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Personalized Pricing: All the Rage

Who could have predicted that AI would return us to a land before price tags?

Last month, the Federal Trade Commission ordered eight companies (like Mastercard and JPMorgan Chase) to provide information regarding their “surveillance pricing” practices – that is, charging variable rates that shift according to the information gleaned from a client’s digital footprint. The FTC means to expose the “hidden ecosystem” of data brokers and middlemen who monitor user data, compile consumer profiles, and sell that information up the food chain. As more and more of those sneaky details and shady deals come to light, public animosity grows. Three-quarters of Americans object to online retailers charging different prices for the same product, and two-thirds mistakenly believe that the practice is illegal.

But we’ve been part of the personalized pricing experiment for a while now. (When’s the last time you paid sticker price on the car lot?) In 1996, Victoria’s Secret was already sending catalogs with cheaper prices to men. Amazon was first caught using the tactic in 2000 showing different people different prices for DVDs. Staples and Home Depot sell items and at different prices according to customers’ geographical location. Travel fare aggregator Orbitz directs Mac users to pricier lodgings. We also know that airline fares rise as you repeatedly search the same dates in your browser.

Further, mere dynamic pricing – rates that reflect the ebb and flow of supply and demand – has long been a staple of the workweek from early-bird specials to happy hour drinks. Hotel rooms cost more as the night progresses; airline fares rise as the date approaches. We seem to accept, daily, that some will pay more and some will pay less for the exact same good or service, so why the outrage now? Where does our sense of injustice come from?

So far, much of the chatter has focused on the digital privacy piece. We dislike the thought of someone sifting through our internet trash in order to paint our consumer profile. Worse yet, we feel violated by having our browser history used against us as a tool for coercion to buy that thing or book that trip. Despite regular warnings, we refuse to accept that we’ve consented to being spied on  – an online presence has become a necessity of life, and it often feels that there is no reasonable exit option. The cost for remaining in the digital space can’t be resigning ourselves to constant monitoring and manipulation. The answer is not abstention, it’s legislation.

These are legitimate gripes. But lost in this discussion is any articulation of the precise problem we have with price discrimination – that is, the selling of identical products to different people for different amounts. If businesses catered to customers’ unique price points without this kind of data scraping would we still have reason to object? Public opinion suggests we would.

Consider Wendy’s, the most recent recipient of consumers’ wrath. Customers revolted when it was suggested that a Baconator would cost more during a demand surge than in off-hours. Lydia DePillis, writing in The New York Times, identified Wendy’s failure as a mistake of marketing: they weren’t upcharging rush-hour customers, they were incentivizing the off-hour passerby. This isn’t a new and nefarious way to overcharge customers, it’s just a means of attracting reluctant holdouts. Everyone has their price. It all comes down to whether people see the lower price as a discount or the higher price as a tax. Everyone loves a bargain.

Ultimately, the trick in rolling out these new automated pricing models lies in accentuating the positive: Catch that break. Grab that deal. Let your self-denial give way to a willingness to pay. We’ll unite buyers and sellers, desire with satisfaction. Let the bidding commence. Welcome to the flea market of the future.

So perhaps public opinion is mistaken. Perhaps our envy and fear of missing out has simply invented something new to be mad at. Jean-Pierre Dubé, an economist at the University of Chicago, offers a telling comparison:

If I literally tell you, the price of a six-pack is $1.99, and then I tell someone else the price of a six-pack for them is $3.99, this would be deemed very unfair if there was too much transparency on it. But if instead I say, the price of a six-pack is $3.99 for everyone, and that’s fair. But then I give you a coupon for $2 off but I don’t give the coupon to the other person, somehow that’s not as unfair as if I just targeted a different price.

Groceries stores and airlines regularly avoid the Wendy’s reaction by masking price differences in memberships and coupons. But our sense of injustice fails to flare in these cases. Doesn’t this mean we’re being inconsistent? Credit scores are used daily to determine different financing rates (i.e., the higher or lower cost consumers will end up paying for an item). What makes personalized pricing so different?

