How to fix US empty store shelves in 48 hours

It’s never a pleasant thing to stand up, alone, in the face of a national mania and provide an unpleasant solution. I’ve been putting it off for some time.

Finally, I’ve had it. Nobody who does this for a living seems to be willing to step up to the plate so I guess I’m stuck doing the job. The free-market solution to excess demand over supply is to raise prices. We are not raising prices to end the empty shelves because the government in various jurisdictions has made it illegal to raise prices in the face of an emergency.

Nobody has had the courage to say this. Everyone who has taken a basic economics course in the US knows this. This lack of even discussion on how to fix the empty shelf problem is deeply weird and nobody is talking about the odd silence either.

Update: Kudos to John Stossel who did address this issue (from a different perspective) a few hours prior to my publishing this. His article is here.

30 thoughts on “How to fix US empty store shelves in 48 hours”

  1. I’ll be even more courageous than you and say what empty shelf problem?

    Stores sell stuff and if not replenished shelves will go empty.

    Until the next truck arrives at the store.

    Then shelves will be replenished.

    Toilet paper is consumed at roughly a steady rate, I think. Thus, people buying shopping carts full of it aren’t going to need to buy more soon. The same with canned soup, ramen, etc.

    Demand will settle out, and the empty shelves won’t stay empty long.

    Raising prices now won’t solve any actual problem but will instead inspire price controls and worse.

    We should avoid all that, I think.

    Tolerate the empty shelves, for a while.

  2. GeorgeNYC – You need to take a microeconomics course. And if you have already done so, you need to get your money back.

    Xennady – You have a point about toilet paper. Now do that analysis on milk, eggs, and meat, all of which are getting panic bought at my local grocery. When perishables are massively overbought, they spoil and are thrown away. It’s funny that you want to tolerate empty shelves to avoid price controls when we have empty shelves because of price controls. Store management doesn’t raise prices because it is illegal to do so.

  3. The local Woodman’s and Costco have instituted rationing for things like toilet paper and hand sanitizer. They have also shortened their hours to allow for restocking. I think this was one of the best moves on their part as it means that customers aren’t snatching the goods as soon as the items go on the shelf.

  4. I actually have an economics degree. Mostly got the highest grades in every single class I ever took. Economics is just math. Nothing more. It is free of any moral authority. The shred of moral authority it has is based on the supposed derivative effect of being a way to “efficiently” allocate resources and therefore benefit people. There are a large number of assumptions that go into creating a true “free” market. i.e. a Pareto-optimal market. Most of economic goes into studying market failures and how to handle them. Most of what I see on this site is really just pro-corporate not pro-market. The corporate form is the biggest subsidy ever invented as all liabilities are specifically limited solely to the assets of the corporation. All externalities beyond that are absorbed by others. That makes sense to encourage certain types of activity but with regard to speculation that is absolute nonsense. As with most conservatives you either anthropomorphize these corporate entities or else glorify their leaders forgetting the fact that these were intended to improve humanity rather than oppress it.

  5. GeorgeNYC – I recall on my first day in both high school and in college economics, they both laid out the purpose of economics as a field is to figure out how much to make, and where to allocate and distribute production. The whole field deals in one way or another with these two problems. So when you say that raising prices is just rationing by another name as if distribution is ever something else, you’ve revealed a complete ignorance of economics, notwithstanding your paper credentials.

    You are bringing in the subject of moral authority. Nobody else is talking about moral authority. It’s not a consideration of the discussion, which is, if you look at the very top of the page, about how to end excessive panic buying resulting in whole sections of stores being devoid of any product.

    Normal milk prices are $3 in my neck of the woods. If today the first gallon was $3, the second $6, the third $12, and the fourth $24, I wouldn’t be out of milk and neither would the store. The fact that the store is out of milk and thus I can’t do my normal restock is not a market failure. It is a failure of government in imposing price controls.

    This doesn’t even touch the other set of market interventions in the price of milk that make it more expensive on a day-to-day basis. A “true free market” is not in the cards in 2020 for milk in the USA. That discussion we can have on another thread on another day.

