Anger about pricey hand sanitiser exposes our bizarre hypocrisy over free markets
Price is determined by what people are prepared to pay. That observation might seem trite, even banal, but a lot of us struggle to accept it, as the current row about the cost of face masks and hand sanitisers shows.
The coronavirus has prompted a bout of panic buying. Toilet paper, tinned food and soap, among other things, are flying off the shelves. Some retailers have responded by allowing their prices to rise with demand – a natural and logical corrective to panic buying. But we are not in the mood for logic. Newspapers rage about “greed” and “price gouging”, citing examples of hand sanitisers being sold online at several hundred times their previous prices. Incredibly, the Competition and Markets Authority (CMA) has stepped in to threaten action against anyone who charges a “vastly inflated” price – including “members of the public if they resell goods, for example on online marketplaces”.
I have no doubt that the CMA’s stance will be more popular than mine, but here goes. There is no such thing as a natural price or, by extension, a fair price. A price is, as the dictionary coldly explains, “the cost at which something is obtained”. It will shift according to place and time, whim and fashion, supply and demand.
Once again, that might seem an obvious thing to say. But it is not obvious to most of us. Our brains are designed to deal with tangible objects, not imagined values. Intuitively, we feel that, just as things have an intrinsic weight, so they must have an intrinsic cost. If merchants are selling them for more than whatever we deem that cost to be, we call them “profiteers”. This was the medieval world view that led to riots, pogroms and mass confiscations. Moving on from it was what made modern society possible.
Except that most of us haven’t moved on, not in our hearts. For example, opinion polls show constant majorities in favour of legislating to prevent hotels and airlines from jacking up their prices during school holidays. Of course, the response might be different if the question were phrased the other way around, namely: “Should there be legislation to stop companies cutting their prices in the low season?” Even so, it is a reminder of how counter-intuitive the notion of supply and demand is for a lot of people.
Think about the consequences, though. If airlines had to hold their prices steady all year round, there would be a lot of empty seats during term time, but we would have to book years in advance for the holiday slots. When rationing by price is outlawed, rationing by queue takes over. The airlines would become a lot less profitable and several of them would pack it in, meaning fewer holidays for everyone.
You might think it outrageous to draw a parallel between holidays and health, but the principle is the same. If the state were to set a ceiling on the price of hand sanitisers – or face masks or, indeed, vaccines – the effect would be to produce an immediate rush to buy, followed by a shortage, since there would be less incentive to bring those products to market. If a government believes that public health requires more of these things then, rather than price-fixing, it should buy them itself and distribute them.
It so happens that the coronavirus is driving down the cost of flights and hotels just as it is driving up the cost of hand sanitisers and face masks. Being an inconsistent species, we take the first for granted, while raging about the second.
Still, ask yourself this. What have you done to make face masks or vaccines more widely available? In my case, the answer is “nothing at all”. I am, in other words, in no position to lecture those who are offering these things to others. Are you?