Price Controls on Hand Sanitizer Are Not Good Under Any, Much Less Crisis, Circumstances

covid-19, coronavirus

The Covid-19 (also known as the coronavirus) pandemic has inevitably impacted our lives and put a lot of Americans and others in compromising financial situations. As Covid-19 continued to spread, this catalyzed to sentiments of anxiety, panic, acrimoniousness and uncertainty for a lot of Americans, which led to altercations in stores due to the shortages of hand sanitizer, toilet paper, disinfectants, etc.

Based on the laws of supply and demand, the exponential demand for the aforementioned products and mainly hand sanitizer led to increases in prices by some retailers and the selling out of the product because of bulk buying (with the intention to resell). There were common consumers who also rushed in droves to purchase hand sanitizer for themselves and their families.

The strong demand for hand sanitizer caused so much volatility in the economy that retailers began charging up to $80 for 40 ounces of the product. Governor Cuomo announced that in New York state the government will crack down on retailers and punish them with fines and possible incarceration for “price gouging” in the midst of the pandemic. New York City has already issued 550 violations equaling $275,000 for increases in the price of face masks, disinfectant wipes and hand sanitizer. In the state of New Jersey, 80 stores have been warned to “stop price gouging” or face fines up to $10,000.

Whenever government intervenes in the market and manipulates prices for the sake of affordability, shortages of products are induced, which deprives a large number of consumers from obtaining the goods. There are numerous examples of price controls and its disastrous results, like the famine in France in 1793 due to the shortage of bread, rent control in Egypt which lead to distressed and dilapidated buildings with generational tenancies mandated by the Egyptian government and due to the lack of incentive to renovate because landlords couldn’t afford to. Additionally, in San Francisco in 2001, ¾ of rent-controlled buildings were more than 50 years old, and in in England and Wales, privately-built rental housing decreased from 61% of all housing in 1947 to just 14% in 1977.

Another example of price control is the gasoline shortage during the 1970s when the Organization of Petroleum Exporting Countries (OPEC) imposed an oil embargo which led to a decrease in the output of oil to the United States. This caused a shortage of another commodity which is time. In this case, filing stations in September 1978 were open for 110 hours a week on average and the open hours were decreased to 27 hours a week in June of 1979!

Price controls alleviate the incentive for the producer or retailer to please the consumer since their business is compromised as a result of government manipulating their prices.

As it relates to the Covid-19, since retailers aren’t allowed to “price-gouge”, this has to led to immense shortages of hand sanitizer especially through out the Northeast region of the tri-state area (New Jersey, New York and Connecticut).

I personally went to five different pharmacies, including a Wal-Mart, and they all stated that hand sanitizer hasn’t been available in their inventory in the past week.  In this case, governmental manipulation of the prices of hand sanitizer has not benefited the masses since there is a lack of availability of these products. This in the midst of a globally alarming pandemic.

According to the supply chain of the production of goods, as the demand increases more a finished product, the price of the supply increases as well according to the laws of supply and demand and price elasticities.

In this case, the only dictator of prices should be the “invisible hand”. The law of supply denotes that when the price of a good goes up, the quantity supplied goes up.  Additionally, the law of demand denotes that when the price of a good goes up, people will buy less of that good. In this case, the price of a product is dictated by the consumer, meaning that if hand sanitizer is worth $80.00 hypothetically, this will get legitimized by consumers patronizing or supporting the retailer who’s selling sanitizer for that price point.

Additionally, if the $80.00 price is too high, then the retailer would either have to lower the price for the sake of profitability or economic sustainability, or their business will suffer. Also, if Retailer A wants to charge $80.00 for hand sanitizer, this would create an opportunity for competitors to charge lower prices, and in this case, instead of the imposition of fines, Retailer A would suffer from consumers supporting Retailers B, C and D because of their competitively lower prices. Not to mention, this would create opportunities for manufacturers to produce an abundance of hand sanitizer to distribute to multiple number of retailers or even directly to consumers.

It seems live Covid-19 has shown a vulnerability in a lot of Americans’ and global citizens’ rational thinking abilities. What we as a global society need to understand is that whether it’s the coronavirus, the swine flu, the bird flu, Ebola or any pandemic, the laws of economics still prevail.

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Baruti Libre

Baruti Kafele, who is affectionately known as ‘Baruti Libre’, is an intellectual entrepreneur, social scientist, proud libertarian, and real estate broker who ensures quality and superiority from his enterprises to his scholarship. Baruti Libre is the chief executive of the successful fashion and multimedia firm called LiBRE BRAND-Freedom of Flyness which is a globally-recognized and viable brand based on the ideals of liberty and freedom. Twitter: @BarutiLibre.