Matt Colvin And His Coronavirus Price Gouging

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So, there was this guy, see, who thought he could make a fortune out of the coronavirus. Buy up hand sanitizer from rural stores and sell in the Big City. Or, perhaps, online. And then Amazon said he couldn’t charge a permium. And e-Bay wouldn’t allow him to sell at all.

The reason? Because of the anti-price gouging laws in many US states. Huzzah therefore, the people have been saved from the evil capitalist.

Except that’s not what is the end result:

So by denying the Colvins the profits of their price gouging, the government is wrecking economic incentives. The next time something’s in short supply in one place and available in another, no one will bother to move it. No one will bother to get people what they need and demand — at least, not in the proper quantity. A shortage will only be worsened by the same laws meant to address its damages.

Killing the incentive to move things from low-valued uses and places to those with higher values will not end well. Unless, that is, we’re just tired of this whole “living in a rich and bountiful society” thing.

We might think it trivial, stopping some profiteer in an emergency. We might even think it righteous. We’d be wrong on both counts. The very reason we’re in a rich place and time is that people do add value. And those bottles sitting in rural pharmacies had no value: People weren’t buying them, right? Yet they had, before the law stopped it, great value at their destination: People were buying them off Amazon and the like en masse.

So why do we stop people from doing this? Sadly, such is the political misunderstanding of economics that we are actively using the law to make society poorer.

Well done peeps, very well done indeed.

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Barks
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Barks

Sure, it’s bald politics that drive these so-called gouging, or anti-gouging, laws particularly at local levels where economics doesn’t have much influence on authorities’ desires. In the instant case, however, the distributors may have learned something from Colvins’ activities and will fine-tune their systems in the future to better get product where it is needed. On the other hand, this is all a blip in the manufacture and distribution of millions of bottles of sanitizer distributed across a country of 350 million people. Had everyone ignored the Colvins and waited a day or two for their gallon jug of sanitizer… Read more »

Bloke in Germany
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Bloke in Germany

Yah, but it becomes unavailable in t’other place as a result of the arbitrage. Source: experience of rurally-dwelling family members. And this isn’t a price signal that the manufacturers (the people we want to start increasing supply) get to hear about.

Worst thing for Mr Colvin is he is probably now facing 999 years in Supermax for shipping something across state lines without a license.

Spike
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Spike

To the contrary, inability to make sales because there is no product on the shelf is an issue of survival to everyone in the supply chain (even if your relatives think no one cares about them).

Jim
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Jim

I notice no-one is accusing US healthcare providers of ‘gouging’ when they charge someone $50k to look them over and give them an injection and few tablets.

Laws for little people, not the corporates it seems…………………

Spike
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Spike

Yeah, “Sons of bitches, all of them.” (Peyton Place) I can pay cash and get it WHEN and HOW I want it for over two orders of magnitude less.

This thread was not about the fact that not all prices are pleasant (“affordable”) but that prices do (and should) rise in times of sharply increased demand, because prices communicate something, to buyers and to sellers. Your generic anecdote proves nothing except that lefties lie about everything.