There is another possibility. Suppose a market participant suspects that there will be a disaster causing a shortage of vital good X. If X can be stockpiled, then they can buy up a bunch of X, sit on it, and hope to rake in the cash if the disaster does happen. (If X has a short shelf life, it’s more difficult; I wonder if futures markets can help here.) (This will raise the price of X in the meantime, encouraging people to manufacture more and use less.) Thus, there exist natural market incentives to stockpile for disasters...
...Unless they anticipate anti-price-gouging interventions. If you’re not going to be permitted to make a large profit on the rare event, then why bother stockpiling anything beyond what you yourself need? The opprobrium towards “price gougers”, “speculators”, “hoarders”, etc., and the expected likelihood of the opprobrium turning into legal action, might well prevent us from being saved by some farsighted speculators.
Or, well, the way it works, elites will probably get what they need, and it’s the majority of regular people who will experience the shortages instead of having the option of paying a high price for what they need.
The more sophisticated views are not that relevant for the fact that the naive view is false / fragile.
Even for the more complicated case if there is anti-gouging it just means you have to price to good for the totality of history rather than a spot time price. This will mean that in calm times the price will be a bit higher. Any seller that would sell at a lower price taking only calm time realities into account would suffer unmitigated shocks from rare events.
With gouging on it means that the financial hit from rare events is borne out mainly with the populace. For example with military one could have a reasonable expectation to be defended from invasions. Say that the goverment runs out of troops and hires private mercenaries to provide the defence. Fullfilling a goverment duty makes sense for the goverment to carry the burden and foot the bill on that. One could imagine that the very same peope could be deployed but instead of the goverment footing the bill the people defended pay the bills. In this arrangement the people themselfs organise the defence and don’t enjoy protection by the state.
One could have a “strategic snowstorm reserve” where goverment does the preparing and upon declaration of an emergency such as a snowstorm would flood shovels outside of the market mechanics. The catch would be that those reserves are not a freebie source of shovels at calm times.
What tends to rather happen is that existing logisitical lines are repurposed or dual purposed for such alternate distribution means. If you want to have shovels in peoples hands shovel stores are atleast on okay delivery vector. You could do it so that it is nationalised for the duration of the execptional circumstances. Or you could do less drastic adjustments just as long as it works as an effective delivery vector. If people not being able to cough up big cash fronts stops shovels being delivered then it becomes ineffective. One could even do stuff like letting everybody be gouged but in the next calm time goverment will make up the difference between gouge and calm market price. If everybody knows this then this will lessen hesistance to fork over the money. (There could be a problem here when if the sellers know the check is open what is the difference between x3 x10, x100 and x1000 markup?)
Even with naive price gouging on there would be a reason to prebuy shovels. WIth untenable pricing in stressed time the sellers will find every excuse not to list the item or the item will be in short supply so there is a low chance to get it anyway. After all the “convenient price at stress time” was a false option.
With full on leisse-faire capitalism everybody gets incentives to be a full on prepper to stock drinking water and such because at any disturbance they might cease to live in a society. Preparation isn’t free and if it is done at group level it can easily lead into more taxes being paid to upkeep facilities/structures which are unsure whether they will get used. Thus one might do stuff like dismanttle an epidemic demartment because there has not been epidemics in years and it has running costs with no pay off.
Even for the more complicated case if there is anti-gouging it just means you have to price to good for the totality of history rather than a spot time price. This will mean that in calm times the price will be a bit higher. Any seller that would sell at a lower price taking only calm time realities into account would suffer unmitigated shocks from rare events.
With inflation increasing over time, this ‘totality price’ becomes less and less possible or effective.
I guess I should have shot for possiblity rather than temporal extent. I for example believe that retail stores track and factor in theft ie they will assume and calculate that 1000$ worth of goods will just disappear off the shelfs with no transaction involved. Then if a secruity guard can for 600$ make only 200$ disappear in the same period it makes financial sense to hire the guard. The 600$ salary for the guard will be from legitimate purchaces of the product. So if the profit target of the company is kept the same a shop in a low crime area can afford lower prices as they don’t have to source security guard salaries on it.
