eBay is a somewhat unique case, because the goods are often resale items. However, the reaction of many social-economics-warrior types suggests they have failed to realize that this kind of behavior is exactly why there is such a shortage of masks in the first place, despite somewhat recent scares with SARS and Ebola.
Letting prices rise is one way to increase production in a hurry. If the mask producers only get to make the same profit margin regardless of demand, why bother fronting the money to increase stock or investing in extra storage space, if there is no guarantee they will be able to recoup those costs during black swans?
There's a shortage of masks because the production facilities for masks cannot be built and staffed instantly. If you tried to start one up now, the price will likely have collapsed by the time you have it running, leaving you with an unprofitable facility.
I own equipment, have stock, and have staff that could start making masks this afternoon (I normally make decorative covers for custom car interiors).
It probably isn't as fast as other production lines, but I could probably make 2 masks per second, and if I brought in night workers, that works out to a million masks a week. Not much, but profitable if I could sell them at inflated prices, but not at regular prices.
I don't though, because I don't have the contacts to be able to sell them. And anyway, I'm scared of liability if my masks don't work as expected.
That equipment will sit idle if coronavirus spreads to my bit of the world.
It's absolutely crucial that masks actually filter out very fine particulates. N95 masks are rated to filter out >=95% of 0.3 micron particles. You probably have the stock to make something close enough to a typical surgical mask, but that's not going to protect the wearer from Coronavirus, at best it would prevent a contagious patient from spreading it. You also need to form the mask such that the edges will seal against the face. I doubt you have suitable filter media on hand, and tight woven fabric will not cut it here. It's significantly harder to trap virus laden particles in the air after they've dried out, so coarse filter media is only going to be effective if it's right in front of the source where the breath is still hot and humid.
In fact, at least one study has found plain old surgical masks noninferior to N95 masks for preventing infection by flu (others have found them a little worse, and that's probably the smart way to bet). Common sense suggests that anything that prevents you from touching your mouth would help at least a little.
There is a difference between the best tool for the job and better than nothing. Our civilization has a dangerous habit of mandating the best tool for the job, and then unnecessarily suffering with nothing in an emergency.
Moreover, even if the party line that coarse unsealed masks are completely worthless at protecting the wearer from infection were true, it would still make a big difference in the rate of spread of the virus for everyone to start wearing masks! Who cares what the private benefit is when there is definitely a public benefit? And yes, we could make plenty of masks for everyone if we weren't crippled by regulation, hatred of supply and demand, and the attitude that inaction is better than imperfection.
Not OP, but here is an article that says the size-based definition of droplet vs. aerosol remains a bit vague (the article is about influenza A virus, but I believe the statement on vector size remains relevant):
"There is essential agreement that particles with an aerodynamic diameter of 5 µm or less are aerosols, whereas particles >20 µm would be large droplets. Some authors define aerosols as ≤10 µm or even ≤20 µm (Knight 1973; Treanor 2005); particles between 5 and 15 to 20 µm have also been termed ‘intermediate’ (Couch et al. 1966; all values refer to the aerodynamic diameter; for bioaerosols, they refer to the aerodynamic diameter after evaporation). When reviewing the literature, it is therefore important to verify the size of the particles being studied and the authors' definitions."
Droplet size is not generally determined by the disease. Droplet size distribution and air suspension parameters depend on humidity and temperature, as well as composition, salinity, etc.
Also medical rated masks that are actually any good against COVID-19 or just dust masks? Medical certification, unless it is sped up considerably, will most likely take longer than the shortage itself.
Are you suggesting they wouldn't sell? They would still be masks, just not having a certified efficacy; I'd imagine if you put a pattern on them and sold them as decorative items you could side-step liability too.
If it were possible to sell supplies like this at inflated prices during times of need there would be more incentive for parties to maintain stocks during low demand times.
hah. Be charitable, you could just as equally say that there would be an incentive to over-hype risk. This is a potential conflict of interest people could suffer from without even realizing what they were doing.
sure there could be an incentive to overhype risk, however when was the last time you listened to a mask maker's analysis of risk? People barely listen to WHO, the CDC, and their local physician, it's really quite a bit much to suppose that they would listen to the mask maker.
California PC396 "prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared", sayth the internets. Many other states have similar gouging rules.
Yes, that is why it is important to allow businesses to profit from costly overcapacities.
Funding overcapacity in a free market through regulation would be even more prone to abuse than most other regulatory projects. Perhaps the public stockpiling that is done anyways could buy in an artificially erratic pattern to reward manufacturers for readiness?
Regarding eBay in particular I think that it is very valuable that they block at least block sellers that haven't routinely sold the product before, to hinder not only opportunistic speculation but also outright theft which is currently an epidemic of its own.
If the price will have collapsed, that means demand is expected to fall, meaning whatever's causing the current demand isn't a real problem. Is that the case?
Of course there is, people who need them may be unable to economically purchase them. Basic price theory only obtains under specific conditions like perfect competition, perfect information, fungibility of commodities, and zero friction for market entry and exit.
Isn’t the fact that some people will be unable to afford them (or some other potentially lifesaving product) when they need them a problem that needs to be addressed either way? I feel like we’ll be talking around the problem forever if we ignore the fact that “willingness to pay” is a useful concept economically but probably doesn’t match most people’s moral intuition about who ought to get lifesaving resources.
It works great for consumer goods, like coffee and beer. As soon as you start trying to apply it to things like medicine and the producer surplus comes with a body count.
