Let the Markets Work

Many people are calling for the President to use the Defense Productions Act (DPA) but the reality is that the DPA is neither especially useful nor necessary. The markets are already redirecting resources in a rapid and sophisticated manner. For the most part, the shortages were due to temporary increases in demand. The shelves are now filling. Food is plentiful. Hand sanitizer and soap is on the way or available. We are not going to run out of toilet paper. Now that the CDC and the FDA have gotten out of the way, we are producing more tests.

Honeywell and 3M are already ramping up production of N95 masks. We should arrange with China to buy more. The Federal Government is playing a useful role by buying surgical masks from companies like Hanes. Ironically, we will be importing them from Latin America.

Winston-Salem Journal: The company went from negotiating a contract with the federal government to beginning production in less than a week, according to the spokesman.

Using U.S.-grown cotton, the masks are being produced in Hanesbrands’ sewing factories in El Salvador, Honduras and the Dominican Republic.

These factories would normally be producing T-shirts, underwear, socks, sweatpants and sweatshirts.

(Note the stupid requirement to use American Cotton.)

A price is a signal wrapped up in an incentive, as Tyler and I write in Modern Principles. Compare the price system with command and control. We need ventilators. The federal government could order ventilator firms to make more but they are already doing so. The government could order other firms to get into the ventilator business but does the Federal government have a good idea which firms have the right technology or which firms have the right technology that could be repurposed to ventilator production at low cost, that is without causing shortages and disruption in other fields? Can they do better than a decentralized process in which millions of entrepreneurs respond to price signals. No.

A word here on “price gouging.” There are two kinds. The first, which has gotten some attention, is when the manufacturer/retailer holds the price constant despite increased demand and an enterprising fellow buys up stock to sell at the true market price–the ticket scalping model. “Ticket scalping” has some good features and I would not make it illegal but it has one big problem–the benefits of the increased price are not going to the producers. It would be better if the manufacturer and retailer raised their prices, the scalpers would then be eliminated and the benefits of the higher price would flow to producers giving them an incentive and resources to expand production. We shouldn’t worry too much about ticket scalping, however, because its temporary. Typically what happens is that the manufactures and retailers hold the price low for a short period of time to avoid consumer backlash, output ramps up, and then the price rises but given the increased supply by not as much as it would have in the short run. This also works fine. The bottom line is that it’s very important that manufacturer prices be allowed to rise to reflect true scarcities and to get resources flowing in the right direction. So far, we are doing that and the system is working well.

If all the trucks are fleeing from the front, we want the army to be able to requisition vehicles to move in the opposite direction. Private and social incentives do not always align and when time and certainty are of the essence command and control may be superior (as Tyler and I discuss in Modern Principles in the chapter on externalities). For the most part, however, that is not the situation we are in now. Private incentives are all pushing in the right direction of greater production. Let the market respond. The federal government is not good at command and control but it does have a role to play in redistribution for need.

America’s great strength is decentralization and markets, and right now we need our strength.

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It works the same as the people whining about Trump letting state governors do what's best for their respective constituencies. What about the federal government makes anyone think they're better equipped to command the response to this than the states or the private sector? In what previous instance has this ever proven true?

The reason why people think the federal government should act is because the private market doesn’t always work as fast as necessary. The changes that are written in this article should have already been done by now and by employing the Act earlier the federal government could have made proactive changes to address the pandemic. Hospitals dealing with corona outbreaks are already lacking a severe amount of supplies. This lack could have been mitigated if the federal government acted earlier. While it’s good the private markers are making changes now...a smart government would have forced them to make these changes a month ago once it was clear we would face shortages.

The shortage of toilet paper reflects the difficulty of central planning. Who in the government could have predicted without the market signal that toilet paper was going to be the first thing to be in short supply? What you are really talking about is the ventilators. The hospitals were anticipating numbers of patients who might need ventilators and then actually numbers in some places showed up needing them. I don't see any evidence that the government could have ordered the private sector to produce ventilators any faster than GM decided they would produce them. The problem is that Trump and regulations at FEMA seem to have screwed up the deal.