Transparency. Consumers are routinely made aware of the perks membership offers. They are also aware of the (undemanding) steps required for them to transition from the out-group to the in-group. That kind of simplicity and stability is priceless. You can’t make a plan if you don’t know what dinner will cost you when you leave the house. But personalized pricing relies on obfuscation – businesses remove all reference points so that consumers can never find their footing. There is no “market” price.

Our post-pandemic world makes for a compelling test case. Today it’s impossible to anticipate what you’ll be expected to pay for everyday goods. Does anyone know what paper towels should cost? Whatever the buyer will bear.

Asymmetric Gain. Despite the promise of daily deals, the benefits of personalized pricing flow in one direction. As Lee Hepner, legal counsel for American Economics Liberties Project, explains, “personalized pricing is a transfer of wealth from consumer to the seller. Writ large, the goal and endgame is to maximize revenue.” By deducing each buyer’s specific pain point, sellers can extract the utmost value. They stand to reap all the gains that come with eliminating the gap between what consumers are willing to pay and what they actually pay. And there isn’t any social good created by charging different customers different prices (unlike the case of senior citizen discounts or letting kids eat free). This is pure profit maximization.

In practice, then, personalized pricing looks awfully similar to price-gouging – consideration of your unique circumstances (when you get paid, the date of your friend’s wedding, your expensive taste) generates inflated price tags. As customers’ need and ability to pay increase, so does the cost.

Consumer Impotence. Perhaps most damning, then, is what personalized pricing does to the already skewed power balance between customers and businesses. Rather than being price takers, sellers now become price setters. Armed with their marks’ financial details and search history, they can ensure every sale returns top dollar.

Buyers, meanwhile, find themselves in the dark, siloed from the experience of other customers, the price history of particular goods, and the unique deals of alternative vendors. But you can’t vote with your dollar if you don’t know your options. And without a shared experience of the marketplace, concerted action is all but impossible. Our ire may be warranted, but we may soon lack any ability to collectively express it. In the bazaar of tomorrow there is no signal, only noise.

Is Shoplifting from Grocery Stores Morally Permissible?

woman with backpack and cart standing in front of produce

No. Right?

Loblaw – one of few major Canadian grocery retailers – recently released its third-quarter earnings report, which boasted a profit of $621 million, up from $556 million compared to the same quarter from last year. This is during a time when grocery prices are increasing faster than the rate of inflation, and when people are switching more than ever to discount and dollar stores to try to cut down on their bills. In my home town of Toronto, grocery prices have gotten so out of hand that 1 in 10 Torontonians now make use of food banks. While there have been many arguments about why, exactly, food prices continue to increase, the majority of Canadians find fault with the grocery stores themselves, accusing them of profiteering (major food retailers in Canada are prone to blame suppliers, instead).

Should the record profits that grocery stores are making and the immense pressure that increased prices are putting on consumers cause us to rethink our answer?

That depends. After all, there are circumstances where it seems clear that theft from a grocery store is impermissible. For example, if you comfortably have the means to purchase groceries and the store in question is a small family-operated establishment, then you shouldn’t steal from them. There are also circumstances where it seems clear that theft from a grocery store is, indeed, permissible. For example, if you risk starvation and have no other means of acquiring food, few would think you worthy of moral criticism if you stole a loaf of bread.

Although these edge cases seem intuitive, there are challenges even to them. The deontologist – the person who believes morality is about following a certain set of rules – may very well find theft of any kind outright impermissible, starving or not. On the other hand, a moral consequentialist – the person who believes the moral permissibility of an action depends on the consequences of that action – may find theft even from the “ma and pa” establishment to be permissible under certain circumstances (or, at the very least, they not rule it as outright impermissible without digging deeper into a calculus of harms and benefits).

But let’s put the edge cases aside and instead focus on your average (in whatever sense you take that to mean) grocery shopper, and your standard (in whatever sense you take that to mean) corporation-owned grocery store. Is it morally permissible for this person to shoplift from that kind of grocery store?

