There’s an awful lot of people who don’t get economics you knowAugust 28, 2017 Tim WorstallTimmy Elsewhere79 CommentsHurricane Harvey Is When We Need Price Gouging, Not Laws Against It You should see some of my email…… previousBloody cheap if you ask menextWhat was it this time? 79 thoughts on “There’s an awful lot of people who don’t get economics you know” David August 28, 2017 at 6:59 am I don’t “get economics”, have you got a recommendation as to where should I start? Tim Worstall August 28, 2017 at 7:05 am Henry Hazlitt, economics in one lesson. Old, slightly biased but still fair, and free. David August 28, 2017 at 7:09 am Much obliged, thanks! Surreptitious Evil August 28, 2017 at 8:08 am Available free as a PDF from the Mises Institute. bloke in france August 28, 2017 at 8:24 am I see your point, Tim. Coyoteblog was on it too. But what if it was the police or the fire brigade, private ambulances, etc? Tim Worstall August 28, 2017 at 8:26 am I even quoted Coyote. I’m entirely fine with public provision of these things …..as also the bottled water. I’m arguing though against the making of private provision illegal. Should it be illegal for there to be security guards (private police) or private ambulances? Bongo August 28, 2017 at 9:05 am Some of those commenters are savages, absolutely awful people who’d string people up if they got the chance. Have they never voluntarily bought a drink at a theatre or football game for five times what it costs at tescos? There was a guy during Katrina who rented a truck and drove from the next State to sell $800 generators for twice that. He went to jail and nobody who wanted a generator at the price got one. John B August 28, 2017 at 9:16 am I am all for anti-price-gouging; Governmenr rationing is best. Yours, A. Black (Marketeer) FysicsTeacher August 28, 2017 at 9:19 am Is there anyway to get the Forbes website to play nice with iPads? I can’t scroll down past the first three comments, it just scrolls the main article instead. Martin August 28, 2017 at 10:37 am This was not an unknown disaster like a terrorist attack or earthquake is. This was a disaster with days of warning. Time to stock up on stuff, time for those outside the area to transport stock into the area or hold it ready at staging points nearby. If water is $99 a case and you cannot sell any then price is too high. If I need water and the only water I can find is $99 a case then I am darn well going to buy it. The guy with high price water sells out what does he do? Get more in to sell. Econ_GURU August 28, 2017 at 11:19 am You, sir are obviously one of that LOT OF PEOPLE, Economics doesn’t have any function or value except within the context of society. Economics SERVES society, not the other way around. Think about it. You seem to think you are some kind of an Economics purist. Economies at the root state of purity are subservient to humanity. If this is not the function of an economy, under any so-called system, it ceases to be economic, and becomes oppressive tyranny. Think about it. Gamecock August 28, 2017 at 11:23 am “Economics SERVES society” Kiss my ass. We are individuals, not a group. Gamecock August 28, 2017 at 11:28 am There was a case down in Florida a few years ago. Approaching hurricane caused a run on plywood; local stores ran out. An enterprising man drove his truck to Atlanta and bought some. Drove back to Florida, set up on a street corner, and sold them. He was arrested for charging too much. Now, when the local stores run out of plywood before a storm, that’s it. Game over. Rewind further. 1973. President Nixon puts price freeze on gasoline. Long lines ensued. Thanks, you Dick! David Moore August 28, 2017 at 11:34 am Gamecock “Rewind further. 1973. President Nixon puts price freeze on gasoline. Long lines ensued. Thanks, you Dick!” Also, Venezuela and toilet paper….it’s a lesson that just never penetrates many skulls out there. abacab August 28, 2017 at 11:35 am “You, sir are obviously one of that LOT OF PEOPLE, Physics doesn’t have any function or value except within the context of society. Physics SERVES society, not the other way around. Think about it. You seem to think you are some kind of a Physics purist. Physical models at the root state of purity are subservient to humanity. If this is not the function of a physical system, under any so-called system, it ceases to be physics, and becomes oppressive tyranny. Think about it.” Not quite right but it should get the gist across. Gamecock August 28, 2017 at 11:39 am “Economics SERVES society” And what is the communists’ Plan B for when “society” doesn’t provide water? People die. By the millions. Gamecock August 28, 2017 at 11:45 am “Society” isn’t driving all night from Kansas to bring water to Texas. And as Tim says, the law will keep any one else from doing it, too. When families bury their own, they can feel good that no one made a profit keeping them alive. The Meissen Bison August 28, 2017 at 12:37 pm UR_rong: Think about it. I have thought about it and it’s gibberish. Social Justice Warrior August 28, 2017 at 1:18 pm The basic underlying economics being that we want whatever scarce resources there are to be applied to their most valuable uses. Rationing by price means that a billionaire can afford to buy bottled water to bathe in, at a price a poor person can’t afford to pay when he needs the water to drink. If you think washing water for the rich is more valuable than drinking water for the poor, then yes, the resources are applied to their most valuable use. Otherwise, Tim’s theory works only if we have sufficient redistribution of wealth before disaster strikes. Gamecock August 28, 2017 at 1:29 pm ‘Rationing by price means that a billionaire can afford to buy bottled water to bathe in, at a price a poor person can’t afford to pay when he needs the water to drink.’ Liar. False dichotomy. Where are these poor people that can’t afford water to drink? Your plan is that no one gets water. All die. How nice. You can feel good when you bury your family. Tomsmith August 28, 2017 at 1:30 pm Billionaires also react to price. Probably more so than other people. PF August 28, 2017 at 1:31 pm “Economies at the root state of purity are subservient to humanity.” Very good..:) You need to change the style slightly though? Add candidly liberally, and perhaps make reference to the courageous state? “and becomes oppressive tyranny” Good stuff..:) Tomsmith August 28, 2017 at 1:35 pm Idiot: “You, sir are obviously one of that LOT OF PEOPLE, Economics doesn’t have any function or value except within the context of society. Economics SERVES society, not the other way around.” How is the price system functioning according to supply and demand not serving “society”, i.e. people? Certainly ignoring reality and expecting wishful thinking to furnish everyone with what they need does not serve anyone. Interested August 28, 2017 at 1:39 pm “If you think washing water for the rich is more valuable than drinking water for the poor, then yes, the resources are applied to their most valuable use.” You really are the most terrible cunt. PF August 28, 2017 at 1:46 pm Paul “redistribution of wealth” But that’s a quite different issue as you know? And, in any case, I’m not aware of many around here arguing against the concept or principle (itself) of redistribution? It’s usually one of degree. “If you think washing water for the rich is more valuable than drinking water for the poor” The logical conclusion of that kind of collectivist judgementalism is that ultimately we are all beholden to “that idiot’s” courageous state? From each, to each? Ie, “a failed state”. Social Justice Warrior August 28, 2017 at 3:12 pm Several abusive replies there, with no sign of any understanding of economics in them. I’ll try again: Tim’s point that higher prices tend to increase supply is a good one. Tim’s argument that rationing by price assigns resources to where they’re must valuable is wrong unless everyone has the same disposable income, or unless you have a special definition of ‘valuable’ which treats the wants of the rich as more important than the needs of the poor. Gamecock August 28, 2017 at 3:22 pm Whah! Whah! Whah! You will kill the poor. The rich will take a little longer. Bongo August 28, 2017 at 4:16 pm The needs of the poor can be met by being hired to service the wants of the rich. I’m poor by UK standards, but if some Duke Cock wants to fill the swimming pool of him and Lady Cock by buying all the milk in the North East for £10 a litre so they can wash in it, then I’m going to get a second job for the milk supply company. ‘Cos redistribution. Soya milk is passable, and after two weeks Duke Cock will be bored and we can go back to before. NiV August 28, 2017 at 4:18 pm “If you think washing water for the rich is more valuable than drinking water for the poor, then yes, the resources are applied to their most valuable use.” It’s not that the washing water is more valuable than the drinking water, it’s that whatever the billionaire did for the rest of society to *become* a billionaire is more valuable than whatever the poor person did that led them to remain poor. Money is the intermediary in a two-part trade. So the billionaire gives a billion people their first home computer (say), in exchange for which we give him bottled water. The poor person gives society nothing (or less than nothing, if on welfare), in exchange for which he gets… nothing. Which is more valuable? A billion people getting home computers, or less than nothing? Supply and demand allocate resources to their most productive use, but sometimes you’ve already got the production, and are only now paying for it. If you didn’t give billionaires preferential access to resources, why on Earth would they bother to do things like giving everyone home computers or iPhones in order to become one? Socialists allocate resources according to *need*. Free markets allocate resources according to productivity. The socialist can only scream “But I waaant it!! I want it reaaally baaad!!”, and has no answer when asked “So what are you going to produce (or what have you already produced) that you’re giving in exchange for it?” That’s what’s meant when we say markets allocate resources to their most productive use. It’s done to motivate and maximise production, so there’s more goods and services to go round for everyone. The socialist allocating resources based on need ends up maximising need, as everyone competes to be as needy as possible while producing as little as they can get away with (since you don’t get paid for it; it’s all taken from you and “redistributed”). Free markets deliver justice meaning you get exactly what you deserve, when socialists are asking for mercy, meaning you get it even when you don’t deserve it, because you want/need it really really bad. There is definitely a place in this world for mercy and charity. Any image-conscious billionaire is quite likely to pay extra to ship in some extra water and give it away. All they’re asking for in exchange is a little love. But charity has to be given voluntary, and the recipients owe the giver a debt of humble gratitude; not, as is common with socialists, seething resentment that they didn’t give more. The end game of socialism is always famine and slavery. It just takes some people a little longer to get there than others. PF August 28, 2017 at 4:43 pm NiV Nicely articulated. Martin August 28, 2017 at 4:44 pm Social Justice Warrior – where in America is someone unable to afford water? If price is too high they do not buy – the person BUYING decides affordability, decides whether they want to spend their money getting that item from that seller. Without being able to charge what the BUYER will pay then no one is going to transport in that item or sell some of what they themselves can use. The person selling water can keep it all to themselves if they want. Hallowed Be August 28, 2017 at 4:58 pm Its been taken down on forbes,, anywhere else to read the piece? Social Justice Warrior August 28, 2017 at 5:33 pm May I remind you all that we’re talking about prices in the hurricane-affected areas of Texas. It seems that NiV in particular is content to assert that in the face of a hurricane the wants of the rich are more important than the needs of the poor. I’m not. It’s helpful to be clear on what one disagrees about. Gamecock