Here's where your hand sanitizer went

[ERD50]

Well here is one point. If you consolidate a widely needed product that is normally widely available into one location, it increases the time needed to obtain that product and increases the risk the product can be obtained at all. It is not "good".

If this guys buys up all the hand sanitizer then gets ill, or decides he will wait six months to sell it because he *thinks* the situation will only get worse, he has damaged the market, at least temporarily, until trucks can deliver more sanitizer.

I guess it is so hard to come up with examples because the logic seems so sound that anti-gouging laws and market cornering laws are a good idea.

No, it's hard because you aren't addressing my point, you revert to the "cornering the market" and "collusion" argument.

I've said in almost every post, that "cornering the market" and "collusion" are different, and probably wouldn't even happen anyhow if prices were allowed to float. So there is no argument.

edit/add: Enter "benefits of price gouging" into your favorite search engine. Plenty of information for you.



-ERD50

 

[Fermion]

No, it's hard because you aren't addressing my point, you revert to the "cornering the market" and "collusion" argument.

I've said in almost every post, that "cornering the market" and "collusion" are different, and probably wouldn't even happen anyhow if prices were allowed to float. So there is no argument.

-ERD50

Wait, maybe I need to re-read what this guy did. What I read is that he drove around to all of the stores in a wide area and emptied their shelves of sanitizer. This likely caused people to be unable to make a purchase in that area and also artificially created panic buying in adjacent areas.

 

[Gumby]

I've said in almost every post, that "cornering the market" and "collusion" are different, and probably wouldn't even happen anyhow if prices were allowed to float. So there is no argument.

-ERD50

Even in markets where prices are free to float, there are many incidents of illegal monopolization behavior ("cornering the market"), price fixing, market allocation and other types of antitrust violation. An absence of competition is almost always preferred by producers. It was once my job to prosecute people for it.

 

[ERD50]

Wait, maybe I need to re-read what this guy did. What I read is that he drove around to all of the stores in a wide area and emptied their shelves of sanitizer. This likely caused people to be unable to make a purchase in that area and also artificially created panic buying in adjacent areas.

I'll take a break after this, but what you seem to be missing is that I'm not advocating for what this guy did. I don't like it.

What I have said is letting stores allow prices to float to meet supply/demand is good, and would actually work against what this guy tried to do (which may very well backfire on him, as Mdlerth mentioned).

Please re-read my posts in that light.

-ERD50

 

[ERD50]

Even in markets where prices are free to float, there are many incidents of illegal monopolization behavior ("cornering the market"), price fixing, market allocation and other types of antitrust violation. An absence of competition is almost always preferred by producers. It was once my job to prosecute people for it.

I don't like monopolies either. That can give the monopoly too much power, and hurts people on average. And I want my government involved to restore a free market where they can.

But that's not what we are talking about here at all. We are talking about letting free market prices float in emergencies, and not outlawing price changes.

-ERD50

 

[Music Lover]

Sure, but I'm saying it's a bad law, with bad consequences.

But unless people realize that, they will support that law on 'feelings', and unknowingly (ignorantly), be hurting people, while patting themselves on the back for "caring about people".

-ERD50

100% agree. Some people can't see the big picture.

 

[CRLLS]

Sanitizer isn't the only option available to disinfect your hands. Buy some soap and let him sit on the 20,000 bottles. If people think that hand sanitizer is their only option, then they are the idiots.

I was in Walmart yesterday and all the pump-type bottles of hand soap were sold out too. They still had some bars of soap.

 

[MichaelB]

Freely floating prices in an emergency situation is extraordinarily regressive, unfairly impacting people of low income and no wealth. If the products affected are truly discretionary, the impact is reduced, but if the products are critical, it can have serious consequences.

 

[NW-Bound]

I was in Walmart yesterday and all the pump-type bottles of hand soap were sold out too. They still had some bars of soap.

We always have a bottle of hand soap at each of the 3 bathrooms. Do people not wash their hands until now?

