Thursday, March 19, 2020

An Interesting Economics Experiment

Economics is regularly derided as "the dismal science" but in my experience contains the only social science law that approaches the character of physical law: supply and demand.  More relevant to my peripatetic writings tonight is that economics frequently studies incentives and how they work.  

The Silicon Swamp area isn't a big city or anything the size of Silicon Valley, but it's not a small town either.  The entire county, 70 miles long and mostly along the coast, has a population of about 600,000.  As of this afternoon, there have been exactly 2 confirmed COVID-19 cases in the county.

Last week on our weekly grocery store run (a Publix), the only things that were in short supply were toilet paper and Clorox wipes (Mrs. Graybeard prefers those for cleaning the stove so they're something we buy regularly).  Today was different.  The entire toilet paper, facial tissues and paper towels aisle was stripped clean, and all around the store other sections were either bare-shelved or stripped close to bare.  Rice and pastas had a couple of packages left.  There was not a single package of chicken, or turkey to be had.  Do I need to say I've never seen anything like this?

Many sections had a "Limit 2 per customer per day" sign, including eggs, prepared meats and cheeses, prepared sauces of all ethnicities (like Italian, Mexican, etc) and more.  It got me thinking this is an interesting economics experiment, in that sense of economics as the study of incentives.

In particular, when faced with a sign like that and a need for one, do you buy one like every week or do you buy two on the possibility it's worse next week and there are none to buy?  We had that with eggs.  There were very few eggs out; not stripped clean but close.  We ordinarily get a local brand of "pasture raised, all natural" eggs (because the package has picture of a manatee on it, we refer to these as manatee eggs).  Ordinarily, we go through about a dozen eggs a week.  We bought two dozen this week on the possibility these are the last eggs we'll get for a while.  

As I said, that was all around the store.  My guess is that the limit causes more people to increase what they would buy rather than limit it.  People coming for a few giant packages of paper towels or TP will stop at two because they have to.  There's no saying they won't come back the next day, though, while it's pretty sure that we won't. 

To be honest, the response to the Coronavirus scares me more than the virus does.  The only scary thing about the virus is that it reproduces.  Eventually, everyone gets it and gets over it (or not, whether the fatality rate is 1% or 3% or 0.2% is still hard to know); the essence is that it's still self-limiting in the long run.  Gradually, the population develops immunity to the virus and the toll lessens.  The reaction of sending everyone in the country a "four digit" check is terrifying.  It seems like Modern Monetary Theory springing to life and I've always been critical of these ideas.  They believe they can make up whatever amount of money they want out of thin air, and I say that devalues every dollar we have.  I've said a thousand times that printing money out of thin air is painting a target on the backs of the middle class and especially anyone living (or planning to live) on savings.

Stupidity in the response to the virus?  As Einstein said, “two things are infinite: the universe and human stupidity; and I'm not sure about the universe.” 


  1. "To be honest, the response to the Coronavirus scares me more than the virus does"
    In spades.
    We are cutting off an arm for a hangnail.

    1. No, we're trying to slow down the growth, to keep from swamping all health care extant.

      There's a difference.

      Whether it will work, or it's too late to do so, is the open question.

      The response doesn't scare me, but it brings its own follow-on problems (how's your 401K this week?) it's just a reality of this that doing nothing has higher costs than doing something, even if it's from a range of sh*tty choices.

      Anything from 150 dead to 10M dead is quite a range, and not a hangnail, but it's totally superfluous to the real question: how many will require hospitalization (when the red line for that number is 900K)?

      Once you surpass that, we're Italy, and everyone dies from everything, and medicine reverts to 1800-era standards of care.

      If you can avoid that, the loss of even 3% of 330M people is a manageable problem, and concerning mainly to the lottery losers themselves, and their nexts-of-kin.

      The other 97% of us will do fine, if no one loses their minds. but most people are idiots.

  2. Everyone adjusts. So you bought two dozen eggs. You'll eat your regular dozen this week. Next week you buy two dozen more (now you have three dozen). You eat your regular dozen that week.

    Do you then buy two dozen more the next week, when you already have two dozen?

    1. Do you then buy two dozen more the next week, when you already have two dozen?
      That's easy: no.

      We occasionally buy two dozen if it's a good price, because if they're going to be used before the expiration date why not?

    2. Yeah, but you'll stop by the time you have 8 dozen. Like I said, people adapt. Extrapolating along a curve is wrong 100% of the time.