If the shop is exposed to risk of not being able to have access to a functioning market at crisis times it will have to hedge against it or perish like a shop that didn’t hedge against theft would go under when robbed.
There is another possibility. Suppose a market participant suspects that there will be a disaster causing a shortage of vital good X. If X can be stockpiled, then they can buy up a bunch of X, sit on it, and hope to rake in the cash if the disaster does happen. (If X has a short shelf life, it’s more difficult; I wonder if futures markets can help here.) (This will raise the price of X in the meantime, encouraging people to manufacture more and use less.) Thus, there exist natural market incentives to stockpile for disasters...
...Unless they anticipate anti-price-gouging interventions. If you’re not going to be permitted to make a large profit on the rare event, then why bother stockpiling anything beyond what you yourself need? The opprobrium towards “price gougers”, “speculators”, “hoarders”, etc., and the expected likelihood of the opprobrium turning into legal action, might well prevent us from being saved by some farsighted speculators.
Or, well, the way it works, elites will probably get what they need, and it’s the majority of regular people who will experience the shortages instead of having the option of paying a high price for what they need.
The more sophisticated views are not that relevant for the fact that the naive view is false / fragile.
Even for the more complicated case if there is anti-gouging it just means you have to price to good for the totality of history rather than a spot time price. This will mean that in calm times the price will be a bit higher. Any seller that would sell at a lower price taking only calm time realities into account would suffer unmitigated shocks from rare events.
With gouging on it means that the financial hit from rare events is borne out mainly with the populace. For example with military one could have a reasonable expectation to be defended from invasions. Say that the goverment runs out of troops and hires private mercenaries to provide the defence. Fullfilling a goverment duty makes sense for the goverment to carry the burden and foot the bill on that. One could imagine that the very same peope could be deployed but instead of the goverment footing the bill the people defended pay the bills. In this arrangement the people themselfs organise the defence and don’t enjoy protection by the state.
One could have a “strategic snowstorm reserve” where goverment does the preparing and upon declaration of an emergency such as a snowstorm would flood shovels outside of the market mechanics. The catch would be that those reserves are not a freebie source of shovels at calm times.
What tends to rather happen is that existing logisitical lines are repurposed or dual purposed for such alternate distribution means. If you want to have shovels in peoples hands shovel stores are atleast on okay delivery vector. You could do it so that it is nationalised for the duration of the execptional circumstances. Or you could do less drastic adjustments just as long as it works as an effective delivery vector. If people not being able to cough up big cash fronts stops shovels being delivered then it becomes ineffective. One could even do stuff like letting everybody be gouged but in the next calm time goverment will make up the difference between gouge and calm market price. If everybody knows this then this will lessen hesistance to fork over the money. (There could be a problem here when if the sellers know the check is open what is the difference between x3 x10, x100 and x1000 markup?)
Even with naive price gouging on there would be a reason to prebuy shovels. WIth untenable pricing in stressed time the sellers will find every excuse not to list the item or the item will be in short supply so there is a low chance to get it anyway. After all the “convenient price at stress time” was a false option.
With full on leisse-faire capitalism everybody gets incentives to be a full on prepper to stock drinking water and such because at any disturbance they might cease to live in a society. Preparation isn’t free and if it is done at group level it can easily lead into more taxes being paid to upkeep facilities/structures which are unsure whether they will get used. Thus one might do stuff like dismanttle an epidemic demartment because there has not been epidemics in years and it has running costs with no pay off.
With inflation increasing over time, this ‘totality price’ becomes less and less possible or effective.
I guess I should have shot for possiblity rather than temporal extent. I for example believe that retail stores track and factor in theft ie they will assume and calculate that 1000$ worth of goods will just disappear off the shelfs with no transaction involved. Then if a secruity guard can for 600$ make only 200$ disappear in the same period it makes financial sense to hire the guard. The 600$ salary for the guard will be from legitimate purchaces of the product. So if the profit target of the company is kept the same a shop in a low crime area can afford lower prices as they don’t have to source security guard salaries on it.
If the shop is exposed to risk of not being able to have access to a functioning market at crisis times it will have to hedge against it or perish like a shop that didn’t hedge against theft would go under when robbed.