Price neglect is a big analytical error

In an interesting story about child logistics, The Wall Street Journal A freight broker quotes a reflection from the executive (see Paul Page, “Baby-Formula Shipments Come to Prevent Cargo Thieves with Less High Security,” May 28, 2022). The reflection is interesting because it indicates a misleading perspective:

During the Covid-19 epidemic, thieves’ favorite items include paper products and cleaning supplies that are in high demand and hard to find. “We were looking at things like hand sanitizers and masks,” Mr Bauer said. “It was not about the price of the product but about its deficit. And that’s something we’re seeing now with the concern of parents who are looking for a formula. “

It is Was (And now for baby formula) about Price The product and not just its lack. The only reason thieves were interested in PPE was Price They could get for it on the black market. Government-dependent legal value will not motivate thieves more than encouraging legitimate producers. Market-clearing price is the result of both supply and demand, i.e. supply and demand, or in other words, the result of demand rather than shortage. A four-leaf clover is also rare but at a very low price (if at all positive) because it is in low demand (if at all). In his last sentence, Mr. Bauer gave an accurate description of the demand.

The price of baby formula motivates thieves because of increasing scarcity and constant demand pushing it. (The same is true when copper prices in the world market rise and copper wires are stolen by leaps and bounds.) The big difference between the current market for PPE and baby formula during epidemic-related emergencies is that there is currently no official price control. Next. This explains why, in the case of the child, the fuel that could be stolen by a potential thief is negligible if there is any other black market. Remember that the black market itself is a very useful outlet for voluntary transactions if theft is prevented by real crime, price control or other government intervention.

When trying to understand economics and society, ignoring value is a big analytical error.

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