Economists who defend disaster profiteers are wrong(economist.com) |
Economists who defend disaster profiteers are wrong(economist.com) |
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 may be the only ones who can afford them, versus people on the street.
Outlawing price gauging alone just ensures masks go to people who don’t need them as much as doctors. Price ceilings don’t force masks to go to doctors. That’s why governments are forcing masks to go to healthcare, regardless of price.
The real story was that last time there was a shortage, he did ramp up production. But after the shortage ended, his customers dried up immediately and he was left with paying unemployment for all the new workers that he had to fire now. It nearly destroyed his business, and he's not making the same mistake again.
His masks cost 10c where Chinese-made masks cost 2c. There's no way to get hospitals to keep him in business during non-crisis times at 5x the price. If there were, he'd do it.
So it isn't just inability to physically increase production. Economics factors in heavily, too. If he could charge more for these masks, he could bank that extra and pay the unemployment (and other business expenses from ramping down) after this crisis ends.
That's just one of many additional costs companies that struggle to continue working are paying.
Some degree (within reason) of increased prices for an high-in-demand product is a necessary if you want to convince employees to work longer hours and through tough conditions.
...not to mention many of their underlying fabric costs are probably higher as well.
This is an anecdote, but if unemployment didn't exist I would have had a decent paying job within 4 months of being laid off. IMO this is preferable to being trapped in an unemployment system with terrible incentives.
I ultimately changed industries after realizing that cleaning up pollution is the last thing people will pay for during economic downturns.
Once you factor in the cost of this crisis as an externality, the cost of Chinese-made anything skyrockets. Outsourcing is a bait-and-switch, always was.
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.
Real people don't behave like this. A billionaire can't make personal use of a million masks and there is no point in stockpiling them during a crisis just in case there is some future crisis. They're not going to be worth more a year from now than they are today because by then either demand will be lower or production will be higher.
So nobody would be buying a million masks to hoard in a bunker right now. The people buying them would be the people who intend to use them.
Then you need to differentiate who needs them the most, but there is no way to do that efficiently from the top of a tower. And willingness to pay is a pretty good proxy when marginal utility falls off pretty quickly with quantity. A software engineer isn't going to pay a high price for a thousand masks they don't need any more than the billionaire is going to buy a million. But a doctor's office might very well pay a high price for a thousand masks they do need, which is exactly what you want to see because it causes them to get what they need.
If we set up a dog-eat-dog world where only money matters, why would a billionaire hoard unneeded masks? They know that they can just buy what they need when the need it. The only people with incentive to hoard are poor and vulnerable people because they know they won't be able to afford masks when they run out. Entrepreneurial types looking for arbitrage will probably cause weird things to happen in the short term, but after a month or two things will rebound sharply to whatever the new normal is going to look like.
If this crisis has taught me anything, it was a mistake not to hoard. I assumed I would be able to buy what I needed at outrageous prices, instead I ran the risk of running out of toilet paper because prices stayed unreasonably low.
If bankrupting hoarders with high prices is going to be unacceptable, I'm going to become a hoarder out of necessity next time I see a crisis inbound. I'll stock up on much more toilet paper than I need because I can't predict when governments/major supermarkets/public at large will let me buy the stuff at market price; which is clearly a bit higher than what the supermarkets are charging.
Food is largely a free market in the US. A billionaire could buy a billion dollars worth of beef tomorrow. But they don't, because why would they?
And in fact, markets have done a better job of feeding people than any centralized planning system has. I don't see why masks would be any different.
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.
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.
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.
Essentially if they can afford to pay higher prices continually then it implies some sort of sustained utility. If their decisions are foolish they would start losing said capability squandering it and give it to the "sources" one way or another.
That doesn't say anything about the morality, sanity, or time pressures but I can see some truth to it.
But that's life. If you can't pay, you won't get what you want, no matter how important it may be. Expecting other people to cover for you is called entitlement.
If anyone truly needs a mask, (e.g. a delivery driver delivering packages to customers, a doctor, a nurse), that represents an economic need for whatever service they provide.
Their employer will be able to charge a high price for their service, and afford to pay a high price for PPE for them.
Even when the mapping is imperfect, the fact that the rich guy was able to afford a mask while others weren't does some social good: it increases the reward for being wealthy, which promotes more productive behaviour from society at large.
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 official's idea of "need") and not prices (which reflect true preferences), you create shortages, black markets, and misery. Command economies just don't work.
There are ways of addressing monetary inequality (e.g., a stipend) in an emergency that don't break the fundamental resource allocation function of the market.
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 end up hiring 100 people and having to fire them 3 months later, which is not exactly pleasant for anyone.
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
In the medium to long term though high prices slowly incentivize people to produce more of that good. So it would be like if your hardware gained more and more CPU threads to dish out over time, until we reach some equilibrium again.
The grocery stores don't want to keep stocking-out and restocking kleenex and paper towels either.
People opportunistically filling up their carts won't have space to buy other higher-margin products.
And kleenex and paper towels take up a lot of space on the trucks, taking up space from higher-margin deliveries.
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.
Maybe, but depending on where you are, you might be 3 weeks into this and demand is subsiding.
Open markets only span something like 1/3rd of our economy. (Most other trades are intra organizational, government appropriations, etc.)
We're geeks, right? Obsessed with optimization, right?
So it seems crazy to me that so many will only consider Freedom Markets™ while dismissing every other possible strategy.
As seen in this very thread, the meme of Freedom Markets™ is so engrained that even the critics only argue in those terms, rather than having an affirmative agenda based on alternatives.
Outlawing price gauging alone just ensures masks go to people who don’t need them as much as doctors.
The problem is that doesn't seem to reflect the reality of the situation. Why are hospitals still experiencing shortages? What stops manufacturers and sellers from limiting supply to drive up prices? This is why governments are stepping in and forcing medical supplies to go to healthcare. They wouldn't get there otherwise.
This has to be one of the most late-stage capitalist things I've heard all pandemic.
To limit supply to drive up the price, this will only work if the mask manufactures are a cartel.
Every extra dollar spent on those high prices is a dollar that could have been spent providing better care in some other way.
Increasing prices does not increase hospitals' budgets for PPE; it only means something else must be cut.
I think it's important to recognize in this case that "important" is being passed off as the same as "ability to pay."
>Outlawing price gauging alone just ensures masks go to people who don’t need them as much as doctors. Price ceilings don’t force masks to go to doctors.
This is such a non-sequitur, it almost feels disingenuous. If you remove controls, you're just going to guarantee that the masks go to the people with the highest ability to pay. And that may or may not be doctors and medical personal. In fact, I don't see any evidence anywhere that it would actually lead to more medical personal actually getting these supplies at all.
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?
1. people won't buy what they don't really need, leaving more for others
2. people will become motivated to sell their surplus supply rather than hoarding it
Further helping things is demand will be reduced due to gouging because people:
1. will not be motivated to buy and hoard
2. will not buy for frivolous purposes
Trying to force companies to produce more at a fixed price is less effective than enticing them to via making more money. An economy cannot be run on altruistic impulses.
In a crisis there is a desperate need for producers to produce more of the goods that are in shortage. Blocking crisis profiteering means that whoever is getting the benefits of arbitraging the shortage the only people with no opportunity to benefit are the producers. Ie, the only action that gets blocked is consumers formally allocating more resources to production using money.
From that frame it is a bizarre strategic blunder to implement pricing restrictions in a crisis. The problem won't get solved at any hurried speed if it is only a little bit profitable to solve it. Market theory suggests the pre-crisis prices were optimised to minimise profits; they really need to go up to get a response from marginal producers.
To me that seems like a very reasonable policy to make sure people who need it can still get it, while at the same time sending a strong signal to only buy as much as you need. That the seller profits from the policy is just a side effect.
That is a good point. Another point is (as Paul Romer mentioned in an interview), high profits during a shortage mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage. If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than on things that are more likely to get votes. (We've now seen that all the talk of the national stockpile was greatly exaggerated.)
A majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/
> “Last time he geared up and went three shifts a day working his tail off,” the mayor recalled. “As soon as the issue died, he didn’t have any sales. He had to pay unemployment for all these people, and he had to gear down.”
It's not a "physical limit" problem, it's that the costs incurred by rapid ramp-up for a temporary spike in production outweigh the payout -- you're asking businesses to bankrupt themselves to spike production which will fall off in four months... and they're stuck with equipment that hasn't paid itself off, and employees which cost unemployment and benefits.
There needs to be an increase in prices NOW (or some other explicit subsidy) to possibly justify the cost.
But the man on the street finds this offensive, and you can see that in the downvotes your comment is receiving.
https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent...
In this article, The Economist is telling governments to force companies to produce "large supplies at fixed prices". Even if governments had that kind of authority in free countries, and they probably don't, that sounds like a policy that could easily cause harm. Companies can't just push one lever to maximum and expect nothing else to change. But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent. As The Economist pointed out, "3M, one of the world’s biggest manufacturers of high-end masks ... has stuck to its list prices and doubled its production." So there's not very good empirical or theoretical support for this idea. But there's hope for economists - "more than half" of economists surveyed about this idea criticized it.
On the other hand, cornering the market for an essential good when there isn't even an underlying production issue is bad.
And increasing production of scarce goods is a good thing.
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 process, fall afoul of confirmation bias, sampling bias, various statistical errors, and good old-fashioned wishful thinking. Consequently, whenever I see a paper that goes with the grain of internet outrage activism, I apply a very high standard of evidence. It's too easy to believe something that tells people what they want to hear.
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 onto the market and finally drive the prices back down
3) it makes people angry. When a group of people see someone with a bunch of something they need to live, and they can't afford it, they might decide to take it by force. This has the potential to cause needless bloodshed.
There's literally no benefit to price gouging, but a huge cost to life and social stability. This is why so many people think it feels wrong: when something causes only harm with no benefit, most people would call that wrong. In fact, one of the definitions of wrong is an action or conduct inflicting harm without due provocation or just cause.
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.
The rules of the game are that:
(1) If you collude to keep prices up you go to jail.
(2) Citizens must be allowed to move about freely to find the cheapest TP.
(3) It’s also cheating if you own such massive amounts of the economy that what you lose in TP profits you gouge back in cell phone bills.
(4) A basic standard of living has to be upheld by society to stop the TP manufacturers from only hiring 20 somethings, and contriving a social world that venerates business, hustle and money above all else such that their workers have to live with housemates well into their 30s in tiny apartments without gardens which cost them 65% of their salary in rent to landlords whose debt is owned by the TP companies financing subsidiary ok I need a cup of tea and a back rub now.
It's the same underlying phenomenon of supply and demand, except this time regular people are using it to their advantage rather than hospitals.
Reading through the comments here, all of the objections to 'price gouging' have been addressed in those articles. I have a hard time squaring HN's mission statement of 'promoting intellectual curiosity' with this contradiction.
We certainly don't have empty shelves reminiscent of USSR.
Joke aside, the only things anti price gouging laws have protected are feelings: the feeling that governments control work, and the overall feeling of moral superiority people like to have.
Personally, I'm frightened by the next wave of "feels good" legislation that will ride on that, blind to the real world consequences of destroying free market, in the worst times since 1929
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.)
When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency goods.
In this case, and in the case of any disaster, that question has an answer, and there’s no problem that a government or anyone can solve. People who happened to make masks and sanitizers, or happened have them in stock, by luck, suddenly became de-facto monopolies. And it will just as suddenly go away.
> When competition exists, the prices will fall to appropriate levels to correctly distribute the emergency good.
In this case, and in the case of any disaster, new competition cannot appear fast enough to meet the demand before the demand goes away. The demand is inherently unstable. Even if competition arrives, the demand will drop, so someone’s going out of business. This free market belief that things will settle at the right place depends on the assumption that there’s infinite time for the market to settle, it doesn’t really address the fact that without some regulation you can sometimes end up in situations where both producers and consumers lose, where there is only economic loss. If the demand changes too quickly, price gouging costs consumers, too many people got sick from lack of supplies due to price gouging, suppliers ramp up production only to have demand vanish, and they suffer loss of demand at the same time they’re stuck with warehouses of oversupply. Sometimes nobody wins if there’s nothing to hold back reactionary behavior.
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.
A lack of laws against price-gouging incentivizes the behaviour of identifying potential future demand spikes, and acting on that information, both of which are socially beneficial.
People that rush buy this stuff to make a profit, are actually helpful in promptly preserving the limited supply from running out.
Click link. Hit paywall. In other words "someone might be ripping you off but unless you pay us we're not going to tell you how". And yes, forced sign ups are a type of paywall.
And then how to decide how to allocate the product in question. Lottery? First come first serve? My friends and family first?
Why not make everything free and distrbute fairly?
And we have a Texas factory saying if the government will just pay for a long contract they will ramp up supply.
https://www.washingtonpost.com/business/2020/02/15/coronavir...
So this is not about disaster profiteers.
This is about total and utter incompetence of hospitals planning ahead.
Which happens every day, just it's happening to a lot of people at once compared to your grandmother who died last year of a preventable issue because the bureaucrats in the hospital didn't care and doctors are to specialised to know about the world around them.
