The New York Times reports that many hospitals are now rationing hand sanitizer and “crucial respirator masks” while at the same time large quantities of these very items are in the hands of speculators who are prohibited from selling them. (https://nyti.ms/2QwyD1R)
“He has 17,700 Bottles of Hand Sanitizer and Nowhere to Sell Them,” reads the Times’ headline. Thus, people are in desperate need and those who could alleviate their needs are prohibited from doing so.
They are prohibited by a combination of anti-"price gouging” laws, ignorance of economics, and, it appears, a preference for the suffering of the innocent over the profit of those who could supply them.
There is no reason for a shortage of anything if its price is allowed to rise to the point of reducing the quantity demanded to the supply available.
There is no shortage even of gold or diamonds. That is because their price is high enough to limit the quantity of them demanded to the supplies available.
There is certainly no good reason for a shortage of hand sanitizer, respirator masks, bottled water, toilet paper, or anything else. A sufficient rise in price would counter the effect of the sudden increase in the need for these items created by the fear of the Coronavirus.
The rise in price would also serve to increase production, and do so the more rapidly, the greater the rise. For example, a sufficient rise would provide an incentive for round-the-clock production and cover whatever increase in cost of production might take place.
The threat of the Coronavirus has created an urgent new and additional need for such things as hand sanitizer and respirator masks, particularly on the part of the elderly, who are at the greatest risk.
The elderly need to be able to outbid younger people, whose need is less urgent. In a free market, the greater urgency of their need would enable them to outbid younger people even of considerably greater wealth and income, but with a much less urgent need.
This outbidding would not be confined to such things as respirator masks directly, but rather extend to alternative products of the same factors of production as required to make respirator masks.
Thus, the elderly would gain respirator masks, and to make that possible, younger people would somewhat reduce their consumption of other goods that required the same factors of production as required to make respirator masks.
Prices are a reflection of the changing relationships between needs and wants and external facts. When these change, prices must be allowed to change so that the buying and selling decisions of people can change accordingly.
Price controls of any kind prevent people from adjusting their behavior to the changes confronting them. They paralyze people and leave them standing helpless in the face of change.
They are the kind of response one would expect from someone who has made himself deaf, dumb, and blind, utterly oblivious to the changes going on around him.
There is one set of prices appropriate to conditions in which there is no threat of the Coronavirus and another set of prices appropriate to conditions in which there is the threat of the Coronavirus.
It’s insane to ignore the difference and pretend that nothing has changed and thus that prices must not significantly change.
Recognize the difference, allow prices to reflect reality, and such things as the shortages of hand sanitizer and respirator masks faced by hospitals will immediately disappear. For the hospitals are in a position to outbid virtually all other competitors for such things.
For one thing, they could immediately obtain the supplies held by speculators, who, under present conditions, are prohibited from selling them, a situation that is insane.
What is preventing these sales is an apparent preference for the suffering of hospital patients over the profit of the speculators, who have assembled the supplies the hospitals and their patients need.
Ironically, forcibly keeping speculators’ supplies off the market, serves to further increase the price of whatever speculators' supplies do manage to reach the market, because the market’s supply is correspondingly reduced.
The pathological hatred of speculators’ profits and their forcible prevention through threats of fines and jail terms is a cause of hoarding over and above the need to prepare for staying at home to avoid catching the Coronavirus.
If there were no price controls or threat thereof, prices in the present situation would be high enough to keep stocks on the shelves. Thus, people would know that while they might have to pay a very high price for it, what they wanted would at least be available.
They would not have to stockpile against the threat of vital supplies simply not being there when they needed them and thus of taking every opportunity to snatch up supplies whenever they appeared.
(For a critique of all aspects of price controls, see my The Government Against the Economy, available at https://amzn.to/2TSrMS4)
