$5000 per violation of price-gouging in CA (opens in new tab)

Jesus. Yeah, it's sick. There's another story along the same lines, to the tune of $70k in disaster profiteering:

https://abc14news.com/2020/03/14/canadian-couple-make-more-t...

If I'm an 80 year old with a heart transplant, I'm happy they're doing this!

> People hoarding aren't trying to create artificial scarcity

https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...

> On March 1, the day after the first coronavirus death in the United States was announced, brothers Matt and Noah Colvin set out in a silver S.U.V. to pick up some hand sanitizer. Driving around Chattanooga, Tenn., 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.”

> People hoarding aren't trying to create artificial scarcity. They are buying because they anticipate scarcity, and want to either (i) be prepared, or (ii) profit from resale

How would (ii) be a profitable activity if buying in bulk wasn't creating artificial scarcity? I mean, I guess you could argue that the scarcity isn't "artificial", but like, when someone is literally buying more hand sanitizer than they could possibly want to actual use themselves, that seems pretty artificial to me.

Higher prices may encourage hoarding, as people might see the higher prices as a sign of scarcity and want to buy as much as possible before prices increase further or stores run out.

I believe the poster was referring to bad actors who have tried to buy up all the local supply so they can resell it at higher prices, not people just stocking up a bit on toiletries for their personal use. Yes, the latter can also cause a shortage but that’s not the cause of the ethical dilemma here nor is it the motivation for price gouging laws.

If you know your actions are going to lead to shortages and you pursue them anyway to make profit (rather than meet your minimum personal needs), then you're absolutely trying to create it.

> If anything, I would expect higher prices would discourage hoarding

This is false. We are seeing artificial shortages due to hoarding that has already occurred. Higher prices would encourage hoarders to profit from their hoarding. I think it’s fair for people to stock up on a few weeks to a month’s worth of food and toiletries to avoid unnecessary trips to the store until they need to stock back up again, but if a hoarder bought way more than they’ll ever need and they can’t profit by selling their wares at higher prices, then they might as well just give them to those in need, or be left with a lifetime supply of toilet paper occupying their guest room.

The stores will restock. This is not a shortage due to production deficits. This is just people taking everything off the shelves as soon as they are restocked. These stores are just going to keep restocking and the panic buying will subside.

You neglected to mention that when people see fake headlines about toilet paper scarcity, there's a nontrivial percentage of people who see that as an opportunity for said arbitrage.

There's two kinds of hoarding happening here: fear-alleviating and profit-seeking, which allows the profit seeking form of acquisition to be possible. Several weeks ago, it wouldn't have been feasible for someone to scoop up the entire market. Profit-seeking acquisition is however both a self fulfilling prophecy for the fake headlines about insufficient production, and a means by which the people seeking these products to alleviate fear have their fears justified.

So is your solution "good on them, they're taking advantage of people's fears to help make the rumors true?" Just what price do you think toilet paper should be right now in stores?

The idea that the correct solution to this is that supermarkets should be charging the same as the profiteering hoarders (say $20 for a small hand sanitiser and $40 for a pack of toilet rolls) is totally insane to me. This isn't some mythical free market model in a textbook, this is the real world, where real people live. Luckily society in general, through its laws, social judgement, etc... agrees to some extent that this level of greed shouldn't exist.

Demand may have increased for lysol, but it hasn't for TP. TP is mostly in short supply because people are afraid TP is in short supply.

The best solution is to increase production to the point where all those hoarders are left with tons of worthless inventory.

Toilet paper is produced locally (since it's very expensive to ship from overseas), so the logistics and production costs for TP aren't likely to have changed much as a result of COVID-19. We don't require employers to provide paid sick leave so the hourly wage people doing production and logistics for the TP also aren't costing the employer more than before, and they're probably showing up sick like usual so they won't be dealing with staffing issues.

At present TP demand is simply higher than normal (from panic) and manufacturers are having to scale up. This is all avoidable.

https://www.forbes.com/sites/amyfeldman/2020/03/12/how-kochs...

The delivery guy I talked said his route was easier on Friday because of all the Work from home. What increases in logistics costs are you referring to?