August 28, 2017 at 6:03 pm “May I remind you all that we’re talking about prices in the hurricane-affected areas of Texas.” People die from lack of water, not it’s price. NiV August 28, 2017 at 6:03 pm “It seems that NiV in particular is content to assert that in the face of a hurricane the wants of the rich are more important than the needs of the poor.” No, it’s the wants of the poor. It’s the poor who get cheap home computers, or supermarkets providing cheap food, or cheap medicines, or whatever it was the billionaire produced that made him a billionaire. Giving the billionaire bottled water in a hurricane-hit area is a small part of the price we pay for the benefits delivered to billions. But it’s production for the masses that we are prioritising, and allocating resources to maximise. “I’m not.” We know. You’re a socialist. Socialists only follow the economic chain of consequences one step. They see the poor person, and the rich person, and which of the two needs the water. What they always ignore is the chain of people standing behind the rich person, and all the benefits they get from making the rich guy rich. Socialists see government as a magic pool of money that can be poured out on the poor, and ignore the effect of taxes on the wider economy. Socialists see labour market protectionism and closed shops raising their own wages, but fail to realise that everyone else’s closed shops raise their wages too, raising prices and negating their pay rises. Socialists see minimum wage laws raise salaries, and never ask where the money comes from as other people lose their jobs to pay for it. It’s like looking at the economy through a drinking straw. Yes, as far as the very first step in the chain goes, you’re right. The poor person needs it more than the rich person, and if that’s all we were measuring then the value to the poor person would be higher. But the wider consequence of ‘correcting’ that situation is that everyone else loses, because you’ve just broken the promise that the value of money is founded on. The market considers the welfare of the *whole* of society, not just the tiny bit that’s all you’re capable of seeing. “It’s helpful to be clear on what one disagrees about.” Yes. Andrew M August 28, 2017 at 6:17 pm Can’t read the original article for some reason, but assuming we’re talking temporary water shortages during the hurricane, there’s another point nobody is making. Water isn’t just there or not there. You’ve got a range of quality from pure distilled water, through Evian, through potable tap water, through the stuff you find in hotel taps on holiday which the locals drink fine but the guidebooks recommend avoiding, all the way down to raw sewage. In short, if you can’t afford bottled water (because Warren Buffet mysteriously bought up all the bottles just before the hurricane struck), you can still drink the 30 litres or so that are sitting in your toilet cistern. Sure, the idea is a bit icky; but it’s actually perfectly clean water. Our forefathers drank far worse. Andrew M August 28, 2017 at 6:31 pm Socialists often miss that last point. They promise everyone a standard car: you imagine you’re getting a Golf, but they provide a Trabant. Social Justice Warrior August 28, 2017 at 6:34 pm NiV: I see the whole thing, including some important parts which you’re missing. Most relevantly, we don’t have to apply the same market rules in the immediate aftermath of a disaster as we do to ordinary commerce. If the main effect of allowing price gouging on bottled water would be to increase supply, then we should allow it. If the main effect would be to enable holders of stocks of bottled water to make windfall profits while pricing water out of the reach of the poor, we should disallow it. This is an empirical question: any evidence? Tim attempts to sidestep the problem by asserting that “most valuable uses” can be determined by who’s willing to pay the most. That’s wrong. NiV August 28, 2017 at 6:54 pm “If the main effect would be to enable holders of stocks of bottled water to make windfall profits while pricing water out of the reach of the poor, we should disallow it.” Why?! It encourages people to hold larger stocks of bottled water than they would do otherwise, The average price you can sell it for is higher, which justifies allocating more warehouse space to it. If people have an expectation that emergency supplies will make more profit, and you live in an area subject to regular emergencies, then it makes sense to stockpile emergency supplies. Which is good. And the more you expect to be able to sell it for, the bigger the stockpile that is cost-justified, which is even better. If everyone saw how people with stockpiles of water made windfall profits last time round, they’ll all want to jump on the bandwagon, bigger stockpiles will be available next time, and the prices will therefore be lower. Eventually the prices drop to equal the cost of the storage The higher prices charged for any scarce resource both motivate more people to provide it, and fund the building of the infrastructure and logistics needed to provide it. The competition to do so brings the price down. Exactly the same thing goes for stockpiles and storage space. Conversely, attempts to price cap a resource results in under-supply of that resource, which in the case of emergency stockpiles in a hurricane zone I suggest to you is A BAD THING. Why in the name of mercy would we want to block that?! Like I said, you see a tiny bit of the logistical chain and ignore the rest. Social Justice Warrior August 28, 2017 at 7:48 pm “If, if, eventually”. Yes, maybe allowing price gouging would slightly increase stocks. Any actual evidence of that? Since we’re dealing in hypotheticals, let’s try an extreme case. Say that water is in very limited supply in the aftermath of a hurricane, and the supply is entirely inelastic (there are no communications to bring in more). Say that the local billionaire likes to keep his swimming pool full of clean water, and is willing to spend millions to do it. Say that he uses those millions to buy up the entire water supply at prices most people locally can’t possibly match. Do you have any problem