    3. Around here we buy eggs for a buck a dozen in five dozen packs. The "expiration date" is meaningless. They will easily last a month, or even two. Strange, though, the stores are out of the 1-dozen packaging but still have the 5-dozen packages.

      Many people just raise their own chickens. I guess that's not an option in suburbia.

    4. In our suburbia, hens are allowed just not roosters. The folks living behind us have a hen house and some number of chickens.

  3. The supply and demand will even out as people adapt, but the monetary policy and the national scene with a rapidly changing supply chain that eliminates China will bring about a much larger shift in the long term.

    1. the monetary policy and the national scene with a rapidly changing supply chain that eliminates China will bring about a much larger shift in the long term.
      Bingo. That's the big one.

      The US leadership has been entirely too willing to outsource everything to China. Companies see the size of the market and sales opportunities compared to the more saturated markets in the US and Europe and fall all over themselves to put things in China so they can sell there. Consequently, the US companies have been taken for the fools they've been.

      Things like the fact that no US auto company is allowed to own even 50% of their own factory in China, and they charge a 25% tariff on US made cars imported into China. Trump has tried addressing these things (and more) with the so-called trade war.

    2. Not quite. This isn't true for Tesla.

    3. Not sure which part you mean, but the quote about no US company being allowed to own even 50% of their own factory in China is from Elon Musk. He followed that up with a line about how many Chinese electric car companies are in this country. It's a few years old, but I remembered talking about it and looked it up to make sure I remembered it right.

    4. I have looked for the information and can't find it quickly, but there was a discussion on Teslarati sometime over the last month that implied that the Chinese only own about 30% of the Shanghai Gigafactory. That was my only source and they may have been wrong.

      I am aware of the 51% issue for manufacturing in China. I'm not quite certain why anyone trusts the place enough to build a factory there, but I suppose it represents profit until they nationalize it.

    5. Let's not overlook that they own 100% of the land there, regardless of who has paper rights to it.

      If you doubt me, ask the former executive directors of the 3M N95 mask production facility in China how that works out when reality steps in.

  4. I'm using mine to buy cruise ship stock. The virus will disappear eventually, and a year or two down the road, I will sell and take my profit.

  5. I'm sending mine to the Salvation Army before the rest of you mess up the economics by blowing it all on ammo and distilled spirits. Psst-silver is at $12. Just sayin.

    1. "Silver is at $12...but no one has any, and the sellers' shop doors are all closed."

  6. In San Antonio (TX) near here, the store shelves look akin to pictures from the Soviet Union 40 years ago. I have just taken a job with one of the big box home improvement stores (yes, they are hiring); the only things we are really out of are masks.

    The local major food store here is HEB. I wish I could post some of the pictures I took. Yesterday (19 Mar), I was in the one close to where I work about 18:30. The shelves were bare in many areas - paper goods, bottled water, cleaning supplies. I know that the stores logistics train is stretched to near breaking. Hopefully people will quit panic buying.

    Once this present calamity passes, I think the wife and I will do some stocking up. We might even investigate some of those freeze dried emergency food kits because I think that in the near future we will have some more of these induced panics to try to turn us from citizens to subjects.

  7. I really dislike the stigma associated with the phrase "panic buying". It's entirely reasonable to buy more than normal if you expect to be trapped in your home for longer than a normal shopping interval.

    Every one of the "panic buyers" who now won't be knocking on my door looking for a handout, or kicking in my door because I've got something they don't have is a WIN for me. And for you.

    Are they now fully prepared? Probably not because they haven't gotten good advice or thought it thru. Are they BETTER prepared to ride out whatever's coming AFTER buying food and TP? YES. Yes they are.

    Anyone that reads Aesop, or any other prepared blogger (and I know the overlap among SiGs blogroll is substantial) or lives in a hazard zone, and ISN'T prepared is an idiot. Sorry if that stings, but YOU are responsible for your life choices. Not me. Not people afraid they'll be locked in their homes and not have enough food or TP.

    Barring extenuating and extraordinary circumstances, no one who frequents those blogs should be bitching about people buying 'all the things.' If you NEED to buy stuff that's unavailable now it means you haven't listened to anything people have been saying since ebola '14 at least.

    I understand you might want to 'top up'. You can never store as much fresh food as you'd like to have on hand. I understand you might have gaps that you've not addressed previously, because I've got some. But if you don't already have food, TP, cleaning supplies and PPEs, why the hell NOT?