It is easy to come up with some arguments that say it is. For example, one might think that given that the cost to the store is almost certainly barely noticeable given how much money these stores tend to make, the benefit to the shoplifter far outweighs the cost to the store – call this the “it won’t make any difference” argument. Or, one might argue that corporate greed (and potentially profiteering) justifies small acts of redistributive theft – call this the “Robin Hood” argument.

Indeed, it may seem as though many people have decided that, in fact, shoplifting is largely acceptable these days. Much has been made about an apparent recent increase in the amount of shoplifting in countries all over the world, especially from grocery stores. One would be forgiven for thinking that the consequentialists have run amok, roaming in gangs, and stealing anything that’s not tied down.

However, while many companies and commentators in the media have claimed that there is a “shoplifting crisis,” the extent to which such a crisis actually exists has been disputed. Furthermore, looking at the data shows very different results. For example, a recent study from the U.S. has found little reason to think that shoplifting has increased in any significant way at a national level, at least when considering the country as a whole.

So even if it’s easy to come up with such arguments in theory, using them to justify actual acts of shoplifting does not seem to be terribly common, or at least no more common than it used to be. This is perhaps surprising: if the “it won’t make any difference” or “Robin Hood” arguments ever had any force then they surely have even more force now.

Instead, one might even provide a new argument for the permissibility of shoplifting, namely one of retributive theft. The argument might go like this: employers are stealing from their employees and face little to no punishment for their actions. As such, shoplifting from those employers is justified.

Is this a good argument? There is ample reason to think that employers are, in fact, stealing from employees: numerous reports over the past few years have found many major companies culpable for committing wage theft, a category of employer behavior that includes paying below minimum wage, failure to pay overtime, denying employees’ legal rights to breaks and meals, the diversion of worker tips, and unpaid labor before or after shifts. A 2017 report found that more than $203 million had been stolen from workers in New York, while Home Depot recently settled a class-action lawsuit over wage theft for $72.5 million. And, of course, major grocery retailers have also been accused of wage theft.

Whether these factors justify an act of shoplifting is up for debate, and will no doubt depend on the circumstances. Despite what might appear to be a gluttony of reasons in its favor, it’s also simply difficult to defend shoplifting by appeal to theory, and it seems unlikely that many would be convinced in any practical sense. However, given the increasing financial pressures on consumers, that may very well change.

Insulin and American Healthcare

photograph of blood sugar recording paraphanelia

On March 31st the Affordable Insulin Now Act was passed by the House and is now being considered by the Senate. The House bill only applies to people who already have insurance, and caps the out-of-pocket costs for insulin to 35 dollars per-month. It does not address the uninsured, nor does it directly address the retail price of the drug. For advocates, it stands as a limited but hopefully effective response to the surging cost of life-saving insulin in the U.S., the crucial medicine for the management of diabetes.

Sponsoring congresswoman Angie Craig (D) of Minnesota stated:

Certainly our work to lower drug costs and expand access to healthcare across this nation is not done, but this is a major step forward in the right direction and a chance to make good on our promises to the American people.

It is also true to the original promise of insulin.

Isolated in 1921, the firsts patents for insulin were sold to the University of Toronto for the price of one dollar as part of a defensive maneuver to ensure insulin could be produced widely and affordably. Nonetheless, insulin became a goldmine. Cheap to manufacture and widely used, it could bring home a tidy profit even at low prices. Since the early days, three pharmaceutical companies, American Eli Lilly, French Sanofi, and Danish Novo Nordisk, have produced the vast majority of global insulin and captured almost the entire U.S. market. Low production costs continue, but insulin is no longer sold at low prices. At least not in the U.S. Eli Lilly’s popular Humalog insulin is sold to wholesalers at 274.70 per vial, compared to 21 dollars when first introduced in 1996. Further costs accrue as insulin makes its way through the thicket of wholesalers, pharmacy benefits managers, and pharmacies before reaching customers.