PS. My wife has a gallon-size bottle from which she refills the small pump bottles.

 

[Fermion]

I don't like monopolies either. That can give the monopoly too much power, and hurts people on average. And I want my government involved to restore a free market where they can.

But that's not what we are talking about here at all. We are talking about letting free market prices float in emergencies, and not outlawing price changes.

-ERD50

Ok. I see what you are saying, sort of.

My only issue then is that you have to make sure the market is really free, for this to be a fair way of doing things. If one person can be allowed to change the price of a product or service during an emergency to whatever the market will bear, then shouldn't everyone be allowed to change their prices based on supply and demand? Not just individuals, but corporations, cities, utilities, etc.?

 

[Music Lover]

Freely floating prices in an emergency situation is extraordinarily regressive, unfairly impacting people of low income and no wealth. If the products affected are truly discretionary, the impact is reduced, but if the products are critical, it can have serious consequences.

The good news is that soap is available so it's neither critical or serious. But had the market increased prices that would discourage hoarding leaving more supplies for everyone else.

Since hand sanitizer is affordable for all but the very poorest, raising prices helps the vast majority while not raising prices hurts many more people when someone hoards supplies because far more people will go without.

 

[Sunset]

Rationing in times of emergency seems like a good idea, prices remain more normal, but nobody can corner the market and artificially create shortages.

I'm glad my Costco slapped a 2 package limit on tp and paper towels.

 

[candrew]

Freely floating prices in an emergency situation is extraordinarily regressive, unfairly impacting people of low income and no wealth. If the products affected are truly discretionary, the impact is reduced, but if the products are critical, it can have serious consequences.

+1

Not everyone comes to the marketplace on an equal footing. And in the case of needing products that are of critical importance, e.g. during a crisis, those disparities are magnified.

I would agree with some posters here who have pointed out that hand sanitizer is arguably not of critical importance as there are other equally effective and lower cost methods of hand sanitizing that are readily available. Soap and water come to mind.

Watching shoppers in the grocery store hoarding canned goods and other supplies illustrates how some people in our society lose sight of the importance of community when it is needed most. This notion of "I've got mine and to hell with everyone else" is disappointing to me, to say the least. Too many have forgotten that all important lesson we learned as young children about the importance of sharing with others.

 

[Gumby]

100% agree. Some people can't see the big picture.

Let me suggest that there is a bigger picture. While the government is normally interested in a free and competitive market, it also has other important interests to serve. Among them are keeping us from rioting and killing each other. As others have noted above, price gouging pisses people off. You may argue economics with them all day long, but you will never change that. Pissed off people are more willing to riot and commit violence in times of stress and danger. It would not surprise me one bit to see these guys harmed or robbed. Sometimes it is best to step outside your tidy theories and see how the real world works.

 

[MichaelB]

The good news is that soap is available so it's neither critical or serious. But had the market increased prices that would discourage hoarding leaving more supplies for everyone else.

Since hand sanitizer is affordable for all but the very poorest, raising prices helps the vast majority while not raising prices hurts many more people when someone hoards supplies because far more people will go without.

Hand sanitizer and soap are complementary products, not substitutes. Away from home running errands, soap is of no use, sanitizer is the most indicated product. Speculative scarcity prices will make a product that was affordable for most now unaffordable for many. Hence the distinction (which you ignored) between discretionary products and essential goods.

Marketplaces are ideal for many situations and do an excellent job or allocation. There are times, however when markets do not lead to optimal allocations. This is one.

 

[razztazz]

Watching shoppers in the grocery store hoarding canned goods and other supplies illustrates how some people in our society lose sight of the importance of community when it is needed most.

The Jack Walshing and Milton Friedmaning of America.

This notion of "I've got mine and to hell with everyone else" is disappointing to me, to say the least.

I can't say I am disappointed as I expect this type of thing.

Too many have forgotten that all important lesson we learned as young children about the importance of sharing with others.