If people can't afford them then they won't be purchased and the manufacturer will not make a profit. The manufacturer must price it's goods such that they will still be purchased, and higher prices in periods of high demand means people won't buy more than they need. This makes products more available, not less.
Yes, it does. Poor does not mean abject poverty. If the good is actually a necessity, someone who is poor is unlikely to refuse spending $20 instead of $10, to avoid death.
By letting prices rise, it may be worthwhile for factories that manufacture a similar product, or have manufactured masks in the past to retool back to mask production.
While it may be too late for this immediate epidemic, it also incentivizes middlemen to warehouse goods like masks which will help for the next epidemic.
This may or may not be good economics, but it's terrible health policy. If the goal was stopping the spread of COVID19 and masks were an effective preventative measure you would want them to be as cheap as possible to encourage use. This is a scenario where the magic hand of the market will get people killed.
> This may or may not be good economics, but it's terrible health policy. If the goal was stopping the spread of COVID19 and masks were an effective preventative measure you would want them to be as cheap as possible to encourage use.
"Health policy" has no exemption from economics. The way you get enough masks during high demand is by someone stockpiling them. If you want them to be cheap, someone has to stockpile even more of them. That could be the government, but only if they thought to do it ahead of time.
If they didn't, now you've got a market problem that pricing is the best way to address -- prohibiting price from rising due to demand only causes misallocation, because people who have more masks than they need have a reduced incentive to sell them to the people who need them. The first guy in the store buys fifty when he only needed one because he wanted to be sure to have enough, but then the store runs out before everyone has one and there are fifty unused masks in the one guy's basement.
Charging more is how you get him to not buy more than he needed.
That's one way. Another way is for the government to declare and emergency and order production, and to set rules about distribution like limiting people to one box at a time or whatever. Markets are typically closer to economic optimality over the longer run but not in the short term, and furthermore optimality is not always that important for many commodities that can be stockpiled against future emergencies.
You are talking about economics like a mathematical theorem when you know full well that economic behavior is an emergent social phenomenon and that people are not pure economic automata. This is disingenuous at best and dangerous at worst.
> Another way is for the government to declare and emergency and order production
Which generally doesn't have to be ordered, because producers are already inclined to produce more during high demand.
You might also want to worry about the business consequences of ordering suppliers of critical products to spend money increasing capacity on an emergency basis without increasing their sales price. With no way to recover their now-higher costs, what happens when you drive them out of business and then need them again next time?
> and to set rules about distribution like limiting people to one box at a time or whatever
Which fails because some people have a legitimate need to buy in quantity, but it's an administrative nightmare to determine exactly who those people are and each failure to correctly identify results in a large quantity of items not going to people who legitimately need them.
It also violates the social distancing principle. Instead of sending one person from an office to the store to buy a box for each person from the office to take home, now every employee has to individually visit the store and create a new opportunity to transmit or receive an infection with other patrons or staff there.
> Markets are typically closer to economic optimality over the longer run but not in the short term,
There is no principle that markets are more optimal in the long run than the short run. Market failures exist, but they exist where they exist and not where they don't.
A huge demand spike isn't a market failure. The higher prices cause markets to do exactly what you want in that context -- increase production and reduce hoarding.
> and furthermore optimality is not always that important for many commodities that can be stockpiled against future emergencies.
This only works if they actually were stockpiled ahead of time, in which case there wouldn't be such a supply shortage that prices would rise to undesirable levels.
It doesn't really seem worth engaging further with pseudo arguments like 'Market failures exist, but they exist where they exist and not where they don't.'
Yeah, right, government intervention and totalitarian control is the solution to all social problems... I very much prefer the free market solution of rising prices.
Even if the masks were actually being used properly, people who need masks the most after the sick, are the people we pay the lowest, retail workers, food service, people who come in contact with extreme numbers of people on a daily basis.
Well paid tech employees can work from home, take 2 weeks of sick days and continue to make thousands a week.
These people will come into work even if they’re anything short of dying because they’re more likely to live paycheck to paycheck when we don’t pay them enough, and the free market has decided not to give them sick benefits that we all benefit from.
The free market is actually externalizing the issue to all of at this point. Don’t give workers enough sick days and keep all that profit, but then when the workers end up spreading the virus as a result of their boneheaded policies, the public will suffer, and the government will pay dearly.
Free market under true emergency situations won't work. As we see with masks right now and we are nowhere near a true global crisis. Why do you think governments went to rationing during war time?
That was exactly the reason, if you don't do rationing in extreme events, people start to mass panic buy everything and then you would have people starving.
There's absolutely no "free market" anymore during panic.
I believe you, but is there a good example of a time when this happened and a bunch of people died of starvation? (I assume there’d be plenty of them, since rationing isn’t a very obvious idea.)
> That was exactly the reason, if you don't do rationing in extreme events, people start to mass panic buy everything
Which is what pricing is for. If people start hoarding then the price goes up and makes hoarding much more expensive. Not only that, it gives the people with a stockpile a financial incentive to put it on eBay and thereby make it available for distribution to other people. Unless they're prohibited from doing so, in which case they carry on hoarding.
You know what would the "middle ground" solution be? Government buying masks at those spike prices to give them away for free to people who need them. This way you get all the benefits: everyone gets a mask when they need one and producers get incentive to increase supply.
Now an interesting plot twist:
Those masks not only do not protect against coronavirus (because the virus is too small, and can get through), they actually increase the risk of infection (because they serve as virus incubators, especially when they become wet)
>The first guy in the store buys fifty when he only needed one because he wanted to be sure to have enough, but then the store runs out before everyone has one and there are fifty unused masks in the one guy's basement.