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.
Not for things that do not need to make a profit. See: essentials like healthcare, housing, and basic food items.
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.
I have a question, if you don't mind answering. What are you doing personally to help the homeless and less fortunate than yourself?
I get that it is easy to sit behind a keyboard and complain that other people aren't doing enough. The way to help people isn't to demand that other people pay more, but to use your own resources for the causes which are most important for you.
Simply giving more money to the state solves nothing. It just makes the state bigger, more corrupt and less efficient. The resources get diverted to other goals which don't match up with your own. Perhaps it would be better to keep more of your hard earned money so that you can utilize it as you feel most appropriate?
Relevant?: https://i.imgur.com/MogFw59.jpg
It seems to me that the flaws aren't with the system, but with people who idly sit and wait for things to improve at the cost of someone else (the "rich people" scapegoat). Your time is often more valuable than money to those in need. Why don't you give up more of your time to help people. Perhaps quit your job and become a full time altruist?
Look, nobody "deserves to be homeless," but nor does anybody "deserve to be homed at the cost of somebody else's labour" Nobody "deserves to be sick," but also nobody "deserves to have healthcare given to them without compensating the healthcare giver for their time". It isn't "immoral to help people who can't pay" at all, but it isn't "moral to steal other people's property to pay to help others" either.
You seem to have a cartoon world view in which everyone should be in prosperity by default - but the reality is that poverty is the default state of all of humanity, and the only way that humans have ever lifted themselves out of poverty is through productive labour and innovation. If you are not productive and you can't innovate, you are not entitled to the successes of those who are.
This might seem a bit cold-hearted, but the people who are in the best position to help others are those who are not spending every hour of every day undergoing basic survival. People have a self-interest to look after themselves and their families first - and then once they've secured that goal, can begin to look how they can help others less close to them. The simple fact is that the vast majority of humans are in the category of figuring out how their own family is going to survive month to month, and the less fortunate are simply just that. You can't help everyone. You have limited capacity as a human, and the most effective way you can help anybody is to secure the well-being of yourself and your family so that you have excess resources and time to dedicate to helping others. If your economic output is limited, your time dedicated to helping people directly is infinitely more valuable than your time campaigning for more socialism.
Your local supermarket making 30% on loaves of bread isn't doing either of these things. Healthcare is the closest to fitting the bill, if we're talking about the U.S., and you guys should look into that even without a pandemic as impetus.
What we needed was immediate rationing policies, the price was never the problem. Stores eventually ended up self-initiating individual buying limits but this was well after all the initial supply dried up.
In fact, if all prices were immediately responsive to local supply/demand, this likely would have effectively resulted in a rationing policy. If the unit price of toilet paper at my local CVS was in part a function of the remaining supply at the local store, as one person attempted to buy all of it, the unit price would soar, effectively preventing them from doing so unless they're a millionaire and prepared to spend thousands of dollars on toilet paper.
Indeed, one can easily make an argument for stronger market forces to solve this problem. That existing markets for common goods are too poorly responsive to supply and demand and that the local supply/demand signals are ignored and only national signals are accounted for.
But also, simple rationing would have worked too.
The exception is healthcare, which I believe the current for profit model is unethical and immoral.
So I think there is more variance on essential goods than you imply.
The general advantage of markets is rational distribution of goods through the mechanism of the price signal. in emergency situations, there isn't really a lot of price finding we need to do. We know where markets need to go (hospitals) and we need to produce significantly more than we realistically even can right now.
https://www.econlib.org/archives/2017/09/a_poll_of_econo.htm...
I think there is more than "large profit" at work here when people talk about disaster profiteers.
There is a critical other element: some reasonable equality of distribution of supplies in emergencies. The persons selling at a large profit are distributing gear to those who can pay the most, which inherently leaves those to drown that can't compete on price.
In an emergency like this, ideally per capita NYC should get the same supplies as Buffalo NY (or Detroit, or Baltimore), assuming they are hit similarly per capita by the virus, despite NYC being far wealthier and able to outbid on gear. Properly in an emergency like this, a life in Detroit should have the same value as one in NYC.
Rich vs poor distribution is questionable in a game like Major League Baseball, big market teams vs small market teams, and it's morally horrendous to observe when it's poorer people (and healthcare systems) in Buffalo competing versus richer people in NYC for medical gear (not meant to represent an actual scenario playing out now).
That's of course very hard to level as a playing field, unless it's the Federal Government stepping in and doing the leveling to ensure some equality of supplies.
The broad point of all of this is that society should be structured in a way that rewards act as incentives to people to create more benefit to others. That's the core idea behind an Adam Smith type capitalism.
About Tokyo housing development deregulation and its impacts [0]
[0] - https://www.wsj.com/articles/what-housing-crisis-in-japan-ho...
They are the hand sanitizer guy.
You are comparing the moral stance of supporting eugenics with the moral stance of supporting a minimum wage? Are those just the first two random moral stances taken by economists that you recall, or are you trying to color the perception the latter with the true horror of the former?
A seriously high minimum wage ($100,000/year for example; no other policy changes) would probably lead to a period of horror and mass unemployment. Possibly famine, I don't know what would happen if it no longer made economic sense to employ people to transport food around. Maybe they are already high earners, what do I know.
A minimum wage is saying "this work isn't worth doing if you can't justify paying someone $minimum". That isn't a morally positive or morally negative position without more information. And it is certainly not more morally sound than "we should be proactive in making sure that children are born with the best chance at life" which is the positive spin on eugenics.
Economists should not be making moral arguments. They get them wrong too readily.
> As a profession, we have a miserable track record on morality.
You can't say they didn't warn you!
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 don't demand payment up-front.
> Companies can't just push one lever to maximum and expect nothing else to change.
They should expect profits to fall. That can happen during a pandemic. Act of God and all that.
> But most importantly, we don't need it. Yes, we've seen some small-time punks buy up too much hand sanitizer, but the big manufacturers are being decent.
And we should gamble our lives on the continued decency of profit-maximizing corporations.
Slavery was enforced (and subsidized) by many governments; it wasn't exactly a creature of the free market. Segregation was similar. Indentured servitude may be a different matter, though it brings up some more complicated questions.
"Not demanding payment up front" has nothing to do with morality; I've gone to many nice restaurants where they didn't charge me up front, and they weren't doing it because they were saints. The history of fire-fighting is also interesting, as it was private for quite some time in many places; insurance companies don't like buildings burning down.
You say that companies should expect profits to fall, but do you expect the companies to drive themselves into the ground (thus leaving their employees unemployed) in an attempt to do a little to help? Most companies spend about 50% of their revenue on labor, and have a profit of less than five percent. That means that a 10% increase in labor costs (think overtime) means they make no money, so they really can't afford to reduce their margins much, and remain an extant firm.
You say we shouldn't gamble our lives on the continued decency of for-profit corporations, but I have more confidence in their ethics than those of the common man. As we saw with toilet paper (and hand sanitizer), the average person will hoard anything they are afraid will not be available tomorrow. Companies have shown more restraint in this crisis and others.
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.
Krugman invokes Rawls:
> The classic argument here is, of course, that of Rawls, whose 1971 “A Theory of Justice” argued that we should evaluate social arrangements by imagining ourselves having to choose institutions and policy behind a “veil of ignorance”: what society would you prefer if you didn’t know who you would be?
* PDF: https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/why...
* https://twitter.com/paulkrugman/status/1246432215422111745
And if I go look at the Wikipedia page Eugenics in America[1] and read through the bios of the first few supporters I can find I get Francis Galton (Polymath uninvolved in economics), John Harvey Kellogg (Doctor), Charles Davenport (Biologist), Henry H. Goddard (Psychologist), Harry H. Laughlin (Sociologist), Madison Grant (Conservationist), Karl Pearson (Biostatistician), Alexander Graham Bell (Inventor), David Starr Jordan (Biologist), Luther Burbank (Botanist), and Margaret Sanger (Feminist).
I don't want to say that economists are blameless here. Henry Rogers Seager famously used eugenics as a reason for a minimun wage writing “The operation of the minimum wage requirement would merely extend the definition of defectives to embrace all individuals, who even after having received special training, remain incapable of adequate self-support.”
But overall it seems that when economists disagreed with the predominant intellectual milieu they've mostly been right and they've mostly only been badly wrong when they've followed along with it.
[1]https://en.wikipedia.org/wiki/Eugenics_in_the_United_States
What are the harms of a minimum wage? Do you have any empirical sources to back that up?
If you want to look at the literature you can start with Card and Krueger, which shows minimal effects for a small minimum wage discontinuity, I believe on the NJ/NY border. The Seattle minimum wage study showed a reduction in hours and benefits and reduced likelihood of new entrants to the labor market. It’s an exciting example of people looking really hard for ways to confirm their priors on both sides.
Or you can look at Europe. Greater employment protections raise the price of employing someone leading to greater unemployment. Minimum wages do the same thing more explicitly. Businesses buy less of things that are more expensive.
Minimum wage is a widely studied issue with well documented pros and cons. It's weaknesses, when addressed in isolation, are so well understood that most discussion at a high level on the topic is not whether it has pros/cons but what instruments it should be combined with to mitigate its cons (the mainstream answer is usually tax breaks of various kinds, often targeting the employee and not the employer.)
Would you ask a Gender Studies professor to defend the assertion that the feminine gender construct is typically defined by its submissive traits or would you ask how these observations are used to make observations and proposals about the real world?
Would you ask a mathematician their sources when they begin to explain linear algebra or would you ask questions that help to understand their perspective on the matter?
Hacker News supposedly has a rule against shallow comments and yet for some reason knee jerk requests for sources with no additional substance to drive the dialogue forward are considered 'reasonable'.
On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
I don't see how a minimum wage is harmful.
When you institute minimum wages (wage floors), businesses pass on those costs to the customer, resulting in inflated prices.
Imagine a pizza maker's market value is (say) $5/hour. They are able to produce (for simplicity's sake) 5 pizza's per hour, or $1/pizza. Including other operating costs + 3-5% profit margin (that's the average for most restaurants), let's say that the pizza sells for $5. Thus the pizza maker can expect to earn $40/day, on the market. Suppose the "livable minimum wage" should be $15/hour, or $120/day. There are 2 ways to guarantee this:
A) The government deposits an extra $80 to the worker, allowing them to make $120 that day. They can buy a pizza for $5, which is about 4% of their daily wage.
B) The government mandates a minimum wage of $15/hour, which means that the labor portion of the pizza cost goes up from $1 to $3 per pizza. The pizza now sells for $7 so that the shop doesn't go out of business. The worker makes $120/day, and can buy a pizza for $7, which is about 6% of their daily wage.
Notice that in (B), the worker is actually worse off, even though they have the same amount of money in their pocket. The worker has to pay a higher percentage of their pay to afford to eat, but this $2 extra means absolutely nothing to a billionaire, it's pennies to a rich person. This is functionally a regressive tax. In scenario (A), the worker is better off, and the welfare system that sustains it can be funded through progressive taxes, which targets rich people.
We as a society (rightly) demand a minimum standard of living for everyone, and we collectively pay for that one way or the other. Either we pay taxes to fund a welfare state, or we pay inflated prices for goods and services to maintain wage floors.
Paying taxes for welfare is more progressive, as the burden falls on richer people. Paying inflated prices for goods and services is regressive as it's a burden that falls equally on the rich and the poor.
In my experience, once you get past the basics, economics is largely about dressing up ideology in the trappings of science. More generously, economics seems to be most similar to philosophy with competing schools of thought that differ primarily in what assumptions and axioms they choose when modeling human behavior.
Hah! As a profession, you've had a miserable track record on _economics_! The profession should be academically "tarred, feathered and ridden out of town", departments dismantled and the models handed over to Operations Research departments along with a strong warning.
Come on, you know the idea of a minimum wage is pretty widely accepted as a good idea by a lot of people, including (most? edit: apparently majority, but not by much) economists. You can't just phrase something as if it was widely accepted as true and make it so.
Don't get me wrong, you're absolutely allowed to voice your opinion on this, but the way you've phrased it strikes me as being rather intellectually dishonest.
From a recent study https://cei.org/blog/what-do-economists-think-about-minimum-... : "A new poll of professional economists finds 74 percent of respondents opposing a $15 per hour minimum wage—and nearly a mirror image of non-economist public opinion, which is nearly a mirror opposite. 84 percent believe it would have a negative impact on youth employment levels. 43 percent favor eliminating the minimum wage outright. Only 12 percent of respondents identify as Republicans, which is roughly representative of the profession as a whole, with 35 percent identifying as Democratic and 46 percent as independents."
https://epionline.org/studies/survey-of-us-economists-on-a-1...
On the one side it's a testament to the US' potential manufacturing prowess, on the other you have to wonder about the moral justification of it. If you take it out of context, of course, I mean they and the rest of the world were fighting some of the most morally objectionable forces at the time (the nazis and Japanese).
As an aside, the way things are heading now, the world will have to unite against the US. At least for now the US seems to keep to itself for the most part.
