The New York Times recently reports there is a developing cooking oil shortage. The subhead to the article reads: “Several British supermarkets have joined other chains around the world in asking shoppers to limit their cooking oil purchases, as supplies dwindle and prices rise.” Before reading the article I wondered if this sort of request of consumers risked being naive and counterproductive. After reading it, I am still unsure.
Basic economics typically says that the most efficient way to allocate resources is through the price mechanism. Prices send important signals to producers and consumers about the availability of and need for goods and services. As prices rise and fall, producers and consumers can often adjust their behavior. Consumers can change how much and what they consume. Producers can see opportunities for profit and bring more or different goods to the market.
Sometimes people refer to prices as one way to “ration” goods. This isn’t quite right. Rationing supposes some deliberate allocation mechanism. Prices, on the other hand, typically respond to market signals, not the dictates of some bureaucrat.
Critics will insist that prices assign opportunities to access goods to people in just the way that any government rationing does. I’d dispute this, but instead of quibbling over meanings of terms, consider more neutrally the merits of certain ways of allocating goods.
Wartime era rationing is one way to allocate scarce goods. Another example is first-come, first-served, such as in queuing. Alternatively or in addition, there might be per-purchase or per-person limits.
Queuing is a way to allocate goods because only people with the resource of time will get access. America’s national parks now experience historic levels of demand. There are often caps on the number of daily visitors. People gain entry only by investing the time to show up early and wait in line.
Another way to allocate goods is by per-person limits. Consider how Ticketmaster restricts concert ticket purchases. During the pandemic, in the USA many stores allowed consumers to purchase only so many packages of toilet paper. This supposedly prevents resellers from buying all available products and cornering the market.
Should there be non-price-based restrictions on cooking oil purchases? For some people, cooking oil is a type of good they use to satisfy their basic food needs. Their demand for cooking oil might not be especially “elastic.” Their needs for it don’t always respond to price signals as readily as their needs for other goods. The significance of oil for many consumers might partly explain why some providers use moral exhortation. The New York Times article includes a photo showing a sign a British grocer had posted, which read, “So that everyone can get what they need – we’re limiting these products to 3 per customer.” This notice explains the store’s policy and might help inspire people to conserve.
If there are no per-purchase caps, it might seem only the rich would get to eat. So, perhaps we should applaud some British merchants who restrict sales in order that people have “fair” access. Moral appeals might seem to help here since people are reluctant to have prices do all the signals for allocating goods. Such moral appeals, one might say, encourage people to conserve.
I doubt scarce goods in such circumstances become more accessible by wishing and pleading. Of course, my hunch is vulnerable to being overturned by data: perhaps those moral appeals have effects at the margins. After all, such appeals seem to encourage many people to bear the costs and inconvenience of recycling. Perhaps too, with cooking oil, sellers can make moral appeals to a sense of civic solidarity to ensure adequate access to scarce sunflower oil.
Still, I worry such limits, combined with moral appeals, mask naive understandings of economics. These measures risk backfiring. Telling people a store is rationing goods is often a surefire way to inspire panicked buying.
Consider again what happened with toilet paper. As soon as stores imposed limits during the pandemic, there were runs on toilet paper. Many families joined others in the US in hoarding it. They did this not because they needed to have over one hundred fifty rolls available, but to fend off shortages in light of people who threatened supplies with panicked buying. In other words, many people overbought out of fear that other people were overbuying. The same routinely happens in the US south when snow storms are in the forecast. People hit the grocery stores to stock up on bread, milk, eggs, and beer (and… not necessarily in that order). If the store caps how much people may buy of such staples, people will often buy up to the limit and encourage family members to do the same. A week or two later, many people are pouring spoiled milk down the drain. So my first worry about these limits is that they inspire panicked buying and exacerbate any shortages there might otherwise be. If a store adds a moral appeal, we must ask whether that’s the most effective way of getting people to allocate resources “fairly.”
Many families would not overbuy if prices had risen to reflect increased demand. If each toilet paper roll were $50, they would curtail consumption and purchasing. It then seems that price signals might be a more effective signal than any per-purchase caps. It might also be more effective than moral appeals.
People might say that increasing prices is inappropriate because high prices clash with “fair” access. Alternatively, they might say, per-purchase caps secure such “fair” access. They might say: surely everyone should have fair access to wiping their fannies in times of scarcity. After all, they might add, demand for toilet paper is inelastic. You’ve got to wipe!
This is false. Demand for many goods people regard as essential is often somewhat elastic. This is true even with toilet paper. Consider how you’d change usage patterns if each roll were $100 or $500. You’d use less. You’d consider substitutes. You can (and many people did) buy a bidet, such as from this seller, which I promote for free only because I like the name.
I don’t dispute the effectiveness of moral appeals in some cases. Whole blood donation in the US provides some evidence. Blood donation drives exhort people to help the sick and needy. Compensation for donors is merely free juice and cookies afterwards. For the most part, in the USA there is an adequate and safe blood available. (But see a related recent book by fellow blogger James Stacey Taylor, giving a compelling defense of paid plasma donations.)
I remain worried that certain moral appeals risk cheapening moral discourse. (See related discussions by Tosi/Warmke.) They risk making morality an empty exhortation, especially when is a better alternative: the merchant could raise the price.
Some merchants won’t do that. It’d be bad PR. Consider a local hardware store in a small town when a rare snowstorm is on the horizon. One might think that’d be a great opportunity to raise prices on shovels and ice-melting salt. Many won’t raise their prices, though. They know that if they do so, it’ll sour their reputation within the community. In that case, one can imagine the owner refusing to sell anyone more than one shovel. The owner might think it’s more important that more people in the community have access to shovels.
Offering moral appeals in certain cases of scarcity seems to undermine the signaling function prices provide. Indeed, offering moral appeals seems to undermine the point of the moral appeals. When prices do not reflect supply and demand, producers lack the information they need to know how to shift production and distribution. But it’s also a problem for consumers. Consider the standpoint of a consumer who wants to allocate their family’s scarce resources carefully and plan responsibly for the future. Suppose that consumer wants not to deprive others of fair opportunities to access important goods. Without appropriate price signals, that consumer might not know what to do. They want their family to have toilet paper (or cooking oil, or milk, or gasoline, or eggs, or whatever), and they might want others to have appropriate opportunities to gain similar access. But the sign on the British grocer’s shelf doesn’t tell them how important it is to, or the extent to which they should, constrain their choices. Prices give even better information in most circumstances.
Ultimately, it might best be left to merchants to decide how to price their goods and what message to send. Some messages risk inspiring greater panicked buying. They also risk undermining the appropriate force of moral reasons.
Prices convey plenty of information. Substituting or adding moral appeals risks making scarcities worse and risks cheapening the value of moral appeals.