Maybe he won't give anything up because price might keep going up and whenever he needs the masks they will be so costly he cannot afford them.
Or maybe the price rise will give some party an incentive to stockpile masks because making money is a clear incentive instead of a more nebulous "avoid a health crisis".
People only don't sell things when the prices go up if they expect them to go up even more. That doesn't apply to temporary shortages at all. Either the demand will fall off over time or manufacturing will catch up to the demand, either of which causes the prices to decrease over time. Anybody who wants to profit from a shortage has to do it while there is still a shortage.
There is no end of this shortage in sight. In fact, the shortages in Europe are only about to start - the last batch of pre-lockdown container ships from China arrived to Europe earlier this week.
It is physically possible to manufacture things outside of China. Which is why higher prices are necessary -- it costs more to do that, but we want it to happen so that the supply increases.
The lead time to start manufacturing simple products like masks isn't that long. That puts a time limit on the high prices -- even if the demand stays high, supply catches up to it. (Compare this to, say, housing where increasing supply is constrained by zoning which prevents supply from increasing in response to demand.)
Tangent: note that masks are useless if you're buying just a few. They're disposable. No point in buying less than a box. And at current prices, few people could afford that.
The magic hand of the market will get poor people killed. That's what the magic hand does. If wealthy British are willing and able to pay more for Irish agricultural products that Irish peasants, the invisible hand does not intervene to prevent the famine/genocide. It just ensures Irish agricultural products fetch the highest profit in the open market. A large percentage of the population of Ireland dying as the result is none of the concern of the hand as long as profits are made in the process.
Ah yes, the famine caused by having to grow cash crops to pay rent to a foreign empire, leading to overdependence on a single food crop that provided several times the calories/acre/year of anything else. Definitely the magic hand's fault.
I am no expert on the subject, so please bear with me if I am missing something. But it looks like back then, people really believed the invisible hand will take care of things, and it didn't, and I would be surprised if it does in our case.
From Wikipedia:
The new Whig administration, influenced by the doctrine of laissez-faire,[11] believed that the market would provide the food needed, and they refused to intervene against food exports to England, then halted the previous government's food and relief works, leaving many hundreds of thousands of people without any work, money, or food.
Charles Trevelyan, who was in charge of the administration of government relief, limited the Government's food aid programme because of a firm belief in laissez-faire.[98]
The Whigs used the laissez-faire argument when they did not really have laissez-faire. Britain had high tariffs on corn and other grains that could have allowed Ireland and Britain to import food other than potatoes. Navigation laws also required only British ships to bring goods to British ports, which further reduced any import of food.
One year later, the British government did intervene by building workhouses to help house the poor tenant farmers. However this made the situation worse because instead of the British government funding the houses, they taxed the Irish landowners triggering mass evictions of the poor tenant farmers.
Consider for a second that you’re comparing an imaginary supposition (the magic hand) by a philosopher of the British Empire with the historical reality of that empire, and evaluate the circumstances again.
Yep, because the magic hand didn't do anything when the one wonder crop didn't grow anymore. It quite literally just let people die. The great irish famine is a fact.
Well then they better hire someone who reads the news. Great ROI on that employment contract. I could do that as a consulting gig, hit me up if you know any mask-making CEO and could connect me with them.
As others have pointed out, production is a bit slower to scale. The more immediate effects of letting prices rise are increased distribution, which can scale very quickly.
For just about any consumer good, a large amount of stock is sitting on shelves somewhere that doesn't ship anywhere, and definitely doesn't ship globally. Letting prices rise a bit will create arbitrage markets, which will get the product to where it is needed.
Yes, increasing price makes it so less people can afford it, but it also makes more supply available so more people can buy it. What use is cheap masks when only a small portion of the population can actually get their hands on it because of shortages?
Do conditions of perfect competition obtain in this market? Is there perfect information for all market participants? Are all offerings in the market perfectly fungible? Are entry to and exit from the market frictionless? Are all other conditions held equal? If these are not true, then your model of supply and demand is uncoupled from reality and will give wrong results.
Supply and demand ais an elementary model to explore the basic principles of price theory. It is a starting point, not the last word. Listening to people talk about it like an iron law of nature is like doing a high school math problem about how fast a car can get from A to B and thinking you've got the hang of autonomous vehicles.
> Do conditions of perfect competition obtain in this market? Is there perfect information for all market participants? Are all offerings in the market perfectly fungible? Are entry to and exit from the market frictionless? Are all other conditions held equal? If these are not true, then your model of supply and demand is uncoupled from reality and will give wrong results.
This is a red herring on the strawman's shoulder. Good. Grief.
I really think you would be much enlightened to listen to Thomas Sowell's Basic Economics audio book. It's really long, but covers this sort of thing just oh so well.
It will help you to answer questions like: how come people in the Soviet Union were starving to death while crops rotted in the field? Among many others...
The questions I raised above are the theoretical conditions under which laws of supply and demand operate perfectly. Thomas Sowell is a political economist who explains economics anecdotally and in rather rudimentary fashion.
I am talking about the rigorous microeconomic theory which involves using calculus is required to actually pass an economics course or analyze a commodity market. If you are not familiar with concepts like elasticity, substitution, or the difference between consumer and producer surplus then I suggest you look deeper into microeconomics.
> The questions I raised above are the theoretical conditions under which laws of supply and demand operate perfectly. Thomas Sowell is a political economist who explains economics anecdotally and in rather rudimentary fashion.
