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Attorney general looking into coronavirus PPE price gouging
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Long overdue
But it's important to keep an open mind, especially since a) the global surge in demand means a natural increase in prices, and b) the number of commercial planes flying to/from China has dropped to virtually zero, meaning that shipping has gotten a lot more expensive.
Yes, selling at 50x the normal price is price gouging, but 5 to 10 times the normal price - maybe not so much as a reflection of global market conditions.
Ultimately Counterproductive
Sideshow stories about people hoarding toilet paper aside, anti-gouging laws prevent goods from going to where they are in the highest need. Prices are the most neutral signal to the market we need more of this thing promptly.
Similarly are the anti-export laws, which all but guarantee the prisoners dilemma goes the wrong way with everyone lacking the parts from our interconnected global economy.
Politicians are not better judicators of allocating scarce supplies, particularly ones that have completely botched this entire process to begin with. That is the entire point of pricing, it is the most neutral mechanism we have for distributing supply.
Informative listening/reading:
- Health & Prices: https://www.econtalk.org/munger-on-price-gouging/
- When pricing is inhibited: https://www.econlib.org/when-free-market-prices-are-banned/
- Price setting chasing supply out of the USA: https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent-a-day-in-th...
That's fine absent extreme distorting factors
Market forces are the best and most neutral mechanism we have for distributing supply, in general, so long as the market consists of uncoerced arms-length transactions. Natural disasters create distortions in the market; without anti-gouging laws these distortions create incentives for behavior that does not lead to an optimal distribution of resources. If there are 5 warehouses on the island, and a storm destroys 4 of them, there is no benefit obtained by allowing the guy who happened to own the one left standing to sell his drinking water for $100 per gallon.
Not really
He's selling it for $100/gallon. Chances are the person most dying of thirst is going to be paying that price before those less thirsty (bla bla bla, what about rich people -- does not change the 99.9% general case that they can be a distortion in our mental game)
Or the hospital treating him will have the easiest justification to spend the money compared to another one that might hold out a little longer.
Ultimately, the price spike signals to everyone else on other surviving islands that "hey, there's a lot of money to be made, lets reconfigure production and shipping to get things over there ASAP"
This does not change in extreme factors. Just like when people got mad at ride-sharing apps for the algorithmic prices rising in an emergency storm. You want that price signal so that the drivers find the payoff worth the extreme risk to themselves, or that people who don't really need it stay home and leave it available for those who might.
There is still an essential distinction
You want a high price to draw new sources of supply into the market in a crisis. There is, on the other hand, no reason to allow incentives for strategic withholding of supply, information arbitrage based on insider information, or other forms of market manipulation.
Where is the benefit?
On an island, a severe storm knocks out the water distribution system. Everyone runs to the store to buy water. The first guy in line buys all the water, holds it for a few days until people are good and thirsty, and then starts selling it at $100 per gallon.
What kind of optimal resource distribution is that? That first guy in line is actually subtracting value from the system rather than creating it.
Libertarian wet dream, right?
lol
lol you waved away one of the most severe problems with your position and we’re just supposed to accept it?
$5.00
Per cloth mask sounds high to me.
Not a crazy price
I know of a nonprofit putting freshly unemployed day laborers to work making nice cloth masks and selling them for $10 apiece. They are stitched together from four pieces of fabric with attractively finished seams, plus elastic headbands. Given what a hat (an item of comparable sewing complexity) costs, it's not a crazy price at all.