On March 1, the day after the first coronavirus death in the United States, brothers Matt and Noah Colvin set out in a silver SUV to pick up some hand sanitizer. Driving around Chattanooga, Tennessee, they hit a Dollar Tree, then a Walmart, a Staples and a Home Depot. At each store, they cleaned out the shelves. Over the next three days, Noah Colvin took a 1,300-mile road trip across Tennessee and into Kentucky, filling a U-Haul truck with thousands of bottles of hand sanitizer and thousands of packs of antibacterial wipes, mostly from “little hole-in-the-wall dollar stores in the backwoods,” his brother said. “The major metro areas were cleaned out.” Matt Colvin stayed home near Chattanooga, preparing for pallets of even more wipes and sanitizer he had ordered, and starting to list them on Amazon. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic. https://www.yahoo.com/news/17-700-bottles-hand-sanitizer-155735689.html Some of you will complain about what these brothers did (price gouging, scalping goods, opportunistically taking advantage of an emergency), but this is the free market at work, and I believe it does serve some beneficial purpose. At first glance, this might look like one of the flaws of capitalism, but I think with some deeper analysis, we will be able to see the functionality of the invisible hand. Why didn't the stores themselves raise their prices, to capture maximum profit? Ideally that's what should have happened. When those stores did not raise their prices in accordance with the increase in demand, that leaves open the door for hoarding. Prices are one of the ways to allocate scarce goods. Higher prices will be an incentive for one person not to just go in there and buy loads and loads more than they need. By buying up all the goods and reselling them at a higher price, these brothers helped, in a way, ensure a more even and equal distribution of the scarce emergency goods. The second thing some of you might take issue with is, why should the store itself be allowed to price gouge in an emergency? Well, that's one of the perks of running a business. If they can gain greater profit during an emergency, then they will be able to offer lower prices the rest of the time. And the potential to make high profits during an emergency can act as an incentive to keep larger amounts of merchandise in inventory than the business otherwise would. This can end up benefitting the consumers. We know that supply increases in proportion to price, and so if a business can charge higher prices during an emergency, there is likely to be a larger supply, the business will have kept more emergency goods for sale, for such an occasion. The last reason is that if businesses can charge higher prices during an emergency, they can also pay their suppliers higher prices, and if the suppliers get paid higher prices, they can provide the goods faster, and the business will be able to restock shelves. Those who complain about price gouging during an emergency don't really understand economics. Sorry, but a business has no responsibility to stockpile all the goods you will need in an emergency, for your convenience, to just buy them like you would in a normal situation. A business would have to stockpile a lot of goods to fully meet the demand in an emergency, and by its very nature, emergencies do not happen that often, so it wouldn't make much financial sense for that business to stockpile things just to be ready for an emergency. Not unless there was lots of money to be made. It's actually pretty economically expensive to prepare for something you will most likely never need, or only seldom use. At that should be reflected in the prices. Otherwise the business could have paid lots of money for goods it will never be able to all sell, and meanwhile those goods could be sitting there taking up valuable inventory space for years. Many will not realize this, but there is an economically big cost to store things on site. (If that wasn't the case, renting a storage unit would be a lot cheaper than it is)
Utter drivel! Economics informs us of two things. First, its typically irrational to 'price gouge'. See the behavioural analysis into price rigidity, where the laws of supply and demand do not operate because consumers act aggressively against unfair practices.Second, economics has always understood that efficiency and equity must both be considered. To ignore the latter is to spread deliberate misinformation over what economic analysis describes.
What is the point of having a 'free hand'? Humans make up the economy, so what's the point of it? It's to ensure the good of society. Or more specifically political institutions. But that's besides the point. We want to have a market that is efficient at distributing goods, services, ideas, peoples, etc. throughout society. A poor person can rise to the top, and the top can fall. It's this flow the OP misses out on. A market is a flow of power. It's social control. But when we have disease, we don't have an efficient distribution of goods because money is not a sign of efficiency of distribution, nor value for distribution. It's a debt people owe to other members in the society that has not been paid yet. A poor person who deserves and would be more efficient with the hand sanitizer in this case but is denied due to lack of funds does not make a free hand. It's just taking away the facade of the "free hand" and assuming normative values based on money. A person deserves the good/service because they can do whatever they want with the debt. At this point in time the market is not a tool of freedom, but of social control through the mechanics of the system.