> I am talking about the rigorous microeconomic theory which involves using calculus is required to actually pass an economics course or analyze a commodity market. If you are not familiar with concepts like elasticity, substitution, or the difference between consumer and producer surplus then I suggest you look deeper into microeconomics.
The claim that economics requires "math" has no support - just follow the epistemology on the claim and it's a dead end. It is always stated matter-of-factly as if it is prima facie true. Social sciences have never been about maths outside of a very non-rigorous movement to convert social sciences into hard sciences.
For example, when I go to the store and they don't have what I want, do you believe there is an equation that I am operating on that instructs me in what to do next? If you truly believe this, then you believe in something akin to a religion - that there is some unknown but discoverable equation all of us make decisions with. If you don't believe this, then you cannot find that equations are how I am making decisions, therefore my decisions on how to allocate my resources are guided by something else, thus, microeconomics cannot be based on the maths.
It is also interesting you state calculus as if it is so hard. I haven't found evidence of this while I have seen people struggle more with advanced algebra than with advanced calculus.
Your statement suggests that Sowell somehow got through Harvard, Columbia, and University of Chicago without taking a "real" economics course, or that those courses were inadequate, or that Sowell is incapable of grasping these more advanced conecpts. These sorts of statements really just make you look like an ass, or worse.
BTW, your first sentence is nonsensical. Things that are theoretical do not "operate" because they are not in the physically existent universe, and economics attempts to explain things exclusively in the physically existent universe.
This is why people are against blind capitalism. Not everything is supposed to be unconditionally placed in the supply and demand curve. Price gouging is immoral, especially when people's lives are at stake.
What do you propose to replace it? The simple fact is that at this moment in time there aren't enough masks. How would you allocate them, and how would you persuade the guy with a box of masks in his basement (he bought them months ago) to let them go for cheap now?
You have a regulatory authority step in, and allocate the masks to people who need them (e.g. healthcare workers). Sales from individuals are banned, and said authority can buy them back from people who own them. Just like how the government buys back land or property if there is important construction that is to be built over it, a similar procedure can take place here.
What use are available masks if only a small portion of the population will buy them because of the cost?
Now apply the same market logic to a future vaccine and you'll have a situation where herd immunity will never be achieved because it won't be profitable to achieve it.
Edit: It's even worse than the above though. Those that won't buy expensive masks/vaccines are also likely to be those most exposed/vulnerable to the disease in the first place. Then, when they're on death's door they will need much more expensive emergency care at the nearest hospital. Letting the market make these kinds of decisions is how the US achieves such dismal health outcomes despite spending a fortune on healthcare.
> What use are available masks if only a small portion of the population will buy them because of the cost?
What use are available masks if only a small portion of the population will have them because of their scarcity?
In the short term, the amount of masks are the same. Pricing them higher doesn't magically cause masks to evaporate, and vendors aren't going to hoard masks when they can fetch a high price on the market. In the long term (when production ramps up in response to the increased price) the production of masks will increase, allowing more people in aggregate to have masks, even if it means that some portion of the population will be priced out.
The alternative is that the supply of masks stay the same in the short term and long term, and the masks is randomly distributed (at best) or held in the hands of a small number of hoarders.
Yes, many people will buy more than they need. But without a forced price ceiling, fewer people will buy even more of them in order to profiteer off an emergency. The former is suboptimal, but still better than the latter.
> The alternative is that the supply of masks stay the same in the short term and long term, and the masks is randomly distributed (at best) or held in the hands of a small number of hoarders.
This is an utterly false dichotomy and a big reasons why government exists and is actually useful. Governments can do things (and compel others to do things) that don't fall in the optimal spot on the supply/demand curve. If supply is limited masks should not be "randomly" distributed, but distributing based on who can afford them is probably not any better than random in an epidemiological sense. Should the first people to get vaccinated be billionaires or health-care workers?
>If supply is limited masks should not be "randomly" distributed, but distributing based on who can afford them is probably not any better than random in an epidemiological sense.
This appears to be a shifting of the goal posts. Your original comment remarked about how "Increasing prices on preventative medicine/devices is a great way to make sure fewer people use them", however now you seem to advocate for central allocation of medical resources. If the government is in charge of allocating resources, prices would be a moot point.
Yes, exactly! After reading through the replies here, I am dumbfounded by many people's lack of understanding of this basic concept of economics (especially given the usual level of intelligence among the HN crowd). "But the natural effects of supply and demand aren't fair in this situation because..."
Letting prices rise is the most fair and overall beneficial reaction in this situation. Even for those who can't afford the inflated prices in the very short-term (who wouldn't have access to them anyway due to limited supply), the rise in prices will help give them access to these goods at reasonable prices in the slightly-delayed short term and in the future when similar shortages occur.
I'm seriously blown away by the level of virtue signalling and mental gymnastics going on by those who don't get it, and it scares me that many of those same people hold positions of power to influence public policy.
It's not price gouging unless one seller got all the masks. It's called market forces. A lot of products were shipped from the middle of the country to the coasts where there was no stock, faster than any central distribution could achieve.
I'm sure people who needed masks were glad they got what they needed before this stupid ban.
It absolutely is price gouging if masks suddenly cost 20x what they normally do (or perhaps 'profiteering' would be a better term?); moreover, in conditons of undersupply, competition doesn't lower prices, because every seller can be confident they'll clear out their stock (as long as the price doesn't overshoot demand completely).