One question that emerges from the whole mess is: Who is to blame for this development? Here, blame needs to be understood in two senses. The first concerns all those actors who are partly causally responsible such that if they had behaved differently, the price of insulin would not be so high. American healthcare economics is ludicrously complex, and a discussion of the price of insulin quickly blossoms into biologics and biosimilars, generics, pricing power, patents, insurance, the FDA, pharmaceutical benefit managers, and prescription practices. What idiosyncrasies of the American healthcare systems allow a drug price to increase 1000% without being undercut by competition or stopped by the government? Insulin is not the only example.

But there is a second sense of blame, and that is which actors most directly chose to increase the costs of a life-saving medicine and thus are potentially deserving of moral opprobrium.

The big three manufacturers, with their overwhelming market share and aggressive pricing strategies, are clear targets. However, when investigated by the Senate in 2019, they pointed fingers at pharmacy benefit managers. These companies serve as intermediaries between manufacturers and health insurance companies. Like insulin manufacturers, the pharmacy benefit manager market is highly consolidated, with only three major players: CVS Caremark, Express Scripts, OptumRX. They can benefit directly from higher manufacturer prices by raking in fees or rebates. While noting that only Eli Lilly and CVS Caremark fully responded to requests for documents, the Senate investigation found problematic tactics on the part of both pharmacy benefit managers and manufacturers, such as leveraging market power and raising prices in lockstep.

The bill, it should be noted, is most directly targeted at insurance companies, rather than these other actors. This leads to both an economic and an ethical objection. The economic objection is that by forcing insurance companies to cap prices and absorb the cost of insulin, the insurance companies may simply turn around and raise premiums to recoup profit. The ethical objection is that it is unfair for the government to intercede and force costs of say, aggressive pricing by the manufacturer, onto some other party. The caveat to the ethical objection is that each of the three major pharmaceutical benefits managers have merged with major insurance companies.

What are the business ethics of this all? One approach would be stakeholder theory, which holds that corporate responsibility needs to balance the interests of multiple stakeholders including employees, shareholders, and customers. Pricing a medically-necessary drug out of the range of some customers would presumably be a non-starter from a stakeholder perspective, or at least extremely contentious.

The more permissive approach would be the Friedman doctrine. Developed by the economist Milton Friedman, it argues that the only ethical responsibility of companies is to act in the interest of their shareholders within the rules of the game. This is, unsurprisingly, controversial. Friedman took it as all but axiomatic that the shareholder’s interest is to make as much money as possible as quickly as possible, but the choice is rarely put bluntly: “Would you, as a shareholder, be okay with slighter lower profit margins, if it meant more diabetics would have access to their insulin?” (For Friedman this moral conundrum is not supposed to occur, as his operating assumption is that the best way to achieve collective welfare is through individuals or firms chasing their own interests in the free market.)

Separate from questions of blame and business ethics are the grounds for government intervention in insulin prices. Two approaches stand as most interesting and come at the problem from very different directions. The first is a right to healthcare. Healthcare is what is sometimes referred to as a positive right, which consists of an entitlement to certain resources. There is as yet no formal legal right to healthcare in the United States, but Democratic lawmakers increasingly speak in this framework. Obama contended, “healthcare is not a privilege to the fortunate few, it is a right.” Different ethicists justify the right to healthcare in different ways. For example, Norman Daniels has influentially argued that a right to healthcare serves to preserve meaningful equality of opportunity by shielding us from the caprice of illness. A slightly narrower position would be that the government has a compelling interest in promoting healthcare, even if it does not reach the level of a right.

A completely different ground for intervention would be maintaining fair markets. This gets us to a fascinating split in reactions to insulin prices. Either there is too much free market, or not enough. Advocates of free markets criticize the regulatory landscape that makes it difficult for generic competitors to enter the market, or the use of incremental changes to insulin of contested clinical relevance to maintain drug patents in a practice called “evergreening.”