    But you don’t want to acknowledge the pernicious effects of the anti-gouging laws and how they are spreading panic across the US as people see empty shelves and realize that they too must stock up to avoid being left entirely without.

  6. I have some pretty decent information on this. The empty shelf problem isn’t a supply issue, it’s a delivery issue. With the huge glut of demand all at once, we simply don’t have enough truck drivers to get the product to the stores and hence, on the shelves. The shelves will be re-stocked with everything soon enough.

  7. As with most conservatives you either anthropomorphize these corporate entities or else glorify their leaders forgetting the fact that these were intended to improve humanity rather than oppress it.

    Interesting POV. “Corporate entities” are an example of people banding together to provide as service or product for their own benefit. “Improving humanity” was the purpose of communism or so it was sold to the gullible. If the public chose to buy the service or product, it was to improve their own lives.

    Dan has a more useful observation. Truck stops are closing all but gas pumps so truckers are having trouble finding meals and showers. That seems to be a problem.

    I agree with the use of volume prices to discourage hoarding. We went out yesterday and were able to find all but paper goods. We have a Safeway market near our home, which is usually not our first choice as it tends to have higher prices, so we shop for most food items at a Frys, which is farther away. Yesterday, the Safeway had a fairly normal selection of grocery items, excepting paper goods. The Frys, which seems to have a somewhat lower socioeconomic clientele, was out of almost everything, especially meat.

    That suggests to me that TM is right. I might try an experiment today. About a mile east of us is a very expensive market called “AJ’s” which caters to the prosperous “Foothill” area where we live. I’ll see if they are bought out. If not, TM’s point is made again.

  8. Dan is right — the empty shelf problem is a delivery issue, not a supply/demand issue. Although raising the prices for high demand items would be a classic example of an effective market signal to devote more resources to delivery of those items.

    Underlying this is the real problem with “economics” — the discipline tends to ignore the pernicious effect of government actions, even (especially?) those that are well-intentioned.

    Government schools have left people uneducated, such that in an unnecessary panic they stock up on perhaps the least useful thing to have in a prolonged lockdown — toilet paper.

    Government-dominated universities produce graduates going into media who really do know nothing — and spread panic in a situation like this instead of spreading information.

    And perhaps under all of that lies a moral issue. People choose to ignore that we are all going to die, every single one of us. And when we are old and have compromised health (which comes to us all), we may die sooner rather than later. Why should any of us feel entitled to demand that other people have to pay for ICUs to extend our lives by a few miserable weeks? If we choose to spend our own money on extending our always-limited life spans — Great! That would be a market signal.

    On the other hand, I have to admit that historically when religion was a much bigger part of people’s lives and government was a much smaller part, the world was also far from perfect.

  9. I had this very argument with my wife yesterday. It is always disappointing to me to realize how many, who otherwise claim to be supporters of free markets, so readily abandon them when they don’t like some particular aspect of the results.

    One word is missing from this discussion: “arbitrage”. Arbitrage is the process of moving goods from locations (or times) where they have a lower value to places (or times) where they have a higher value. Arbitrage is a normal, every day part of a market. But where it really comes into play (and proves its value) is during emergencies.

    The fact that higher prices encourage greater supply and help reduce demand seems hard to dispute. Why turn that function off during emergencies? The laws of human behavior (economics) don’t change, they’re just pushed beyond the normal range. During local/regional emergencies (hurricanes, tornadoes, floods, earthquakes, etc), the rise in local prices encourages supplies to move toward that region (arbitrage) and help encourage minimization and substitution and, thus, reduce local demand. During nation/global emergencies, the primary effect is minimization and substitution. But these are exactly the effects we want to happen during emergencies!

    Anti-gouging laws are simply a form of temporary price controls. As we know, price controls always induce shortages and rationing. Empty store shelves are exactly what I would expect if prices are not allowed to rise to the actual market price. Why not buy 6 months worth of toilet paper? It doesn’t cost any more. And the empty store shelves don’t actually inspire a whole lot of confidence that it will be available tomorrow or later. Anti-gouging laws induce panic buying. Would you be inclined to buy months worth of toilet paper if it was available on the shelf, but at 5 or 10 times the normal price? I think not.