> One could say “we don’t want more price discrimination.” But that is a choice to prefer shortages over price increases.

Except we're not really limited to only two options. Rationing might be an unpopular option, but it works just fine.

I agree with the approach but not the instances. 1 pack of toilet paper lasts a good while so that's OK. 1 pack of pasta per day means you have to go back to store every day and expose yourself and others to danger.

But if we created it at the dramatically and artificially increased demand that it has right now, it would be disastrous for that industry once this panic subsides. Imagine the increase in infrastructure these companies would have to build to keep up with this fake supply. The workers, the real estate, the building of supply chains and machinery. Now imagine what happens to that industry when suddenly the market's demand tanks back to a reasonable level, and there's suddenly not only far more capacity for production that is now unprofitable, there's a huge backlog of supply already in the hands of consumers.

This situation is just as bad for the manufacturer as it is for the consumer.

The problem is also with the industry itself, particularly if it's perishable. If this continues much longer, there's going to be a point (and perhaps it's already there? We don't get numbers about capacity - though I'd love to see it if there are numbers available!) where these companies reach peak capacity, and would have to incur significant investments in order to scale: investments that would become a detriment once the market comes back to normal, particularly if everyone has a glut of stored supply by the time this has ended.

> Perhaps the law we need is one to control hoarding behavior or the rate of change.

You know what would control hoarding? Higher prices.

>Perhaps the law we need is one to control hoarding behavior or the rate of change.

Aside from an authoritarian system of governance where all purchases are tracked, and one must only purchase their "allotted" amount of goods, how exactly would one control hoarding?

i hope you are not proposing such a dystopian future.

> The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it. The hoarding profits are a charge to the rest of society for a more efficient distribution of the item compared to 0.

> What bothers people here primarily is that hoarders made money while everyone else is suffering.

No, what bothers me is the assumption that "higher desire" means "more willingness [and ability] to pay," and that "more efficient" means "assigned to the people with higher desire." For reasons of life and death (which I, personally, find more important than the principle of a free market), I think a "more efficient" tool should be one that distributes to people with higher need, and need is generally not correlated with ability to pay. It may even be inversely correlated: I as a tech worker can just stay home for weeks, and I haven't needed a drop of hand sanitizer. Someone who drives buses or makes hamburgers can't do that and must be out in the world for their job, and their jobs pay them a lot less than my job does.

So, government rationing would be an "efficient" solution in my definition, yes, but there's a milder option here: use the government's influence to artificially prevent the price of the product from rising. Then there's no incentive for people to buy large quantities with the purpose of reselling it, and it's more likely that everyone will buy the small amount that they need.

>To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero.

This is pure ideology. Do you have any evidence that a single person buying 10,000 masks from every hardware store in an entire state has no marginal impact on the scarcity of a product? Basic math would suggest this is not the case.

Even with #2, I worry that people who are short of money would sell their allocated hand sanitizer to pay for more urgent needs (rent, food, fuel), so we'd end up with an allocation similar to #1, but with higher transaction cost.

> To a very good approximation, the marginal impact of any hoarders on the scarcity of a product is zero. Hoarders are not trying to drive scarcity themselves, they are trying to buy a product now because they think the price will rise, but they're not trying to make the price rise by buying it. The distinction is important!

Are you sure? https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...

"Mr. 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."

> This completely ignores the fact that the cost to produce a product is not a fixed amount, but rather that higher prices induce producers to make more product sooner.

How will they make more product sooner? By expanding their businesses - making new factories, procuring new manufacturing machinery, hiring new workers? What happens when demand reduces, and they're back to not only having a normal amount of demand, but having that further reduced by the glut of supply - supply of a nonperishable good in particular?

We have certainly fallen back on rationing during times of emergency in our society - even here in America. If it comes to that, I know many people will find it distasteful, but your point of:

> The higher price means that those who demonstrate a higher desire for an item (by their willingness to pay) end up getting it.