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Thank God President Trump is in charge and not Obama, Hillary Clinton, Joe Biden or the deep thinkers at GMU.

God forbid America has a president that isn't showing symptoms of Adderal withdrawal.

And what are those symptoms?

"The medicines, & what I like to call, & people are calling, 'therapies' are things that can help, or maybe help, people who are ill, or not quite ill, but feeling a little better, or getting better, or before they even get sick in some cases..."

Pretty clear to me, and I am sure that you understand what he is saying, but choose not to think about it. But MR is the perfect place for you.

I think prior is saying he's happy Trump isn't displaying prior's symptoms.

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Lucky us, next cycle we get to choose between Trump and Biden. ;)

Are resolutely resisting going gently into that good night, and dragging the rest of us with them.

However, it is still several months before the election, and neither of them is exactly in a low risk Covid19 group.

It isn't lost on me that a lot of the people who run the government are not exactly in a low risk COVID19 group. Whether or not you believe in the "Deep State".

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I've seen on the www that there is seriously low COVID 19 risk for people with Type O blood and demented old men like Biden.

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If it's scalping tickets for a concert that's one thing, if it's scalping surgical masks that's something different.

First thing we do, let's seize the means of production of toilet paper.

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Glad you are around to tell people what's important and how to live their lives.

And I'm sad that so many like you don't see the difference.

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For once I agree 100% with the Alex.

^

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Me too.

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Their are several problems DPA solves:

1. Conflicts between sovereigns....one country calls on you to produce something for them; another does not have a corresponding order on or regime to compel.

2. Supply chain conflicts. Like above, you can threaten those in the supply chain below you that they should release products.

3. Coordination...Antitrust exemption in DPA for coordinated activities.

4. Breach of contract...you can invoke force majeure or order of the government to breach a pre existing contract.

These are problems that the market cannot solve.

People should look up the history of the DPA and how it has been used.

Re: Supply chain conflicts

Let's say you manufacture a product, composed of components A, B, C and D. You have assemble A, B C and D is the holdout and is exporting D to China and/or under a pre existing contract.

You really really should have arranged supplies of D well ahead of time.

Guess why not and post below. If you do not know, say "I do not know"

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1. This just assumes every country is some kind of collective. I don't even

2. WTF does this even mean?

3. We already have coordination from prices

4. This is just breaking stuff. This solution is worse than the problem.

As the article demonstrates, your 'problems' have already been solved without your destructive non-solutions.

1. Your assumption is that countries don't compel or create conflicts.
2. I can understand why you don't understand, but most people would.
3. Coordination would violate the antitrust laws and therefor need an exemption.
4. You didn't answer.

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It might solve those problems, if they were problems. You haven't convinced me that it would or they are.

If I shut my eyes,
It's dark around me.

What a stupid comment

Maybe you think this Heritage Foundation piece is stupid too and that they are as blind as well.

Apparently they can see, but you can't:

"It seems likely to us that the president will need to use the authorities under the statute in the coming weeks and months, whether that’s to allocate raw materials among manufacturers, prioritize government contracts, or limit distribution only to permitted buyers. For the time being, we wanted to answer some basic questions about the statute."

https://www.heritage.org/defense/commentary/what-the-defense-production-act-and-how-can-it-can-help-the-government-fight

You should learn more about the Defense Production Act and how it is and has been used.

From what I've seen so far the powers of the executive in this emergency have been used to speed up regulatory processes or remove barriers entirely. Likely there were some instances where some recalcitrant bureaucrat was holding something up.

Activating the nation guard, either state or federally allows military resources to be used in ways they were not authorized by legislation.

I doubt that there will be much mucking about in supply chain arrangements; the expertise is in private businesses on how that all happens. It likely is more about 'yes do it quickly' than micromanaging.

Unless they do it badly, which is always a possibility.

I think what Alex might be worried about, but which I think would not happen under this president, is the DPA being used to control prices. It's more likely to be used in the areas I mentioned at the beginning of my comment.

