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.
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?