One knows this is the case precisely because speculation of this sort does not occur secularly—it occurs in response to catalysts like negative supply shocks and/or positive demand shocks
If you’re suggesting that there actually was a greater total need for toilet paper at the start of the pandemic in the sense that the majority of the excess demand was not made up of speculators and panic buyers, I’d like to see some evidence for this.
I’ve been keeping speculation separate from panic buying in my mind, perhaps that has confused us, but I thought it was clear earlier. Panic buying is part of the demand shock. It’s not “smart” but it isn’t a “fake need” either. There are varying of uncertainty here, and eventually it does slip into stupidity (“I think I’ll run out next week, I might have enough til then, better get some in case” … “I have enough for months but I better grab more!”), and yet again mandating low prices does not defeat this tendency because it operates just like any other demand. If you want them to think twice, charge them more. Or ration. But mandating low prices is counter-productive.
Well sure, there you go, paternalism is easy to justify when people are seen to be so irrational that their perceived needs can be dismissed and replaced with your personal preferences.
That’s a good point about encouraging rationing through price ceilings, as -finally- a reason why they might push in the right direction. As we saw already, price ceilings are not a necessary condition for the rapid implementation of rationing by business. I doubt any induction would be incrementally strong enough or implemented early enough to either matter or justify abandoning any potential preference ordering ability of pricing. But that’s an empirical question, one that I cannot confidently dismiss out of hand.
Been a pleasure discussing with you. And while I personally don’t particularly hope to see new natural experiments on anti-gouging in the future, if we do, I sincerely hope we end up seeing solid analyses of the effects.
Well sure, there you go, paternalism is easy to justify when people are seen to be so irrational that their perceived needs can be dismissed and replaced with your personal preferences.
… in a real-world example of people being irrational over perceived needs.
If you’re suggesting that there actually was a greater total need for toilet paper at the start of the pandemic in the sense that the majority of the excess demand was not made up of speculators and panic buyers, I’d like to see some evidence for this.
I’ve been keeping speculation separate from panic buying in my mind, perhaps that has confused us, but I thought it was clear earlier. Panic buying is part of the demand shock. It’s not “smart” but it isn’t a “fake need” either. There are varying of uncertainty here, and eventually it does slip into stupidity (“I think I’ll run out next week, I might have enough til then, better get some in case” … “I have enough for months but I better grab more!”), and yet again mandating low prices does not defeat this tendency because it operates just like any other demand. If you want them to think twice, charge them more. Or ration. But mandating low prices is counter-productive.
Panic buying is a fake need when the supply shock has minimal direct effects.
If you mandate low prices, stores will often implement purchase limits—that is, the store will ration the product themselves.
Well sure, there you go, paternalism is easy to justify when people are seen to be so irrational that their perceived needs can be dismissed and replaced with your personal preferences.
That’s a good point about encouraging rationing through price ceilings, as -finally- a reason why they might push in the right direction. As we saw already, price ceilings are not a necessary condition for the rapid implementation of rationing by business. I doubt any induction would be incrementally strong enough or implemented early enough to either matter or justify abandoning any potential preference ordering ability of pricing. But that’s an empirical question, one that I cannot confidently dismiss out of hand.
Been a pleasure discussing with you. And while I personally don’t particularly hope to see new natural experiments on anti-gouging in the future, if we do, I sincerely hope we end up seeing solid analyses of the effects.
… in a real-world example of people being irrational over perceived needs.