There are probably some in house lawyers counseling their clients today on how to react to Trumps urging of them to work with their competitors when several of them are working on competitive products. See supercomputer project. Any reasonably competent WHouse would invoke the DPA to protect the companies collaborative undertakings where they could be later sued by some private plaintiff for killing a product or commonly setting a price for the service. But, then, we don't have that or they are afraid to speak up. For a similar example, you might want to look up the antitrust exemption in the 1984 Joint Research and Development act.

News Update:

Trump invokes Defense Production Act re hoarding and price gouging.
OK, now, everybody change polarity.

Supply conflict is the most obvious potential problem BUT: "No materials have been designated as critical, Barr said, but HHS and DOJ are working together to identify possible cases where hoarding is hampering response efforts amid the coronavirus outbreak."

https://thehill.com/homenews/administration/489125-trump-signs-executive-order-to-prevent-price-gouging-of-medical

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Private incentives are all pushing in the right direction of greater production.

That statement will be such a comfort in the next few days of people who are experiencing the benefits of private incentives. "At a Long Island hospital, employees have been instructed that they each will receive one mask and must take care of it themselves because it “will not be replaced on a daily basis,” according to a memo shared with The Washington Post.

“Do not assume a replacement mask will be available and take care of your mask accordingly,” the memo advises.

At a Northern Virginia hospital, clinical staff said they are reusing old masks for the day or even the week and storing them in brown paper bags after cleaning them. Several workers said they were threatened with termination if they did not comply.

At Beth Israel Lahey Health, which has several locations in metropolitan Boston, workers were told to wear surgical masks and N95 respirators “for as long as they can tolerate” and to save them in special bins while the hospital system looks at ways to sterilize them.

At Harper Hospital in Detroit, food service workers who bring trays to patients’ rooms said they had been told not to use gloves and masks as they normally do because of the shortage."

The article is directly about efforts in increasing the supply shortage. You point to an example of a supply shortage.

It appears that you admit to Alex being right, but you can't actually write it down.

The problem is now, in part because of the private incentives to not waste money on unnecessary inventories.

Remember this? 'The tests are beautiful,' Trump added after meeting with top U.S. scientists amid the coronavirus outbreak. 'Anybody who right now and yesterday, anybody that needs a test gets a test.'

How has that worked out, more than 2 weeks later? It is apparent that after having squandered weeks and weeks (and where was private industry during that time, anticipating predictable future demand?), that something is now being done.

You can read to get an idea of how the U.S. and UK look to someone living in Spain th eguardian.com/commentisfree/2020/mar/23/europe-views-uk-coronavirus-plan-disbelief

Then think about this, and how private industry could help out - "authorities in Madrid, the Spanish capital, have commandeered the city’s ice rink to create an improvised morgue for Covid-19 victims.

From today, the 1,800m rink at the Ice Palace, in Madrid’s Hortaleza district, is to be turned into an improvised cold storage facility for the dead, after the closure of the city’s municipal funeral home.Making the announcement on Monday, Madrid’s city council said:
Given the progressive increase in the number of deceased and the [inability] of funeral homes to be able to bury them within the established period, the Ice Palace concessionary company has ceded its facilities to house these bodies.

According to a report in El Mundo, a “technical surface of synthetic material about two-three centimetres thick” will be installed on the ice rink, so that bodies will not be resting directly on the ice."

"The problem is now, in part because of the private incentives to not waste money on unnecessary inventories."

That's not a problem as the article makes clear. Supplies expire btw.

"Remember this? 'The tests are beautiful,' Trump added after meeting with top U.S. scientists amid the coronavirus outbreak. 'Anybody who right now and yesterday, anybody that needs a test gets a test.'

How has that worked out, more than 2 weeks later"

Trump being a retard has nothing to do with the market's efficacy, which btw is working brilliantly when the FDA gets out of the way: https://www.msn.com/en-us/news/us/fda-authorizes-new-test-that-could-detect-coronavirus-in-about-45-minutes/ar-BB11yhFl

Arguing with him at all is frankly a waste of time, but when prior starts changing the subject, that's an indication that you've won the point.

