(The following article is contributed by Henry Chew)
The Coronavirus outbreak has led Singaporeans to scramble for face masks from supermarkets and pharmacy stores island wide. When prices spike by as high as 600% on platforms like Carousell, it is an emotional reflex to blame scalpers. Are scalpers really to blame in such situations? Should we really stop them from scalping?
This article will:
1) demonstrate the economics of scalping,
2) introduce an in-depth ethical analysis of such behaviors, and
3) suggest alternative policies to anti-scalping regulations.
Scalpers are distributors too
Most would think that scalpers do not provide any add valued-ness as they do not physically participate in the production process. It is also widely believed that such greedy middlemen simply profit off the backs of low-wage factory workers while squeezing every bit of profit out of desperate buyers in times of need.
However, it does not require too much thinking to realize that scalpers are also distributors. Scalpers are ones pushing the masks to Singapore. It is unrealistic to wish supply to come into Singapore to end scalping.
The reverse is true, it is due to the profit opportunities that supplies will make its way to our shores. And eventually, thru the market process, prices will drop, but this requires a process.
We cannot expect businesses not to gain, and still, hope masks to magically flow to us. As there are no fixed prices, nor are there such thing as “normal” profits. No one single person can set the price (or value) of masks for everybody else for all times and all situations.
Additionally, it is nothing short of robbery to force others to give up their goods, their (mental) effort, their time, and the sweat on their brow- at a price they disagree with.
Furthermore, profit is the result of value being added, as scalpers transport the masks from where they are less valued to places where they are highly valued.
If there is a price control policy dictating only one price, then there would be no scalpers bringing the mask to hands where it is highly valued. Sellers will sell their mask at a first-come-first-served basis, at a uniform price. Consequently, there would be long queues for masks.
It is surely acceptable to have a minimal government rationing system, to ensure that the poorest have access to some masks at one price- zero.
However, we must recognize that the reason why distribution of mask is so smooth, is due to the fact that the rationing system is minimal and there is a large functioning marketing allowing urgent buyers to save time by getting the masks at higher prices.
An anti-scalping regulation would not only form long queues but also stop inflow of masks, as sellers have no motivations to import. Moreover, such regulations would only target local scalpers, leaving overseas middleman untouched.
To have a policy against scalpers is to have a policy against value-added ness and value creation. If we want to add value to society, then we must not vilify profits.
Let citizens be rational and self-responsible
In the free market, it pays to plan rationally. If a scalper behaves irrationally and overprices his masks, then he will not clear his stock. This is true for hoarders too; a hoarder will simply suffer financial losses if he/she hoards excessively.
Either being overly obsessed about self-preservation or being extremely inflated in opportunism simply does not pay well. If our government were to ensure a rational citizenry, then it should allow the citizens to exercise their independent judgments.
A policy of distributing and rationing masks penalizes the resourceful and the thrifty, by awarding those that do not save and do not prepare. Such policies should be kept to a minimal.
Furthermore, it takes self-reliance away from citizens and incentivizes them to be dependent on the government for solutions.
I thoroughly agree with Minister Chan Chun Sing last year, when he said “The margin which resellers can command is freely determined between willing buyers and sellers. This means that the resale price can end up being higher or lower than the original price.” In other words, leave it to the willing buyers and sellers. It can be further argued that, unlike non-essential items, like concert tickets, the more in need the good is, the more we need plenty scalpers to import them.
Alternative policies to anti-scalping regulation
Singapore does not manufacture most of the goods we buy. This is true for our food, clothes, energy sources, and almost everything else. We produce very little masks, and almost all the masks we use are manufactured overseas. For a trade dependent country like Singapore, scalpers are essential economic actors.
It is further impossible for any government to predict every future crisis and start to stockpile unique crisis goods. The only reasonable “good” to “pile up” are our financial resources, as they are easily convertible. Singapore has done exceptionally well in this aspect.
Perhaps we can rethink the economic defense in our total defense strategy. Economic defense may not exclusively come in the form of citizens sacrificing themselves in contribution to the national reserves in the form of taxes or in kind.
Another view of economic defense can be building our wealth independently for rainy days. Wealth is both a privilege and the best defense against a crisis.
Also, economic defense may also mean allowing scalpers to secure mask and other resources overseas, to ease the shortages here.
One of the best economic defense unexplored is our numerous free trade agreements. A lot can be done further from the state’s perspective. One of which is to ensure that our trading partners remain our close friends, and continue to trade with us, in times of crisis.
It is these desperate times that we ask our trading partners to not ban the exports of masks. And deal with us, neither as aid receivers nor aid givers, but as dignified equal trading partners.
Mask scalpers are not the cause of the virus; therefore, we should not blame the scalpers for the situation we are in. It is not the high prices that gives us scarcity, but it is the scarcity that gives us high prices. We further should not stop scalpers from “taking advantage” of the situation as they are solving the scarcity, – in parts.
Profit seekers are not villains, simply because they deliver the biggest value to those in need, by transforming (or in this case transporting) low-value inputs to highly valued outputs in the hands of the consumer. The best thing about this, is that scalpers do it efficiently at their own accord.
The entrepreneurial spirit stands like a candle in the wind against the huff and puff of social populism calling end to profiteers.
Indeed, most of us have no reselling experience and may not fully empathize with scalpers, but that should not limit us from understanding economics, entrepreneurship and the struggle for individual independence. Just because most of us have never been a middleman before, does not mean we can narrowly vilify them. In the same light, the lack of understanding of the value of scalpers’ work, as valued by other purchasers, does not mean we should ban them.