Coronavirus Needs Markets
COVID-19, known more commonly by the broad name
for the type of virus it represents, “coronavirus”, has captured the news over
the last several weeks. The virus seems to be spreading rapidly so far, to the
point that any statistics I could provide now on the number of those infected
or dead would almost certainly be outdated by the time of your reading.
Governments around the globe have been involved
in trying to contain and stabilize the situation as best they can. The WHO
reported that the international community has put forward $675 million to try
and combat the virus and its spread. These efforts will likely increase if the
virus continues to spread, and there is likely a long road ahead to reach
containment of the virus.
Understandably, the outbreak has caused
shortages for many consumer goods used for cleaning and sanitation. Amazon has
already removed products because of prices they deemed to be unreasonably high.
A quick search on eBay will show prices for hand sanitizer much higher than
what would normally be charged in stores.
These shortages are affecting the international
healthcare industry as well. The WHO has estimated that healthcare workers will
need a monthly supply of 89 million masks, 76 million gloves, and 1.6 million
pairs of goggles. To meet this demand, WHO estimates that production of these
goods and others will need to be increased by 40%.
As with many other crises, any views that
markets are best left alone are abandoned as soon as an emergency strikes.
Markets work well under normal conditions. Resources are allocated efficiently
and so forth. However, in times of emergency, free market principles must be
abandoned in favor of governmental control. Prices need to be controlled, after
all!
While it is certainly true that in times of
relative comfort and peace markets work well, it is equally true that markets
work well in times of uncertainty.
If production on necessary goods needs to
increase by 40%, as the WHO states, the best way to allow this to happen is to
let prices rise on these goods. An increase in price provides a signal to other
entrepreneurs that these industries are more profitable and production in these
industries is more profitable than previously. This will lead to increases in
production and alleviation of the stress on supplies of crucial goods.
If Amazon truly wanted its shoppers to purchase
hand sanitizer of other goods, they would allow higher prices. Keeping the
prices artificially low leads to shortages, just as in any other scenario with
any other good. Kicking sellers that voluntarily sell with others who
voluntarily buy hurts both parties involved and keeps the goods out of the
hands of those who need them.
The price of wages for workers in industries
producing medical goods should be allowed to rise for the same reasons. Higher
wages attract more workers to these industries. The same applies to any jobs in
the medical industry.
Markets will allocate resources according to
where they are valued the most highly. This is done via prices, which will
attract new suppliers if prices go up. If consumers and governments wish to buy
more medical goods, i.e. value those goods more highly, then those increased
prices will create shifts in markets that align with the preferences of buyers.
The idea that markets cannot work freely in
times of distress is pure assertion. Market mechanisms are still in play even
in times of trouble. To meet the rising demand for medical goods, we must
understand and embrace these market mechanisms. Much labor and money will
undoubtedly be spent before COVID-19 is fully contained and edaricated, but if
there is to be a quick solution, markets must be involved. Emergencies do not
invalidate markets, but rather, emergencies show the need for markets.
If you got this far, thank you for reading! If
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thanks for the information and god with us against corona virus corona new today
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