with that, or is it just a fair reward for having supplied cheap home computers? Pcar August 28, 2017 at 8:18 pm @Tim Worstall As @Hallowed Be, August 28, 2017 at 4:58 pm says Forbes have removed your article and comments. Are you pressing Forbes to unblock it? Planning to re-post on CapX? NiV August 28, 2017 at 8:43 pm ” Do you have any problem with that, …?” Of course. But I have a bigger problem with the alternative. The local, short-term consequences of cornering the market are bad, but the knock-on consequences of price-capping for the rest of the economy and for the response to future disasters are *worse*. The problem is under-supply. The solution is obviously to increase supply, and if transport is cut during the emergency, the only way to provide that solution is to stockpile more locally. That has to be paid for. Price rises during the emergency are how we pay for it, so if you stop prices rises, you’ll end up with shortages even if you stop the billionaire filling his swimming pool. The billionaire simply represents an even larger demand for water you need to meet in an emergency. It would have the exactly same consequences if you were grossly under-supplied but everyone wanted it for drinking. The root problem that makes your hypothetical situation possible is the lack of foresight resulting in an under-estimated demand and therefore insufficient supply. The ideal solution is better foresight. Prices rising in an emergency are what makes that possible. It’s how we motivate it, fund it, and provide the right amount in the right places – something difficult verging on impossible for central planning, but easy for the market. So to short-circuit that mechanism might save some lives in the short term, but costs a lot more in the long run. Bloke in North Dorset August 28, 2017 at 8:53 pm The rich are, by and large, quite intelligent and will recognise a supply shock. In the event they have stayed in the affected area they are unlikely to pay this higher price for more than they need, plus a bit extra. If that price signal doesn’t get to work there will be a real problem for the poor, not a hypothetical one dreamed up by the left. I’m reminded of the plumber who turns out on Christmas Day to fix an emergency. Liberal Yank August 28, 2017 at 9:24 pm SJW, What you are missing is that, as long as people are allowed to profit, people will find a way to deliver water to those that want it. If the local billionaire is spending millions filling a pool someone can then use part of the profits to hire a helicopter to fly more water in. What we really would like to know is how much price fixing during storms reduces the local reserves before the storm? If I owned a store, in hurricane territory, and a storm was coming, I would try to stock just enough to sell out before the storm hits. There is a distinct possibility that my store could be destroyed. Since there is no reward for overstocking and insurance payments take time, there is now zero motivation for me to create a reserve for after the storm hits. Social Justice Warrior August 28, 2017 at 9:30 pm So in countries where there an no restrictions on price gouging, there are never any shortages following a natural disaster? Obviously that conclusion is false: the mechanisms NiV suggests don’t work. In practice I doubt that sole traders in trucks make any significant contribution to alleviating water shortages. Because if they could, supermarkets with lorries could and would do it much more efficiently. I suspect that it’s almost always the case that anyone selling water at vastly inflated prices has obtained it locally, and is doing nothing at all to increase supply. How has this profiteer got hold of the water? By buying it from shopkeepers who haven’t increased their prices. Why not? Because they think it wrong. Or because they intend to continue in business after the disaster, and are unwilling to alienate the local community. Why would the local community be outraged by price increases enthusiastically supported by commentators here? Because people are like that – this proposition at least is strongly supported by the evidence. (Proper economists understand that the world does not always operate according to simple theories of supply and demand: right-libertarian blog commentators tend not to.) I think that to allow us to get the best out of human altruism, we do need to restrict the activities of those who seek selfishly to take advantage of it. That means that we should have restrictions on selling water in an emergency at an unreasonable mark-up to one’s cost of supply. That doesn’t stop the enterprising truck-driver, nor anyone who’s spent money on long-term storage. It stops the profiteer. Fred Z August 28, 2017 at 9:31 pm The billionaire has a storm-proof fortress of a home, which is gigantically well stocked with both bottled water to drink and bulging cisterns of bathing water. Not to mention fine food and wine and armed guards to keep the thirsty poor people out. The thought of a billionaire haggling to buy a truck full of bottled water to bathe in makes me think that SJW is either more retarded or more subtle than I have heretofore believed. NiV August 28, 2017 at 9:32 pm Suppose, to take a hypothetical extreme, that the poor people have *zero* money for clean water (none of the ATMs are working, and the benefits office is flooded), so the only price you can cap it at to allow them to obtain it is zero. i.e. you declare that shops with water have to give it away free. What will that do to the stockpiled supply of water *next* time there’s an emergency, when all the shops know that any stocks they have will be legally ‘stolen’? What will that do to the financial viability of the shops? It’s the same argument as with life-saving drugs. It costs a billion dollars to bring a new drug to market. But a lot of people cannot afford to pay the prices you’ll have to charge to recoup that, and will die of curable conditions for lack of medicine. So the government cap the prices. You ask the drug company to fork out a billion dollars, and only get 1% of that back. What do you think that does to the supply of new drugs? Introducing price caps, even