+1, as soon as he realizes he's lost the argument, he'll change the subject.

So, are we all stipulating to the "retard" part?

And perhaps blaming the people who warned us?

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July 2015, Theranos got FDA approval for a $9.07 herpes test. See
Controversial multibillion-dollar health startup Theranos just got a huge seal of approval from the US government
https://www.businessinsider.com/theranos-gets-fda-approval-2015-7

Today, Elizabeth Holmes is actual in trial for multiple fraud charges, including fraud charges for the herpes test.

If she had gotten started five years later with her board of directors from various administrations, I'm sure she would be appearing with Trump today with him touting her "TREMENDOUS rapid and 100% PERFECT" COVID-19 tests.

The FDA rules Trump iis complaining about seem to be the fallout from actions by Theranos. According to TheVerge:
"The US government is finally examining a regulatory loophole that has allowed companies like Theranos to market diagnostic tests to patients without going through the US Federal Drug Administration first. FDA officials pointed out today in a hearing that these tests endanger patient safety — and that bad tests can require costly clean-up.

The Energy and Commerce's Subcommittee on Health held a hearing in Washington today to discuss a controversial category of diagnostic tests called "lab developed tests" or LDTs. This category is basically a huge loophole that has been around for about 30 years (longer if you consider that regulation wasn't enforced before the loophole was coded into law in 1988); it gives companies that develop and conduct a diagnostic test in a single lab the ability to avoid submitting their tests to the FDA before using them on patients. The LDT category exists because research hospitals often need to modify commercial tests to suit patient needs. And because academic researchers tend to publish their results anyway, this form of regulation hasn't raised too many eyebrows."
https://www.theverge.com/2015/11/17/9750048/ldt-loophole-fda-hearing-theranos-lab-tests

Free market capitalism brings forth the likes of Elizabeth Holmes, Befnie Maddoff, and Donald J Trump who want to get rich taking your money.

Usually with the help of politicians who proclaim the American free market capitalist system should take over every government function, including public health and war, paid for by taxes.

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Maybe they could borrow some from the hospitals in New Jersey and Oklahoma who have banned mask-wearing among hospital staff because wearing them might incite fear and panic among patients.

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I will tell the ladies' auxiliary sewing brigade, unless you think the activity would be good for them in some way ...

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But I think that Dr. Tabarrok does not address the central point. The market is going to respond, like it has, to market signals. Trump's responsibility was to get ahead of the market. Its called planning. Of course its too late to use DPA now. But history will note an error in judgment in not using it 1 month ago.

The DPA is not an appropriate solution it's commandeering. Buying more supplies, maybe. Otherwise ramping up a response definitely.

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DPA before there was any indication of an issue within the US?

You are insane. Or power mad. Or both.

A far more simple solution is possible ahead of time: requisition a large number of masks. Even investors could have done this and made real money. Few did this, this means few predicted where we would be.

Re: " A far more simple solution is possible ahead of time: requisition a large number of masks"

What do you do when you haven't?

If wishes were horses,
Beggars would ride.

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before there was any indication of an issue within the US?

Oh right. No issue. Cases going to zero any day now. You believed all that?

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If I said 3 weeks instead of 1 month would that satisfy you. DPA was always intended to be anticipatory.

"Even investors could have done this and made real money. Few did this, this means few predicted where we would be." I guess the market got it wrong at a really critical point. Maybe, if the White House was listening to the experts early on, they would not have gotten it wrong also.

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What you will see is a dramatic increase in public health reserve equipment.

As a right winger, if we can sit on a bunch of multi billion dollar b-2bombers we can happily sit on a strategic public health reserve that the market probably wouldn’t sit on.

So yes let the market do it’s work. Try and get bureaucracy out of the way, but sitting on a larger public health strategic reserve probably wouldn’t hurt....

You'd think with a $12 Billion annual budget the strategic reserve of masks would have been.....

More than 24 hours worth. But here we are.