    Panic buying could be stopped tomorrow if we simply allow (even encourage) retailers to raise their prices until at least some of the items remained on the shelves at the end of the day. People don’t go into panic mode if what they need is available but much more expensive. They will panic if it is not available at all.

    In my local area, the panic buying is very spotty and illustrative. Things that can be stored longer-term (e.g., toilet paper, cleaning products, water, peanut butter, pasta) are sold out–store shelves are completely empty shortly after the stores open. Other non-perishable items are picked over, but still readily available. Perishable items (milk, meat, vegetables, etc) are picked over, but still available. People are making rational choices. There is no point in stocking up on perishables that can’t be used beyond a certain date. Items which don’t expire–buy it all because you never know when it will be back in stock. And since going to a store is a risky endeavor in and of itself, there is strong pressure to buy anything you might possibly need until your next store visit. Thus, more unnecessary purchases.

    No one likes the arbitrageur. They ARE taking advantage of a situation. Nonetheless they perform a vital service, especially in emergencies.

  10. Doesn’t Paul Krugman have economics degrees and numerous awards as well as a Nobel price in economics? Sure he does, and comes up with larger and larger roles for government intervention to manage market failure. His much cited “A manifesto for economic sense” could have been the blueprint behind the neo-keynesian policies that has resulted in the massive debt increase that followed the bailouts and stimulus and resulted in the minimal recovery from the 2008 government cause collapse of the highly regulated mortgage “market”. It was really a justification of those actions.

    We are about to go further along that path with the measures being rushed into being. Can we really stand an additional $2 Trillion in debt? This is not a lack of demand recession, it is at base a supply shock, aggravated by sourcing such a large part of our supply chain in one third world dictatorship and scaring the dickens out of consumers and producers. No major crisis should ever be wasted in righting “market failure” with minimal conception of the induced long term secondary “failures”/effects. After all we get to “do something” about those as they arrive on our door step. Win-win for Bernie/Joe/Trump/Krugman/etc. Market adjustments often take more time to sort out shocks than the political cycle and many of the examples of failures are the children of past political interventions. The beneficiaries have every incentive to perpetuate these by deflection and political rent seeking. The rest of the folks who are paying the price don’t even perceive they are paying them in present costs (direct and indirect) as well as unrealized opportunities for something better.

    So, basic micro-economics question, which signal simulates a faster and larger reaction to a shortage: rationing with price control, empty shelves with price control or empty shelves with unregulated prices? Get that wrong and your credential/common sense is worthless for predictions. Obviously price controls, imposed for “fairness” have a distributional effect. It means that someone with the willingness and ability to buy the item at a higher, temporary market clearing price may not find the item for a longer period of time without an incentive to increase production from the higher price. Those geniuses who can’t figure out that more toilet paper won’t be beneficial based on actual symptoms will hold the current supplies because they horded the current supply with no higher price to check their panic. Sure seems “fair” to me. The moral judgement behind the price controls during an “emergency” undoubtedly moved us farther from Pareto optimality. Additionally, just how much of a core value should we hold preserving and extending individual freedom in an imperfect world full of imperfect people? Where do those imperfect people get to exert the most perverse influences over and control on others?

    Get a refund. The current field of economics is distorted by government funding seeking to find academic support for a larger role in the economy. Funding talks. Remember the part about opportunity costs? How about positive versus normative judgements? Capture theory of regulation? Indirect/unintended consequences/ short run/long run? If you can not answer yes to each of these fundament economic concepts, demand damages. Intensions don’t matter, I choose:

    “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”
    ― Milton Friedman


  11. George NYC way up at the top is correct, it’s rationing by different means. Whenever wants exceed resources, somebody, maybe everybody, has to do without or make do with less. We can ration by prices, we can ration by politics, we can ration by the law of club and fang.