Hard to take someone seriously who blithely compares genocide to a minimum wage....
The argument in this case appears to be exactly that, i.e. we shouldn't do that because those people would make too much money.
> Hard to take someone seriously who blithely compares genocide to a minimum wage....
There was a lot more to dislike about eugenics than genocide. You play the same game from the other side and you get to claim that Stalin's purges are attributable to the minimum wage because minimum wage is a communist policy and therefore responsible for all the things the communists did.
Eugenics is a much more mundane stupidity than that, like purposely trying to breed a lack of genetic diversity independent of "race" -- and we still do this with crops and livestock to our peril -- but back then they did it with people.
This has obvious parallels to minimum wage, where people are messing with something they don't fully understand based on simplistic assumptions. And then you do things like make it harder for young people to get internships because they can't pay a living wage even though that was never their purpose to begin with, or subject desperate people to really terrible jobs with longer commutes or less flexibility or otherwise higher real costs that actually really messes up their lives because you decreed that they couldn't accept a better job that pays less. Which have serious and long-term effects on large numbers of people.
The minimum wage was established to price out black workers.
I strongly disagree under these circumstances. Prices are one benchmark of importance/value and are often useful as such. But Goodhart's Law comes here in full force.
In particular I would argue that when unusual things happen, the usual benchmarks and proxies we have deserve extra scrutiny, since often any discrepancy between a measure and what is being measured is magnified in abnormal times.
And right now times are quite abnormal. Now is exactly when traditional benchmarks of value should be re-evaluated to see if they are still useful under present circumstances.
You don't need to subsidise anything. > On March 1, 2018, Trump announced his intention to impose a 25% tariff on steel and a 10% tariff on aluminum imports. > Trade Act of 1974 allows the president to impose a 15% tariff for 150 days if there is "an adverse impact on national security from imports
>NAFTA originally required automakers to use 62.5% of North American-made parts in their cars to be imported duty free
You can just require that 25% of PPE purchased by the government has to be made domestically. That would give you 3-4 factories. You make a requirement so they are 1000 miles away from each other and be able to 4x capacity within 2 weeks.
Except the demand is going to fall back down in the future, and your hypervisor is sentient and realizes there's no point in spending its own resources to provision more vCPUs if they're going to be running idle by the time they're activated.
I think we agree that consumer prices are important. The point of this example is to compare two situations where the prices to the consumer are the same, and only the profit differs, to tease out whether profit really matters.
Government can prevent people from being enslaved. But without a government being involved, slavery will still happen. In fact, it will happen much more often as is evidenced by the fact that modern day slavery happens primarily in countries where governments are not powerful enough to stop it.
Chicken or egg. You can make this argument either way. The fact is that slavery has been around for a lot longer than the governments that "enforced" it and it eventually took governments to abolish it completely.
> As we saw with toilet paper (and hand sanitizer), the average person will hoard anything they are afraid will not be available tomorrow. Companies have shown more restraint in this crisis and others.
Luckily in a well functioning democracy it would not be the toilet paper hoarders that'd be charged with coming up with ethical legislation.
It's not either or. Legislation doesn't solve everything, but neither does a completely free market (which doesn't and couldn't exist anyway).
OK, then child soldiers. Or chemical weapons. Pretty much anything outlawed by the Geneva Convention–all economical ways to wage wars, trumped by morality. Not as anti-competitive measures against killer robots.
> I've gone to many nice restaurants where they didn't charge me up front,
Restaurants also typically don't risk their lives for you, so not really relevant.
> You say that companies should expect profits to fall,
That's what I said.
> but do you expect the companies to drive themselves into the ground (thus leaving their employees unemployed) in an attempt to do a little to help?
That's not what I said. It helps if you stick to what I actually said.
> Most companies spend about 50% of their revenue on labor, and have a profit of less than five percent.
We're not talking about most companies. We're talking about big industrial PPE manufacturers like 3M, which reported net income of about $5b dollars in 2018, and because of accounting tricks,[1] probably under-reported their income. They have a profit margin of about 50% for at least the past five years.[2]
> That means that a 10% increase in labor costs (think overtime)
We're not talking about a uniform, across-the-board 10% increase in labour costs, we're talking about targeted cost increases specifically for PPE manufacture.
> they really can't afford to reduce their margins much, and remain an extant firm.
Based on the actually relevant numbers, it looks like they'll be just fine.
[1] https://www.forbes.com/sites/greatspeculations/2020/02/26/hi...
> You say we shouldn't gamble our lives on the continued decency of for-profit corporations, but I have more confidence in their ethics than those of the common man.
I'm just curious, who do you think makes up these for-profit corporations, some kind of special saints? As opposed to 'common' people?
There is no gamble here. Maybe you're misunderstanding the article but again here is what it says:
> Ordering large supplies at fixed prices is the right policy.
Emphasis: ordering is the suggested policy. Not forcing companies to fill orders. Companies able to fill those orders will do it because those are the only orders that make sense for their scale. Small companies unable to ramp up production will produce what they can and fill smaller orders that make sense for their scale.
Does one person with a million dollars in excess liquidity to spend on water represent a greater "need" than one million people with no liquidity to spare?
Would it be moral for that person to buy more than they need, solely to inflate prices? Would the resulting spot price in the market be in any way a meaningful gauge of the actual need?
Market prices are only one gauge, and they are pretty faulty, easily manipulated one at that.
Next up, you'll probably tell me that story points are a solid basis for predicting delivery times and making decisions about resource allocation.
That the accepted answer to this question has become "who has the most money?" is a victory for... well, the people with the most money, so I guess we can call this a sterling example of the effects of income inequality. The vast majority not only don't have the majority of the money; they don't even have the moral standing of "legitimate" need.
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.
The guy buying up all the masks and reselling them for 10x the price is price gouging. He doesn't make anything.
If a manufacturer ramped production and billed the current inventory to cover costs, then that's a very different thing. Of course all of this is why the Defense Production Act even exists.
A perfect use of the DPA would be a mask manufacturer ramping up local production - if they had predictability of pricing beyond the current crisis, then it would let them forecast what they could and could not make, or get subsidized at the higher rate to ensure their business could ramp down gradually (or be retained at the subsidy price to ensure local availability for the next time).
This is essentially how finance, banking, markets, and pretty much our whole economy work.
The idea that producers should only be able to charge a modest margin over their "costs" is pernicious nonsense. Furthermore, if you punish this sort of risk-taking intensely enough, producers will just shut down during unusual times (the exact opposite of what is needed).
The guy buying up all the masks and reselling them for 10x the price is making availability, which is highly important in a crisis.
When you consider our democratic system it becomes pretty obvious. You need slightly more than 50% of the votes. So the minimum wage is picked so that at least 50% of the population earns more than it. Therefore by definition a minimum wage chosen by politicians is going to set it to a really low value that will then be associated with poorer people. Therefore the minimum wage gains a reputation of helping poorer people.
But at the end of the day it's just a price control. Minimum wage has nothing to do with morals. It's just a rule that says who can or can't have a job. It doesn't actually give people a minimum wage job. You can set it high or low. If it is too low then it does nothing. If it is too high then it prevents people from getting a job. The minimum wage must always follow the market, because the market won't follow the minimum wage.
A feared employment apocalypse at the low end has stubbornly refused to appear, at minimum wage levels that would have been considered reckless not long ago, and it's proved a useful policy coup neutralising a key Labour campaigning point.
But it is a horror now that we've seen a few genocides, which is why it shouldn't be compared to something of a completely different kind, like the minimum wage.
Instead, compare it to wars - which are far closer in terms of the harms they cause - and have also received moral support from economists.
> A seriously high minimum wage ($100,000/year for example; no other policy changes) would probably lead to a period of horror and mass unemployment.
This is reductio ad absurdum, since the min wage wouldn't go that high without major structural and contextual changes in the society and economy.
In the case of eugenics, we don't need to conjure such wild hypotheses about what would happen, because we've repeatedly seen what happens when that idea is carried to it's extreme by governments.
>In New York police arrested a man who had stockpiled medical gear, allegedly selling it for a 700% mark-up.
These supplies are already being produced as fast as possible. Even people with 3d printers are making these masks to give away
#2) bubbles form with a group of people purchase goods at already inflated prices, with the explicit attempt to drive up prices further and sell them for a profit. "If people are willing to pay $50 for a roll of toilet paper, maybe if I buy up all the toilet paper, I can sell it for $500!" -People causing bubbles.
3) If the state has a responsibility to maintain order, then they have a responsibility to combat price gouging, because failing to do so is a failure to maintain order. It's not an emotion issue, it's a rational one.
I feel like you're the one whose intuition is off. What I'm talking about are real, proven issues with price gouging and these are literally the reason that it is outlawed in nearly all of the USA. It's a slam-dunk case for prosecutors too. There's a reason why people caught price gouging are in the news the next week for "donating" their stash.
Expensive goods or shortages: pick one, but neither "maintains order."
Cheap manufacturing cones from cheap labor, which comes from recently being a third world nation.
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.
Personally I have mixed feelings: If the prices don't go up, the incentive to ramp up production is pretty weak. It does, though, seem inhumane that increased prices can have an outsized bad effect for the very poor in disaster situations.
This caused a huge hue and cry about how terrible it was. So the law clamped down on it.
Now people in a hurricane zone get no gas while they wait around for the government to provide some.
So, which is better:
1. gas at a higher price
2. no gas
?
There is no single system that does better universally, but there are plenty of narrow fixes that do fine. As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation...
No country in which there are corn subsidies is there a "free market."
Greed is good is an ideology for the morally impaired with limited attention span. A relatively small differential in wealth and large differential in social standing is arguably enough to achieve maximum "productive" behavior after which diminishing returns are had.
As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.
Defining pursuit of self-interest as greed is the type of ideologically motivated moralizing that leads to people ignoring rational arguments and the evidence on what types of laws work and what don't.
>>As proof observe many European nations that are almost as productive wherein the wealth of most practitioners of most professions tops out much lower than their US counterparts and yet they produce similarly to our citizens.
1. The U.S. is significantly more productive than Europe on a per capita basis.
2. Even if 1 weren't true, your argument would prove nothing, as there are a vast array of differences between the EU and the US that could explain your observation. Your 'proof' is nothing of the sort. It's lazy confirmation bias. The empirical evidence, in the form of analysis on large datasets, strongly suggests being more market-based is associated with more rapid economic development. For example see this study: https://web.archive.org/web/20170821004405/http://ime.bg/upl... There's no evidence of any threshold where that benefit diminishes. These empirical observations are strongly supported by the basic economic theory.
> My imaginary capitalist has capital because he worked hard clearing part of the boundless forest while his employee to be was being lazy and living on what he could gather--so it is entirely just that the capitalist gets part of the output of his land and his employee's labor. But the leftist doesn't like that hypothetical. His imaginary capitalist inherited his capital from a father who stole it. I don't like that hypothetical.
http://www.daviddfriedman.com/Libertarian/My_Posts/My_View_o...
I often suspect Friedman is right that a lot of normative disagreements boil down to different intuitions about what people typically do to become wealthier.
The fact that market economies so vastly outperform non-market ones is a pretty clear indication that wealth-generation in market economies generally has positive economic externalities, and as such is socially beneficial on the balance.
It encourages rent-seeking behaviour, which is not necessarily productive, and in times of crisis, demonstrably not so.
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.
So perhaps right now the supply chain isn't able to do this, but that doesn't mean it can't move towards it.
>On the other hand, you can have no minimum wage, and end up with a class of working poor who have no time to educate themselves, thus condemning them to a life of constant work with no hope of social mobility.
The minimum wage can also create cycles of poverty by pricing people out of work. Some portion of the people who are "least hireable" are unable to get jobs because nobody would pay them $15/hour, so their only option is living permanently on welfare, which has a demoralising effect, and is associated with poor outcomes for their children. Imagine for instance the stereotypical Frankston junkie.
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?
If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.
That actually sounds kind of a lot like what they did to some of the victims of eugenics.
I'd like to see data comparing minimum wage to drug abuse, but there's a few problems with trying to make that correlation. E.g., social welfare measures would largely factor in here, but I imagine that both minimum wage and welfare measures typically go hand in hand. But by naive comparison, just this wiki article seems to show that opiates abuse is about 5 times greater in the US vs Australia.
https://en.wikipedia.org/wiki/List_of_countries_by_prevalenc...
Those numbers don't look all that different from the US. Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
>Are people pursuing minimum wage jobs after graduating high school or university? Even high school graduates with no intention of pursuing higher schooling seem to pursue a vocation at something higher than minimum wage.
Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds. Try not to think of the average person; instead imagine the worst behaved, most disruptive, academically failing students at your high school, and consider what kind of jobs are available to them. It's the least hireable people that are affected by minimum wage laws, not anybody who's capable of getting a better job.
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.
> We can get closer to the correct amount when people are incentivized to calculate the correct amount
I think that's wishful thinking when you're talking about unforseen crises, and history has shown this over and over.
> Price caps paradoxically lead to higher prices.