Why do you suck so much c*ck?

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Did we actually have $12B worth of strat reserve of masks?

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Another way to think about Dr. Tabarrok's post would be to say "not to worry with weather forecasts; people will use their umbrella's when it starts to rain".

You let yourself get rained on by cumming pensis.

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"(Note the stupid requirement to use American Cotton.)"

The US produces 2/3rds of the Western Hemispheres cotton, so it's pretty irrelevant either way.

+1

Realpolitik: underestimated.

What? We're going to use our control of the worlds cotton supply to deprive our enemies of face masks?

You would make a brilliant supervillain. I was thinking purely that someone made that ask, and was granted it; and it's very little less likely to be, ultimately, a good idea than many another dreamed up by the brainiacs who are appalled by it.

People lie you pretend to understand realpolitik and have no grasp of it either way. There is nothing about producing 2/3 the world's cotton that makes mandating its use a good idea.

What would you use instead, in a factory that heretofore made cotton socks and underwear?

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You produce 2/3rds of the world’s gay blowjobs.

And I’m PROUD of it!

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In conversations with people who are outraged about price-gouging, I find we can agree on reverse bulk pricing where the price goes up the more units you buy--$1 for a single unit, $2 for the second unit, $3 for the third unit and so on--as a means to get resources where they are most needed. There would, of course, need to be rules for managing bulk purchases by large consumers. I don't know how many companies billing systems can handle that, but I find that people can at least agree on the on the underlying principle of using the pricing system to allocate resources efficiently when the discussion is couched in those terms.

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I agree with Alex on this. All our market actors, out of a combination of altruism and business sense, are responding admirably.

But it is too bright & sunny a day to argue about anything really. May everyone in social distancing have clear skies.

Do they have senior shopping hours at the liquor stores?

Today in NY is lovely! It's raining like Hell and 38-degrees; and it's my kind of weather but too bloody early to start drinking.

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We're already likely inflicting far most costs on ourselves & the world by the overreaction caused by panic than the virus could have with more reasonable precautions. Media portrayed the situation as a choice between doing nothing & shutting down the whole damn economy, a false dichotomy - but faced with a panicked public, governments at all levels have been led to overreaction.

"but faced with a panicked public, governments at all levels have been led to overreaction."

Actually governments and bodies all over the world spent quite some time underplaying it. That was a mistake, and that's what led to this situation. Always listen to the experts.

Which experts? The medical guys who have no idea how an economy works? The politicians who have no idea how an economy works? Or the economists...well, you get the picture...

+1, that's a great point. If you break it down into the medical argument and the economic argument, there were a lot of people on one side or another, that were completely ignoring the other sides argument.

Even though there are compelling arguments on both sides.

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"Media portrayed the situation"

Could not agree more, this is a panic inspired by the media. They had two agendas "if it bleeds it leads" and "orange man bad." They thought that their two imperatives were aligned and they pounded the table day and night whipping the people into a frenzy.

Sadly for them Trump pivoted deftly and became "the war time president" which bolstered his ratings, we'll see if this lasts. Amazingly, their response to this is to criticize him for not using enough power. This will end badly for them.

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"Honeywell and 3M are already ramping up production of N95 masks. We should arrange with China to buy more. The Federal Government is playing a useful role by buying surgical masks from companies like Hanes. Ironically, we will be importing them from Latin America." ............................................................................................................................China is not likely to sell en masse soon: Here is why: The east asian consensus is to blanket every man woman and child with masks. Look at Taiwan: Her production is up to 12.6 million per DAY. For context, we get excited when a company donates 500,000 or the whole DOD allocates 5 million for civilians - and not even immediately. Taiwan, with likely the highest by far per capita production of masks on the planet, still does not export to us or anyone en masse. They are only doing tin pieacemeal y donations here and there: Like 100K per week to US hospitals: or 1 thousandth of their production. Why is China the only one getting criticized for this when Taiwan likely dwarfs China in per capita production? We have less leverage with China than Taiwan for obvious reasons - we are allies and friends so it is time to cash in chips we have earned for decades - or agree to sell lots of Arms even - if China doesn't like it then they can give us masks instead! Why has Trump's staff not put things in these terms - "We are not Making a Historically Expensive (but worthwhile) Alliance work to Save American Lives. This is an emergency - not the time to be coy. Trump needs to convince them - bribe them with whatever - Taiwan is our only hope to get millions more masks within the week!

