cheered on.

Re: Economists who defend disaster profiteers are wrong

#63

Post by quotemstr »

mywittyname wrote: post #57
quotemstr wrote: post #19

To lots of people, so-called "price gouging" feels wrong, so it must be wrong. Disaster pricing can't just be morally wrong: it has to be economically wrong too. We must make the science fit our intuition, the braying crowd says, and not the other way around. Reality doesn't work that way. The trouble is that when we want something to be true, we find all sorts of specious ways of demonstrating this truth, and in the…

Price gouging is wrong because not helpful at all. 1) it doesn't increase the supply of goods. Everyone is very aware that there's a shortage and they are working hard to produce more. Jacking up the price does not achieve this goal. 2) it encourages hording of critical supplies. People don't want to sell now in hopes of getting a better price tomorrow. They continue to do so until the next batch of supplies come ont…

Re #1: yes it does. For example, during Katrina, high prices encouraged people to drive long distances to bring supplies from other states.

Re #2: low prices, not high prices, encourage hoarding. Why not buy 20 multi-packs of toilet paper if it's cheap? If toilet paper is expensive, you buy what you need. The alternative to price gouging isn't everyone getting what he needs: that's a fantasy. The actual alternative is empty shelves and black markets.

Re #3: emotion is no basis for public policy. The state has a responsibility to maintain law and order during an emergency.

In some situations, intuition serves us well, but economics is not prone to these situations. It really is a good thing for prices to rise in times of scarcity. Thousands and thousands and thousands of years of history tell us that price controls only ever make things worse.

Re: Economists who defend disaster profiteers are wrong

#64

Post by hannasanarion »

megous wrote: post #54
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.

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.

Re: Economists who defend disaster profiteers are wrong

#65

Post by droopyEyelids »

wpietri wrote: post #45
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…

In the absence of a law structuring the sale, money is the best proxy we have for importance.

The law, in a system of democratic governance, is a big asterisk to that sentence! It's important too. But aside from that, price signaling is our most 'objective' way to determine importance.

Re: Economists who defend disaster profiteers are wrong

#66

Post by lettergram »

perl4ever wrote: post #16
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…

I was able to get kleenex and paper towels saturday because the grocery store is now limiting people to one purchase per day. I am sure there are people who need more than that, and any system of rationing should allow for exceptions. But when people insist that a "free" market is inherently correct, it's no different from insisting that your OS scheduler is perfect even though some processes never get to run https:/…

If they had allowed dynamic pricing then people who needed more would probably be willing to pay $10/roll of paper towels Vs the fixed $2/roll. They aren’t necessary for life, so setting fixed prices are why they need hard limits.

Seems crazy to me we aren’t seeing a “free market” at play, where both inherently the stores “win” and the people receive the goods they need / can justify.

Re: Economists who defend disaster profiteers are wrong

#67

Post by saghm »

quotemstr wrote: post #25
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.

> 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…

> I understand that not everyone has the same ability to pay, but we can't crucify the market on the cross of equity

It's mildly astonishing to me that someone would attempt to make an argument in favor of not regulating absurd prices by comparing the alternative to gruesome public execution. Even ignoring the hyperbole, it isn't a very compelling argument; yes, we all agree that destroying the economy is bad, but the whole discussion is about whether enacting these regulations would _actually_ harm the economy more than it helps, so just asserting that it would with an exaggerated metaphor doesn't really add anything useful.

Re: Economists who defend disaster profiteers are wrong

#68

Post by closeparen »

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.

Suppose a farmer or a developer relinquishes his handsome profits by switching to less efficient techniques. Or the price of one of his inputs sharply rises, and he doesn't have the market power to pass it on. Now he only makes a narrow living. Has the world become a better place?

Re: Economists who defend disaster profiteers are wrong

#69

Post by pmorici »

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…

That kind of assumes the only way to increase production is to add more machines but there is an alternative, higher utilization of existing lines. In normal times it might not be economically feasible to run 24/7 and weekends because of over time laws. During a crises if you can increase production by 180% but you have to increase prices by 100% to cover extra costs of operating nights weekends and over time is that not a good thing?

Re: Economists who defend disaster profiteers are wrong

#70

Post by hannasanarion »

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.

Hoarding isn't the (entire) problem, a bigger issue is the sudden shift in consumption from commercial to consumer. Nobody is pooping in office buildings, schools, or shopping centers anymore, everyone is doing it at home. Producers that uses to sell 50/50 consumer to commercial are now selling 90/10 in favor of consumer and they can't reconfigure their production lines fast enough.

https://marker.medium.com/what-everyones-getting-wrong-about...

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