Enzo wrote:There is pure market freedom, and then there is the added filter of consumer protection.
So I've heard from time to time.
I'm a consumer, and I've been subject to "consumer protection" from time to time. I have on some occasions felt I would have been much better off if I weren't being protected. I have also on some occasions benefitted from various consumer protection measures, but wondered why I should. Subsidies for air travel are one of those; as someone who travels more than the average bear, I benefit from government subsidies for airports and the like. But really, why the hell should the taxpayer subsidise my lifestyle?
So the things I tend to think about in the face of consumer protection measures are,
(1) What is the consumer being protected against?
(2) Should the consumer be protected against this thing?
(3) Does the measure protect the consumer from this thing?
For (1), do I take it the thing the consumer is being protected against here is, paying more for something at a time of shortage, than they pay when there isn't a shortage? This one is important; if the purpose of this consumer protection is something else, then there's no point reading the remainder, because I would need to revise the answer to (1) first. Then the answers to (2) and (3) could be modified accordingly, depending on how (1) comes out.
For (2), assuming my answer to (1) is correct, I'm rather ambivalent about this. So the price of something is at a certain level for a while, then this creates some sort of right that it should always be at about that level? Or is it that price increases should only take place slowly, rather than rapidly?
This thread started about oil, which for a while at least was lower than the price it had in 1948. I take it consumers do not need to be protected from the low price of gasoline, even though they've gotten used to paying a much higher price for a long time. I'm also going to guess that I know the number of people who have pulled into the local filling station, and declared, "I don't want to take advantage of this whole coronavirus slowdown, I'd like to pay the price that gasoline was at a few months ago". My guess is a number that begins with "ze" and ends with "ro". So do producers need to be protected against the consumers who are taking advantage of the glut of oil supplies? (I am always surprised at how popular corporate welfare measures are, and not just among the beneficiaries. At least among "glamorous" industries. The idea that airlines should be subsidised seems quite popular. So does the idea that auto manufacturers should be subsidised. I've never heard anyone argue that shoe repair services or toilet brush manufacturers should be subsidised.) The oil suppliers might want to be careful here. If they keep the price too low for too long, maybe they'll be accused of price gouging when things get going again, and the price goes back up. Perhaps they should keep the price high now.
So I'm back to thinking why an increase in the price of toilet paper is something consumers need to be protected against. Sure, they'd like to pay less. Probably they'd like to pay less all the time, not just now. Should the price be regulated permanently? If there were some conspiracy among the toilet paper makers and distributors to keep the price high, by forming some sort of cartel, well, I can see the case for that. Is something like that happening?
Rather, the reason for the shortage (and therefore the high price, if the price is left up to the marketplace) I keep hearing about in the news, and also anecdotally from people I know, is something else. And it's not something the producers are doing; it's something the consumers are doing.
Which brings me to (3). These price gouging measures generally take the form, you can't raise the price of something too much too quickly. So whom does this predict? Well, the proponents of such measures say, the consumer. They pay the price that was prevailing (or maybe a price only a little higher), instead of a much higher price if market forces were allowed to prevail. The detractors of such measures will argue that consumers are often protected from having the product at any price. And I am wondering if that is what is going on here. Sure, if you are able to get toilet paper, and the regulation says the price is $1.50, whereas market forces would set the price at $5.00, then you have benefitted in the amount of $3.50. That's assuming you can get it. This sort of consumer protection certainly does not increase the amount of toilet paper available. Does it actually decrease it? Well, maybe, I'm not sure. So a few possibilities.
a) Shop owner. Should I swim through a river of coronavirus to get to work today, or just stay at home? Toilet paper is at $5.00 per roll, and I've got a bunch of it! Let me make hay while the sun shines! Oh wait, it's illegal to sell toilet paper at that price. Maybe I won't.
Is that happening? I don't know. If it's limited to just one product, maybe not very much, or at all. If it applies to lots of products? I can easily imagine that.
b) Also the shop owner. Wow, people really want toilet paper, they're willing to pay for a lot for it, and I'm running low. Maybe I can have some shipped in from somewhere else that has enough. Or maybe I can have my supplier divert shipments going somewhere else, by offering to pay more. (The US government is currently being accused of doing this by other countries, offering higher prices for masks that have already been promised to some other country.) However, the price of toilet paper is regulated, so if I do this, I can't charge enough (even though the consumers are willing to pay enough) to cover the extra costs. So I won't do it.
Could that be happening? It wouldn't surprise me at all. We've been there before. Medieval England had for a time the death penalty for grain speculation. The result was, whenever there was a local crop failure, lots of people starved, because it was illegal to go buy grain somewhere else and bring it in.
c) The consumers. Based on what I'm hearing, this one is happening. Why is there a shortage at all? Did a toilet paper factory burn down somewhere? I haven't heard about that. Did a freighter loaded with toilet paper sink in the middle of the ocean? I haven't heard that either. Has there been some big contagion of an arse-itching bug, so that everyone is wiping a lot more than previously? I haven't heard that, although this virus apparently does cause diarrhoea in a certain percentage of people. What I
have heard, is that people (also sometimes called "consumers") are hoarding toilet paper.
So I wonder, how much toilet paper do people hoard when the price is $1.50, and how much do they hoard when the price is $5.00? Seems to me, the primary beneficiaries of this particular bit of consumer protection are precisely the consumers who created the problem in the first place - the hoarders. Is this a "Hoarders' Welfare Protection" act?
Seems to me that this sort of consumer protection regulation is based more on an emotional response that somebody is taking advantage of a crisis, and needs to be punished for it, rather than because of any substantial benefits it brings. But I do hope the victims of the price gouging managed to fill up on nice cheap gasoline on the way to the courthouse to testify. And maybe on the way back too.