That's because the people who taught it didn't believe it themselves. It's just another way parents have of telling kids to shut up.

 

[Music Lover]

Let me suggest that there is a bigger picture. While the government is normally interested in a free and competitive market, it also has other important interests to serve. Among them are keeping us from rioting and killing each other. As others have noted above, price gouging pisses people off. You may argue economics with them all day long, but you will never change that. Pissed off people are more willing to riot and commit violence in times of stress and danger. It would not surprise me one bit to see these guys harmed or robbed. Sometimes it is best to step outside your tidy theories and see how the real world works.

In the real world no one raised prices (which you prefer) and then a few people hoarded thousands of hand sanitizers hoping to cash in. People on this site are predicting...and some are even hoping that they will meet with violence.

Perhaps your theory to not raise prices isn't the best option.

 

[Gumby]

It's not the first time you and I have appeared to be talking past each other, and I'm sure it won't be the last. So I'll just leave you with the last word and move on to something more productive.

 

[ERD50]

Freely floating prices in an emergency situation is extraordinarily regressive, unfairly impacting people of low income and no wealth. If the products affected are truly discretionary, the impact is reduced, but if the products are critical, it can have serious consequences.

You are applying a static model to a dynamic situation, and ignoring what we have been seeing with our own eyes.

If the poor person finds an empty shelf at the store, they are also impacted. If we let prices float, there is a higher likelihood that there will be product on the shelf. Of course, it may be harder for a poor person to afford it, but at least it's there. Maybe they buy a week's worth instead of a month's worth. When the price is fixed, more than just the richest people can afford to stock up, it's cheap to do so, and so many do to an unreasonable level.

Maybe charities step in, and buy enough of the product at higher prices until the gap is filled and prices come back to normal. They can't do that with bare shelves.

Sure, poke holes in it, it's not perfect (the enemy of good). But it appears to be a better way to deal with shortages.

Let me suggest that there is a bigger picture. While the government is normally interested in a free and competitive market, it also has other important interests to serve. Among them are keeping us from rioting and killing each other. As others have noted above, price gouging pisses people off. You may argue economics with them all day long, but you will never change that. Pissed off people are more willing to riot and commit violence in times of stress and danger. It would not surprise me one bit to see these guys harmed or robbed. Sometimes it is best to step outside your tidy theories and see how the real world works.

Empty shelves are pissing people off too.

Ok. I see what you are saying, sort of.

My only issue then is that you have to make sure the market is really free, for this to be a fair way of doing things. If one person can be allowed to change the price of a product or service during an emergency to whatever the market will bear, then shouldn't everyone be allowed to change their prices based on supply and demand? Not just individuals, but corporations, cities, utilities, etc.?

Yes. Did I ever give the impression that I thought this practice should discriminate?

I'm pretty sure that the Supply/Demand graph in that Econ 101 text book did not have a footnote that read "Applies to only some segments of the economy, sometimes".

-ERD50

 

[Fermion]

Yes. Did I ever give the impression that I thought this practice should discriminate?

I'm pretty sure that the Supply/Demand graph in that Econ 101 text book did not have a footnote that read "Applies to only some segments of the economy, sometimes".

-ERD50

Would it not be more ethical to limit the quantity sold per person than to raise the price to a level that only the rich can afford?

Take the gas station example where some event has caused a severe shortage and only one station in a area has any fuel left. Instead of raising the price to $50 a gallon, would it not be a bit more ethical to just limit the sale to 5 gallons per person or some such figure. It accomplishes a similar goal, of keeping people from hoarding and yet still allows the poor to at least set their foot on the playing field of the rich.

Some stores do this, they limit purchases to 2 items per person. Evidently this guy was not limited since he would clean out entire shelves of sanitizer.

 

[MichaelB]

The difference between Econ 101 and the real world is much like Yogi Berra’s description of the difference between theory and practice. Marketplaces and human behavior are complex and dogmatic conceptual approaches often don’t work as expected.

