Price Gouging Could Actually Fix Our Face Mask Shortage
If we don’t let prices for essential goods rise, we can’t incentivize making more of them
The fear produced by Covid-19 has created unexpected shortages in our lives, from toilet paper at home to masks for health care workers.
Nobel laureate Joseph Stiglitz argued that this is a market failure—that markets work poorly in a crisis:
No country in times of serious war turns to markets. We don’t use markets to allocate how our troops should be deployed, and we didn’t rely on markets for producing tanks, airplanes, and other essential matériel in World War II. We needed immediate action, with complex coordination and changing demands; markets just don’t work well in these circumstances.
Stiglitz is right that we don’t use markets to fight physical wars. Or as one governor put it, during WWII, each state didn’t buy its own aircraft carriers.
But the pandemic is a different kind of war. As I write this on April 30, New York has about 300,000 cases of Covid-19, California has 50,000, and Wyoming is under 1,000. Masks and ventilators aren’t like aircraft carriers. Each state’s health care personnel need their own masks and ventilators, in radically different quantities.