to make life-saving products available to those who otherwise could not afford them, results long-term in under-supply and *nobody* getting them. Whereas allowing people to charge high prices funds the development of solutions, which eventually filter down to help the poor too once the initial investment has been paid off. Rationing by price undoubtedly has undesirable consequences, but the alternative is even worse. Andrew M August 28, 2017 at 9:58 pm SJW, Price-gouging has two important consequences. Firstly, it makes buyers think carefully about their purchase and only buy the amount that they really need. They don’t think “oh I’ll pick up another 24-pack of water in case my neighbour needs some”. Secondly, and closely related, by allowing gouging in the open market, you prevent gouging on the black market. Faced with a fixed price on the open market, people will buy more than they need, thinking “oh I’ll pick up another 24-pack because I know I’ll be able to sell it at twice the price tomorrow to my neighbour”. (See: Glasto tickets.) By banning gouging, you’re strengthening criminal networks: people will learn which local Mafioso to turn to in hard times, and they’ll not dob him in because he helped them out. NiV August 28, 2017 at 10:10 pm “So in countries where there an no restrictions on price gouging, there are never any shortages following a natural disaster?” No. The market’s foresight isn’t perfect, disasters are quite variable, and to some degree there is a trade-off between costs and benefits that tolerates some additional cost. I’m saying the market is the best solution we’ve got, not that it’s perfect. “In practice I doubt that sole traders in trucks make any significant contribution to alleviating water shortages. Because if they could, supermarkets with lorries could and would do it much more efficiently.” Of course. But supermarkets know the laws on price-gouging, and so won’t do it. Sole traders often don’t. “I suspect that it’s almost always the case that anyone selling water at vastly inflated prices has obtained it locally, and is doing nothing at all to increase supply.” The vastly inflated prices are what increases supply – but they do so during the *next* disaster. Supply goes up as the price does. “How has this profiteer got hold of the water? By buying it from shopkeepers who haven’t increased their prices. Why not? Because they think it wrong.” Yes, this is the ticket tout problem. Music venues organise gigs with fewer seats than people who want to go, but they don’t want to charge higher prices to limit demand, because they think that would be “wrong”. So the people buying the tickets at £10 each find they can sell them at the market rate which is £100. The profit goes to the touts and the lucky few who managed to get tickets. People going to the concert wind up paying the full market price anyway, but you don’t get the market’s adjustment of supply and demand resulting in lots of dissatisfied fans, so it fails on *all* counts. The *correct* solution is to *increase supply* – to hire or build bigger venues. But to do that, you have to direct the money to the musicians and organisers, not the touts. So charge higher prices, and use the money to build a bigger venue that can seat the number of people who want to see the show at £10/ticket. More fans can get into gigs, for cheaper, and the organisers make more profit. Everyone is happy. Whenever you introduce price caps, you not only get under-supply, you also get a black market feeding off the difference between the cap and the market rate. That sort of thing funds smugglers and organised crime, which creates a whole host of other expensive problems for society. It’s stupid. Stop doing it. “Why would the local community be outraged by price increases enthusiastically supported by commentators here? Because people are like that” Because they’re ignorant of basic economics (having been failed by the educational system, which for some reason doesn’t teach this to everyone as the sort of basic stuff everyone needs to know), and have been bombarded with socialist idiocies in the media and the political debate for the past century. “I think that to allow us to get the best out of human altruism, we do need to restrict the activities of those who seek selfishly to take advantage of it.” No! You have to *take advantage* of human selfishness by making it profitable for them to raise supply to meet demand! The problem is lack of supply, the solution is to motivate people to increase supply. If you want to be altruistic, give your money to poor people so they can afford the market rate. Then you let the market rate adjust supply to match demand, for *next* time. Messing with the market rate fails on all counts. It takes away any motivation to fix the problem, and it fuels the black market and hands it over wholesale to criminals, by legally excluding any legitimate businesses taking part. It’s insane! Social Justice Warrior August 28, 2017 at 10:24 pm It’s the same argument as with life-saving drugs. It costs a billion dollars to bring a new drug to market. But a lot of people cannot afford to pay the prices you’ll have to charge to recoup that, and will die of curable conditions for lack of medicine. So… This is not the same argument at all, it’s much worse. Paying for drug development by granting monopolies to drug companies is a stupid system. It happens to be the one we’ve got, which alas makes it the only one the economically naive can think of. Gamecock August 28, 2017 at 10:25 pm “we should disallow it” WE? WHO THE FVCK IS “WE?” Go fvck yourself. Whoever this “we” is should be marched up the gallows. The Pedant-General August 28, 2017 at 10:31 pm “I suspect that it’s almost always the case that anyone selling water at vastly inflated prices has obtained it locally, and is doing nothing at all to increase supply.” And you’d be wrong. Particularly especially because the gov’mint has very noisily arrested people driving overnight to bring supplies in from outside the affected area. People driving overnight to bring supplies in from outside the affected area is called – wait for it – “increasing supply”. This seems reasonably