I’m going to follow Gumby’s fine example and move on.

 

[NW-Bound]

In an emergency, rationing may be the only way to distribute the critical goods, although in reality this is difficult to administer.

I read that hospitals are running low on supplies. Remember the tweet from the Surgeon General last week or so about people buying masks drying up all the sources for hospitals?

It turned out that hospitals did not keep a high supply, because inventories cost money. They bought as needed, and then did not get any.

Forget hoarders. Even normal people buying a mask or two each would cause a sudden demand for 100s of million of masks.

 

[ERD50]

Would it not be more ethical to limit the quantity sold per person than to raise the price to a level that only the rich can afford?

Take the gas station example where some event has caused a severe shortage and only one station in a area has any fuel left. Instead of raising the price to $50 a gallon, would it not be a bit more ethical to just limit the sale to 5 gallons per person or some such figure. It accomplishes a similar goal, of keeping people from hoarding and yet still allows the poor to at least set their foot on the playing field of the rich.

Some stores do this, they limit purchases to 2 items per person. Evidently this guy was not limited since he would clean out entire shelves of sanitizer.

Well, price float is a form of rationing. You've kind of loaded your comment by saying "raise the price to a level that only the rich can afford". I might have thrown around 10x to pick a number out the air, but it probably would not even need to be that high.

Double it (and have a big sign - "Prices DOUBLED until we get more shipments") and I bet a significant number of people would pause and think -"wait, I have enough at home, I can wait until next week to get what I need at normal prices".

Sure, not everyone, but I'll keep up with that perfect-evil-of-good saying. It doesn't need to be everyone, it needs to be enough so we don't see bare shelves to this extent.

It's not "the rich" we have to worry so much about, they can only use so much TP. It's the larger middle class, and I think enough of them will respond to a price increase that it would not need to be so extreme. Right now there is almost zero pain to stocking up "just in case". TP isn't perishable, so you get a lot of hoarding action. Raise the pain just a little, and much of it would be curtailed, I'd expect. It's just too easy for too many.

Other forms of rationing may work, but many also have their share of problems (but don't need to be perfect either). For your gasoline example, maybe a combo - 5 gallon limit at 2x the $/gallon? That would still have a mitigating effect on people topping off their tank, "just in case".

But I think overall, price float pretty much works every day of the year on just about every product. Shelves are rarely empty, and stores rarely have fire sales on high end products. I think Adam Smith had a word or two to say on the subject.

-ERD50

 

[Fermion]

Storage space and hassle is the only reason I don't just buy 2 years of toilet paper at a time. It is not price. I don't even look at the price, I buy what makes my rear happy.

I *did* notice today at the grocery store that all the chicken was gone, most all of the ground beef (except a couple of small, more expensive lean 1 pound packs) but there were still plenty of $11.99 a pound thick prime rib eye steaks available...at least 10 packs.

It does give some argument to your contention that people will not horde things which are more expensive than what they are used to paying. It still doesn't sit right though to raise the prices because it is really going to hurt the family whose wife is a waitress and just got laid off. They might not even have 2x the normal prices in their budget.

Say they don't have credit cards and normally spend $50 a week to feed their family of four. Now you raise the price of things they need to $100 so hoarding is prevented. That is great and all, but they still only have $50 so essentially the items are not available to them.

 

[ERD50]

The difference between Econ 101 and the real world is much like Yogi Berra’s description of the difference between theory and practice. Marketplaces and human behavior are complex and dogmatic conceptual approaches often don’t work as expected.

I’m going to follow Gumby’s fine example and move on.

OK, I'll close out my discussion with you with this:

The differences between theory and practice regarding the supply/demand curve are small. We see it in our every day lives, all the time. Are you a supply/demand denier? (small joke)


Regardless, it's not the point of this discussion. The point is whether outlawing price 'gouging' (a loaded term in itself) is better/worse than letting the price float.

-ERD50