What about discouraging people from buying more than they need? If masks are 3x the regular price, I’ll probably try to buy just enough rather than buying twice as many as I need.
If someone buys the increased price it obviously means they couldn't find it in brick and mortar.
Also the world supply is short and no amount of lawmaking will materialize more masks. There's not enough masks for everyone and there won't be any time (very) soon, plain and simple. It takes a factory, not a lawmaker to increase the supply.
They might not have been able to find it at the brick and mortar because their neighbour bought out all the stock to sell on eBay.
Brick and mortar stores generally won't raise prices under these circumstances despite the scarcity, because it might create a long term negative reputation even if they can get a bit more profit in the short term. So there's an opportunity for arbitrage that eBay no longer facilitates.
You're not wrong. But the people in charge of the retail stores are not being irrational about this. They know what will cause their reputation to take a hit, and what won't.
Also possible that they know what will cause the eyes of the government to turn in their direction - anyone price gouging in a crisis must be evil, after all. And of course the first store to start doing this will get media attention, amplifying the negative impacts...
> Also possible that they know what will cause the eyes of the government to turn in their direction - anyone price gouging in a crisis must be evil, after all. And of course the first store to start doing this will get media attention, amplifying the negative impacts...
I'm guessing you're trying to be snarky with this bit?
> anyone price gouging in a crisis must be evil, after all
That's kind of text definition of "evil". Taking advantage of people panicking. Pragmatic, probably rich by the end of the thing, but still evil.
I think following supply and demand curves - whether that be Uber's surge pricing, gasoline during a power outage, lifesaving medicine outside of a crisis, or rent in SF - isn't evil.
Evil would be denying those goods to someone based on their race/gender/age. Or taking action to prevent more of the good from being made/delivered - which you might notice anti-price-gouging laws do.
No, my point is that if the stores raised prices they wouldn't be cleared out for arbitrage or hoarding.
You seem to think it's possible to eliminate all resale markets, and thus eliminate the arbitrage opportunity. Ignoring the fact that hoarding would still exist, I would say such a thing is essentially impossible. Which makes the only way to eliminate the price difference (supply and demand curves held static) to have the store raise prices.
It is possible to significantly reduce resale markets by going after price-gougers though. It doesn't have to be perfect to have the intended effect, and the threat of being busted is usually enough to push it to the edges. This assumes a certain level of law & order though, so in areas with thriving black markets the effect lessens.
Similarly, it's possible to reduce hoarding by putting a limit sold per customer. Not perfect, but helps. Hoarding definitely happens, but only certain goods are really things people realistically hoard.
There's another argument I'm not seeing brought up, but one that is key to the argument. The reason why we tend to have laws and regulations around situations where people are desperate is a moral obligation. These laws and regulations acknowledge the vulnerability of people in these situations - we are not homo economicus when our lives or those of our loved ones are on the line.
In the case of price gouging, it disproportionately affects the poor. I'm seeing a lot of comments coming from a place of privilege, where people see the upside of higher prices (more stock for them) and not the downsides (a person goes to the store to get some and cannot afford them).
I understand the different points being made, however this is hardly the first time this type of thing has happened or been debated.
> In the case of price gouging, it disproportionately affects the poor.
I'm all for more solidarity, but this statement, at face value, is pure oppressive communism. Being wealthy should give you certain privileges, otherwise there's no point in even trying to be better / smarter / more skilled / more productive!
Obviously we can argue whether or not any specific intervention should, or should not, affect people differently based on wealth (e.g. I imagine many people would be quite angry if there were traffic lanes for wealthy people, though they seem to be OK with it at airports), but your comment isn't arguing why this specific instance should be equally distributed (health & wellbeing generally isn't, even in EU "socialized medicine" countries - and that's a good thing too, because then the rich can afford to fund new research, drugs & medical procedures).
I think it's hilarious that your argument against communism (which nobody even suggested) is that it "oppresses" you by getting in the way of you being an authoritarian.
An understanding of the difference between simplistic textbook examples with a lot of constraints, and the real world. Please, read some scholarly economics papers, not just textbooks or ideological treatises. Actual economists are acutely aware of the messiness of the real world, the imperfection of their models, and the complexity of feedback loops and multi-agent interactions.
If you do, then it's because you are choosing to posture. There were no ad hominem attacks in my post, but an explanation of what was missing from your perspective and exhortation to broaden it with some specific suggestions.
Your suggestion was "read a few papers". Not "this part of what you're saying is wrong, and why", not "look at this paper that makes X argument", not anything of that sort - just "only someone who doesn't understand anything could possibly think that, so I won't rebut anything".
Incidentally, I think the consensus among economists that price gouging laws are bad is pretty strong, so I'm not even sure what sources you're suggesting I read. Econlib [0] has a piece on this, particularly on a survey of economists done by the University of Chicago Booth School. I'd expect their opinions on banning resale to be similar.
I'm not your personal tutor, nor am I obliged to gain your approval.
The Chicago school is famous for having a particular and extremely ideological point of economic view, and the blog you're quoting loudly announces its own firmly libertarian credentials.
You're right, you're not my personal tutor. Nor are you obliged to gain my approval. But when saying "you're wrong", a "why" is generally required to convince anyone - not just myself, but also anyone else reading the thread.