simple stuff and has f*ck all to do with millionaires. NiV August 28, 2017 at 10:41 pm ” Paying for drug development by granting monopolies to drug companies is a stupid system. It happens to be the one we’ve got, which alas makes it the only one the economically naive can think of.” Oh, cool! You’ve got a better one? Which is? Mohave Greenie August 28, 2017 at 11:13 pm Got this when I went to the site: Error 503 first byte timeout first byte timeout Guru Mediation: Details: cache-dfw1838-DFW 1503958088 176004739 Are they running the web site on Amigas? That would explain a lot! Social Justice Warrior August 28, 2017 at 11:22 pm NiV: see Stiglitz TP-G: reference please NiV August 28, 2017 at 11:41 pm “NiV: see Stiglitz” That’s a bit vague. Henry George theorem, perhaps? Gamecock August 29, 2017 at 12:00 am “Paying for drug development by granting monopolies to drug companies is a stupid system.” It’s just the standard patent system. Stupid? Andrew again August 29, 2017 at 1:17 am “See Stiglitz” This is the standard way of people who don’t know a subject well arguing from authority, which gets the treatment it deserves around here, rather than presenting the argument themselves. It appears authoritative but in reality is just there to waste the time of the reader. So @SJW we are enthusiastically waiting for your erudite explanation. Given the exchange so far I feel it will be NiV and others giving patient explanation of why SJW’s belief is incorrect and SJW repeating “No, *you* are wrong [and an uncaring bastard for not putting the poor first]” Andrew again August 29, 2017 at 1:19 am Congratulations to SJW for coming back again and again for a cause they believe in though. Such devotion where the evidence points the other way is remarkable. Social Justice Warrior August 29, 2017 at 1:50 am Such devotion where the evidence points the other way is remarkable. None of you has cited a single piece of evidence. It’s all assertion. This is the standard way of people who don’t know a subject well arguing from authority… And yet none of you would-be experts is even aware of what Stiglitz has to say on the subject. we are enthusiastically waiting for your erudite explanation Since you’re so keen, here‘s something I wrote about it years ago. Liberal Yank August 29, 2017 at 3:04 am The obvious problem I see is collecting and managing all of the information needed to appropriately assign value to patent holders. While I believe it is technically possible, I expect this would be very expensive to run. There will still be a need for some type of marketing budget. I need a way to find information about a drug, therefore, someone has to spend their time providing that information. While marketing could be cheaper, there is a chance that the systemic complexity will lead to budget overruns for marketing. Finally, I see a few other problems. Drug companies already buy senators. Regulatory capture will most likely happen very quickly. We also have to consider the sheer amount of data. We have to consider the rights of every person that doesn’t want to have their information recorded in one very public target. Basically, the least morale among us will want positions running healthcare so they can fleece the taxpayer. Bloke in North Dorset August 29, 2017 at 8:18 am My Google mojo has failed, I Googled “Stieglitz price gouging”and all I got were a few articles that made arm waving reference to his comment that there sometimes isn’t an invisible hand. The bulk of the argument against price gouging appears to be “it’s not fair”. To which I refere you to my grandmother’s comment when we were kids- “life’s not fair”. If, after a disaster, there’s a water shortage it means that both the market and State have failed. Price gouging is the sign that the market can react a lot faster than the State. We should be castigating the State with its vast resources not prosecuting those seeking to fix the problem, even if the are making a quick killing. The State failing and then restricting the only solution available to hide that failure is madness. PF August 29, 2017 at 9:16 am “Congratulations to SJW for coming back again and again” That’s Tim and his evil free markets thing again. If it was a boxing ring, he would have stepped in yesterday evening and stopped it… Interested August 29, 2017 at 10:27 am @SHW “Since we’re dealing in hypotheticals, let’s try an extreme case.” You already tried an extreme case when you suggested 1) that there were billionaires buying bottled water to bathe in while the poor died of thirst and 2) that anyone here really thinks that is a good thing. But as I said you’re a terrible cunt. HD August 29, 2017 at 11:07 am Regarding the NiV/ SJW “debate” : I am reminded intently of the Simpsons where Homer dressed as Krusty the Clown beats up the Krusty Burglar. Stop. Stop. He’s already dead. The Meissen Bison August 29, 2017 at 11:10 am SJW’s possible next “extreme case”: What if the bilionaire buys ALL the bottled water and builds a seond pool because the first pool isn’t big enough to hold ALL the bottled water and then builds an electric fence around both pools with a gazillion volts and deaths-head signs and then just in case some poor person gets through has a champagne-fuelled pee in both pools? Andrew M August 29, 2017 at 12:14 pm The billionaire’s marginal utility for water falls quite rapidly. A more realistic scenario (for our resident devil’s advocate SJW) is that the top 50% buy up all the water, leaving the bottom 50% with nothing. The solution there would be rationing, not price-fixing. But good luck issuing ration cards at 48-hours notice. PF August 29, 2017 at 1:03 pm If the state does feel the need (for all sorts of perfectly good reasons), to step in, then there is nothing to stop it doing so. But not with fascist measures (this is not war!), rather, “in addition”. Why not simply helicopter in their own supplies, for free if they want? Sure, that will affect “the market”, but then so could anyone. Indeed, any of us, or a charity, could hire a truck (helicopter?) and altruistically ship in bucket loads of all sorts of free stuff. I didn’t read the article (Forbes wouldn’t permit it), nor focus