Is unfortunately the truth (though it's interesting that you chose to phrase "ability to pay" as "willingness to pay" - that discounts the fact that many people have a high desire for these items, but could be forced to choose between them and other items needed for basic survival), and left unchecked it will result in a pretty quick reversal of the "rising tide lifts all boats" argument for Capitalism if this situation continues long enough. It'll be pretty hard to argue that the free markets help all Americans when only people who can afford to do so can wipe their ass, or have access to basic health necessities.

Yes, that is exactly what some people are doing, and what has quite a few posters justifiably angry. It may sound ridiculous to you, but That doesn't mean there isn't another person out there willing to do it.

It is also not likely to work beyond a few days unless you have the means to continuously buy all the toilet paper.

Check ebay and equivalents, kijiji just had to go on record that they were banning sales of toilet paper, sanitizer, etc.

"No, you can't have more pie. You have had enough already."

Literally any exasperated parent who has to deal with little children having a tantrum because they can't get what they want.

Yes, that sounds harsh, but it's exactly how this works. Your statement is simply saying that society - you, me and everyone - should obediently and without criticizing enable those who can't cater to their own emotional needs; those who don't know how to deal with their own drive towards self-gratification; those who haven't learned to not indulge in their own irrational fears.

People don't need toilet paper, they need to talk and understand that hoarding is a dysfunctional way of approaching their own fears about the future. And that hoarding - ultimately - is a self fulfilling prophecy as it puts unnecessary pressure on supply chains and creates even more unrest and fear.

That's why your comment is not constructive nor even remotely funny.

We're society, and we value needs over wants.

Might as well just give up on society with that attitude.

You could, alternatively, convince them that they don't want that much toilet paper. For instance, convince them that stores will not run out of stock and that they will be able to go to stores. This is the normal state of the toilet paper market. The problem here is not that we've suddenly been possessed by demons who want infinite toilet paper, the problem is that people are making rational decisions based on actual facts on the ground changing. Some of those rational decisions are "I'm worried I won't be able to get what I need because I hear that stores are running out." Other rational decisions are "I think I can make a profit on this because of upcoming scarcity." ("Rational" is not a value judgment.) If you can prevent people from believing those "because" clauses, they'll stop demanding it.

Also, price-gouging laws do not "stop the market from giving them what they want." If anything, price gouging does - if someone who has $100 in savings wants a year's worth of toilet paper, they're less able to successfully get it if the market can run unchecked. It's true that an unregulated free market is good at getting products sold at the best price for the sellers - that's very different from giving people what they want.

Really? Regardless of the consequences? What becomes of that toilet paper when this fear has subsided? What becomes of the companies that had to scale production, create new factories, hire new workers etc... when the existing glut of supply is not only so much that those new facilities are hurting them, but also that it has decreased the demand for their product even with normal production capabilities?

I would argue that the supply/demand pricing isn't responding fast enough to the hoarders. If the price was fully elastic, as people began to hoard lysol wipes, prices would rise on the hoarders and make it much less profitable for them. But prices aren't rising correctly, much like an artificial price ceiling would do, making it possible and profitable for hoarders to create a shortage.

>"Vancouver couple exploits pandemic by hoarding Lysol wipes and charging double to resell them."

aren't they doing a public service here? I grew up in the shortage driven economy of USSR and have the hate to speculators and price gouging ingrained into my brain with the milk of the mother, yet hear me out - the consumption of the Lysol wipes has increased while the production stays pretty much the same, and the producer and big distributors and retailers aren't willing to increase the price while the price increase is really necessary to adjust/optimize for the new equilibrium between the new increased consumption and the same production levels, otherwise there will be shortages - similar to CAP theorem you can have either price control or availability (in my experience USSR with price control and total shortages and later, in 199x, Russia with freed prices and immediate availability of everything are direct experimental confirmation of that - you had to see how sausages and everything else magically appeared on Jan 1, 1992 in the just yesterday empty stores, granted it was 3x of the yesterday's fixed price, yet it was really available at that 3x price while yesterday at that nice 1x price it just wasn't there). Thus the price gougers like that couple de-facto do necessary job which the producers/distributors/retailers aren't willing to do.