The “free market” is central to the modern American discussion of healthcare, as it allows considerations of healthcare to not be discussed in terms of rights – that everyone deserves a right to healthcare – but in terms of economics. Republican politicians do not argue that people do not deserve healthcare, but rather that programs like Medicare for All are not good ways to provide it.

At the center of this debate, however, is an ambiguity in the term free market. On the one hand, a free market describes an idealized economic system with certain features such as low barriers to entry, voluntary trade, and prices responding in accordance to supply and demand. This is the use of free markets found in introductory textbooks like Gregory Mankiw’s Principles of Macroeconomics. This understanding of a free market is at best a regulative ideal, in that we can aim at it but we can never actually achieve it and all actual markets will depart from the theoretical free market to some degree or another.

On the other hand, the free market is used to refer to a market free from regulations and interference, especially government regulations, although this understanding does not follow from the theoretical conceptualization of the free market. Oftentimes government interference – such as breaking up an oligopoly – is precisely what is needed to move an actual market towards a theoretical free market. Even for advocates of free market economics, interventions and regulations should be evaluated based on their effect, not based on their status as interventions. From this perspective, the current insulin price represents not an ethical failure but a market failure and justifies intervention on those grounds.

The current bill, however, does not try to correct the market, but instead represents a more direct attempt to secure insulin prices (for people with insurance). This is an encouraging development for those who believe essential goods like insulin should not be subject to the whims of the market. More discouragingly, the bill is likely dead in the Senate.

Making the Best of a Bad Situation: Russia and the Energy Crisis

photograph of electric power pylons in winter landscape

Europe is facing a crisis (I know, another one?!). This crisis, however, isn’t viral, ecological, economic, or migratory – although it is influenced by, and influences, these phenomena. No, I’m referring to the European energy crisis. Since the beginning of this year, the wholesale price of gas has increased by 250%. This, in turn, has caused similar price rises down the energy production and consumption chain. As a result, businesses and domestic consumers have seen their energy bills rise phenomenally, increasing the numbers of people facing fuel poverty and forcing EU leaders to call emergency meetings.

The reason for this price rise is hard to pin down because it isn’t attributable to any single cause. Instead, multiple factors – such as a shortfall in renewable energy production, an increase in demand as the global economy resurges post-COVID, and a steady phasing out of energy from coal production – have led to the crisis. However, to oversimplify it, there’s not enough energy to meet demand, causing prices to rise. And, while the situation is at its worst in Europe, there’s no reason to think that it will not eventually spread. Indeed, prices have already begun to rise in other parts of the globe.

While this is a dilemma for those countries who import all or some of their energy (be that gas, coal, oil, or electricity), it is also an opportunity for exporters. Higher prices mean greater profits as individuals, institutions, and even states become increasingly willing to part with funds to secure essential resources. On a small scale, prices being dictated by supply and demand isn’t too much of an issue (provided you’re onboard with capitalism). It’s how your local shop decides how much to charge for toilet roll – the more people want it, the more that shop can charge. But, when it comes to nation-states’ selling and purchasing power, things can become tricky as scarcity confers additional political power to those resource-rich countries, which they can leverage against the resource-poor.

It is precisely this politicization, and even weaponization, of energy supplies that several countries fear will take place within Europe. More specifically, concerns are being raised that Russia, one of Europe’s largest natural gas suppliers, is going to capitalize on the European energy crisis, using it as an opportunity to solidify its already significant bargaining position or even refuse to export energy as a means of weakening its (perceived) rivals. Of course, this is something that Russian authorities have denied, with Vladamir Putin going so far as to not only deny Russian involvement but also blame Europe for the whole affair.

This concern raises an interesting point, however. While fears have been expressed about Russia’s intentions during the crisis, it’s not entirely clear what would be wrong with them making the best of it. Why shouldn’t Russia, as one of Europe’s largest gas suppliers, take advantage of the crisis to better its fortunes, even if this does lead to an increase in gas prices?