much on what’s currently taking place, so no idea if that got covered or happened? But no, as we see with the Murf and too many others, socialists invariably prefer the fascist / bossy cnut solutions. Fred Z August 29, 2017 at 1:40 pm I tried to read SJW’s proposal to end drug patenting and licensing but had to stop at “we will award patent holders a share of a global drugs fund, according to how much good their patented drug is doing.” The stupid was too strong and overcame me with visions of “we” creating a “global drugs fund” with dishonest thugs like Russia, Iran, China et al involved. I was also dazzled by dreams of how much of the fund could be peculated by Sir Humphrey Appleby and his hordes of followers and if perhaps I should, even late in life, go to work for the branch of government running this thing. Dreams of fiscal sugar plums easily lifted from this vast pool of money …. Gamecock August 29, 2017 at 6:21 pm “Drug companies already buy senators.” Name one. NiV August 29, 2017 at 8:15 pm “I tried to read SJW’s proposal to end drug patenting and licensing but had to stop at…” The main bit you needed to read was the following: The price of the branded drugs will fall precipitously once all drug manufacturing becomes generic, freeing up perhaps $700 billion a year of healthcare spending. We just have to collect that up and distribute it to the drug companies according to their logged QALY contributions. So first, we’re going to take the current drug spending budgets and spend it all on drugs – this presumably includes private citizens buying drugs over the counter, or privately. Apart from channeling it all through government, it’s hard to see how that’s going to change the prices of anything, or who pays it. The proposal is a bit vague about the method (“…by whatever mechanism works best for them”). Second, there’s no mention of payments expiring. Drug patents only last 20 years. But the benefits potentially last forever. Will we still be paying the inventor a hundred years later, if it’s still in use? Isn’t that more expensive? (Obviously you can set an expiration date, but what? Justified how?) Third, slight improvements on an existing drug only get the marginal improvement. So if you invent a drug that achieves 90% of the effect, you continue to get 90% of the money in perpetuity – even after everyone has ceased to use it at all because there are better drugs. That means that the inventors of those improvements only get 10% of the money they otherwise would have got – despite theirs being the drug everyone uses. And their development costs will still be the same – the full billion dollars. How is that going to work? The committee sounds a bit like NICE – who decide what drugs to buy depending on factors like cost per quality-adjusted life year saved, setting a price on it. One of the criticisms of it is that different people set different prices on life years saved. They may have different priorities, and different competing demands on their money. (That is to say, NICE say the new cancer drug isn’t worth the money, giving only a marginal extension of life. But patients and their families disagree.) That same objection seems to apply to this new committee too. It’s not clear how changes in the total budget are to be dealt with. The proposal is that the current $700bn/yr is redistributed to drug manufacturers, in perpetuity. But what if someone invented a way to cure everything for only $300bn? Do they still get the full $700bn? Suppose we decide we’ve got more money to spare for health care (since everything else is made by robots and has got cheaper). How do we tell the system that? How do the committee know that that’s what our collective preference is? I could go on. I think the proposal has a lot of problems, but to try and be as fair as I can be, I will definitely give points for making the effort to generate an alternative proposal and try to *think* about it. Innovation doesn’t happen if we’re too scared to propose alternatives, thinking there must be something wrong with them. The next step, of course, is for the proposer to try to understand the objections, take them on board, and make another suggestion that fixes the problems identified in the previous one. What puzzles me, though, is what this has to do with Stiglitz. I can’t imagine a Nobel prize winning economist – even of the Georgist/Leftist persuasion – suggesting this scheme. What might be a “good try” for an amateur effort would have to be judged more harshly if it came from a professional. I don’t know, though. — “Stop. Stop. He’s already dead.” That’s what we thought in 1989. Liberal Yank August 29, 2017 at 9:09 pm Gamecock, Manchin. Mylan has a lot invested into that seat. Dongguan John August 30, 2017 at 2:16 am I like to holiday on this small island in the Philippines called Malapascua. In 2013 the island was hit, dead-on, by typhoon Haiyan, that big one that killed thousands. Thankfully all the very poor locals on the island could shelter in well built buildings owned by foreign capitalist dive centre and hotel owners and nobody died there, but thats another story. Anyway, although no one died there was need for emergency aid such as bottled water. After a day or so the water started to arrive on the island by boat from charities and the government. The bottled water was dumped for free on the south of the island. All the locals in the village in the south grabbed the lot leaving nothing for the villages in the middle and the north. The southerners then started flogging the water that they recieved for free to the rest of the islanders at ridiculously inflated prices. People were calling these people pieces of shit but the villages in the north would have done the same were the bottles dumped on their beach. A capitalist from the mainland flogging water at a generous mark up would have done a far better job of ensuring everyone got water than the idiot charities and government who just dumped it on the beach. Gamecock August 30, 2017 at 5:07 pm “Manchin. Mylan has a lot invested into that seat.” Manchin’s daughter is CEO of Mylan. You consider that “invested?” Gamecock August 31, 2017 at 8:54 pm “we should