Yes, the Chicago school is biased. So is Econlog. But I was under the impression that their survey selection wasn't. If we're bringing up ideological biases though, the fact that your profile starts with "Fully Automated Luxury Gay Space Communism" might be relevant to this discussion about economics... (And I would say that this is not an ad hominem attack, since it's directly relevant)
In my country (Indonesia) masks and hand sanitizers have disappeared from all brick and mortar stores (medical equipment stores, drug stores, convenience stores, everywhere you normally can buy them) because speculators are reselling them online for 20x the price. The police has been cracking down on it but seemingly has no effect on availability just yet.
I totally agree that going too deep into globalization creates tail risks. Switzerland has very high tariffs on many foodstuffs for this very reason. They literally don't care if you bring in 50kg of gold into the country without telling anything to the authorities. But try bringing in 50kg of meat without a valid customs declaration, the cops will be quite angry. You can't eat money.
Retail establishments don't usually gouge nearly as deep as eBay sellers.
Also, the free market is why price gouging exists. It's a natural consequence of supply and demand coupled with speculation. The only solution the free market offers is that people don't support price gouging via resellers... Which is what eBay is avoiding doing.
They didn't jack the prices up, they introduced significant friction to the market.
Which means the market for masks bought and sold by individuals is less efficient. This will likely leave more masks for pre-established supply chains, and reduce the incentive for people who aren't part of these supply chains to buy up (or steal!) masks for resale.
These are almost all rent-seekers: They aren't going to make more masks, just obtain them wherever they can get them cheaply (e.g. by buying everything from a supermarket that hasn't jacked up prices nor introduced rationing, or from a thief) and resell them for a higher price. This also often happens in circumvention of existing laws against price-gouging.
There is no supply. It's a supply-shock-like type of situation. There are not enough masks for all the people that want them, let alone all the people. You have to wait for new masks to be manufactured. And I wouldn't blame the Chinese if they halted the shipments with their equivalent of an Executive Order.
You are correct, in my country in europe only ones who wear masks are medical professionals and even then not all of them. Nobody wears one when they get cold or flu and still decide to go out. So in my country there is no buffer at all and I assume that people watched tv saw chinese wearing them and heard that china made it mandatory to wear when going out which led to panic buying of face masks. Because local press and tv say it doesn't protect a healthy person, which is true.
I can see how it can be effective when every single person wears these masks outside, like china did, since it would prevent people without symptoms spreading disease as much, but in a situation when we can't supply everyone it is better to leave them for use by medical staff and people in need only.
Basic price theory only obtains under specific conditions like perfect competition, perfect information, fungibility of commodities, and zero friction for market entry and exit.
Yes, the theory only applies perfectly under those conditions, but real world experience is that the theories are quite robust even when all of those "perfect" preconditions are far from perfect.
This is what makes the theories so practically useful in the first place!
Studying how and when the theories break down when "perfection" diminishes is a very interesting part of Economics.
> So they jacked up the prices from high (few people can buy) to infinity (nobody can buy).
If nobody can buy, the sellers don't sell any (and lose potential profits), so they'll be forced to sell for more reasonable prices. See - no heavy-handed intervention needed, and market prices naturally stabilize to a fair price accounting for what is available and how much of everything else a person is willing to sacrifice in return for the product of interest.
The price is reflective of an underlying economic reality. Banishing the price doesn't fix the reality. In fact, the reality could be fixed through the organic incentives created by not engaging in censorship.
Most services exist to ameliorate a want. That is to reduce misery. Your statement basically means people shouldn’t profit. But if they shouldn’t profit what incentive will they have to reduce misery? It seems clear to me that if anyone is guilty of profiting from misery it is doctors, whose high salaries are inexcusably tied to misery. Truly, they should donate their time and live in a tent outside the hospitals they work at, and accept only kitchen scraps for compensation.
Profit is good, if you are in the business of producing a good or distributing a good to the intended customer, that is, if you are a manufacturer or part of the normal retail chain.
Profit is not good, if your business is basically black marketing. That is, removing a product from its normal retail chain just so that you create a shortage and then sell with a profit due to the shortage created by you.
And with medical supplies, we need to make sure that all those, who are in desperate need, get the needed supplies.
The two cases aren't really comparable. In the case of epipen, the price is high because manufacturer has a monopoly, and is using that monopoly to hike prices. With the masks, the prices are high purely because demand far outstrips supply. Those ebay sellers hardly have a monopoly, so I expect them to be priced close to the market clearing price, otherwise they'd be either be selling out (if below) or have zero sales (if above). In a perfect world, any profits would be redistributed back to society, but that's more of a taxation problem than a market one.
I wish this were true but instantly I think tobacco, alcohol and gambling. Also where do you draw the line? Should Walmart be able to charge so much to a struggling single mom who has to choose between eating herself and feeding her baby? There is no easy solutions to this but I ultimately think big corporations try and maximize their profits at any cost every single day and no one says Walmart or whoever sells these masks should sell them at cost.
What is the cost of a mask when the capacity of the existing factories is tapped out and (in principle) one more mask requires a new factory? It's fuzzy when that point comes exactly, but it kind of has to exist. If you want to say the cost of masks is exactly what current operations require, then that one mask must be millions and millions of dollars. So who pays for it?
The panic buying has also trickled over to isopropanol/IPA. I needed to buy some anyway and I picked up a litre earlier this week for about £6. At the time Amazon had a lot for sale, now they're all out.
Given that consumer hand gel is basically just IPA diluted down to 60% (see edit), I also bought a few tubes of aloe vera to mix it with... I suspect a lot of other people had the same idea.
It looks like there's a lot still available on eBay, so if you really want to by sanitiser, you might as well make your own. Just remember to dilute it a little, 99% won't do too much damage, but it's not particularly kind to your hands if you rub it in on purpose. It's also extremely flammable!