Pictures of empty shelves on social media is causing panic and driving more shortages. This is a lose-lose situation for gov interference. This sort of punitive response will always be far too late or too little to be effective anyway.

The markets will respond far faster with supply than setting price ceilings and fining random opportunists will.

So few people question whether it will actually work in the real world before asking if in an ideal scenario it is an effective idea.

I mean what’s going to happen next time? Are they going to lock up all the TP and ration it out on first signs of any sort of epidemic or other causes or panic? Because that’s when the hoarders and grey market guys were already stocking up.

Letting supply and demand determine prices doesn't necessarily redirect goods from poor people to wealthy people; it redirects goods towards those that actually need them, because those people are willing to pay the higher price. If we're talking about someone living paycheck to paycheck who really can't afford toilet paper being 2x more expensive, they may have to use a substitute, but with price ceilings the shelves will be empty anyway.

>it redirects goods from poor people to wealthy people.

In this case it's arguably something desirable, as the most at-risk group, the elderly, on average are much wealthier than young people. Someone over 80 is around 100x more likely to die from the virus than somebody under 40.

> Two problems; factories cannot surge up immediately and all of the actual gouging here is not actually making it to the manufacturers, it's people mass buying out stocks and reselling. So the supply side isn't actually seeing any increased price to increase their supply. The Econ 101 pro price gouging logic breaks down here because of that.

This may be due to the fact that the retailers are heavily threatened by government action, so they take no action to increase prices.

Contrast this with the must-have Christmas toy, which may otherwise be seeing similar unanticipated demand and suddenly the same retailers are incredible pricing experts.

The factories will need to maintain long-term relationships with these retailers and they may also have similar threats from government action.

More likely is that whatever slack there is in the supply chain will be exported to countries which have no such price control policies, because price-control policies do not address the underlying issues of supply and demand.

> factories cannot surge up immediately

Really? How about longer shifts, double shifts, weekend shifts? If you could suddenly make twice the profit on your product you would figure that out pretty quick! If you can't make any extra profit, why bother?

Having people line up around the block to be first when the pharmacy opens is perhaps politically optimal but it is not epidemiologically optimal. Except from the point of view of the virus.

If we look at who it's most dangerous too, elderly people, then basing it off wealth would actually be in their favour compared to basing it off who can get to stores quicker to hoard it.

...by placing an artificial price ceiling that will ensure a shortage of goods.

In a pandemic, prices go up, rightly or wrongly, because there is an increased demand. This price scales as the difference between supply and demand grows, in order to decelerate how fast the shortage occurs relative to the speed of creating the good. The price ceiling just means the shortage happens immediately.

Econ lenses can be quite useful, but econ 101 ones rarely are in a context like this - it's the econ equivalent of they physics "assume a friction-less spherical cow in a vacuum"; i.e. ignoring some of the things that make this an interesting real world problem, doing X should mean Y. Except it doesn't, for all the reasons you assumed away.

Yes, for some reason people complaining about the supply-demand economics of price gouging laws seem to think Clorox, Charmin, Kleenex, etc are the ones jacking up the prices of supplies...

Manufacturers producing enough quantities to sell is not the issue. The assholes that swoop in and buy out all the stock in a store temporarily to quickly turn around and sell the items for much more are doing the gouging. It's like going to the gas station right after a refill with a big-rig tanker during a time of high demand, filling up all the gas from the station, and then sitting next to the now-empty gas station all day and charging people 500% more for gas.

That is why stores are now implementing quantity limits for certain supplies, so people don't just hoard them for profit and to deny everyone else access to buying the supplies.

Amazon and eBay banned all sales, regardless of price. Anyone relying on those platforms to sell products is stuck.

Why don't the pharmacies raise their own prices 20x before the scalpers can get to them? The answer is probably, "they don't want to get slapped by gouging laws." So in essence this is a prohibition scenario where lawful providers don't want to touch the situation and unlawful people fill the gap.

Price gouging is the supply side artificially raising prices significantly above normal to take advantage of a temporary imbalance in the anxiety vs actual threat being experienced by the demand side.

The day congress declares war on Iran, if you significantly raise fuel prices at your gas station but the wholesale supply hasn't changed, you're generally trying to take advantage of the consumer's fear.