Ah yes, you're right and it's true this can happen on the black market under price controls. In your thinking, why is that worse than unrestrained price gouging? What is the meaningful difference in outcome? Does it matter how much higher? Does it matter what the balance is between price-capped sales, and black-market overpriced sales?
Bigger picture, my more fundamental question is why free-market thinking is diametrically opposed to slowing down changes in pricing during spikes, if we were to assume that prices will be uncapped eventually?
Even under ideal conditions, the market takes time to respond to changes in demand. When spikes in supply are price-capped, let's assume not that it'll be price-capped forever and all time, but that either it will be price-capped during a time period that is too short for the market to respond to, or that changes in pricing will be rate limited rather than value limited.
If price changes are rate limited, instead of hard-capped, then in theory nothing changes in the limit, the market can still optimize eventually, right? What does it matter if a market takes a little longer to balance?
Yeah, that's grotesque. Everyone who works on the front lines of providing care to COVID patients is a first responder, and whether they or their employers pay, is irrelevant.
It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later.
Not to mention, I've always said we need more expensive health insurance in America.
> If you just start confiscating them then anyone who did something we very much would like them to have done right now -- stockpiled a lot of such equipment to profit in just such an emergency, thereby causing such a stockpile to actually exist -- would see what you've done and choose not to do it anymore. And then next time the shortage is worse.
That's not true, the government can learn from this catastrophe and not disband the entire pandemic preparedness department a few months before a pandemic. It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices. As they have done with oil. And helium. And raisins.
https://www.washingtonpost.com/opinions/2020/03/16/no-white-...
I bet it's relevant to them.
> It is the moral imperative of leadership to do what it takes to resolve the situation now, and figure out the details later.
But what does that even mean? Suppose Donald Trump is suddenly made owner of all PPE. How is he qualified to allocate it efficiently? What does someone do who legitimately needs it but didn't make his list?
> Not to mention, I've always said we need more expensive health insurance in America.
You need more healthcare during a pandemic. It costs money. It has to come from somewhere.
> It could therefore create a national stockpile of gear first responders might need in a pandemic, and fill it at contracted prices.
And then go several years without a pandemic at which point the stockpile will either have rotted or been cut from the budget as "unnecessary" before the next one.
This is the type of problem where you want redundancies. The government can try to keep a stockpile and you still want private stockpiles in case they fail or are insufficient -- as has obviously happened. It's not like this is the first ever pandemic in the world that no one could have ever foreseen. What is going to cause them to do any better next time?
> As they have done with oil. And helium. And raisins.
The strategic petroleum reserve is some kind of a silly farce. Oil is a global commodity and the US is a major producer. The reserve exists entirely as a result of politics, it isn't really useful for much.
The "helium reserve" exists primarily because the government is a major producer of the stuff. Nearly all the helium on earth is a product of nuclear reactors.
And the "strategic raisin reserve" (insert eyeroll) was recently found unconstitutional.
There's a lot of problems with this concept.
We don't live in a meritocracy. Having money doesn't mean your life is more valuable then someone else's. A kid born to a billionaire has access to extreme wealth (and therefore economic power) without proving any merit for it. Humanity has tried monarchism already, and we've decided it's not the best way to run things. People shouldn't be given power just cause they are related to the last guy who had it.
Hell, even if we did live in a meritocracy, is it moral to let people die because they lost the genetic roll of the dice? Somebody born with a disability should just die since they have less economic worth?
Is it moral to replace broken things instead of trying to fix them, considering that fixing will be more expensive and the thing might just break down again after a while anyway? That's not a question about morality, is it? Except if you replace "things" with "humans". I personally do not understand why this difference exists, however.
Why is it alright to abort babies that might get a disability, but it's completely out of the question to murder someone later in life for the same reason. It doesn't make sense to me. A persons life isn't inherently worth anything. If the economic output is negative and no one is willing to cover, why shouldn't that someone just die? It would be like saving money. There are probably good reasons that I just don't know, otherwise things wouldn't be the way they are or at least that's what I figure.
For instance, do you believe your life to be worth less than that of everyone else who has more money than you? What if that money was inherited and they didn't work a day in their lives? What about the life is say, Nikola Tesla who didn't have much money but laid foundations upon which a lot of our world is built today?
Is the person who negotiated for more money than you make now (while doing less useful work) have a more valuable life than yours?
Imagine you were walking with a friend of equal net worth, by your logic, if they suddenly found $100 on the ground and took it, their life is suddenly more valuable than yours? What if you both got struck with an illness and the doctor triaging said "huh, Kaiyou is worth $100 less than their friend so I guess I have to let him die and focus on the slightly wealthier person".
Have you ever enjoyed the company of someone who was economically worth less you? What of the benefits of their contributions (think of your teachers, researchers, janitors, construction workers, etc.). Assuming human value can be simply measured in made up constructs of money and debt obligations ignores a lot of what makes our experience richer
> Is it moral to replace broken things instead of trying to fix them, considering that fixing will be more expensive and the thing might just break down again after a while anyway? That's not a question about morality, is it? Except if you replace "things" with "humans". I personally do not understand why this difference exists, however.
It seems a big driver of your beliefs is that humans are worth nothing inherently. Morality enters the game entirely because we're conscious and have created morality questions and concerns for ourselves. Your shoes never quite evolved to have those questions (though if we ever achieve some loosely defined form of AGI, those questions will come into play)
Sure, I was not saying markets are perfect, I asked what system with no markets is better?
> There is no single system that does better universally, but there are plenty of narrow fixes that do fine.
Agreed.
> As an example, scarce donor organs are not allocated based on ability to pay, but in other ways: https://optn.transplant.hrsa.gov/learn/about-transplantation....
And if you investigate it I'm sure you'll also find plenty of examples of failures in organ allocation.
That only is true if we ignore the organ black markets that many millionaires/billionaires have access to.
Why do you take it as fact that there isn't enough to go around? Are you sure that's the case?
Ultimately, if you want food on the plate, you either need to grow the food, or you need to trade some of your time or other commodities with somebody who has already grown it. The food won't grow itself. (Well, some will naturally, but in very limited quantities compared to the harvests that can be made through deliberate labour).
Similarly, houses won't build themselves. Somebody needs to labour to take the raw materials gathered from the earth and turn them into shelter. If this isn't you, why would you think you "deserve" to be sheltered?
Nobody is entitled to other people's labour. If you consider the case where one person takes 100% of the proceeds of another person's labour, we can safely say that this relationship is one of a master and a slave. If this is the case, what percentage of another person's labour can be taken where they are no longer a slave? Is it 60%? 50%? 40%? Who knows - some arbitrary figure. Of course the correct answer is 0%. Only if you own the full reward of your own labour are you a free person.
[1] https://www.usda.gov/foodwaste/faqs
[2] https://www.ers.usda.gov/topics/food-nutrition-assistance/fo...
[3]https://endhomelessness.org/homelessness-in-america/homeless...
Also, this:
> the only way that humans have ever lifted themselves out of poverty is through productive labour and innovation
...is utterly false. Maybe somewhat true in the general case (although less and less so even there in more recent history), but not at all for individuals. People and governments have helped other people and governments many times without asking for anything back.
Well yes. Theft is bad, and socialism is theft.
> Don't you think most people here have made up their minds on that issue and are tired of watching endless fights about it? We aren't on slashdot.
I'm well aware of how far left most of HN leans. Sometimes I wonder if this place is an internal discussion forum for the CCP (There are certain moderators who bark when anything critical of China gets posted here). I have a posting limit of 5 posts every few hours because my views are "the wrong views."
> ...is utterly false. Maybe somewhat true in the general case (although less and less so even there in more recent history), but not at all for individuals. People and governments have helped other people and governments many times without asking for anything back.
I was referring to the general case. Ultimately, somebody must perform labour or somebody must perform invention for the standard of living of themselves or others to improve. The work won't do itself.
The question is one of whether you are implicitly entitled to the results of other people's work and invention, which I refer to as theft, versus instead receiving charity out of other people's good nature.
The capitalist is often described as "evil," yet many engage in voluntary charity, and the socialist deludes himself to be the moral arbiter of good, when in fact, he simply thinks stealing the fruits of others labour is the solution to problems.
It seems like you're doing that here yourself:
> The Seattle minimum wage study showed a reduction in hours and benefits and reduced likelihood of new entrants to the labor market.
https://ritholtz.com/2018/10/seattle-studys-shocking-conclus...
Minimum wage may have some complexities to be played out and examined, but to go back to the parent, the net harm here seems to be minimal at best, if not helpful over harmful, quite unlike how most feel about eugenics. That comparison, while criticizing the moral compass of economists generally, is quite something.
Per Sowell, there is no cosmic justice, and pretending so just makes things worse.
I was looking over the past 10-20 years (I have no idea how long Australia has had a high minimum wage...I figured that wasn't a recent development). Around 2008 the discrepancy had the US 10% higher.
> Not everybody is able to find a higher-paying job, that's why we still see people at age thirty working in checkouts or McDonalds.
I agree. What I had (incorrectly) drawn from your statement was graduating implied they were pursuing a field--not the average person. I just saw that the US has 44% working low-wage jobs.
Then as now, the only thing that is forbidden is criticism of The Party. Want to exploit your workers and ignore all environmental and hygienic concerns? That was and is OK there. That’s how they undercut the West in manufacturing, no other reason. Concepts of protecting the environment or workers rights ironically only exist in the capitalist West.
Chinese labor is cheap because it has been a poor country, lacking capital to raise its productivity and labor standards to western levels.
Comparative advantage means both sides benefit when Chinese labor makes goods for the west. They get better paying work, and we get to make our goods cheaper.
Working for Foxconn is a huge improvement in living standards over the rural jobs most of the Chinese workforce comes from.
Environmental protections cost money. It’s far easier for wealthier first world countries to bear those costs without significantly reducing their living standards.
Poor countries, whether it be China, first half 1900s USA, or as we saw previously with the USSR, are more likely to prioritize economic output over environmental protections.
Economic growth is why environmental standards improve over time. It costs proportionately less to increase them, and new technologies also lower costs of enacting tougher restrictions.
As China continues to grow wealthier, it will likely continue to increase its environmental protections. Especially if it ever turns into a real democracy.
epionline.org is especially laughably biased and cherry picked.
The first two points from MR:
> – The numbers of hours worked by low-wage workers fell by 3.5 million hours per quarter. This was reflected both in thousands of job losses and reductions in hours worked by those who retained their jobs.
> – The losses were so dramatic that this increase “reduced income paid to low-wage employees of single-location Seattle businesses by roughly $120 million on an annual basis.”
Do you have any source for that? Because the same author sets are on both studies. The article I linked to is directly criticizing the study you linked to (and also directly links to it).
Admittedly I am not a field expert and I haven't dived into the weeds on these studies. But my points I think aren't reliant on these details. The are simply:
1. There is much debate over if minimum wage laws or even specific implementations do more good or harm, which would seem contrary to the parent appearing to try to claim the harms as facts.
2. All of this seems to make the claim that the harm of eugenics is equal to minimum wage quite egregious.
I'm not trying to start a flame war over the details of viability of minimum wage here - I don't think that will be productive for anyone. I just want to underscore how egregious comparing minimum wage to eugenics is here.
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.
Could being employed on a low wage also have it's own negative hedonic consequences? I suppose you have answered the question: 'What happens if you change this single lever of minimum wage in terms of employment?' But whether it is harmful also depends upon other government economic policy, specifically welfare. The trade-offs for minimum wage, in this light, don't exactly speak of how it is 'harmful' in an ethical sense, but it's specific effect on unemployment.
In terms of minimum wage and how it harms the economy, it would be interesting to know if a higher minimum wage has as effect on Economic Complexity and whether that would have a net benefit to an economy?
Or you get into the awkward situation the US is in with immigrants working farming, janitorial, etc. jobs off the books with no protections.
Their statement begged the question, and it was asked.
I wasn't asking out of hostility, but out of curiosity. If the point can be made, and as you say, there is overwhelming evidence, I'd like the self-described expert of their field to provide an authoritative source. That's to the benefit of all readers.
Instead, we have a bunch of hand-wavey replies on both sides with dubious back-up, balanced with maybe a more illuminating discussion about the intersection of morality and economics, specifically regarding slavery and minorities - which I feel somewhat swayed by.
> Minimum wage is a widely studied issue with well documented pros and cons.
Throw us a bone then :) There are many countries around the world that do have a minimum wage, surely there's some data out there we can grok. Perhaps a minimum wage to quality-of-life measure? Inform this naive individual.
There's also a rule that you are aware of, having read the rules, about not creating throwaway accounts routinely. Though to be fair to you, it doesn't specifically say don't create a throwaway because you don't want to abuse other posters under your regular account.
That seems like a strange thing to do, though, when your side of the argument is "wildly uncontroversial".
This is not an uncontroversial opinion, even among economists.
I am questioning the particular way they worded their comment, I thought I made that obvious.
Minimum wage does not price people out of jobs, it puts a cap on the profit that a corporation can squeeze out of its workers. Employers who would be paying under it are simply not viable moral businesses, they would be businesses based off the exploitation of its workforce.
Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Should we prohibit colleges as "simply not viable moral businesses"?
Now suppose we have something which is halfway in between. The benefit to the institution is positive but small. You're doing productive work but it's only worth $4/hour. On the other hand, you're learning stuff and that's very valuable to you -- much more valuable than an $8/hour job where you're not learning anything. Should we prohibit this and not the school? Why?
Internships for lucrative fields where knowledge experience/investment pay off have no issues existing in economies with minimum wages as very clearly demonstrated by the fields of software engineering, businesses, and many other fields. Not to mention that most minimum wage laws make exceptions or reductions for internships, and people do unpaid internships often for things like PolySci students for political campaigns.
So, yes, we should continue to support internships that invest in people and we already regularly make such considerations in minimum wage laws. $4 an hour jobs in a place where $8 an hour is the minimum wage is not an example of an internship where you are going to learn something valuable, though I am open to hearing about these jobs. The cost of an intern is often far less the pay and much more the hours of those senior to them who would be teaching. Minimum wage is not standing in the way there.
Even if these jobs exist, what percentage of $4 jobs will those be? In reality this will be exploited by large corporations every time, pricing as low as the market will let them, irregardless of livability.
Yes, it quite obviously does.
> it puts a cap on the profit that a corporation can squeeze out of its workers.
No, it doesn't. Competition does that. Minimum wage puts a floor on the economic value of labor that can get hired at all.
It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
> Employers who would be paying under it are simply not viable moral businesses
If there is work to be done that genuinely has value less than the minimum wage, is it truly better for society that the worker instead has no job prospects and the one who would have the work done instead has no work done? Who benefits from that.
> Now we can have economic arguments about what is true here, but the purpose of minimum wage today is a moral one and that must be factored in.
Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income and providing a UBI as high as economic productivity can bear without out-of-control inflation.
Which is not to say that in practice minimum wage isn't better than nothing, it's just far from the best means of achieving it's legitimate purposes, in large part due to the adverse consequences it has in limiting employability.
Competition can also do it, but idk how that eliminates minimum wage from doing it. Neither raises revenue, both simply put pressure on profit margins. The only difference is one is regulation, the other is market force.
> It might limit value extraction where there is a monopsony purchaser of labor who is not also a monopoly supplier of the good produced with that labor, but that's not actually all that common a situation.
I think that's a very narrow view. If you look at Walmart and the like, these are still huge chunks of the market with low pay precisely because of economies of scale, so they are monopsony purchasers, even without being the only supplier or a product.
Also not covered is that with high unemployment, competition isn't there. People in minimum wage job searches are often picking between a job and no job, not two different jobs. You're assuming that employment markets are both efficient and equally balanced.
> If there is work to be done that genuinely has value less than the minimum wage
I think this is where the moral disagreement comes in. An economy that regularly squeezes people below living wage for work needs to be corrected. Minimum wage is an attempt at that by lowering corporate profit.
> Any legitimate moral purpose of minimum wage is served better by taxing business income and high-end personal (including capital) income and providing a UBI as high as economic productivity can bear without out-of-control inflation.
I would love to see this! But realistically that's not politically possible (though it is looking more so with the pandemic but still, generally speaking) and we can't be idealistically categorical in our policy. Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
A minimum wage does absolutely nothing. It's like the British Queen: a political symbol that you can talk about.
If it actually did something then you wouldn't choose a low limit. You'd increase it to $100/hour but then you realize something. Even your well paid software developer job is at risk of being stomped by the minimum wage.
I think you misunderstand my use of the word "exploit" here. The underpayment is the exploitation, not work conditions here. I'm not sure where someone wanting to quit their job factors into my argument.
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 others with lower needs. This is clearly a valuable service that some, perhaps many, are willing to pay for. I feel like these are indisputable facts.
There is a separate topic of moralizing about the issue, whether or not you think the gouger is a bad actor or whatever. You can keep going on about that, but I won't address it because I don't care about your feelings regarding my personal health.
The availability is primarily negatively impacted because of hoarders and gougers.
The problem wasn't the rights themselves, it's that they were purposely offered to white men only.
Therefore it's deceptive to attack the minimum wage as being any more racist in origin than the right to vote is. Much of the law has deeply racist origins that has only been reformed in recent decades, and even then not completely.
That's my theory for immigration controls as well. Economic theory suggests that unlimited flow of human capital is just as valuable as unlimited flow of financial capital. However, we know that shock movements of financial capital can be bad, and instinctively people dislike shock movements of people. A good solution for both is to limit not velocity, but acceleration. The economy can absorb a steady flow, but needs time to react to rate changes.
I agree with you that the economy needs time to react to rate changes. The problem with rent control is sometimes it's implemented as a value cap, and sometimes it's a rate cap that is too low. I wouldn't rule out rate caps just because someone somewhere set the rate too low.
I do want to counter the idea that caps are bad just because something bad happened in some cases. That's not enough to prove that price caps are always wrong. I know price caps can cause problems sometimes. But not having any regulation can cause problems as well, and there's also plenty of evidence for this.
Pollution and global warming is already starting to have massive global economic effects, and the costs and causes of it have been externalized by corporations for a hundred years. All of the free market "success" that has been enjoyed by global manufacturers is starting to cost humanity, and our children are going to need to re-evaluate whether letting the companies operate as freely as they did with our air and land and water was a good idea. There's a growing global consensus that it was not. The implications of that on free market thinking are that we need to understand and acknowledge that some freedoms come with invisible or unaccountable costs, and/or very late costs. And sometimes these costs can outweigh all the short-term benefit. Companies can come, make billions, last for a generation, and die before we even know what the cost was. No amount of waxing laissez faire philosophy can undo the actual damage we've already done.
>>You're glossing over that by ignoring externalized health and environmental concerns, among other things. The market might be stronger if it's left unchecked, but that's not the same thing as slowing down the spread of a disease. Free Market theory simply does not guarantee that we'll have the safest outcome in the shortest time.
Government has a role to play. The market can't do everything, as not every asset can be turned into private property and have a price attached to it. The meta function of enforcing respect for private property rights is also not something markets can provide.
In a pandemic, there are many things a state can do, like fund the development of open-source designs for masks and ventilators, and public domain treatments and vaccines.
It can also fund extensive reviews of the PPE and treatments on the market, to help consumers be better informed.
The government playing this role, while the market acts within the framework created by the public goods generated by the government, optimizes society's response to pandemics.
Price controls worsen society's response to pandemics.
>>Ah yes, you're right and it's true this can happen on the black market under price controls. In your thinking, why is that worse than unrestrained price gouging? What is the meaningful difference in outcome?
Without price controls, there will be larger stockpiles in place, so the market price will not spike as high during a pandemic. More importantly, shortages will not be as severe during pandemics.
Without price controls, business activity to alleviate the shortage is more greatly incentivized as well, leading to the shortage being filled more quickly.
>>Even under ideal conditions, the market takes time to respond to changes in demand. When spikes in supply are price-capped, let's assume not that it'll be price-capped forever and all time, but that either it will be price-capped during a time period that is too short for the market to respond to, or that changes in pricing will be rate limited rather than value limited.
That's a good point, but I think the conditions under which the benefits of free market prices don't outweigh the benefits of price controls to be very limited.
I can't imagine any scenario where price caps that extend for more than three days after a disaster (time enough for high prices to encourage air freight to bring essentials in) will do more good than harm.
"The law provided that all federal construction contractors with contracts inexcess of $5,000 or more must pay their workers the "prevailing wage," which in practice meant the wages ofunionized labor. The measure passed because Congressmen saw the bill as protection for local, unionized[12] white workers' salaries in the fierce labor market of the Depression.[13] In particular, white union workers were angry that black workers who were barred from unions were migrating to the North in search of jobs in the building trades and undercutting "white" wages.[14] The comments of various congressmen reveal the racial animus that motivated the sponsors and supporters of the bill. In 1930, Representative John J. Cochran of Missouri stated that he had "received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South."[15] Representative Clayton Allgood, supporting Davis-Bacon on the floor of the House, complained of "cheap colored labor" that "is in competition with white labor throughout the country."[16]"
So it was mandated for "everyone", but by your own description, not really, because it adjusted another variable - who had a job - by race, which is practically the same thing as being racially exclusionary.
This is not so different to how black people in theory got the right to vote after the Civil War, but practically were excluded from voting in many areas until just 50 years ago.
"[The minimum wage will] protect the white Australian’s standard of living from the invidious competition of the colored races, particularly of the Chinese."
https://marker.medium.com/what-everyones-getting-wrong-about...
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.
The rational response to $20/roll is to buy as much as possible. It will be worth $40 soon.
Insulin, rent, or food? Ah, just prioritize, honey!
If they remain employees, that is.
It's as if there's something going on there that this reductionist model didn't account for.
People who get upset about the lack of high prices for scarce commodities seem to me to be inconsistent - if you aren't in a high stakes zero-sum competition, then why should you care much about being able to outbid others? And if you think that you are, how can you ethically defend everyone not getting a minimum ration or be sure that in a so-called free market you will get yours?
If the marginal profit on TP is $0.10/roll and the price is not allowed to increase in time of excess demand, you’re likely to see factories optimize to squeeze every efficiency out, trying to eek out another penny per pack of 6 rolls.
Imagine instead a world where prices rise in times of excess demand. Producers now have an incentive to maintain flexibility in monthly production, not squeezing the last fractional penny out and instead allowing flex to over-produce when demand is high (and prices/marginal profit is higher).
Likewise, warehouse and distribution adapts to capitalize on high prices, using those high prices as a signal to get more goods to flow to those demanding the goods. In other words, more toilet paper is available for people who want toilet paper.
Instead of today’s world where I have to shop twice a week instead of once, or can’t add a more vulnerable neighbor’s shopping to my own, because we are limited to how many eggs I can buy in a single trip. How does that help anyone’s health?
To me, the fairest way to distribute any good is to the highest bidder. If someone is truly desperate for food, they will find a way to get the money to pay for it. I would rather that food be instantly available to that highest bidder with a true need, rather than having to jump through some kind of Soviet bread line to get their “ration”.
Are you saying it is “ethically” better to have an empty shelf with government price controls than a full shelf with prices set by your high-bidding neighbors?
With an empty shelf there is no negotiation possible, simply the will of the government bureaucrat or store manager (with a government gun to his head). They don’t have any personal knowledge of the hungry.
With a full shelf the food is right there, and it’s only money. The hungry can communicate their immediate need for food on the spot by forking over the cash.
So hell yes the capitalist system is the most ethical. Hunger is a private matter that affects individuals - not a faceless mass to be treated as robots with a government program.
There is not enough time to solve the coordination problem (or, more accurately, we solved it in advance).
The government elected by most market participants steps in (or threatens to step in) to help maintain order. This seems like a less crazy idea than seeing how many nurses will pay $500 for a mask.
Elections as currently administered are highly limited in their ability to produce good collective judgments, so the fact that politicians support sonething is no indication that it's socially beneficial. If the democratic process produced socially optimal governance decisions, no democracy on Earth would institute rent control for example, and we see the opposite in practice.
And yes, if the shortage for masks is so severe, that they would fetch $500 in a free market, we need prices to spike that high, to spur massive rapid restructuring of the economy to ramp production of masks and alleviate that shortage.
Capping the price doesn't solve the fundamental problem, which is the shortage. It interferes with the process of solving the shortage.
It takes time to build and staff and supply a mask factory, meanwhile you risk the scarce (in the best of times), skilled clinicians getting sick en masse or abandoning their jobs.
Market solutions work when there is no coercion besides price, unfortunately viruses won't take checks, nor will people who are fearful or desperate.
The store is competing with other stores, but the management determines what to do within the store without either voting or unregulated competition.
But I'm not viewing things as fine grained as you are, but more fuzzy. A hundred bucks are basically nothing, but if I'm a doctor and have to decide whether to work for someone paying me a thousand dollar per hour or for someone paying me a thousand dollar per day, who am I going to choose to work for is obvious. If the difference in money isn't big, than things aren't as obvious.
I don't know much about what Nikola Tesla did, but maybe it's similar to someone having failed to negotiate adequate compensation. Which in turn is similar to someone getting killed and having his wealth outright stolen. The outcome is kinda the same: someone who didn't create the wealth reaps the benefits. Here's the thing, though, all said and done it doesn't matter who created the wealth, but who has it. Or let's rephrase that. Between the guy who cured cancer and the one who killed that guy, but got all the research results. Does it really matter to you who sells you the cure as long as you get the cure, if you suffer from cancer? Sure, there's injustice and all that. But does it really matter enough for you to not buy the cure for cancer from the murderer and die instead? And that is my answer. If you can amass wealth you are worth more. Even if you stole the wealth. You might then be hated and persecuted, but with enough wealth, that's not really that much of a problem, as there are few people not willing to buy the cure of cancer from a murderer if their life is on the line with no alternatives.
It's all about benefits in the end and wealth is a form of benefit. If you're good at gaining wealth, you're worth more than people who are bad at gaining wealth.