    What’s intriguing is that perhaps we’ve got to have some of that politics or that club and fang. I was recently reading Red Plenty, about the efforts of the mathematicians in Khrushchev’s USSR to automate as much of the rationing on autopilot. Then some genius worked out Novocherkassk’s allocation on the basis of the dietary requirements of the polytechnic’s students, neglecting the toilers in heavy industry, and when the algorithm adjusted prices …

    The book is historical fiction, thus I don’t know whether the subsequent introduction of a commissar to override the algorithm is real.

  12. Not trying to nit pick, but buying now based on a future shortage causing a cost increase is speculation, not arbitrage. Because it carries the risk you might be wrong. If you have good information to back up this gamble (better than the market presently has, example insider information), your risk may be worth tasking, but it is still a risk. The decision to horde toilet paper is likely to reduce future toilet paper prices as a market surplus could be caused in a few months from now. Movement toward a market equilibrium price is sometimes a bumpy path after a uninformed panic shock.


  13. Now do that analysis on milk, eggs, and meat, all of which are getting panic bought at my local grocery.

    The same analysis applies.

    Also, great comment from GeorgeNYC.

  14. The fact that higher prices encourage greater supply and help reduce demand seems hard to dispute. Why turn that function off during emergencies?

    The guy that collected the 17,000 bottles of hand sanitizer had to donate them, I hear. Sad to hear that so many are so ignorant about economics.

    I may try my experiment with the high priced grocery store, but tomorrow. Rain today.

  15. I’m giving an upvote to Dan. Temporary shortages of basic commodities that are widely produced are almost always distribution issues that will not be solved in any real sense by raising prices.

  16. Stores that intend to survive have to take their customers perceptions into account. I’m childish enough that I’d feel somewhat peeved if I went to a store and saw a cooler full of milk for $12 even after being in another with an empty cooler of $3 milk. Whether or not I decided I wanted the milk that badly, it would tend to leave a bad taste in my mouth that would last longer than the milk when the rational me should be celebrating the free market. Unfortunately, I’m somewhat less than 100% rational as are most people.

    Uber tried to square the circle of supply and demand with surge pricing. They don’t seem to have solved the problem.

    In California, there seem to be a large number of people willing and able to pay any amount for the water to preserve their planting, pools and fountains, not to mention golf courses. They appear willing to bid up the price to the level that the non wealthy would have trouble affording a shower a week.

    Nobody complains that Bentleys are being rationed, they are priced at what the market will bear. Drug companies tend to set new drug prices by what the insurance companies will pay.

  17. Most retailers have a generous return policy. Bring in the purchased product in unopened package within a week or so , show the receipt, and get all your money back. Sticking the store with excess inventory …

    In scenarios where a customer clears the shelves and has already disrupted the supply pipeline, u think that customer should forfeit return/refund privileges.

  18. I doubt $12 milk would sell but prices are a signal and should be able to vary with demand. To take a medical example, France has a health care system in which you are free to choose the most expensive doctor in town but the health insurance system will reimburse you the same. Bentleys are not rationed.

    If people are clearing shelves of $3 milk, why not charge $5.?

    I remember a serious situation at LA County Hospital during my training. The post anesthesia recovery room was not staffed in Saturday night, one of our busiest times. As a result, three patients died. I was so angry that I told two families to sue the county,

    On Monday morning, I told our chief, Dr Rosoff, about it. He called the Director of Nurses. She said that they had been unable to hire nurses to cover that shift. He asked if they paid a shift differential. She said they did but it was very small. He asked if they could staff the Recovery Room if the paid nurses $100/hour? Of course they could, she replied. He asked “How about $50 an hour ?” The point was that patients were dying because they would not pay enough.

    Dying patients are not gallons of milk but the point is that a price that will clear the market is what the proper price is. Shelf clearing hoarding is a sign that the price is not right.

  19. Dan from Madison – The problem is that some people spend so little on perishable food that they don’t mind overbuying to the point where they will throw spoiled food away. That behavior has to stop or the truck drivers will not catch up anytime soon.

    Stephen Karlson – Do you really agree that raising prices is not a solution to the problem of empty store shelves due to panic buying?

    Xennady – If you make no differentiation between perishable and non-perishable goods, your analysis is going to be off. But that’s your choice.