A mask every two days for every man, woman, and child in the country: 12.6 million, is not enough to start sending a few million per week to your best friend that is undergoing an emergency where health care workers don't even have enough???
3/24: Virus Outbreak: Taiwan not yet able to export masks: ministry
https://taipeitimes.com/News/taiwan/archives/2020/03/24/2003733269

Sorry just to be clear it is 12.6 million per day for 23 million Taiwanese -that is 1 for everyone every two days: Source for 12.6 Million/day Taiwanese production Claim: https://focustaiwan.tw/society/202003230016

Why won't the Trump administration Act? I bet Trump's staff are more concerned with not hurting the alliance with Taiwan so they won't lay things out for him - but we have to call in chips with a dear friend because it is an emergency.

This should be on the Tucker Carlson show - "Why Doesn't America Make Our Alliance with Taiwan Work to Save American Lives Instead of Just Enrich the Military Industrial Complex"

Taiwan placed an order for masks with a US fatcory, American prestige in Jan/Feb for 100 million masks. (I think singapore and HK did as well.)

We probably should have banned exports in Jan and February.

DPA could do that or not?

Yes, it could.

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New cases in the US are already dropping, significant decrease from yesterday. Seems none of this will be necessary.

You have the figures? or a source?
Thanks.

Disregard this guy.

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Disinformation alert. Unsourced or unsupported assertion contrary to fact. https://coronavirus.jhu.edu

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9300 new confirmed cases yesterday, 8,617 so far today. Almost certainly by the end of the day we will be above yesterday's high.

I doubt it. It is already pretty late in the day. We’ve already had peak increase, we are slowing down.

You are comparing end of day figures with partial day figures and you know it on the basis of what you just said..

That tells me something. That you knew you were misleading others because you did not qualify or disclose.

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1 point does not a trend make.

Furthermore, the current amount is almost certainly higher than the patient growth because we are working down a testing backlog. Expect the numbers to drop as we get through the backlog, but that doesn't mean they'll keep dropping. At some point they should start tracking the actual patient population's growth.

+1 agree.

The raw total # of cases is an almost useless number. In our state, we are so limited in testing we only test really sick people who need hospitalization, so the # of cases ~= hospitalized patient + ICU patients + dead patients + recovered patients. Mild symptoms we tell to go home to isolate and presume they have it because we don't have testing capacity.

NY may have more tests so they may be picking up milder cases.

The really useful breakdown that is unfortunately not available is the # of hospitalized and ICU patients, because once we reach hospital capacity we will have a lot more deaths.

Since the US health care system is more market-based than other countries I don’t think it’s possible for the US to reach capacity of ICUs

Disagree. The US ranking on # of ICU beds per capita is lower than other countries. Being market based actually incentivizes against having many ICU beds. The focus over past few decades has been increased throughput to handle more patients by churning them through beds faster, which is why we have all the home health initiatives.

Being able to ramp up supply of all the components of critical care (bed, nurse, RT, ventilator, physician) is complicated. Just as it takes time for companies like GE to repurpose its factories for PPE and ventilator manufacturing, so too does it take the American medical system to reallocate to more ICU care.

Also it's not clear that we need it. This is a transient shock and afterwards it's most likely that the ICU demand will return to baseline. Is it really worth all the disruption of reallocation to deal with this? Either everyone gets better or many die without ICU care and we allocate scarce ICU resources in whatever manner you prefer (auction based or by government) based on your priors.

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The bottom line is that it’s very important that manufacturer prices be allowed to rise to reflect true scarcities and to get resources flowing in the right direction. So far, we are doing that and the system is working well.

