That wouldn’t have led to more lifeboat spaces being produced. (Whereas one of the key arguments against price ceilings and the like is that allowing prices to rise does lead to more of whatever-it-is being produced.)
It wouldn’t have led to more lifeboat spaces being transferred from other ships. (Whereas one of the key arguments against price ceilings and the like is that allowing prices to rise does lead to more of whatever-it-is being transferred from elsewhere where the need is less and therefore the price is lower.)
So the case of the Titanic’s lifeboat spaces is quite unlike (say) the case of surgical masks at the start of a pandemic, or the case of Uber taxi rides when there’s an event on.
(There are other cases that are more Titanic-like. For instance, government-imposed limitations on increasing rent; building new housing and repurposing buildings are relatively difficult, expensive, and slow.)
Whereas one of the key arguments against price ceilings and the like is that allowing prices to rise does lead to more of whatever-it-is being produced.
Except that its not the only way of incentivizing production. Ie, forbidding price rises doesn’t disincentivise production. Most businesses would be happy to sell more products at the same price.
I don’t think anyone was ever arguing that it’s the only way of incentivizing production. (There are others besides “you get to sell more at the same price”, too. A government could offer grants to businesses making whatever it is, or threaten penalties for businesses that could make them but don’t.)
Any given combination of potentially-incentivizing mechanisms will produce some level of increased production. So the question is: how much production do you get, and therefore how much of the relevant thing do you get to the people who need it, with different combinations of mechanisms, and how does that trade off against the downsides of those mechanisms (free-market prices mean that poorer people have more trouble getting the thing; government grants mean that the government needs more money from somewhere, probably taxation; any government intervention risks getting the required quantities wrong; etc.).
Exactly how all this works out seems like a complicated question, but here are two key things from the OP: “most economists agree”, and “the empirical situation lines up with the theory”. Of course the first might just indicate prejudice on the part of economists or something, and the latter might be based on cherry-picked empirical evidence; if you have reason to think that either or both is so, I’m all ears. But the way it looks to me right now is: there’s a simple argument suggesting X should happen; fancier analysis (visible via opinions of “most economists”) and actual empirical evidence both suggest X does in fact happen; most likely the simple argument is basically right, and the various ways in which it’s too simple don’t end up invalidating it.
I wasn’t arguing that when someone says “X is good” they mean “X, Y, or Z is good”; I was arguing that when someone says “X is good” they mean “X is good” rather than “X is good and Y and Z aren’t”. But, in fact, I see that TurnTrout did actually write “There’s no economic incentive for them to increase production” (in a situation where prices can’t increase), which I agree is wrong outside Econ101-land (because supply is a function of expected demand as well as price, so in situations of increased demand there’s an incentive to produce more even if prices can’t increase). I suspect that TurnTrout was being sloppy rather than outright wrong and didn’t really mean to claim quite what he did, but you’d have to ask him to find out whether my guess is right or not.
The first of the two specific bits of research TurnTrout quoted in support of the claim that “the empirical situation lines up with the theory” was specifically about emergencies, and it purports to find that heavy-handed state intervention is harmful in the emergencies it looks at.
(The second is about shortages of goods like toilet paper and hand sanitizer near the start of the COVID-19 pandemic, which is less emergency-like.)
But if you have particular research in mind that finds that anti-price-gouging laws are beneficial on net in emergency situations, I’d be very interested to know what it is.
I see that TurnTrout did actually write “There’s no economic incentive for them to increase production” (in a situation where prices can’t increase), which I agree is wrong outside Econ101-land (because supply is a function of expected demand as well as price, so in situations of increased demand there’s an incentive to produce more even if prices can’t increase). I suspect that TurnTrout was being sloppy rather than outright wrong and didn’t really mean to claim quite what he did, but you’d have to ask him to find out whether my guess is right or not.
If you end up being right about this consideration, it’s fairer to say that I was wrong, because I hadn’t thought of it.
But I don’t yet clearly see the argument. Competitive firms produce until P=MR=MC. If (expected) demand increases and there’s a binding price ceiling at P, the firm still has P=MR=MC and so extracts no economic profit from producing a greater quantity.
If MC is locally constant, then I suppose they could increase production without economic loss. But that seems bad because once the demand shock subsides, they’ll be stuck with too much production capacity and no one to sell it to, right?
EDIT: Another way I could be wrong is if short run supply were responsive enough to adjust on non-price dimensions, like lower quality same price, to drive up profit and produce more overall.