    MCS – I’m aware of the resentment issue and wonder if a graduated price would provoke a different reaction where the first gallon is normal price and subsequent ones are higher. Would it make a difference if the extra money all went to researching coronavirus treatments and vaccines? Demand is destroyed no matter whose pocket the extra money goes into but psychological effects may not be the same.

    Mike K – If I saw milk for sale, I’d buy two gallons for fear of not finding it again anytime soon. If the first gallon was $3 and the second gallon was $6, I’d buy one gallon.

  20. TMLutas – I’m not making any sort of argument on the topic of pricing, merely noting that this isn’t really a supply issue per se. Its a delivery issue. And it will be fixed sooner rather than later from what I am hearing.

  21. TMLutas,

    My take is that we should tolerate the empty shelves for a while rather than conjure some clever scheme to prevent the shelves from going empty.

    This also goes for perishables. If someone buys more hamburger than they can eat, I presume they will learn their lesson and stop. I am not inclined to protect fools from their folly lest we fill the world with fools, nor do I want the invisible foot of government to clumsily attempt to do the same.

    Your idea would solve one problem and I suspect create another, worse problem. That is, the wealthy would be able to purchase all of item x that they want, potentially up to all of it, while the majority would be potentially left with nothing, after the one or two item x’s they could afford was used up.

    This has grim political implications, I think. I suspect our politicians are, amazingly, actually smart enough to understand this, hence why I’m seeing billboards that tout anti-price gouging laws.

    I admit that I don’t actually like anti-gouging laws- I think they’re likely unnecessary- but I very much prefer them to burned-out stores and murdered rich people.

  22. In WWII, gas was rationed not because there was any shortage of gas or oil but because there was a shortage of rubber and spare parts and no replacement vehicles.

    The government is greatly exacerbating the problem by talking about shutdown/lockdowns where they mean nothing of the sort. Meaning instead that the few will be able to hunker down in as close to an emergency bunker as they can manage while the rest of us deplorables will be expected to keep things going so that they will still have a wide selection of take-out.

    The default government response is to just shut something down. I saw an article where Pennsylvania has shut all of the rest stops, and different places are putting restrictions on the drivers, trying to more or less lock them in their cabs and throw away the keys. A really good way to make drivers decide to just park their trucks and let somebody else cope.

    DeSantis is being criticized for not closing the beaches during Spring Break. In the absence of authoritative evidence, I’m willing to believe that it’s a lot harder to transmit the virus on a beach than in an overcrowded hotel room.

    None of this should be new to the best and the brightest that we’ve been paying for decades to think this sort of thing through. There have been three previous near misses, nothing that’s happening now is in any way novel. Yet all the alphabet agencies are making it up as they go along.

    A work friend’s FIL has a medical condition that puts him at very high risk and has been living alone out in the country. My friends have decided that the wife that can work from home will hunker down with him in their city apartment while my friend will keep coming to work and live elsewhere. I told him it sounded like the best thing that I could think of.

    There are many in a similar condition with no such alternative, yet I haven’t seen anything that addresses it. Much more needs to be done to protect the most vulnerable before they get sick and it would probably be pretty cheap compared to the cost, assuming that they make it alive to an ICU.

    I’m annoyed by needlessly empty shelves but not threatened. Less annoyed than if I hadn’t bought a package of TP that I didn’t strictly need a few weeks ago.

  23. TM, your example is what I suggested.

    I hope the problem is a delivery one and will see how things go this week. I plan to do my own little experiment today.

    We are running low on eggs and a few other items so I will go to Safeway this morning to see if they are stocked. They closed at 3 PM yesterday, possibly to restock the store. If they are out of items I want, I will go to AJ’s the Gelsen’s equivalent for Tucson .

    It is easy for us to self isolate. My son and DIL have three teens that are very into sports, not book readers. My DIL works from home but her employer has announced that they are having cash flow problems. They are a business of arranging meeting and conferences.

    My wife is very high risk but has been taking hydroxychloroquine for rheumatoid arthritis so is probably protected in part.

    The public hysteria is probably a combination of the novelty of this virus, the irresponsibility of the news media which has a financial interest in stirring up fear, plus Trump hate that is malicious. The FDA and CDC were typical of government bureaucracies in indolence and concerns with PC nontopics like racism , obesity and guns.