We're for some reason cool with this in the financial markets, but for tangible consumer goods like food and fuel it's (rightly) considered predatory and criminally anti-social. Unchecked gouging can lead to real and dangerous social destabilization.

Well, from the perspective of the buyer it doesn't matter if you're buying it for 20x the price from CVS or from Joe Schmoe Markup Inc. It matters to CVS, but that's their problem.

“While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions...”

They forget to mention that the marketplace is highly optimized at the foundation to make this bullshit.

There’s no open marketplace. The government protects concepts like inflation which is the deflation of buying power of the masses to prop up the power of aristocrats.

I have zero qualms with government stepping in to actually create some pricing competition.

Financial “value” is not a property of an objection reality. It’s a human ideology. No one in economics disputes this.

And somehow we’re convinced old gits dumber than us, outnumbered us have sold us on truth of markets.

They pray on confusing and controlling our innate behavior to model our future. “Oh guess my model will be these cube walls forever.”

And I’m talking specifically about the bulk producers of basic human needs, food, material supplies, medicine.

How shallow and self aggrandizing America as a culture is is on display right now.

A weak ass people who coddle old gits because they can’t source local TP, and toothpaste?

The people are so incapable of absorbing a true calamity in this nation is frightening.

And only in a state of emergency. If you’re in Egypt, that can be thirty years or more. In California, probably not.

Excessive and unjustified seem quite subjective.

Not subjective is exporting to Japan.

It depends on the details. The recent NYT article about buying in stores and selling online mentioned that more than 50% of the sale price could be eaten up in shipping and other fees.

Yep, here's that comment. Business benefit over direct customer benefit seems to be the manta these days.

I don't think someone saying "oh look, I saved 10 cents" is going to stop price gouging. As much use as a chocolate fire guard.

Most stuff is bought by scalpers and sold on the black market anyway

High prices induce production that would not have occurred otherwise. They also curve demand downwards so that only those who really want the item will get it. There is little reason to outlaw price gouging save for humans have a disgust response to people who profit from tragic events. Absent these laws, there would be incentive to create stockpiles of needed items before a disaster and retool less-efficient factories to produce now more-profitable items during a crisis. We do not think markets are magic. We think they are machines that run on price signals, and bashing these signals with hammers will degrade the efficiency of the machine.

What externalities?

If the stores are underpricing, why shouldn’t people who are paying more attention reap those profits instead?

Someone’s going to get it. I’d rather it go to those paying attention and willing to put in the work to get it to where it is most needed.

And like most things, basic econ is not the be all and end all of how the world works otherwise we wouldn't have those all-important second year econ classes.

Price gouging is not an efficient market result for anyone - the goods aren't actually, in real terms, worth the temporary price (the costs of manufacturer's switching over production is going to wind up much higher then any profit they can make once they're tooled up) nor does their value represent efficient allocation of resources - the guy with 11,000 bottles of hand sanitizer has no use for them, outside of the extremely limited window of people panicking due to uncertainty.

But really, whether anyone believes this can be viewed through a very different lens: multiple times in the past week, US exchanges have ceased trading due to automatic circuit breakers from 7% drops in the market. Surely if the market is all knowing we shouldn't trigger these mechanisms and instead just let the invisible perfect hand let people sell stocks freely. After all, if we don't allow sudden plunges, what incentive will there be for investors to properly allocate their risk in the future?

But, no one's making that argument. Nor is anyone questioning why it was suddenly urgent that the government put $USD1.5 trillion of liquidity into the market.

Do you actually think our economy needs 200x as much hand sanitizer production?

If the demand runs high enough for long enough, it wont be an emergency, and emergency measures don't apply.

The President does have the power to direct factories to make masks during a national emergency.

>solipsistic pseudo-liberation reasoning

Basic economics is solipsistic pseudo-liberation reasoning now?

I would rather the price 10x if it means people can buy toilet paper, than have it be unavailable to all. But I am thinking rationally rather than emotionally.

It's because the default mindset is that everyone is horrible and motivated solely by profit.