    You've been hearing it since Y2K. Every couple of years a hurricane, wildfire, earthquake, winter storm-nado, or epidemic reminds you of the need and benefits of prepping. If you haven't done it by now, when will you? Getting pissed because other people beat you to it is about as idiotic as anything outside of the youtube comments section.

    There is always some disaster that can affect you and your loved ones. This particular one didn't come out of nowhere. It's been on the radar for a minimum of a month. Months for some of us.

    If you aren't ready yet, think outside your normal pathways. Lots of restaurant supply stores are going to need customers. There are still trucks rolling and stores are being resupplied. Try again later. Keep trying. Use what time is left to improve your odds in whatever way makes sense for you.

    For me, it means staying home, where I know the virus ISN'T.


    1. That's a good summary, Nick. I know that when I was growing up, we had hurricanes every few years. That slowed to a stop around the time I got out of high school, but when it was time for setting up a household, having preps for a week or two without power was just completely natural. The thought of not doing it never entered our minds. Over the years, the pantry has gotten a bit deeper and the supplies a bit more complete.

      The thing is, we have hurricanes but most of the country doesn't. Most of the country has winter storms and we don't. Many places have earthquakes. Others are more likely to see tornadoes. There's just always something. Why does every big winter storm result in a run on the stores? A friend up north remarks that the stores get run on eggs, milk and bread - so the snowstorm triggers an urge for French Toast.

      Your summary of panic buying is right on, too. Yeah, I could never have as big as supply of fresh food as I'd like, and one that would withstand any contingency. It's easy to convince yourself to get that one more thing.

    2. I disagree on Nick's POV.

      Most people view "preppers" as having a phobia of the future because of what they have seen or heard directly or indirectly about preppers. Those that I have known have been prepared for an active WW III or other such apocalyptical event which just seems a bit over the top. A late friend who was a "prepper" when I first met him around 2005 had a storage shed with multiple 55 gallon barrels of grain other survival needs stored in nitrogen, a small room dedicated to reloading and whole lot of other stuff that I don't remember since he died years ago.

      I used to go to Utah for Air Force reserve duty. Out there the local populous was recommended to keep a 72-hour kit in case of an earthquake along the Wasatch Front (Provo, Salt Lake City, Ogden, etc.). I understood that because of the interruption in normal life a major earthquake could produce on the major fault along the Wasatch Front. Hill AFB had preparations for such an issue; so I was covered while there.

      I don't live in an area of prolonged, widespread disasters; most of my life has been spent in Tornado Alley. The general area of a tornado strike is limited, so there is no need other than to take immediate measures. If you live through it and there is sufficient damage to your abode, you go to a hotel/motel or even apartment till issues are resolved.

      I now don't even live there but in the Texas Hill Country. The whole of the county I live in has not had more than 50 reported tornadoes since 1950 and most were in very rural areas. The bad flooding we had 5 years ago resolved in 48 hours. We don't get snow storms but maybe we could get an ice storm; I lived through a couple of those in NW Arkansas about 50 years ago with the worst thing happening was my car getting stuck in a parking lot about a half mile from my residence.

      Most people therefore don't see a need to have more than just a weeks extra on hand which is what they normally keep in case they don't make it to the store regularly enough because of their life experiences. What I have observed in San Antonio, Texas is "panic buying" because the Left has been passing around rumors of 30 day quarantines which most people are not prepared for. While it is in Dallas, Texas, my daughter-in-law had a friend whose sister works in the Pentagon pass along that Trump was going to impose martial law last Monday (16 March)for 30 days; I am sure something similar has gone around San Antonio, a known Leftist enclave.

      So Nick, I think your criticism of everyone that wasn't prepared like you or Aesop is a little over the top since there have been open rumors of 14+ day quarantines that most people are not prepared for.

      Now to counter that, I was working towards being a little "preped" before the November General Elections because the outcome may well spark a civil war. If Trump wins the Left may well go completely Berserker. If the Left wins (on paper) the conservatives may have to water the Tree of Liberty.

  8. @BillB, I have to say that I'm a bit puzzled by your comment.

    You argued that your risk assessment and level of prepping was fine, because you don't have long duration disasters and there is help coming, but other peoples' risk assessment is flawed because they heard about long duration disaster coming (long quarantines)and acted on it in a way you don't approve of (panic buying.) If one believes that long quarantines are coming, then gearing up quickly for 30+ days is perfectly sensible, especially since no help is coming from outside. And here we are, in the middle (actually beginning) of a world wide deadly pandemic, and every time TPTB talk about it, the length of time it will affect us gets longer and longer.