> Which in turn is similar to someone getting killed and having his wealth outright stolen
I don't quite see the similarity but that's because I believe in a general, fuzzy way, all our lives are sacred but grant that individuals make exceptions for personal gain and their perceived "greater good".
> If you can amass wealth you are worth more. Even if you stole the wealth. You might then be hated and persecuted, but with enough wealth, that's not really that much of a problem, as there are few people not willing to buy the cure of cancer from a murderer if their life is on the line with no alternatives.
Ain't that the truth. Still focusing on a single axis of our humanity (material wealth) but from that axis, what you say is correct.
Money is thankfully not all that life comes down to imo. Observing reality, money does drive a lot of the world and we directly and indirectly use that as a proxy for what someone's life is worth but I think we can accept the reality while still advocating for meaningful change.
That's part of why several people each day choose not to optimize purely for $$ but consider some deemed higher purpose (arguable ofc) of helping others be happier, healthier, finding spirituality, researching in academia when you could make 2x the money in industry, and fighting to improve the outcomes of others who are less... fortunate.
I previously misinterpreted what your perspective as "fuck it, it all comes down to money so nothing matters", but I now see it more as an observation and statements of the world's perspective and not necessarily that you believe your life is worth more than that of an incidentally poorer person.
Vegetarians extend this in-group preference to animals, but not to plants. I've once watched an interesting series about how a Vampire secretly turned more and more people of a village into his own kind. Most didn't have a problem hunting humans after the change, but there was one character who chose to starve and die instead of drinking the blood of humans. That left a deep impression on me. So now I'm thinking, if you don't sacrifice your own life for your ideals, are your ideals even worth anything? If you want poor people to receive money, but don't want to transfer all your own wealth to them, aren't you just a hypocrite?
It's true that not everyone chases after money, but it's undeniable that lots of money equals power. If you don't partake in the competition, you can't win. You might succeed in deceiving yourself and others, but you won't wield the power of money. There are other forms of power, of course, like religion or other organizations, for example companies or countries. But even then, if you strive for the top of any of those, you'll naturally amass more money than the people at the bottom of the hierarchy. If you don't want the responsibility that comes with wielding such power, all you can really do is live in peace and hope that the powers that be leave you alone. You don't have any initiative and also no right to complain.
There's this saying that power corrupts, but I don't think that's the truth of it. Power only reveals your true character. Like the character from the story I mentioned, who received the power of being a vampire, but chose to starve himself to death.
Found where I got it from: https://www.seattleweekly.com/news/seattle-is-getting-an-obj... I'm not American so no idea if this is accurate or not.
What kind of smile is there when there is nothing to buy at any price?
Before all these laws, in natural disasters there used to be marginal producers (people with a pickup truck etc) who would load up on some supplies like ice etc. and bring them to the area that was hit to make a quick profit. When the electricity is out and someone wants $12 a bag for ice it would anger you if you just want to keep your drinks cold, but you would think it is a bargain if that way you can keep your insulin chilled.
https://www.econlib.org/library/Columns/y2007/Mungergouging....
In the hypothetical, you have no idea whose life is more at risk. And the central planners who want to implement price fixing, purchasing quotas, etc. do not have much if any more insight than you.
A _manufacturer_ charging more is not _front-running_.
Minimum wage only potentially does it for a narrow range of work with actual economic value that is between the minimum wage and a small multiple of it, and only for jobs where there isn't effective competition for labor (because effective competition for labor already does it as much as is possible, leaving nothing for minimum wage to do), and always has the cost, whether or not the conditions exist to provide the benefits, of making impossible all wage labor with an actual economic value less than the minimum wage, which not only kills jobs, but prevents upward mobility from the experience people would gain in those lower-value jobs.
> Minimum wage is fully pragmatic to me, not an ideal. It's a net positive compared to the current situation.
Minimum wage + means- and behavior-tested public benefit programs is the current situation.
> but prevents upward mobility from the experience people would gain in those lower-value jobs
You can see my other threads here but I would love to hear about these jobs with valuable experience that need to pay under any reasonable minimum wage that would not be already existing internship programs. I just can't imagine what these are.
As to the rest, I just don't believe that area is as narrow as you describe.
> jobs where there isn't effective competition for labor
I really don't think you have experienced/have an idea of what it is like to be anywhere near unemployed and "unskilled". Nearly all of retail/warehouse/gig/delivery jobs experience little to no competition since they all go as low as possible and say "take it or leave it" because they know the alternative in unemployment. Competition only exists today really in skilled job markets.
In a world without scarcity you'd have infinite food and infinite houses. We do not live in such a world.
You don't give people without the ability to pay for things stuff for free because you don't want to absolutely wreck your economy. If I'd get food and housing for free, I'd be the first one to quit my job and just live the good life of not working ever again. I'm incentivized to work because that isn't the case. And also because it's such a stupid idea, that I can see that it would collapse fast.
Scarity doesn't mean finite. It means shortage. Wasted food and vacant homes aren't shortages.
Minimum wage is much more underhanded than that, because it was passed in the name of fairness but it was really just to protect entrenched workers against an incoming wave of competition.
These labor protections in the US are what initially got so many working-class white Americans on board with the progressive agenda in the first place.
was much more underhanded, not is.
Who cares how it started? Again, many rights we have today started out either explicitly or implicitly limited by race.
Today, the minimum wage is very much about fairness to low wage workers of any race, but especially low income people of color, who are over-represented at the bottom end of the income ladder.
If you arguing against that, you'd be arguing that today's progressive movement is secretly about preserving jobs only for white people, which would be extremely far fetched. It seems more like you are trying to foist the racist rationale for minimum wage from yesteryear upon the far more equitable purpose it serves today, in an perhaps underhanded attempt to discredit today's version.
If you're going to argue against today's minimum wage, you should use arguments relevant to today, i.e. the usual ones you hear from its opponents about how it will bankrupt businesses, and rob the poor of the incentive to pull themselves up by their bootstraps.
Condescension by experts is one means by which bad ideas can promulgate, and lead to bad policy. Everyone you speak with is a potential voter, and at the end of the day, badly or uninformed voters are bad for democratic outcomes.
To go back to your original criticism, asking for background information is a lazy dismissal wasn't a fair assessment. Is wasn't a dismissal but a request for more information. It's important than when you make an assertion that a lay-person might have some misgivings, that you provide some real evidence, or qualify your statement as opinion. An appeal to one's own authority isn't enough, at least it ought not to be in HN, where it would seem many people really care to know more, and want to engage in real discourse.
Edit: qualified some statements..
And in most situations, money can solve the problem, and get the essential item in the hands of those who need them. Those with stockpiles typically have them in order to sell them during a shortage. Not pointlessly hoard them and forego the profit earning opportunity.
The long-term damage of anti-price-gouging laws is fewer stockpiles to prevent shortages from emerging during future crises, and a slower ramp up of production and distribution when a shortage does emerge.
Try it like this. Federal minimum wage comes out to around $15,000/year. This is in the same ballpark as college tuition -- which is generally regarded as costing a lot of money. If you go to an institution where you're a novice and it takes half your hours to learn the trade and the other half is productive but effectively unskilled work for the employer, you would expect these two to net to approximately zero, right? So why is it at all unexpected that it would frequently net to a number which is slightly positive but less than minimum wage?
> Even if these jobs exist, what percentage of $4 job will be those?
Probably the large majority of them, because otherwise why would anybody take those jobs? They wouldn't be paying enough to attract employees unless they were offering something else of value that existing jobs with higher compensation don't have.
Corporations can't just offer to pay $0.25/hour and get a line of workers lining up at the door. They have to outbid other companies for labor. That's why most companies already pay more than minimum wage for most jobs. And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
Again, you are missing the point. Either that job is an internship (non-permanent and I already addressed it) or you will quickly become a fully productive worker (this is literally just training/ramp up and is not a significant cost to employers). These are not the jobs/pay structures minimum wage laws are affecting nor are people discussing, this is just a straw man.
---------------------------------
> How would you expect to you hear of some when they're prohibited by law?
Legality does not define what concepts exist in the world, so let's hear them! You have yet to even mention a single example.
Companies can and do regularly lobby for laws. They don't appear to be using this line of reasoning because if large minimum wage employers like McDonalds or Walmart tried this they would be laughed at even in political spheres.
> Probably the large majority of them
I suspect we're gonna have to agree to disagree here on what's going to happen without a minimum wage.
> because otherwise why would anybody take those jobs?
People take badly paying jobs because if you're faced with bad and really bad, you'll take bad. Companies are free to exploit this without minimum wage laws in place. This type of exploitation only works in a buyers (if we put employees here as "buyers" of jobs) market, and immediately pushes wages significantly lower in a sellers market, which we have seen for quite a good deal of the past few decades. We can't have economics that are only moral when things are going well.
> Taking those options away makes peoples lives worse, not better.
The flaw here is that you're looking at only one side of the equation. You are improving the lives of every job that has a raised salary as a result. Now the calculus on how many jobs that removes vs raises, what kind, and where is a valid debate, but again, this tradeoff is a moral one. Economists are doing studies to get numbers so that then we as a society can make the moral decision on the tradeoff. That moral question however is not one that economists can answer. They can only study and communicate the effects.
> And it's why most of the jobs that would pay less than minimum wage are ones that offer the workers something else in its place -- education, more flexible hours, a shorter commute etc. Taking those options away makes peoples lives worse, not better.
Big citation needed here.
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I'm not looking to get into the weeds here frankly, that is not the point of my original comment. There are many studies on both sides of the minimum wage debate, and that's just going to turn into a linking war between people who are not economists and are also not likely to change their minds on the internet. I have my beliefs based on the data I have seen but again, this doesn't seem fruitful to go down this route.
The point I am making here which none of your points address is that minimum wage legislation is very much tied to moral considerations, and economics aids in giving numbers for those. At the end of the day, the viability rests on morality as interpreted based on data produced by economics.
You're asking for examples and then pigeonholing any possibilities into one box or the other.
Some occupations take a long time to learn. Years. Particularly if it's effectively half training and half working, because then it takes twice as long to finish the training. If it's the equivalent of four years of undergrad and three years of grad school then it would take fourteen years -- hardly "temporary" but at the end you would be qualified for a six figure job and have no student loans. Is that a sufficient example?
> Companies can and do regularly lobby for laws. They don't appear to be using this line of reasoning because if large minimum wage employers like McDonalds or Walmart tried this they would be laughed at even in political spheres.
The institutions that would lobby for this legitimately don't exist because their structure is prohibited by existing law, so it's chicken and egg.
Existing large minimum wage employers generally don't want to eliminate the minimum wage because it would make it harder for them to retain talent because their prospective employees would have more options.
Suppose you work at McDonalds and have a 30 mile commute. That costs you thousands of dollars a year -- you have to buy, maintain, insure and fuel a vehicle -- and about eight hours a week of sitting in traffic. A job that paid $2/hour less but was close enough for you to walk to work would leave you healthier with more money in your pocket and more free time. McDonalds would have to pay you more in order to get you to not quit and take the other job. Why would they want that?
> People take badly paying jobs because if you're faced with bad and really bad, you'll take bad. Companies are free to exploit this without minimum wage laws in place. This type of exploitation only works in a buyers (if we put employees here as "buyers" of jobs) market, and immediately pushes wages significantly lower in a sellers market, which we have seen for quite a good deal of the past few decades. We can't have economics that are only moral when things are going well.
But that's the whole problem, isn't it? When things are going well it's a seller's market and you don't need a minimum wage. When things are going poorly, the option isn't minimum wage job vs. less than minimum wage job, it's less than minimum wage job vs. unemployment. So then you're prohibiting bad and leaving them with really bad.
> You are improving the lives of every job that has a raised salary as a result.
You're also worsening the lives of every customer who has to pay more for goods and services as a result, and for that matter everyone who makes less on their retirement account. That part of it is a zero sum game. The part that isn't is the part where where the minimum wage prohibits Pareto-optimal alternatives that generate actual surplus.
> Big citation needed here.
If there exist two complex options and you take one away based on a simple factor, there will be some number of people for which the option you took away was the better one. Can you not imagine that some jobs might pay less money but be more flexible or closer to home or less emotionally taxing and thereby preferable despite the lower pay?
> There are many studies on both sides of the minimum wage debate, and that's just going to turn into a linking war between people who are not economists and are also not likely to change their minds on the internet.
All of the studies of this question are inherently politically compromised because it's trivial to design a study to find the outcome you want. If you want to see no increase in unemployment from a minimum wage increase, find one where hardly anyone was making the minimum wage even after the increase to minimize the economic effect. If you want to see a large effect, find a large minimum wage increase in a place with many small businesses that can't absorb the higher costs and few large institutions that can.
The ability to cherry pick data doesn't prove anything. But notice this: Even when a minimum wage does exactly what you want it to, the effect is to transfer money from the large institutions that can absorb the minimum wage increase to the minimum wage workers. But you can get exactly the same desired effect simply by changing their relative tax rates (using negative rates if necessary) without incurring any of the harm caused by constraining anyone's choice of employment.
