Authorities are cracking down on 'price gouging' as the public hoards face masks. But price surges would actually help prevent critical shortages by discouraging people from buying masks that they don't need.
Authorities, governmental and otherwise, are cracking down on companies that raise prices on face masks. They’re accusing retailers of profiteering from the coronavirus crisis.
In Singapore, the Ministry of Trade and Industry sent a letter to one retailer demanding an explanation for price hikes on face masks.
The company issued an apology and lowered its prices. That satisfied the Singaporean MTI, which closed the investigation.
As face masks sold out on Amazon.com, the retail giant warned sellers not to raise prices. They face suspension if they offer the face masks at prices “significantly higher than recent prices offered on or off Amazon.”
An Amazon spokesperson told CBS:
We identify them and quickly take action.
But price surges help deter panic-buying, so those that really need the face masks (like hospital staff) won’t run short.
“We need to make sure those N95 masks are available for the doctors and nurses that are going to be taking care of individuals that have this illness.
That’s important because panic-buying is becoming a dangerous problem.
People are panic-buying face masks all over the world, risking a critical face mask shortage during what Bill Gates recently called a “once-in-a-century pandemic.”
This hoarding could leave the most exposed, like hospital staff, without the protection they need. Moreover, hospital staff often have compromised immune systems as they work long hours under high stress to combat the deadly pandemic. That’s probably why so many medical staff are dying from their infections.
Health officials say there’s no need for healthy people to wear masks. In fact, the masks may even increase their chances of infection because it makes people touch their faces more.
But authorities haven’t had any success dissuading the public from hoarding masks.
The U.S. Surgeon General begged the public on Saturday to:
STOP BUYING MASKS!
Vice President Mike Pence, who’s in charge of the U.S. coronavirus response, urged Americans at a press conference Saturday not to stock up on masks. He said the average American does not need to buy them.
But there’s no way to enforce these requests. Price surges, however, are a natural enforcement mechanism. It’s a self-evident axiom of economics that people respond to price increase by purchasing less. That’s especially true for products they don’t need. Economists refer to this phenomenon as “price elasticity of demand.”
When authorities force the market to signal that supplies are high (with lower prices) when they’re actually short, it creates perverse incentives like hoarding.
In a free market, prices are a rationing mechanism. During emergencies like coronavirus, that function is even more critical. Sellers should ration critical supplies by raising prices during emergencies. That discourages people from hoarding masks when they don’t need them. And it encourages suppliers to ramp up production.
In short, the best course of action might be letting the market naturally fix the face mask problem.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
This article was edited by Aaron Weaver.
Last modified: March 1, 2020 9:54 PM UTC