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Second, and importantly, this is exactly what the supply-and-demand model we teach in introductory economics courses predicts when we actively prevent the free market from functioning. The shelves aren’t empty because of free-market capitalism. They’re empty because of active interference with free-market capitalism. Specifically, governments aren’t letting prices change to reflect new market conditions.
States are declaring states of emergency, perhaps rightly so in light of some of the risks we likely face as COVID-19 spreads. Bundled with sensible emergency measures like recommendations about social distancing, touching others, and so on are price controls as politicians rattle their sabers about “price gouging” and “profiteering.”
These are basically embargoes on knowledge [3]. Higher prices serve a crucial social role by asking people to think a little harder about whether or not they really need that much hand sanitizer or toilet paper or whether they might be able to get by with a little less. The unintended consequence? There’s a roll of toilet paper or a bottle of hand sanitizer waiting for the next person who wants it at the market price.
This gets turned upside-down when we go after so-called “price gougers.”
Chelsea Follett writes wisely about the COVID-19 pandemic [4]. A slice:
First, humanity has never been better prepared technologically to deal with a pandemic. We are fortunate to live in an age of drive‐through [5] diagnostic test stations, advanced computer modeling [6] that can help predict where and how fast the virus will spread, real‐time interactive online outbreak‐tracking maps [7], and medical supplies delivered by self‐driving cars [8]. An AI epidemiologist [9] sent the first warnings about the novel coronavirus. Information about the virus is able to travel faster than the virus itself, arming individuals with knowledge [10] about how to slow the disease’s spread.
Also writing wisely about today’s crisis is Ed Stringham [11].
David Harsanyi wisely calls for an end to coronavirus scare-mongering [13].
Even Paul Krugman is unimpressed with Thomas Piketty’s new tome [14].
Here’s Pierre Lemieux on The Economist‘s review of Piketty’s latest. [15]