Reiver, you do understand that even in the case of price gouging there is still competition? If you think it's so profitable, why don't you open a business designed to garner profit from stockpiling large amounts of goods for an emergency? (That was kind of sarcastic and rhetorical) Obviously it wouldn't be that profitable, would it? And thus it justifies price gouging. You anti-market people are all emotion in your thinking. You seem unable to see the bigger picture and wider logic. If you think businesses are ripping people off, well guess what? Anyone can start a business. Equal opportunity. There's plenty of competition, this is not a monopoly. Stop placing all the blame on the business. That's just a pathetic appeal to emotion. The business doesn't owe you anything. (other than honest exchange) Go buy an insurance policy yourself if you have a problem with it. If you don't like the risk, you have to pay for it, one way or another.
Besides, we know that when we try to implement price-fixing, it just leads to shortages of supply, and makes scarcity of goods even worse. Just one example: If a toilet paper factory is selling rolls of toilet paper for 1 dollar each, and suddenly it has to double or triple the output to keep up with demand, caused by a panic, the factory is now going to have to sell that toilet paper for 2 or 3 dollars each, to make a profit. It's not cheap to suddenly hire more workers or buy more machines, especially when that increase in demand is very temporary. It's a complete ignorance of economics. Price gouging is good. Those who complain just want something for nothing. Typical anti-business entitled attitude.
Two aspects. First, price rigidity is competition's response. You pish off the consumer you will encounter long term damage. Second, equity must be considered in all market conditions. This is grunt. I'm far from anti-market. I am stating something much more simple: You don't understand economics. Your hard right wing outlook has naff all to do with economic reality. More aimless ramble! I've referred to how business won't necessarily exploit the laws of supply and demand. I've also stated that, as you have ignored that reality, your "let's celebrate price gouging" comment mixes hot air with cretinous non-economics.
update on the original story in the article: The two brothers are now stuck with 17,000 bottles of hand-sanitizer after Amazon removed their listings for "price gouging". https://wgntv.com/news/brothers-buy-17000-bottles-of-hand-sanitizer-before-amazon-pulled-sales/ If they cannot find somewhere else to sell them, they may be stuck with the surplus and take a huge loss. However, ironically, Amazon by delisting them has made it even harder for consumers to be able to buy any hand sanitizer, even at inflated prices.
Reiver, isn't it true that if you don't let the businesses reap the benefits of price gouging, the prices will be a little bit higher the rest of the time? Trying to ban price gouging is a little bit like forcing the consumer to buy insurance for a time of emergency, isn't it? So you could essentially do the same thing if you were able to just buy a special insurance policy, isn't that correct? (instead of slightly higher prices, your money would be going to pay premiums, and the insurance payout could later be used to pay the inflated prices during an emergency) I'm just saying, there is theoretically a free market way for you to get what you want.
A cretinous question. Businesses already have the opportunity to price gouge. They don't as its irrational pricing that would lead to long term damage to the brand. As I said, you're clueless about the economics!
You don't understand competition, do you? If a business is so profitable, and you think they can rip so many people off, why not start your own? I think you'll find it's not as easy, or as simple and easily profitable as you imagine, in most cases. Price gouging can also allow businesses to recover faster after a natural disaster, if there are damages that have to be fixed.
Is this why you think businesses don't raise prices higher than they are? I really think you are just trying to pull stuff out of your hat now.
You don't. Integrity of the brand is everything. You have a semi-Econ 101 understanding of supply and demand. You then use that to make ridiculous right wing comment. Its pathetic.
In some cases. In other cases people don't care about the brand. I'm not buying your argument here. No one, or very few people are going to avoid buying a brand just because that brand price-gouged them during an emergency before. "Customer loyalty" is mostly a thing of a bygone era.
Any rational businessman knows that exploiting such a position is long term doom. Its only the non-branded that try to exploit the situation. They're rent seeking scumbags
