Is capitalism evil? And especially "speculation"?
People often talk about speculators - they buy when demand is lowest and sell when demand is highest. Profiting from people. Interestingly, they sell when demand is highest - meaning they increase supply at the critical moment. Isn't that a paradox? I have a friend: before the COVID-19 epidemic began in Ukraine, he bought a box of masks and sold them when they cost 7 UAH each. He made a little money on this. And others - lost? At first glance, yes, someone paid him out of their pocket. But actually — no: everyone benefited from this, including those who paid him. Let me explain why.
Let's consider two scenarios: when there are no "speculators" who buy masks in advance and resell them at higher prices, and when there are.
| No speculators | Speculators exist |
|---|---|
| At the start of the epidemic masks are available: cheap, always enough for everyone. | Masks are available, but speculators bought out all stock in some pharmacies. Some pharmacies start ordering their full stock from suppliers. Supplier inventories are already shrinking. |
| The epidemic starts spreading everywhere. Masks are running out, many pharmacies have no masks. Pharmacies start ordering many masks from suppliers, more than they had before, some suppliers don't have such quantities, some manufacturers' warehouses are empty and they ramp up production. But masks are still generally available and affordable. | When many pharmacies run out of masks, many people rush to buy masks by the pack. Almost no masks in pharmacies. But speculators start selling masks at several times the price. Masks are not only missing from pharmacies, but also from suppliers and manufacturer warehouses, all manufacturers have already started continuous production. |
| Epidemic at its peak. Not enough masks at all. Neither for the sick nor for those in contact with them. Manufacturers can't keep up. | Same thing. But additionally, speculators sell masks at ten times the price or more. You can buy, but it's expensive. Well, expensive means 10-20 UAH per mask. Manufacturers of other equipment, vacuum cleaner filters for example, see that masks sell for 20 UAH and enter the game. |
| Peak of the epidemic. Masks are insufficient. The president orders libraries to sew masks. | Masks are a bit expensive, but available. Experts argue which masks are better - medical, construction, or made from vacuum cleaner filters. |
So who won? Didn't everyone? But people paid crazy money — highway robbery, those damn speculators. Yes, people paid the speculators, but also paid for faster market reaction and production restructuring. Some won money, others won health, everyone won. Although the moralizers lost badly.
P.S. A trick question - what will happen if selling masks at higher prices is banned? Will vacuum cleaner filter factories restructure their lines if they won't earn anything from it and will only lose?
P.P.S. I've given this example several times already, so I wrote it down to share links. And yes, this is somewhat simplified, you could add details and more complex cause-and-effect mechanisms, but the result won't change.
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