[voodooranger]

Excellent point. What is 3M for example — an American company — doing? Are they attempting to ramp up production in the US or have they determined that it’s not feasible because PPE prices are are not permitted to rise because of anti gouging laws?

[ardy42]

The problem isn't anti-gouging laws, it's that medical customers aren't willing to commit to long-term contracts to justify the investment to increase production.

https://www.dallasnews.com/news/watchdog/2020/04/03/if-you-i...

> ...during an outbreak like this, everybody wants to be [an American mask/respirator maker's] customer. But as soon as an outbreak subsides, his customers dump him and run back to China. The reason? His masks may cost a dime each, but a made-in-China mask might go for two cents.

> “Last time he geared up and went three shifts a day working his tail off,” the mayor recalled. “As soon as the issue died, he didn’t have any sales. He had to pay unemployment for all these people, and he had to gear down.”

Also, why would you think anti-gouging laws would be the problem? The only thing raising prices would do is send PPE towards people with money who may or may not have actual need. No one sensible is going to ramp up extra capacity or create stockpiles of perishable goods with the idea that they'd be able to gouge during infrequent, unpredictable crises. The only people that price gouging helps are the parasitic middlemen who make a profit engaging in it, and the fools with money to burn who can't demonstrate priority need.

[bluGill]

Gouging helps those who have the foresight to stock up long before. If I knew I could see large amounts of 2 cent masks for $10 every few years I could stock up, and throw away expired masks. Every few years my profit more than makes up for the losses every other year.

Of course it is unlikely someone would take the risk, but gouging laws make it impossible.

[ardy42]

I already said gauging helps parasitic middlemen who are just out to make a profit for themselves. It just doesn't do anything to actually help society in a crisis.

For every $10 of masks some wannabe gouger was motivated to buy and store in their closest for years, a professional gouger will buy $10,000 worth the day the crisis starts and help hasten the arrival of empty shelves and shortages. Then he'll turn around and ask those who truly need them for $100,000. If he can't sell all his inventory at his markup, he'll just dump the remainder after it's no longer needed for the crisis at the regular market price.

[dTal]

What the "gouger" is doing is correcting a market inefficiency by performing arbitrage through time. In order to turn any sort of profit, they must have more accurate information than the rest of the market. The guy who chooses to buy $10,000 bucks of masks on day 1 of a crisis is sending a message to the market - "I believe that masks are currently undervalued." If they are right, it might indeed hasten the day you can no longer buy the masks at their original, undervalued price. It might also spike demand earlier than it would have spiked, which sends a signal to ramp up production. That is a market correction they are helping to realize. And the result is it prolongs the time you can buy any masks at all, at any price. 1 person snapping up 10,000 masks with intent to sell is better than 100 people snapping up 100 masks each that they intend to stick in their closet "just in case", while people that really need them find empty shelves.

Nothing is exempt from market forces. Masks are more valuable now than they used to be, that's just a fact. If you try and hide that fact, you will prolong the shortage and cause more harm than good. If you don't like the idea of the government having to pay more to procure this essential commodity in this time of sudden shortage, the people you should be annoyed with are the ones who depleted the national PPE stockpile in time of plenty, when it existed for this very reason. Don't shoot the messenger.

[stainforth]

I don't see it that way at all. Grocery stores are now rationing which is fair to all consumers. If one rich person is able to buy up an entire store and then resell it, all it's done is made the food more expensive for the people, and funneled wealth towards an already wealthy person. I don't think we should advantage those types of people. Market forces seem to always benefit just a few. In all of history market forces have not resulted in an equitable situation for everyone.

[Consultant32452]

I would like to recommend "Basic Economics" by Thomas Sowell. It provides an excellent understanding of economics in language that is accessible to everyone and uses historical examples to demonstrate all of the concepts. I think if you understood markets and pricing better, you would have a different opinion. Your grocery store example would not turn out the way you're describing.