> conservative bullshit
I think it helps to be mindful to not fall prey to ideology through opposition. Visualizing your interlocutor as an enemy gives no room for either you or them to grow in knowledge, and encourages bad faith dialogue... IMHO :)
The article I linked too was the personal experience of an economist who was in Raleigh after a hurricane hit the area. As he writes:
>...The problem for Raleigh residents was all about price, at that point. The prices of all the necessities that I wanted to use to “preserve, protect, or sustain” my own life shot up to infinity. Within a day after the storm, there were no generators, ice, or chain saws to be had, none. But that means that anyone who brought these commodities into the crippled city, and charged less than infinity, would be doing us a service.
There were not tons of people bringing supplies into the city. The state had to actually beg other states and the federal government for supplies.
In the long run, high profits during a shortage also mean that suppliers in general will be incentivized to keep a larger stockpile of things that have a good shelf-life since they know they will be able to make good money the next time there is a shortage (more than the storage costs). If you are going to literally make it illegal to try this, then you better have a government be willing to spend its tax dollars on creating a stockpile rather than spending money on more immediate things that are more likely to get votes. (We've now seen that all the talk of the national stockpile the federal government supposedly had was greatly exaggerated.)
For these reasons, a majority of economists are opposed to 'price gouging' laws. For example see http://www.igmchicago.org/surveys/price-gouging/
That's the common definition. There's also an economic definition having something to do with limited supply and limitless wants. I'll leave that to the academics. My argument is that there is enough food to feed the hungry and enough shelter to house the poor in the US. If someone has evidence to show otherwise, I'm open to it.
You can give them your own money if it pleases you.
TP selling for 200% that is headed to 400% shortly is a smarter buy than most stocks.
Since people can't actually store infinite TP wouldn't all hoarders end up with the max TP they are willing to hold in a reasonable time frame after which more supply becomes available for everyone else. In the mean time most buyers haven't been wiping with leaves they expected more effort to visit more stores and ultimately settled on buying some inferior TP. It's not even clear that your suggestion would bring equilibrium faster.
If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.
There isn't an alternative. If you assume people behave irrationally you may as well send the army in straight away. People are often stupid but rarely irrational given what they can understand. There is pretty solid evidence that people with money are the ones who spend it rationally.
And besides a private buyer's opinion of what is rational is just as valid as anyone else's.
> If I may suggest you and a minority of others would be better served in such a situation and you are trying to construct an argument so as to justify a policy that would benefit yourself.
Yes? I'd like to live in a world where I can go to the store and buy toilet paper. Just like everyone else. This is not an unreasonable demand.
I'd like to see everything go back to normal as fast as possible, thanks. Policies that make it irrational to return to that happy equilibrium are not in my interests. We need producers and companies involved in consumer logistics to change their behaviors. Money is the fastest tool to do that.
Besides, seriously, why do you think people earn money if not to get first dibs on stuff they want? What do you think money is for? It isn't like everyone is going to get what they want, there is a massive shortage. Someone is going to have to do without. If someone has to do without we use money to figure out who. That is how life works in this era, and the eras before dating back to the invention of money. Price controls aren't going to win a war with the economy. It is more likely to take down the government than stop wealthy people getting what they want.
The point is not that you desire to be able to buy TP its that you are willing to sacrifice the general well being for your own convenience.
Hoarding of some non emergency items is self limiting and self correcting in a way that doesn't rob the poor of the ability to wipe their asses. It's a problem that doesn't need solving beyond the simple expedient of not allowing one person to buy too much of it to give other buys a chance.
Your solution by contrast is actually more likely to shift whose hoarding it and why then solve the problem.
If your position was apt then surely you can give one example of such a system working?
Economic modelling often fails because they assume a small number of rational and logic rules. But people are highly variable and rational for one person is irrational for another, depending upon experience and situations.
Your claim that people with money spend it rationally is countered by evidence that poor people are often spending money rationally, given their situation, needs and income. Different situations lead to very different definitions of rational and "common sense". (Mental stress & fatigue also becomes a decision making factor at low income levels.)
This is false, as well as being a false dichotomy. We know people act at least somewhat irrationally. That's why we have laws on gambling. It doesn't mean sending in the military.
Of course there is - look at how people actually behave given various stimuli, rather than presuming enlightened rationality.
Enlightened rationality does not govern real actions, we know this, we have ample evidence of this, and making economic forecasts on this basis has been repeatedly exposed as a fools game.
There is an alternative: distribute wealth. On aggregate people tend to behave a lot more rationally than individuals do. So if you spread the buying power as widely as possible then you get a more rational market.
Indeed. Just the idea that TP is the topic of interest and not, say, food or medicine proves this. You don't need TP. A lot of the world don't even use TP. You can, instead, wash.
But there's not much you can do to replace eating.
The problem arises when rich people start hoarding at times when supply is constrained, because they can do it so much more rapidly and create a much greater shock to the system.
It was notable in London that severe shortages only really existed at stores you can drive to. Stores that you can only walk to have been much better stocked.
The market signal that would make rich people hoard masks in the good times would be ... an expectation that if an unexpected crisis arose then prices would rise to extreme values. Nothing else is going to make that happen. Not even most governments manage to resist economising and running down their medical supplies after the last health scare they faced.
I'm not going to hoard in good times because I'm not crazy; I know I can't be ready for everything. I'm just going to try and preempt everyone else at the start of a crisis. It won't work every time but that is the strategy that makes sense if the crisis response is includes 'stopping price-gouging'.
If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.
We don't want anyone hoarding (or gouging). However keeping TP enough for 2 weeks when supply was ample, whould have prevented this ever being an issue, and no gouging needed. TP production has never been an issue, the system shock of people panic buying (too much) all at once was. People aren't shitting more than before.
I have about a month's supply of TP at home, and have only bought 10 rolls since this whole thing began. I am not a prepper nor a hoarder. I just like having a buffer of things I like not being without. There's a miniscule opportunity loss of storage and sunken cost, but I'm not spending any more than I would with just-in-time purchasing.
> If we allowed price gouging, I might seriously keep a few extra boxes of masks ready for selling to others the next time this happened. I like money. I have some shelf space. The only question is will prices go high enough to justify using it.
Great argument for not allowing price gouging then.
Disposable PPE is also funny in a way that it makes no sense to buy it unless you buy in bulk. If you can get 200 N95 masks for $20, it's OK. If you can buy 2 masks for $20, then you'd better spend $1000 or don't buy at all. A lot of people buying few masks each just wastes a whole supply of masks that could all go to one place (e.g. a hospital) where they would make a difference because there would be enough of them to be used properly.
Everybody believes that, in general. But in the short term, the elasticity of supply with respect to price approaches zero. If we ramped up production though, it would be too late, and then there would be a glut.
If some other store did not ration the product, then they would have empty shelves, so I'd go to the one that did.
This is one of the saddest things I've ever seen on HN.
Try re-reading the post I replied to. If it's not making you feel a bit sick, might want to spend some time on introspection.
Qu'ils mangent de la brioche though I guess.
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 they're virtually guaranteed a profit. If you want to discourage hoarders, then enact purchasing limits: limit 1 per person.
But I noticed you didn't even attempt to engage with the solution of enforcing purchasing quotas instead of allowing price gouging.
Others with lower means, you meant?
Pricing (which includes 'gouging') is not perfect, but it's better than central planning, price fixing, and quotas at efficient allocation of resources. At the very least it provides a 'wisdom of the crowds' affect where anyone with enough money can reallocate some of the resources to a location of need that might lack visibility to the hand full of people that would hypothetically be centrally planning all the resource allocation.
I just wanted to clarify that when you said higher prices discourage those with lower needs, what you really meant is that it discourages those with lower means-weighted-needs. Which is to say, it discourages the desperate-but-poor, rebalancing demand toward the less-desperate-but-more-wealthy.
Like bananas, this is an issue of commercial and residential supply chains. Most commercial bathrooms have totally different toilet paper than home paper - thin, and on a huge roll. People are using the bathroom at home far more than before, since they’re not using it at restaurants, work or other public areas.
There's no need to theorize or argue, the historical evidence is that price fixing (anti-gouging) leads to shortages (or gluts).
https://www.amazon.com/Forty-Centuries-Wage-Price-Controls-e...
Literally overnight. And they never returned since.
There are 18.6 million millionaires in the US. If each of them bought 10 n95 masks just in case, or for themselves + family + friends, that's 186 million masks. They could easily pay $20 / mask (that's only $200 per millionaire), which would significantly push up the cost to hospitals of acquiring masks.
Hospitals might not even be able to afford the masks they need. They are having budget shortfalls due to the ban on elective surgery. Cuomo was complaining about paying $7/mask, and NY state is going to have budget shortfalls as well due to the recession.
But the most annoying thing about this thread is how it has turned into some kind of let's-forecast-the-markets game, instead of dealing with the underlying reality - that the markets failed to provide an essential good when it was needed, resulting in a significant number of avoidable deaths.
There should be a special word for the moral delusion that markets exist in an abstract philosophical vacuum and price signals are somehow more important than people's lives.
No, that's correct, because you can't (profitably) buy a million masks to hoard them right now.
If you'd done it on January 1 though, you'd have been able to buy as many masks as you liked.
Selling them now? Is this the height of the crisis? Perhaps.
> Real people don't behave like this.
They do, but most people don't have millions of dollars to fuck around with.
But if they think they can make a quick buck, they'll happily empty shelves in the local stores of masks, hand sanitiser, toilet paper, etc, and then turn around and try selling it on for a huge markup.
This is why I've not seen a roll of toilet paper on shelves in my local supermarkets or stores for three months now. Nor a bottle of hand santitiser, nor masks of any kind. But hey, I jump on local buy&sell sites and there's heaps of it there, at 10-100x markups.
For most of these folks, it is/was fairly low risk - they had the free cash, and they thought they could always return it. Some of them are stuck with supplies they now can't sell on, or return - so they now have a few years worth of toilet paper and hand sanitiser, but hey - it's not a huge loss for them.
Whereas my local Costco has had continuous stock of massive piles of toilet paper available for over 2 weeks now. That's an arbitrage opportunity that's not being exploited because of the difficulty travelling.
Three months ago was January 14th. Perhaps you are being a mite hyperbolic?
Mid February is when Toilet Paper, Kitchen Towels, Facial Tissues, and Hand Sanitiser disappeared. My understanding is that masks went earlier, but I don't have direct knowledge of those.
There were no purchase limits then, and now every time they're restocked there's a pile of people buying up every single one of them in record time. There's video from my local supermarket of a whole pallet stacked high with toiletpaper being delivered, and disappearing in minutes.
I don't understand why people aren't talking about how disposable PPE defies this point at the low end. Hoarding a million masks doesn't make you better off than buying a thousand, but buying ten N95 masks is as good as buying zero. Masks, gloves, even hand sanitizer are consumables, so getting a little bit of them for everyone is as good as just throwing them into a hole and setting on fire. They work only when concentrated in bulk. Like a thousand of masks per household, or a million per hospital. Enough hand sanitizer that you can actually disinfect your hands every time you accidentally touch something outside. Etc.
I'm in China and have sold over 30,000 masks to the US (not for profit, but I don't have the cash to just donate them). We've sold to hundreds of different individuals at this point, and none of them are using the buying patterns you describe. The only people buying more than a hundred or so are buying for employees, hospitals, or doing a good job of lying about their intentions. Everyone is buying just a few and making them last.
So far I've personally taken one 10-pack of KN95s from our stock (of which I use 4 so far, on rotation. the other 6 are still in the pack), and about 5 surgical masks. There are strategies for extending the life if you do a little research.
The vast majority of regular people just aren't currently using PPE in the way you describe. After reading up on it, personally I think there's a useful middle ground between throwing away masks like you would in an ICU and completely doing without.
Sanitizer and gloves I know less about. But we do sell gloves and nobody is ordering more than a few boxes of those, either.
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.
And even taking your clinic example, you see the same issues there. If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.
But then they're not price-insensitive billionaires, so if the price goes up it deters them from hoarding (and gives them a financial motive to unload their existing hoard), which is exactly what you want.
> It's 18 months or so before we get a vaccine. There's plenty of incentive to hoard PPE.
It's 18 months or so before we get a vaccine, but not before anybody can start manufacturing more PPE, which is already starting to happen and will only increase if demand doesn't subside. And if demand does subside, same result.
> If rich clinics outbid poor clinics for a limited supply, we'll see rich places stocking up and poor places going without.
What allocation process are you proposing that would avoid things like that happening? The same one we use to allocate tax dollars to bailouts doesn't feel like a strong candidate.
> but not before anybody can start manufacturing more PPE
I think you really aren't coming to grips with how people think and behave differently in crises. Possibly having more PPE in a few months is only valuable for reducing hoarding and profiteering now to the extent that people are confident that will happen.
> What allocation process are you proposing that would avoid things like that happening?
Letting local and state public health officials allocate scarce medical supplies is the obvious start. Point-of-sale purchase controls are another one that's easy to implement. In the long term, transparent rationing where needed. Fining, arresting, and imprisoning disaster profiteers are all excellent options when it's severe.