    No one who heard the news or watched what has been happening and then gave it any thought would conclude that this will be over in 14 days. If you don't want to risk getting the virus on a shopping trip, you better be prepared to stay in, or geared up in PPEs for when you have to go out and resupply.

    Aesop and others have been talking about having enough to stay in for MONTHS to let whatever comes burn itself out. And they've been talking about it for years. To me and my risk assessment, that sounded like prudence and I increased my planning horizon in '14. I had ups and downs with it since then, but the goal was 30 days without leaving home, then 45, then 90, and I was working on six months when this thing started pinging on the radar. I've got two kids and a wife at home to feed and keep healthy. I'm the stay at home dad, with a small ebay business, so I didn't and don't have unlimited funds or time to devote to the project, but small efforts add up over time, just like compound interest.

  9. I have been watching CDC spend LOTS of my money on preparedness awareness for pandemic flu for more than a decade. They buy billboards about it in the mid-west fer peter's sake, and issue terabytes of reports and guidance online. I've watched them bungle ebola response twice and many other things in between, but I've always been convinced that a pandemic of some kind was indeed coming.

    So I planned for it. Funny thing is, it covered me for floods and hurricanes too. For unemployment, for under-employment, and for sickness and in health. It turned snafus into nothing when I was able to go to the stack and pull out whatever was needed. FFS, how many dads can say that when their daughter needed citric acid for a slime making project, they just went out into the garage and got some? (I have it for oral rehydration solution, an epidemic prep.)

    Your comment seems to boil down to 'some people took a rumor I don't believe seriously and acted on it, and now I can't get what I need.'

    You didn't take Aesop's warnings or advice seriously. I did. You think a weeks worth of independence is sufficient. I don't. You think people are acting inappropriately by stocking up, I think it's prudence-if WAY late.

    My main points, and I'll accept responsibility for poorly communicating them if that's the issue, were-

    -people are suddenly acting on information that may be new to them, and it upsets other people, for in my mind, all the wrong reasons. Every person that is any bit better prepared is a GOOD THING (tm).

    -if anyone here has been reading the people on SiG's blogroll, they have no one to blame for not being ready but themselves. Getting upset because other people are buying all the stuff that they want to buy before THEY can get it at the last minute is dumb. Seriously. That's the word that best describes it.

    I read and reread your comment, so if I'm still off base, that's on me too. I'm tired and headed to bed. I don't wish anyone ill, and am not gloating- it kills me that my mom in Sarasota never believed me enough to even have a couple of flats of bottled water and some easy to prepare canned foods in her storage unit. She went to WALGREENS today looking for rubbing alcohol. She went to the bank to get small bills so she can tip the food delivery guy every day when he brings her Burger King with a side of Wuflu. I've failed utterly to protect the ones I love, because I couldn't convince them of the real threats coming their way.

    And that's why it kills me that everyone who had the chance, who reads the blogs and not the MSM, who got clued in a month ago or more, DIDN'T get prepped up. I see it in comments all over the blogosphere, people who talk about prepping, who should know better, but aren't ready. No one can be completely ready. Robert Thompson prepped for years and his heart killed him before he used any of it. Aesop sounds like he's gonna ride this one in until impact, and we'll lose him and all he's prepped for too unless he's damned lucky.

    I've got kids to raise, so my outlook is going to be different from others who are past that, or never had that.

    There are lots of threats in this world and this is just one of them and a pretty unlikely one at that, compared to losing a job, or a hurricane in the Gulf, but no one can say they weren't warned about it. Or that they never happen. We've had warnings and near misses for a decade.

    Use the time and freedom of movement to keep stacking if you don't have enough yet. Or hunker down, raise the drawbridge and get ready to ride it out. Sometimes you fight the war with the army you have, not the army you want.

    good luck to us all.


  10. "Most people" are morons. That's why intelligence is always a bell curve.
    The people on the left side of middle get what they get, because they are who they are.

    And on this, 100 isn't average, unless you did something about what you knew months and years ago.

    1. As for "riding this in until impact", it's not ging to be a 3% lethal virus that kills me, in all likelihood, but if I die, it'll be under the burned rubble, in a hellacious brass pile, and with stacks of corpses out to 600M in any direction.

      I like my odds, even here.

      As J.B. Books noted, "Most men aren't willing."
      After one or two get center-punched, the rest tend to lose interest rather rapidly.

    2. Glad to hear it.