Interestingly Wikipedia seems to suggest that you should use at least 90% alcohol to kill flu. And that lower concentration formulations are potentially ineffective because they evaporate before killing stuff off. Hospitals use 70-95%. Obviously the higher you go, the more flammable things get.
> Based on our efficacy data, we do not consider any of the tested alcohol-based hand gels to be suitable for hand antisepsis in the health-care setting because their antimicrobial efficacy may be insufficient to prevent the spread of pathogens. Future ethanol-based hand gels used in hospitals should contain at least 80% (v/v) ethanol as the active ingredient and should be as effective as the EN 1500 reference alcohol within 30 s.
For viruses, alcohol rubs are considered better than soap+water because it's harder to screw up alcohol rubs and viruses are easily inactivated.
The big problem with alcohol rubs is that they're useless against spores, so you can still end up with a C. Difficile problem, but that's usually more of a hospital issue.
Of course. If you throw some bacteria into a gallon of hand sanitizer then put it all in a blender to ensure good mixing, I am certain it will. But that’s not how you’d actually use it, right?
Of course bacteria have resistance. Bacteria mutate, some random mutation will be resistant to a given antibiotic, and that new strain will propagate and dominate.
Lots of people fall to understand that, which is why we have antibiotic-resistant strains of gonorrhea in the wild now.
I have the same "Coronavirus Protection Mask" in the screenshot and I got it from Amazon a year ago. It barely works for keeping dust out of my nose when I am using the table saw. I feel comfortable saying it will offer zero protection for airborne illnesses.
These things are just a charcoal pad on the inside of a mesh with very large holes. If sawdust can come in my cough can go out.
And I am not saying all masks are dumb. Just this specific one when it is marketed as protection from the current problem. It is fraud.
I spent six hours on the cancer floors of the local hospital the other day getting injections and we had to wear masks in the lobbies. It was the only part of the hospital I know of that required them. But it is the cancer floors and people have very little immune systems. When I was a few months into chemo my WBC count was under 1200. So low they couldn't do anymore chemo.
So every little bit helps. And perhaps I am a bit angsty thinking that people are using the masks for no reason when there are people that actually need them. Again, I am not talking about the ebay garbage mask. I am talking about the ones that actually could help our sickest people.
ALSO be aware masks like that have one-way valves to make exhalation more comfortable. They're just a little rubber flap so the exhaled air is not filtered.
So construction mask like that might catch some inhaled droplets but won't do protect others from exhalation if the wearer is ill.
I would imagine they will offer a similar protection to a surgical mask, which also cannot "filter" outgoing air as there is no seal; it's just a line-of sight protection, perhaps helped somewhat by absorbing moisture droplets. A piece of tissue paper inside the valve would probably have the same or better effect, if you could persuade people to do that purely for the benefit of others.
FWIW I looked at this a week or so ago and the NHS (England I think), recommend the Alpha Solway 3030v (https://www.nhsggc.org.uk/media/251465/nhsggc-hs-guidance-on...) for FFP3 masks. But the mask users have to have training, and there are testing kits to check for correct fit. So, it seems there's a degree of skill needed to use them properly. They're also a single use product, up to 8 hours AFAICT.
At the time, last week, there were no masks available in the UK except one or two non-mainstream suppliers [and no 3M FFP3 masks that weren't at gouge prices] - the sale price on ebay/Amazon was about 5 times the retail purchase price I could get. For IPA70 the sale price was about 10 times what I found.
I got several 3M 1870's just in time then. Heh. They weren't that expensive. It was a pretty good deal actually.
To play the devil's advocate: price gouging is market efficiency because subsidized products in times of scarcity can be over-bought and resold for more. It reduces demand to those who actually need it.
To play the angel's apprentice: price gouging is wrong when people who aren't made of money need a particular product and need to use it now (inelastic demand). The rich can also bid a product up beyond what a poor person could afford, and always prevent them from acquiring it.
I think in this situation, it might be better for the federal government to crack open the enormous strategic stockpile, distribute masks to make people chill out and seem like they're doing something on-the-ground. Even if it's ineffective if worn properly, the emotional support value may make the difference in mood and trust.
And have money to afford it, something which is not accounted for in the simplistic models of supply and demand that people are promoting with religious levels of certitude up and down this thread.
So it would seem that the real problem is wealth inequality (again!) rather than "price gouging" as such. If everyone had the same purchasing power, there would be no ethical problem whatsoever with rising prices in the face of increased demand and limited supply - your willingness to pay would accurately reflect how much you needed the product.
Essentially creating a command economy for a particular good is missing the larger picture.
It's a lot simpler to create a command economy for particular goods under emergent circumstances than to reorder the entire economy such that everyone is resembles homo economicus.
Command economies are fallible because they are run by humans with varying levels of trustworthiness and accountability. But they have their uses, and are often far mroe efficient than trying to automate the human factor away completely and live in a idealized model.
People should be wearing these masks in public. I’m not sure why this is being so actively discouraged.
You don’t know if you’re infected. You may be asymptotic for days. That’s why we should be wearing face masks — to prevent us from accidentally spreading it when we’re sick.
"Our first priority is to ensure the safety of our employees and customers around the world," an eBay spokesperson told CNBC in a statement.
...by restricting the sale of items whose purpose is to increase the safety of their users? The inflated prices are bad, but making it harder to acquire such items --- even at higher cost --- seems an even worse situation.