Now, the answer might seem obvious – people are going to suffer without gas. If people can’t afford to heat their homes during winter, this will cause suffering and even death – things which we typically class as undesirable. Thus, one can argue, from a moral and political cosmopolitanism, that Russia shouldn’t act in a manner that causes harm to people regardless of their nationality. Consequentially, it should do what it can to help minimize gas prices and thus minimize harm.

Yet, it’s not entirely clear why Russia should care about the suffering of individuals beyond its borders, or at least, what it owes those people. After all, pretty much every person already has a political entity that exists to protect their interests – their own nation-state. Why should Russia pass up an opportunity to better its fortunes and act in a way that benefits the well-being of individuals for whom it holds little to no responsibility? What concern is it of Putin’s if people in the U.K. are cold because they can’t pay their gas bills? After all, those people have the U.K. government to care for them. Why should the Russian government miss out on an opportunity to better its standing and that of its citizens?

This attitude may seem callous or even cruel (indeed, I would be inclined to say it is). But a failure of a government to act in the best interests of those to whom it holds no obvious bond is arguably not a dereliction of duty. After all, it would seem uncontroversial to claim that the purpose of government is to secure the well-being of its citizens. If it fails in this purpose, that is when its legitimacy can be called into question. But to disregard the well-being of citizens of other member states, while potentially distasteful and even unethical, doesn’t seem to contradict a government’s function. For the Russian government then, if it can act in a manner that solidifies its positioning and thereby (in)directly betters the lives of its citizens, it would seem acceptable, even necessary, that it takes advantage of the unfolding crisis. The Russian government should look out for the Russian people, and passing up an opportunity to do this, simply for the benefit of those whom it holds no duty of protection, would seem antithetical to its very purpose.

Now, that is not to say that Russia would be off the hook if it did take advantage of the current situation. There is still plenty of scope for condemnation if it did drive up energy prices, resulting in suffering, simply as a means of increasing its political power (cosmopolitanism has already been alluded to as a potential basis for such criticism). But, to find fault with Russia for taking advantage of the crisis simply because it’s acting in a way that will give it political leverage over its peers or competitors seems to criticize the nation for doing its job, one which every government holds. After all, if the positions were reversed, how do you think your government would act? In the best interests of its citizens or the interests of others?

Moral Distinctions between Crisis Capitalizers

photograph of hands exchanging a one hundred dollar banknote

After announcing an expectation-exceeding fiscal quarter, Apple CEO Tim Cook unabashedly stated that despite “uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relentless innovation.” Cook’s statement comes amidst waves of criticism due to Big Tech’s apparent invincibility to the pandemic-driven economic crisis. News of unprecedented profits and increasing stock shares is often juxtaposed to highlight the giant disparity between a few lucky corporations and billionaires with the majority of Americans and businesses financially suffering. While some activists and politicians have proclaimed the gross immorality of those continuing to profit during the pandemic, there has been little discussion surrounding the moral distinction between these so called “crisis capitalizers.” Is there something inherently immoral about profiting from the pandemic? And is there significant moral distinction between profiting off of a crisis rather than profiting during it?

The sheer inequality of the current economy might be enough to argue that anyone still profiting during this time has an obligation to help those suffering. Since March, 51 million Americans have filed for unemployment. The United States just reported its worst economic drop ever recorded in one quarter, with US GDP collapsing by 32.9%. To make matters worse, over 40 million Americans are at risk for eviction, after relief programs expired on July 31 with no economic safety net in place. Meanwhile, the profits of businesses and individuals in the tech industry have been soaring. The Guardian reported that Amazon’s profit over the past quarter was $5.2 billion, shockingly higher than this time last year. Both Facebook’s and Apple’s quarterly revenue have also exceeded projections. This stark economic inequality between the majority of Americans and the “1%” might be immoral in itself. When one considers the fact that these very same corporations have notoriously been exempt from paying taxes in recent history, it is troubling to witness their general lack of action in contributing to alleviating the economic crisis fueled by the pandemic. In terms of the billionaire individuals at the helm of these tech corporations, only about 1 in 10 billionaires worldwide have verifiably contributed monetary donations to COVID-19 relief efforts. The moral obligation for wealthy individuals to act is even more pertinent considering the underwhelming response to both the health and economic crisis by the United States government.