How do you know this? An ER doctor I know tells me that masks and other PPE are in short supply. This in a hospital in a well-off community.

What does Alex think will be the effect of his wondrous price-gouging on hospitals in poorer places, with limited budgets?

"What does Alex think will be the effect of his wondrous price-gouging on hospitals in poorer places, with limited budgets?"

Available supplies

At prices they can't afford. Especially since states are now bidding against one another for needed supplies.

This is insane. Use the DPA, get these things manufactured, pay the manufacturers a sensible price, and get the masks and whatnot out.

The Chinese are distributing masks to the public for free for Pete's sake. Can we have done with ideology based on stick-figure economics?

Medical masks aren't that expensive, if temporarily doubling the cost were to double the supply, that's a trivial expense to the American health care budget.

According to the linked article:

New York Gov. Andrew Cuomo (D) warned that prices for crucial masks had spiked from $0.85 to $7 apiece and urged the federal government to step in.

Crickets from JWatts who obviously reads every comment.

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“At prices they can’t afford”

Who can’t afford?
You do realize, don’t you, that just because the government “hands out masks for free” or manufacture are forced to produce the masks in the presence of a price ceiling, the masks aren’t really “free”, right?

The costs are paid through incurred debt and deadweight losses in the economy.

The better solution is to let the price system and the distributed knowledge of the market economy work to coordinate supply and demand and solutions that minimize incurred debt and deadweight losses.

There is no such thing as a free lunch, and the a “pandemic” does not magically change that fact.

Spare me the lectures. Yeah there's a cost. The point is that China is producing enough masks for everyone.

The better solution is to let the price system and the distributed knowledge of the market economy work to coordinate supply and demand and solutions that minimize incurred debt and deadweight losses.

You're throwing around a lot of terminology you don't understand. What are you talking about with "incurred debt?"

You say I’m throwing around terminology I don’t understand, but you can’t even figure out what incurred debt means in this context?

LOL

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Maybe it is not a well off community as it had imagined, if the hospital is running out of supplies already.

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The government could order other firms to get into the ventilator business but does the Federal government have a good idea which firms have the right technology or which firms have the right technology that could be repurposed to ventilator production at low cost, that is without causing shortages and disruption in other fields? Can they do better than a decentralized process in which millions of entrepreneurs respond to price signals.

Millions? If you like, let the government run an auction.

"We need X ventilators by mm/dd. Quote us price and quantity."

The real answer to Tabarokk’s question is “no, the government cannot do better than the free market”.

There is no evidence that the government can ever do anything better than the free market when it comes to coordinating production.

The true believer speaks.

Did you even read my suggestion? If so you clearly didn't understand it. I'm not saying the government will "coordinate production." I'm saying it will, in effect, place an order.

What the free market is giving us now is chaos, as orders go unfilled because a higher bid comes in, and supply is unreliable.

Go draw some pretty graphs.

Sure. Your suggestion isn’t all that bad as far as statist approaches go.

But my comment still stands:
The real answer to Tabarokk’s question is “no, the government cannot do better than the free market”.
There is no evidence that the government can ever do anything better than the free market when it comes to coordinating production.

And: No, the free market is not in chaos. It is responding quickly and appropriately where the government has gotten out of the way.

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What people need to remember; when there is an unanticipated demand surge, part of the market solution to the scarcity is people who can't pay for it do without it. It works the same whether it is diamond rings, cars, a life saving drug, or a ventilator.

...And?...

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Tabarrok states "private and social incentives do not always align and when time and certainty are of the essence command and control may be superior". Thus, the DPA should only be utilized when private and social incentives work against each other. The DPA act, however, was initially created during a time when private and social incentives worked with each other. The Korean War saw a spike in demand for aluminum and titanium. Private and social incentives aligned here, but the government still deemed it necessary to provide additional incentives to elevate supply. The DOD used the act to provide capital and interest-free loans to mining and manufacturing industries.

