I appreciate the reply and the links. FWIW, I think trying to paint my views as anti-money and anti-profit is a straw man that is extreme and doesn't effectively respond to what I said. I believe that competition and profit does do what you're saying sometimes. I know there's evidence that it works sometimes. I may be perfectly comfortable saying it works most of the time. But there's also historical evidence that it fails sometimes. You're glossing over that by ignoring externalized health and environmental concerns, among other things. The market might be stronger if it's left unchecked, but that's not the same thing as slowing down the spread of a disease. Free Market theory simply does not guarantee that we'll have the safest outcome in the shortest time. Even if we assume it does work as advertised, the best we can say it economic inputs and outputs balance at some local optimum some time in the future.
> We can get closer to the correct amount when people are incentivized to calculate the correct amount
I think that's wishful thinking when you're talking about unforseen crises, and history has shown this over and over.
> Price caps paradoxically lead to higher prices.
Ah yes, you're right and it's true this can happen on the black market under price controls. In your thinking, why is that worse than unrestrained price gouging? What is the meaningful difference in outcome? Does it matter how much higher? Does it matter what the balance is between price-capped sales, and black-market overpriced sales?
Bigger picture, my more fundamental question is why free-market thinking is diametrically opposed to slowing down changes in pricing during spikes, if we were to assume that prices will be uncapped eventually?
Even under ideal conditions, the market takes time to respond to changes in demand. When spikes in supply are price-capped, let's assume not that it'll be price-capped forever and all time, but that either it will be price-capped during a time period that is too short for the market to respond to, or that changes in pricing will be rate limited rather than value limited.
If price changes are rate limited, instead of hard-capped, then in theory nothing changes in the limit, the market can still optimize eventually, right? What does it matter if a market takes a little longer to balance?
You shouldn't limit price value or velocity, as evidenced by the perverse effects of rent control laws. However, a limit on price acceleration could provide a good balance, allowing the market to adjust on a reasonable time-scale, such that humans can react.
That's my theory for immigration controls as well. Economic theory suggests that unlimited flow of human capital is just as valuable as unlimited flow of financial capital. However, we know that shock movements of financial capital can be bad, and instinctively people dislike shock movements of people. A good solution for both is to limit not velocity, but acceleration. The economy can absorb a steady flow, but needs time to react to rate changes.
Interesting, an acceleration cap might be just fine, and easier to tune correctly & get political agreement on.
I agree with you that the economy needs time to react to rate changes. The problem with rent control is sometimes it's implemented as a value cap, and sometimes it's a rate cap that is too low. I wouldn't rule out rate caps just because someone somewhere set the rate too low.
I do want to counter the idea that caps are bad just because something bad happened in some cases. That's not enough to prove that price caps are always wrong. I know price caps can cause problems sometimes. But not having any regulation can cause problems as well, and there's also plenty of evidence for this.
Pollution and global warming is already starting to have massive global economic effects, and the costs and causes of it have been externalized by corporations for a hundred years. All of the free market "success" that has been enjoyed by global manufacturers is starting to cost humanity, and our children are going to need to re-evaluate whether letting the companies operate as freely as they did with our air and land and water was a good idea. There's a growing global consensus that it was not. The implications of that on free market thinking are that we need to understand and acknowledge that some freedoms come with invisible or unaccountable costs, and/or very late costs. And sometimes these costs can outweigh all the short-term benefit. Companies can come, make billions, last for a generation, and die before we even know what the cost was. No amount of waxing laissez faire philosophy can undo the actual damage we've already done.
Thank you for keeping an open mind and remaining civil.
>>You're glossing over that by ignoring externalized health and environmental concerns, among other things. The market might be stronger if it's left unchecked, but that's not the same thing as slowing down the spread of a disease. Free Market theory simply does not guarantee that we'll have the safest outcome in the shortest time.
Government has a role to play. The market can't do everything, as not every asset can be turned into private property and have a price attached to it. The meta function of enforcing respect for private property rights is also not something markets can provide.
In a pandemic, there are many things a state can do, like fund the development of open-source designs for masks and ventilators, and public domain treatments and vaccines.
It can also fund extensive reviews of the PPE and treatments on the market, to help consumers be better informed.
The government playing this role, while the market acts within the framework created by the public goods generated by the government, optimizes society's response to pandemics.
Price controls worsen society's response to pandemics.
>>Ah yes, you're right and it's true this can happen on the black market under price controls. In your thinking, why is that worse than unrestrained price gouging? What is the meaningful difference in outcome?
Without price controls, there will be larger stockpiles in place, so the market price will not spike as high during a pandemic. More importantly, shortages will not be as severe during pandemics.
Without price controls, business activity to alleviate the shortage is more greatly incentivized as well, leading to the shortage being filled more quickly.
>>Even under ideal conditions, the market takes time to respond to changes in demand. When spikes in supply are price-capped, let's assume not that it'll be price-capped forever and all time, but that either it will be price-capped during a time period that is too short for the market to respond to, or that changes in pricing will be rate limited rather than value limited.
That's a good point, but I think the conditions under which the benefits of free market prices don't outweigh the benefits of price controls to be very limited.
I can't imagine any scenario where price caps that extend for more than three days after a disaster (time enough for high prices to encourage air freight to bring essentials in) will do more good than harm.
> We can get closer to the correct amount when people are incentivized to calculate the correct amount
I think that's wishful thinking when you're talking about unforseen crises, and history has shown this over and over.
> Price caps paradoxically lead to higher prices.
Ah yes, you're right and it's true this can happen on the black market under price controls. In your thinking, why is that worse than unrestrained price gouging? What is the meaningful difference in outcome? Does it matter how much higher? Does it matter what the balance is between price-capped sales, and black-market overpriced sales?
Bigger picture, my more fundamental question is why free-market thinking is diametrically opposed to slowing down changes in pricing during spikes, if we were to assume that prices will be uncapped eventually?
Even under ideal conditions, the market takes time to respond to changes in demand. When spikes in supply are price-capped, let's assume not that it'll be price-capped forever and all time, but that either it will be price-capped during a time period that is too short for the market to respond to, or that changes in pricing will be rate limited rather than value limited.
If price changes are rate limited, instead of hard-capped, then in theory nothing changes in the limit, the market can still optimize eventually, right? What does it matter if a market takes a little longer to balance?