That wouldn’t have led to more lifeboat spaces being produced. (Whereas one of the key arguments against price ceilings and the like is that allowing prices to rise does lead to more of whatever-it-is being produced.)
It wouldn’t have led to more lifeboat spaces being transferred from other ships. (Whereas one of the key arguments against price ceilings and the like is that allowing prices to rise does lead to more of whatever-it-is being transferred from elsewhere where the need is less and therefore the price is lower.)
So the case of the Titanic’s lifeboat spaces is quite unlike (say) the case of surgical masks at the start of a pandemic, or the case of Uber taxi rides when there’s an event on.
(There are other cases that are more Titanic-like. For instance, government-imposed limitations on increasing rent; building new housing and repurposing buildings are relatively difficult, expensive, and slow.)
Except that its not the only way of incentivizing production. Ie, forbidding price rises doesn’t disincentivise production. Most businesses would be happy to sell more products at the same price.
I don’t think anyone was ever arguing that it’s the only way of incentivizing production. (There are others besides “you get to sell more at the same price”, too. A government could offer grants to businesses making whatever it is, or threaten penalties for businesses that could make them but don’t.)
Any given combination of potentially-incentivizing mechanisms will produce some level of increased production. So the question is: how much production do you get, and therefore how much of the relevant thing do you get to the people who need it, with different combinations of mechanisms, and how does that trade off against the downsides of those mechanisms (free-market prices mean that poorer people have more trouble getting the thing; government grants mean that the government needs more money from somewhere, probably taxation; any government intervention risks getting the required quantities wrong; etc.).
Exactly how all this works out seems like a complicated question, but here are two key things from the OP: “most economists agree”, and “the empirical situation lines up with the theory”. Of course the first might just indicate prejudice on the part of economists or something, and the latter might be based on cherry-picked empirical evidence; if you have reason to think that either or both is so, I’m all ears. But the way it looks to me right now is: there’s a simple argument suggesting X should happen; fancier analysis (visible via opinions of “most economists”) and actual empirical evidence both suggest X does in fact happen; most likely the simple argument is basically right, and the various ways in which it’s too simple don’t end up invalidating it.
It’s the only one I can see mentioned in the OP.
You could argue that when someone says “X is good” they really mean “X, Y, or Z is good”...but I don’t have to believe you.
Does it? There’s plenty of evidence that heavy handed state intervention, like rationing and price controls work in emergencies.
I wasn’t arguing that when someone says “X is good” they mean “X, Y, or Z is good”; I was arguing that when someone says “X is good” they mean “X is good” rather than “X is good and Y and Z aren’t”. But, in fact, I see that TurnTrout did actually write “There’s no economic incentive for them to increase production” (in a situation where prices can’t increase), which I agree is wrong outside Econ101-land (because supply is a function of expected demand as well as price, so in situations of increased demand there’s an incentive to produce more even if prices can’t increase). I suspect that TurnTrout was being sloppy rather than outright wrong and didn’t really mean to claim quite what he did, but you’d have to ask him to find out whether my guess is right or not.
The first of the two specific bits of research TurnTrout quoted in support of the claim that “the empirical situation lines up with the theory” was specifically about emergencies, and it purports to find that heavy-handed state intervention is harmful in the emergencies it looks at.
(The second is about shortages of goods like toilet paper and hand sanitizer near the start of the COVID-19 pandemic, which is less emergency-like.)
But if you have particular research in mind that finds that anti-price-gouging laws are beneficial on net in emergency situations, I’d be very interested to know what it is.
If you end up being right about this consideration, it’s fairer to say that I was wrong, because I hadn’t thought of it.
But I don’t yet clearly see the argument. Competitive firms produce until P=MR=MC. If (expected) demand increases and there’s a binding price ceiling at P, the firm still has P=MR=MC and so extracts no economic profit from producing a greater quantity.
If MC is locally constant, then I suppose they could increase production without economic loss. But that seems bad because once the demand shock subsides, they’ll be stuck with too much production capacity and no one to sell it to, right?
EDIT: Another way I could be wrong is if short run supply were responsive enough to adjust on non-price dimensions, like lower quality same price, to drive up profit and produce more overall.
If you weren’t sure, you could just ask which I meant. gjm is right: I wasn’t claiming that gouging is the only way to incentivize production.
What about Cowan?