Right now, private and social incentives appear to align, but this is only in the short-term. Increased production of ventilators may require capital investments, which are often long-term and can impose higher costs than short-term variable (labor) costs. COVID-19 presents a short-term increase in demand. If this is just a temporary spike in demand, industries will be hesitant to invest and manufacturing capabilities will not meet short-term demand. Private and social incentives are aligning in the short-term. They are not aligning in the long-term. The DPA act should be implemented to provide manufacturing companies interest-free loans to invest in manufacturing capital, in turn boosting supply to match both the private and social rate of return.

The physical and human capital that is used to make appliances, vehicles, ect, are largely the same for producing ventilators. So where are all these alleged “capital investments” being incurred?

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National Review writes that:

China is currently setting restrictions on such American companies as 3M that manufacture medical-grade masks and other safety equipment in China, barring them from exporting these goods from China for use in America and other nations where there is a current shortage

Here:
https://twitter.com/YanzhongHuang/status/1235300037875335170

China is openly threatening to plunge the US "into the mighty sea of coronavirus" by damaging our supply chains of medical equipment including the face masks.

Tabarrok says, "We should arrange with China to buy more."

I'm on board with free trade; if China is selling quality goods for a competitive price, great. If they are being a bad actor, I don't have some intense loyalty to buy from China, I will buy from other countries.

Tabarrok is twisting this story in a pro-China anti-America direction. Tabarrok takes a dig at US cotton. US is the third largest global supplier of cotton. I don't know the details of the cotton market, but it seems like Tabarrok is bashing America for no good reason.

We're in the middle of a trade war needlessly started by Trump and looks incredibly shorted sighted in hindsight. Nobody should be surprised if the trade in masks is politicized.

That sounds like an ultra-politicized narrative: we were living in free-trade nirvana until Trump needlessly started a trade war. I suspect that's what Tabarrok would amplify.

Tyler Cowen took a much less slanted and more neutral take on the Trump Administration's actions.

I think this virus episode really shows that the Trump Administration was right to put more pressure on China. China really are the villains in this story.

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“Scalping” can be beneficial though by the signal to the producer that demand has increased. The sooner the store sells out, the sooner they can ramp up production. If the scalper is as accessible as the original store, the scalping should speed up the increase in supply available to the public. The problem when the scalper tries to sell them out of his garage where few customers can find him. This is probably a good reason to keep it legal so such arbitragers have an incentive ‘scalp’ more openly.

For an economist, it's rationally true. Problems arise because of an emotional response against how unfair scalping "feels". People are liable to expend their outrage in unproductive ways like violence.

Try modeling for irrational human behaviour.

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> We are not going to run out of toilet paper
Alex, maybe where you live toilet paper is plentiful on the shelves of every super market in your neighborhood, but that is definitely not the case in Los Angeles
Another sign for the toilet paper issue is to look at what Amazon can deliver to you and how far in the future that delivery date is ( if you are even given a delivery date )

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This will be very persuasive to those who have supported a tax on net emissions of CO2 all along.

LOL
So, it will persuade individuals who are already persuaded? Wow. Amazing.

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Reality, as opposed to Alex's Fantasyland BS.

https://www.washingtonpost.com/business/2020/03/24/scramble-medical-equipment-descends-into-chaos-us-states-hospitals-compete-rare-supplies/

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Markets can do better than the government in this case. When China had the corona outbreak in January. Some people in North America are preparing. They bought masks in case the virus spread out to the U.S. I bet smart businessmen driven by monetary incentives would more likely smell the importance of masks than politicians in D.C. However, the best businessmen can do is satisfy all the demands. But they cannot maximize social welfare because there are huge externalities involved here. Many people are not willing to wear masks either because they don't realize the seriousness of the virus, or they don't care and wearing masks is uncomfortable. Even for satisfying demands part, businessmen may not do better than the government because it involves the knowledge of how fast the virus can spread, which may only be obtained from the best medical experts. The government can do better on two things: 1) Getting the best experts; 2) Considering the externalities --- one person wearing masks provides benefits to another person. Of course, the problems are often politician is slow in acting on the advice from the best experts.

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