disallow it” The Committee of Public Safety, that’s who “we” is. PhoenixM September 1, 2017 at 1:51 pm I’m not going to respond to comments (I have a lucrative career, and a social life, and my own physical and mental health to which I’d prefer to attend), so feel free to argue and rebuke me, but do so knowing that I am literally not even going to see a word that you type out – though, in all fairness, you’re only doing it to impress your own like-minded friends rather than to somehow sway my thinking anyway. Anyway… did the people posting on this thread fail kindergarten? Did you not learn the basic skills that kindergarten teaches about sharing with people, playing nice, not hogging all of the games and – maybe most importantly – imagining yourselves in the shoes of the people that your actions are hurting? Hell, even the Christian bible has that whole “golden rule” thing going on that you don’t seem to remember any more either. But maybe just as importantly as kindergarten skills – did none of you learn logical thinking back in your Ivy League college days? Laissez-faire capitalism is a great idea in principle. And for a middle-of-the-road everyday economic situation, it works pretty well; I mean, not everybody can or should own a 4K 60″ television, or a nice car, or designer clothes, or anything else that can or should be considered a necessity. As a self-made man, I wholeheartedly agree that hard work and wise decisions should be a strong deciding factor in the wealth that we have compared to other people. But there’s a difference between *wealth* and *survival*. If I don’t have a 4K television, life goes on. If I don’t have potable water or food, live doesn’t go on. This is where Laissez-faire breaks down. Unless you literally think that the most advanced race on this planet (i.e. the human race, at least in theory) should in its most literal form adhere to the “survival of the fittest” mantra of the lowest level of the animal kingdom, then you must accept that there is a pretty reasonable moral argument against allowing swaths of people to die in the face of a natural disaster, when we (as a country or species) have the means to prevent it. There is not a supply-and-demand influx of “new markets” in disaster areas; by definition, disaster areas are sites of survivors moving out, and emergency/rescue personnel moving in. The people selling emergency supplies are not doing so because they are innovative businesspersons who have opened up new avenues of trade; they are simply selling what they have at ridiculously-inflated prices because they know they can get away with it. I’d like to point out that Harvey in Texas: 1. Is a once-in-800-years situation that was not anticipated as being such until it was too late to do anything about it; and 2. Once that realization was made, could not possibly have been evacuated in time due to physical road-capacity limitations. What I’m saying is that the people who found themselves as victims of Harvey could not, within reason, have planned or expected in advance that they’d be in the middle of a once-in-30-generations event, and could not be evacuated once that realization became clear. In other words, there is nothing that they, as common folk, could reasonably have done in advance of this that would have changed the outcome; the best they could have done is *not be so poor* so that $99 bottles of water wouldn’t be as much of a stretch. So let’s get back to the brilliance of Laissez-faire economics. Its blind spot is that it fails to distinguish between wants and needs, and the extremes that living creatures will go to in order to ensure that its needs (and/or the needs of its loved ones) are met. It’s not all decided by the free market; sometimes it’s decided by desperation. To put it in less-intellectual terms… I am former military, and I would not hesitate to kill somebody who was attempting to extort $99 from me for a bottle of water that my family needed to survive. Hell, if the shopkeeper affected exactly the right or (you might say) exactly the wrong attitude with me while telling me that I needed to give him $99 (for the item he paid $1 for) for my child to survive, I can’t guarantee that I wouldn’t subjugate and tie him up him rather than kill him outright, and then let him watch as I slowly skinned his own family alive. So yeah, feel free to ignore the plights of human beings trying to escape a disaster area. But just like Marie Antoinette, don’t be surprised when your “let them eat cake” comments make you and your loved ones post facto victims of the disaster as well. We’re the superior race on this planet. Isn’t it time we started acting like it? David Hakala September 1, 2017 at 2:20 pm I have never so many armchair economists who haven’t the slightest clue how the real world works all on one blog. Few humans are the type of sociopathic monsters who would charge their neighbors $99 for a case of water during desperate times. Those who are, are social evils who will be eradicated by boycotts after a disaster, if they aren’t killed on the spot. Thus does society minimize the costs of sociopathy. For every sociopath you champion, Mr. Worst(of)all, there are thousands of empathetic, compassionate, kind humans who give water and food and other essentials away for free to their desperate neighbors. Some even give their lives. If your noses weren’t stuck in books written by simpletons for simpletons, you would have observed all of this in Houston and learned from it. Tim Worstall September 1, 2017 at 2:27 pm Isn’t that excellent. So, since no one will be doing it then we don’t need laws against it, do we? PF September 1, 2017 at 3:14 pm PhoenixM I suspect most people on here would agree with your sentiments, with regards to human nature, there would be few dissenting? You and David are right, in the sense that the bigger the diaster the more people will tend to rally round? But isn’t that in fact a quite different issue from the main discussion above? Leave a Reply Cancel replyYour email address will not be published. Required fields are marked *Comment Name * Email * Website Save my name, email, and website in this browser for the next time I comment.