Yeah, the government is great at stopping price gouging. You know - like in Medicare or DOD contracts.

> These types of situations are textbook explanations for WAR PROFITEERING (except we are in a crisis instead of war).

Meh. I don't think it is the same thing at all. There is no shortage of raw materials or of labor (as in war time).

There is an increased demand (irrational or rational doesn't matter). Best way to decrease demand is to let prices rise. It isn't really any simpler than that.

If politeness or customs or laws prevent the price from rising while demand continues to rise then the outcome is 100% expected: shortages where the product isn't available for any price.

It is our own mis-placed disdain for surge pricing that is creating the shortages.

It's full of people intelligent enough to understand how incentives and consequences work, and mature enough to be able to accept that some possibly immoral people might benefit for the greater good.

How do you get from small/no government libertarianism to “right-wing”?

Yes! Especially the Hacker News Silicon Valley types. HN is becoming so predictable these days.

> I'll be extraordinarily surprised if shelves aren't completely full of those consumable within 7-10 days.

Then why do we need any price-gouging laws? Who is harmed without them, if the supply remains intact?

> People are strange - the fact that there was a global pandemic coming at us was pretty obvious as of early march, but it was this weekend that everyone decided to panic? It's not as though this were a hurricane that just landed on us by surprise.

Human behavior doesn't make a lot of sense, but up until a few days ago, the media and the federal government in the US were completely downplaying the seriousness of Covid-19. Many of us who have been warning our close friends and family about this for weeks have been assumed to be paranoid or crazy, but actually we learned this week that the media and government were intentionally downplaying it.

Sigh. The fact remains that perfectly rational actors have concluded that they may not want to be shopping for the next two, three, or four weeks. That means purchasing more now for your own completely rational use.

If everyone does that at the same time, you'll have a shortage.

One thing that might limit the shortage is higher prices, as it makes people purchase less, and incentivizes production and delivery.

One thing that most definitely will not help the shortage is limiting the price increases (i.e. price gouging laws).

Except, and I'm answering to @illumin8 as well, you really can't find hand gel anymore, not here at least. It may bounce back in time, or only in a few months. And if you call buying 10 pieces unethical behavior... really.

So if Arnold Arbitrage changes his name to Henry Hospital and always charges a high markup, that's A-Ok with you? This point of view seems inconsistent.

They should be charging increased prices. They should have charged increased prices the moment demand went up (like Uber surge pricing). That would have snuffed out the speculators right quick.

One reason they don't do this is because of the attitudes illustrated in the comments here. People irrationally believe that surge pricing in this case is wrong and the negative response by their customers outweighs the benefits of surge pricing. I believe that attitude about surge pricing is wrong and it is one reason why we end up with shortages. It is a terribly self-defeating attitude that exacerbates the situation.

People are businesses; businesses are people. It's not illegal to go into business as an individual and there's no special magic about stores and manufacturers that doesn't apply to arbitragers.

"actively decide not to buy any that day" and not wipe your rear end after using the toilet? If you're out of paper towels or soap and the cost is 50x the usual you're just gonna not wash your hands? Think through the consequences here. Not everyone can afford to stockpile stuff like this in advance, some people live paycheck-to-paycheck. I've got a couple weeks of paper products in reserve typically, not 2 months worth - and if the timing is bad I might be down to a week's supply. Thankfully in this case I restocked just before things got bad but if this lasts I'll have to deal with shortages just like everyone else. I'm actually out of hand soap refills...

The thing is, once people are hoarding for any reason, profit or not, and that leads to signs of potential supply problems, everyone else has a strong incentive to stock up defensively, not for profit or defense against the original disaster, but to prevent being adversely effected by the supply shortages caused by hoarding. Which then creates a positive feedback loop of incentives unless external controls (rationing) are imposed.

Or selling software with 0 marginal cost for $40k? :-)

As with all moral issues, it is difficult to come up with an objective distinction between wrong and right. I tend to rely on Kant’s categorical imperative: Would society be harmed if everyone behaved in this way? In our situation where hoarders are attempting to profit from a crisis, I believe the answer is clear: It’s immoral.