    The LA Times, typically, has a headline that bashed Trump with no justification.

    Trump declared himself a “wartime president” — an acknowledgment both of the deepening coronavirus crisis that he had shrugged off as recently as last weekend, but also of the alarm bells ringing in his reelection campaign.

    I suspect that his closing of China flights in January has been a significant factor in the limited effect of the virus so far, giving us time to find treatment and prepare the public.

  24. As usual, Angelo Codevilla puts his finger right on the detail that matters,

    Our 21st-century “developed” world, which so touts its own rationality, is now engaged in the historically unprecedented attempt to shut down most social and economic intercourse for the sake of mitigating the effects of a virus the lethality of which is far more like recent strands of the flu than that of the plague. One reason we do not know how many persons have been infected by this virus is that most infections in most people are so mild as to be unnoticed. That is also why we do not know the virus’s true lethality. Of course it is especially lethal to the old and otherwise infirm. What isn’t?

    Hence, we really have no basis for believing that, left unchecked or dealt with as just another round of seasonal respiratory diseases, the Coronavirus would devastate modern life. After all, having no cure for it any more than 17th century Europeans had for the plague, the only real weapons we have against it are the same that served long ago: heightened hygiene, social distancing, quarantine and self-quarantine. It is not clear what good the rest of the restrictions do.

    By contrast, we have far better basis to gauge the effects of what the “developed” world’s governments are doing to our societies and economies, and to judge that these measures are certain to reduce the general population’s prosperity and quite likely to result in a substantial transfer of even more power to those who already have too much of it.

    Why then do so many in high places advocate this global shutdown so vehemently? And does the question answer itself?

    The shutdown of schools, offices, all manner of public venues—in short the imposition of something like national and international time-outs—does not hurt everyone. For government employees, for most people in the media and for professionals it is more like a paid vacation than anything else.

  25. TMLutas — yes, prices do function to allocate demand.

    There’s some evolved response among people, though, to avoid recognizing that principle at work. It’s a little outside my area of expertise to understand where that comes from, or what evolutionary advantage it confers.

  26. Xennady – You’ve got the situation backward. We’ve created a clever scheme to guarantee empty shelves. We should stop pretending that it’s the natural order of things. It’s not. It’s a law and if the store manager raises prices to market-clearing levels he will go with the police in handcuffs within a day.

    Isn’t the threat of arrest worthy of comment? Aren’t government-engineered empty shelves worthy of discussion? There is nearly no discussion.

  27. Government-engineered — What if we had a government which announced:

    So far this flu season, something like 22,000 Americans have died from the flu, representing about 3% of Americans who have died from all causes over the flu season. These deaths are sad, but this is a big improvement over flu deaths in recent years.

    The current Media Panic Virus has been associated with the deaths of less than 200 Americans. All citizens are advised to take suitable precautions against the Media Panic Virus, just as they are already taking appropriate precautions against the flu virus.

    There are many countries in this big world. I wonder if any government anywhere has enough common sense & realism to tell its people — Get a grip! Get on with your lives!

  28. I carried out the final steps of my experiment today. I mentioned that the market we usually use for most food, Fry’s in Tucson, is getting cleaned out every morning, partly because it has low prices and good quality. We buy most meat at Costco but I want to be nowhere near that place until another week has passed, if then.

    Safeway, which is close to our house, has higher prices and we usually don’t shop there. I went in this morning and found almost all we wanted except eggs, butter and milk. We don’t need milk yet so that was not an issue. Zero eggs, though, and no butter. I did get margarine and some other grocery items.

    Then, later today, I went to a very expensive market we rarely use. I was testing my theory that price works to keep inventory rational. AJ’s is the market and resembles Gelsen’s in Los Angles. I went in and, sure enough , found butter and eggs. The store would only sell me one dozen but that was enough.

    We are good for another week. We have not tried home delivery although one partial order from Costco showed up after four days. A second try resulted in a failure as the “checkout” function timed out and I was never able to get back in,.

Comments are closed.