Pricing (including gouging) may be imperfect, but it is better than central resource allocation, price fixing, etc. at leading to efficient allocation of resources.
You say I'm pigeonholing you but you have yet to name a single occupation - what am I pigeonholing? Also, my "pigeonholing" is not arbitrary, it is the breadth of jobs that can exist with a minimum wage enacted...
No, it is not a sufficient example because you haven't said a word about what this person is doing. You can see how this feels like pulling teeth on my end, yes? I just want an actual concrete example of a job that could exist. If there are so many of these that there is a notable economic impact from this, it really isn't unreasonable to ask someone to name one, is it? I can't imagine what the job looks like that you described.
> But that's the whole problem, isn't it? When things are going well it's a seller's market and you don't need a minimum wage. When things are going poorly, the option isn't minimum wage job vs. less than minimum wage job, it's less than minimum wage job vs. unemployment. So then you're prohibiting bad and leaving them with really bad.
My argument is exactly that you need a minimum wage in a sellers market because the market is exceedingly inefficient for workers and allows companies to exploit workers and pass that profit off to already wealthy shareholders and upper management. For non-sellers markets the minimum should be adjusted to match economic times, I'm not saying we set a $25 minimum wage during a recession here. I'd be very happy to pin minimum wage to economic times.
> Can you not imagine that some jobs might pay less money but be more flexible or closer to home or less emotionally taxing and thereby preferable despite the lower pay?
If it is between a job that pays enough to survive vs one that does not? No I can't. Between two jobs that pay enough to survive? Absolutely.
> Even when a minimum wage does exactly what you want it to, the effect is to transfer money from the large institutions that can absorb the minimum wage increase to the minimum wage workers. But you can get exactly the same desired effect simply by changing their relative tax rates (using negative rates if necessary) without incurring any of the harm caused by constraining anyone's choice of employment.
I fully agree that would be a better policy. It has proved much harder to pass through the political system. I have said it in other threads here but I am 100% not saying a higher minimum wage is an ideal economic state, it is simply better than the current point we are at and the seemingly easiest to pass at the moment. In the end, the clear way to do this is through UBI IMO. And I think that is the root of a lot of these threads that I'm not going into responses on - this isn't a one and done policy change, you need others to match it like an increased social safety net to make that "really bad" unemployed scenario not as bad.
Because it isn't in any way specific to an occupation. It's anything where the employee receives a non-monetary benefit from working somewhere that offsets a reduction in monetary compensation. It doesn't matter if what they're teaching you is to be a lawyer or an electrician or an auto worker, what happens is that you receive long-term training in exchange for less pay.
> My argument is exactly that you need a minimum wage in a sellers market because the market is exceedingly inefficient for workers and allows companies to exploit workers and pass that profit off to already wealthy shareholders and upper management.
This is not a description of a seller's market. When labor becomes more scarce or more in demand, the price goes up without need for any special rules.
> If it is between a job that pays enough to survive vs one that does not?
The point is that minimum wage is a garbage metric for this.
Suppose one job requires you to incur $4000/year more in transportation expenses for commuting and then pays $15,000/year instead of $12,000/year. The lower paying job leaves you with $1000 more in your pocket after expenses, but it's prohibited. If either of those jobs doesn't pay enough to live it's the one with the higher nominal pay.
> I fully agree that would be a better policy. It has proved much harder to pass through the political system.
I don't think they've had an easy time raising the minimum wage either (for much more legitimate reasons) and would do better to give up on the worse policy so they can concentrate on the better one.
So provide an example of what such a role would be...
Why wouldn't he just borrow the money to pay for it, hoard the supply and then flip it back onto the market when the price hits $40?
You're assuming a finite amount of money, but the monetary system is necessarily elastic.
Then the hoard, because it has gone up in value, becomes collateral for more loans.
Whereas rationing necessarily solves the distributional conflict instantly.
Price auctions only work when the demand is optional and the supply is elastic.
We know that the amount of toilet paper being produced matches how much is being consumed because it did pre-crisis and consumption/production aren't really changing. Any ramp up at all from the factories will quickly lead to a glut of the stuff. The problem is the commercial-private shift causing a mismatch between the orders for consumers and the supply for commercial toilets. If the price goes high enough someone will figure out how to match the two and it will happen really quickly. The price isn't going to climb after the initial spike; it is going to fall.
If we were talking about something really vital like food, those same 2 weeks become unacceptable.
It's a good thing that it did not happen at the same scale for food (supply is more elastic? demand is less elastic?) and that we can debate about an annoyance, not people starving.
Interesting data point: about three weeks ago a guy was selling single rolls for $5 a piece outside our development. He put his kids in gas masks and had them prance around with a big sign. I'm sure he wasn't doing it for the kindness of his heart.
And there aren't enough millionaires for their toilet paper buying habits to have a meaningful effect on the market unless they each start buying millions of rolls, which is a ridiculous hypothetical with no chance of really happening.
I claimed that most people spent their money rationally. You're not countering me with that point, we're agreeing. If wealthy people make a habit of spending irrationally they go broke.
This just isn't the case. Unless they're spending irrationally AND a large proportion of their wealth then spending irrationally is unlikely to make them go broke. And unfortunately some people have so much wealth that they can spend market-distorting amounts of money that are still a tiny fraction of their overall wealth.
Average person doesnt buy iphone because they need a new phone, or coke to quench their thirst.
If people shouldn't profit off disaster, why profit from any misfortune?
Because they had a government gun to their head in the form of anti-gouging laws, or implications for the same. That's what I am arguing against.
If they were free to set prices, they might consider raising prices to keep stores in stock, rather than ration. They might not, if they calculate it will be a long-term PR hit. But right now, they are not free to choose.
Further, local and state politicians and AGs often are seen grandstanding about how they stand ready to prosecute anyone who is raising prices on necessities beyond the normal price (sometimes allowing +10%, but often not even being explicit about that, leaving businesses in a murky area).
Watch for it next time a power disruption hits your local area.
Pricing spreads the capability of resource allocation around. In the central planning model the poor desperate person is reliant on a tiny group of central planners to allocate them some resources, and the central planners may not see that particular poor/desperate group. With the pricing model, anyone with the means can allocate resources where they see a need. In both scenarios the poor are reliant on someone else to allocate them resources. In the pricing model, the poor person has a better chance of being seen by at least someone with the means to make it happen.
https://www.amazon.com/Basic-Economics-Fifth-Common-Economy/...
For example, lawyers write. How is it possible for this person to develop their writing? Typically in law school, you spend an entire school year in one class developing your legal writing. Writing briefs from scratch for your professor, so he can IN DETAIL explain what you did right and wrong. Do you think a firm is going to invest this time in such an individual? I don't think that is a likely circumstance.
Nevertheless, what you describe is essentially an internship, which law students typically do their 1L and 2L summers. Oddly enough - the minimum wage has nothing to do with it. They are jobs where you are either working at a large firm and getting compensated at the same rate you would as a full time(180k a year - not too shabby for a fresh grad), or you are working at a smaller firm and probably for free... Nowhere is the minimum wage getting in the way.
I can see why the other poster kept taking up the issue with you. I can't imagine an actual situation where it's as you describe.
The immediate result of price signals is huge amounts of money will become available to anyone who is producing a scarce good. If something in your scenario (government, public pressure, whatever) interferes with the market then the people who produce food will no longer be awash with money and will not produce more anywhere near as fast.
Even if people are starving the solution is not to ban disaster profiteers or implement price controls. The solution is for the government to start buying food at market prices and distributing it evenly. Working with the price signalling system, not against it. It isn't efficient but if people are starving then sure efficiency isn't the single biggest problem. At least it keeps the incentives where they need to be.
I think our divergence in opinion comes from how much extra incentives to produce there is between the normal margins and the supply-constrained margins and how helpful that incentives is.
My hunch is that as long as there is a profit to made, extra demand will be met as soon as possible. Massively increasing the profit would help only if it would go towards raising food faster, which I think is not something that can be meaningfully improved in the time-frame we are talking about. Yours seems to be that it would help us get food faster. I might be totally wrong, so any data is welcome.
Note that I am talking about a case where raising margin would be forbidden, not raising price if it is necessary to increase production. Also, this is only for the case where supply and demand did not change long term, and the current demand spike is caused by irrationality (panic buying or people trying to profiteer from panic buyers).
I can get a lot more for sale though; at some point it becomes cost effective for people to start moving chickens over from other countries by air freight.
There is a price where people will start going out and hunting too. In Australia if the price of meat went up enough we'd start harvesting kangaroos, for example. The meat is a bit tougher than chicken but it is pretty good.
The argument in that sentence, and I don't mean this unpleasantly, is that you are a limited human who can't imagine a way of getting food on the table quickly that costs a lot of money. That is a fault in your imagination rather than a real limit. And if the situation is so dire that no food can be found at any price, people are going to starve whatever is tried so it isn't like it makes much difference in the big picture of this hypothetical. But anything up to that and more people working on the problem will help.
> Massively increasing the profit would help only...
There is a price point where Goldman Sachs employees stop trying to figure out how to screw over the little guy and start trying to get food to people. Until prices have reached that point, more profits will help increase production ASAP.
There is ample evidence that a shortage problem is better solved with subsidies rather than quotas. The main complaint is that subsidies are too effective at triggering oversupplies. There is no faster way of going from shortage to sufficient than throwing money at the problem - so the suggestion here is maybe at least try throwing money at the problem. People don't have to starve; governments can step in and buy them food - but if we need more food paying more to food producers for food is the single most effective way to get it.
Please cite evidence that this was "millions of millionaires" buying masks.
When an oil refinery blows up and gas prices rise, that isn't evidence of millionaires hoarding, either. It's evidence of supply and demand at work.
From my perspective, there should be some word for the delusion that equitable distribution of a smaller, price-fixed supply is better than prioritized distribution of a larger, price-gouging supply. The lack of masks that not allowing higher prices causes is going to kill people, and you want to restrict the supply available to everyone in order to not be unfair to the poor?
In the real world, which recently has provided an ample sufficiency of evidence that manufacturers can do no such thing because the process depends on specialized machinery that takes considerable time to manufacture in its own right, such an argument can most kindly be described as struggling to achieve relevance.
Somewhat less kindly, one might note that such an argument equates to saying that, well, actually you can produce a baby in one month by getting nine women pregnant, as long as you pay all the women enough.
Just delegating responsibility for resource allocation to groups of people is not a silver bullet.
"Aggregate people" tasked with distributing wealth (or taking wealth and converting it to some resource and distributing that) seems to be highly succeptable to holding onto more and more of that wealth over time for trickle down distribution within it's own organization.
Large nonprofits regularly come under fire for using too much of their income on their leadership and luxury fluff for themselves. Governments routinely spend their income paying themselves and paying for pork for their friends and paying for fluff instead of making people's lives good. Religions tend to amass more and more wealth until some sub-group tells them to shove it and historically this results in violence. You could fill libraries with the volume of work written about all the ways organizations become corrupted and self serving and fail to achieve their goal.
It's basically democracy for economic power. And you're right, it's not a silver bullet. But I believe it could be a significant improvement on the status quo.
Distributing wealth is self-destructive behavior. Generally, you want wealth in capable hands, who can use this wealth to create more wealth. You don't just want to piss it away.
"Pissing it away" is also known as buying things, which drives economic growth. The poor spend every penny they make, and this is generally considered good for the economy.
Persuasive.
"If someone is truly desperate for food, they will find a way to get the money to pay for it."
Are both massively ignorant and quite sickening, and that if you aren't reacting at least a little bit to that sort of statement too, you may have a serious lack of empathy.
Anyway, good luck in life, I have no interest in carrying on a conversation on this matter any further. If you're not seeing it you're not seeing it, I just hope you never get anywhere you can make policy.
"If someone is truly desperate for food, they will find a way to get the money to pay for it."
Just wow. Ignorant and awful.
The growth in that sector is swallowed up by the overall hard-stop of the entire economy.
And if you end up going without, that's your issue. Not only that, but that's the best and fairest system, the way it should be! This is a pure expression of "Fuck everyone else, I got mine"
> maybe you should remember that the person who made that point is a human being and not a monster.
Yes, totally, because saying their posts are ignorant and cruel is totally the same as treating them like something other than human.
If we arrange the rules of human behavior, such that there is an incentive to create a surplus of food and money, then the poor will be much better off.
Those who have tried to simply make a law that says "no one is allowed to die of huger" have created monstrous regimes which led to the starvation of millions.
If you’re hearing “fuck everyone else” that’s pure projection. You’re obviously putting words into his mouth. That seems cruel to me and counterproductive.
You should be more empathetic when you discuss with people on the internet, assume good faith.
> If you’re hearing “fuck everyone else” that’s pure projection.
"If someone is truly desperate for food, they will find a way to get the money to pay for it."
"The hungry can communicate their immediate need for food on the spot by forking over the cash."
"Hunger is a private matter that affects individuals"
We tried consuming our way to prosperity during the housing bubble in the early 2000s. That turned out how you might expect.
At this point we're just going round in circles.
Nope, that’s just your projection. You’re callously disregarding him.