The spokesperson added that eBay is also "taking significant measures to block or quickly remove items" on its marketplace that make unsubstantiated medical claims.
On the other hand, I think this is a far more sensible thing to do.
> The spokesperson added that eBay is also "taking significant measures to block or quickly remove items" on its marketplace that make unsubstantiated medical claims.
> On the other hand, I think this is a far more sensible thing to do.
it's sensible as long as the unsubstantiated medical claims are actually unsubstantiated. There's been a lot of stuff going around (including from the CDC) about how masks don't actually protect you from coronavirus and things of that nature - whereas the truth there is that the right kind of masks will protect you if used properly. But there's a limited supply, and telling the masses that they don't work makes getting supply for hospitals easier...
I live in London.As of at least last week,one can't buy masks or hand sanitizers. This is a country of 60M people.Yet, when I commute to work,I see probably 1-2 people with mask,which makes it about 0.1% of all people I see on daily basis.So my question is,who has all the masks and who's wearing them?
The best thing that can happen in an emergency is to let sellers increase prices. When gas is scarce, let the price of gas go up. This signals to people that they should carefully ration the supplies that exist, and only let the people willing to pay the most get it. Supply and demand solves the problem itself.
When you arbitrarily constrain prices, you make people wait in lines and clever entrepreneurs stock up to sell at inflated rates on the black market. Terrible policy!
I don't think it's as black and white as that. If demand exceeds supply, you have to have some means of making them match. But it doesn't have to be price. You just have to accept that it will be something and not pretend there is no issue. In WWII, people got through it with rationing.
In the long term supply and demand solves the problem, yes, but in the current situation that is not necessarily true. Raising prices incentivises people to hoard masks, buy up all masks they can from retail for lower prices, steal masks, etc to sell at a profit. By the time more production is available the outbreak is already over, thus the amount of masks is essentially fixed to what we have.
"Who is willing to pay the most" is not necessarily the best metric of dividing essential goods in a crisis. What if nurses and doctors don't have access to masks because a few people that don't even need them buy up all supply, to then price gauge people later?
This will simply cause a bigger panic buy next time. It would have been much better for retail to raise prices until they are always stocked, that way at least no one will have to pay shipping and eBay fees. If government wants to have enough for healthcare workers, then pay up, they can get as many as needed.
It might have been better to set a maximum allowed price per unit rather than to make the supply evaporate.
To be clear, I think what a lot of these vendors were doing was just immoral. I've been buying these masks for years for our shop. Normal pricing is in the range of $12 for a box of 20 (or something like that).
I would allow a 2x to 3x premium and that's that. I don't have an issue with someone who has an inventory that might be very difficult to replenish getting a reasonable premium. That's OK. When people take an item like this and use an emergency to charge $50 for a $0.50 product, well, that's just wrong.
Mine was not an absolute legal opinion but rather a moral/ethical observation.
> The only people buying it are ones who consent to that price—same as any other transaction.
Of course, and I agree 100%. That said, the act of taking advantage of an emergency situation is, I would hope you agree, morally wrong.
When might high pricing be OK?
Well, one example is if someone, through great trouble, was able to purchase a supply of a much-needed item at a high price and wishes to make a profit. If they paid 25x normal price and that, plush shipping, their time, packaging, taxes, whatever, is their cost basis, it might very well be OK for them to sell that item at 50x normal price.
Context is always important.
> How can someone be a victim if they want to engage in the trade, and explicitly chose to do so?
If someone is in a personal emergency, even if it's just perceived, that they need to protect themselves against a virus, their consent is no longer freely given. It's coerced consent, not by the seller, but by circumstances. In plenty of european countries, price gouging is illegal for that reason. You can't charge what you want, especially in situations like this.
No third party has any business telling the first and second that they can’t transact at a price to which they both agree (or threatening them with violence if they ignore them and do anyway). Governments that do so are infringing upon their rights. All this feel-good sort of law does is make the thing that they feel they need, which would otherwise be expensive, now be totally unavailable. That doesn’t benefit the buyer or the seller, and in fact makes the situation worse for the buyer who it supposedly wished to protect: it just makes some busybody who is not even party to the transaction feel good about themselves.
There’s no such thing as “coerced by the circumstances”. We all need to enter into transactions to not die; we buy food, water, medical care even outside of emergencies. Sometimes those things are expensive due to supply and demand. This instance is no different.
If a doctor were to ask a patient for 100k$ or they won't do a life saving operation, then the patients consent is fabricated. Their need for a life saving operation is the third party.
I think you misunderstood what I mean by third party; it's not necessarily a person, legal or natural, interfering with the transaction, it can be a force of nature, circumstances and many other things. It won't go away because you don't like it.
And yes, there is such things as "coerced by circumstances", see above example. Normally, when you buy food, water or medical care you're not in a life threatening situation or perceived or real emergency. If you are then you cannot give informed and free consent, simple as that.
The only way we’re going to get more masks is to pay manufacturers a premium up front and then absolve them of legal responsibility for the mask not working.
Prices are high because demand is high and supply is low. Demand isn’t going anywhere so the only answer is more supply.
I feel like starting a business for the express purpose of profiting off of others abusing a public panic is going to end badly for all involved. It is immoral. Not illegal, just wrong.
To me the best type of entrepreneurship is one where everyone wins. Plus then you can sleep at night.
Letting prices rise is one way to increase production in a hurry. If the mask producers only get to make the same profit margin regardless of demand, why bother fronting the money to increase stock or investing in extra storage space, if there is no guarantee they will be able to recoup those costs during black swans?