[ardy42]

> What the "gouger" is doing is correcting a market inefficiency by performing arbitrage through time. In order to turn any sort of profit, they must have more accurate information than the rest of the market.

No, that's only true if you believe the simplistic myth that a price-driven market is always the best and fairest way to allocate scarce resources, in all circumstances. That myth is false, but it's a seductive myth because the market works very well in many situations.

Price gougers operate only in crises, inserting themselves as middlemen to extract a profit on emergency essentials. They can't do anything to increase supply, because there's no time for that. They don't direct resources to where they're most needed, rather they direct them wherever the most profit is. They perform no social good, and are actually a form of market failure.

> It might also spike demand earlier than it would have spiked, which sends a signal to ramp up production.

That's a fairy tale. The manufacturers aren't solely reliant on price to learn about demand, and they have clearer and more direct ways to communicate with their customers in situations like this. Do you think Purell and 3M needed guys like this [1] to tell them demand for their products was spiking due to an incipient pandemic? No. 3M was literally ramping up in late January [2], before the COVID-19 was even a blip on the price-gouger's radar.

> 1 person snapping up 10,000 masks with intent to sell is better than 100 people snapping up 100 masks each that they intend to stick in their closet "just in case", while people that really need them find empty shelves.

Firstly, there are better ways to manage the surge demand, which the actual businesses involved are implementing: prioritizing sales to customers based on need and implementing retail purchase quotas to prevent people (usually gougers) from buying everything up and creating artificial scarcity.

Secondly, it's likely that the 100 people in your example who bought from the gouger just put the masks in their closest anyway. Gougers take supply out of the normal channels and inflate prices so much that the people who bought from them are worried people with more money than sense, rather than those with real need like nurses and hospitals.

Thirdly, at the maximally inflated prices gougers often sell for, they may end up functionally becoming hoarders themselves and still make a profit. If a gouger buys 1000 masks at $1/per, sells 100 at $10/per, 200 at $5/per, 300 at $2.50/per, and unloads the rest at the original $1/per after it's all over, he's more than doubled his money while wasting half his inventory. He's not looking to speed resources to where they're needed, but milk every cent out of them that he can. The supplies do no more good in a profiteer's garage than in a prepper's closet.

[1] He Has 17,700 Bottles of Hand Sanitizer and Nowhere to Sell Them (https://www.nytimes.com/2020/03/14/technology/coronavirus-pu...)

[2] How 3M Plans to Make More Than a Billion Masks By End of Year (https://www.bloomberg.com/news/features/2020-03-25/3m-double...): "Andrew Rehder, manager of 3M Co.’s respirator mask factory in Aberdeen, S.D., got the call from headquarters on Tuesday, Jan. 21....Rehder told them that a new virus was spreading rapidly in China and that 3M was expecting demand for protective gear to jump....Now, Rehder told his charges, Aberdeen would shift to “surge capacity.” Idle machinery installed for precisely this purpose would be activated, and many of the plant’s 650 employees would immediately start working overtime."

[makomk]

That's more of a problem for surgical face masks, where customers seem to be more cost sensitive. A reasonable chunk of N95 masks are made locally in the US and other countries and 3M apparently has a certain amount of surge capacity ready in case of emergencies like SARS, the trouble is that the current demand is so far beyond what's been needed before that they literally can't be made fast enough.

[Thriptic]

According to anecdata from a friend of mine at 3M, they are running manufacturing 24 hours / day and are expanding. Apparently one of the problems was that when China was infected, 3M depleted a lot of their existing mask stock selling to the Chinese. When the virus came to the US, existing stocks were already somewhat depleted.

[tinalumfoil]

The issue is a lot of the factories that make these products are in China. The US has foresight to ensure military supply lines aren't dependent on China, but that foresight didnt extend to medical equipment. There simply isnt the capacity enough masks in the US.

[baybal2]

> The US has foresight to ensure military supply lines aren't dependent on China

I have to surprise you. A surprising amount of US defence hardware is double digit Chinese BOM.