However, others have argued that profiting during the pandemic is not immoral, and should in fact be celebrated as a sign of adaptation and resilience. In an article on Medium, Bloomberg Beta head Roy Bahat argues that it is important to acknowledge the difference between taking advantage of the pandemic and adapting to it. He considers it “okay, even noble for businesses to thrive right now,” since companies are “helping to keep people employed.” Bahat makes a point, especially considering the fact that the US is facing one of its worst unemployment crises in history.

Is there something to be said for businesses’ ability to adapt? Many independent entrepreneurs have adapted to the crisis such as those on popular small business website Etsy, which is projected to double its quarterly income. The success of Etsy has also meant the success of “anyone with creativity and 20 cents.” Additionally, the profits of many of the thriving corporations are the product of their sales revenue, reflecting consumption of products. One might argue that if we all stopped buying products from Amazon and Apple, and stopped using Facebook, perhaps the revenue of these organizations would not have increased during the pandemic. If we consider current corporate profits are simply a reflection of consumer demand, it appears as though these companies have adapted to fill an economic niche. In fact, some might argue these very corporations are actually filling a crucial role in ensuring access to necessities during a crisis.

While the morality of profiting during the pandemic might be considered up for debate, can the same be said for profiting off of the pandemic? Profiting off of a crisis can be considered immoral from many different ethical perspectives. While profiting during the pandemic clearly requires the participation in an inequitable economy, profiting off of the pandemic could be considered more sinister in both its proximity to the crisis itself and in its willingness to use suffering for personal gain. If one believes healthcare to be a human right, the entire concept of private industry profiting off of medical assistance is potentially immoral. Those who identify strongly with Kantian ethics would be most disturbed by instances during the pandemic where access to goods and services is limited to use people’s need to survive as a means to an end. Profiting off of crisis also is potentially immoral because it might showcase inherent selfishness, which reflects a corrupted internal character. Lastly, profiting from the pandemic might even be considered wrong on consequentialist grounds if withholding goods and services necessary for survival leads to further sickness and economic suffering. This is especially true if individuals are unable to afford/access healthcare to treat or prevent COVID, or if an individual/company is attempting to profit off of phony healthcare products which arguably endanger the general public.

Alternatively, some might argue that though the medical/pharmaceutical industry is directly profiting from the pandemic, it is more consequentially balanced than its critics paint it to be. Take the widespread demand for masks for instance. Masks have been prescribed by public health officials to slow the spread of coronavirus, yet masks remain a for-profit industry. While some politicians, like Senator Bernie Sanders, have argued masks should be subsidized and free for all, there remains a giant market for masks — both from large medical companies and small independent businesses using their skills to make decorative or high-end masks. From a utilitarian perspective, the market for medical supplies to combat COVID is promoting good as widespread mask use has been projected to save lives. Cheap medical masks are largely accessible, protecting those who wear them and profiting the companies that sell them. Higher end customizable ones arguably encourage more people to wear them and give satisfaction both to those selling them and those buying them. Similarly, pharmaceutical companies profiting off of test kits — and potentially vaccines in the future — could be argued to be a net positive (from a consequentialist perspective) if these products are largely available to the general public. Perhaps it is especially important that private industry take a role in developing a vaccine for COIVD-19 considering the fact that most medical research in the US is already privately funded.

Perhaps even more complicated are those who are less clearly profiting directly off of the pandemic. Large department stores, like Walmart and Target, sell PPE and important cleaning products, but also reportedly resulted in an uptick in sales items related to quarantine and work-from-home. For Target, the sales bump in April actually exceeded its typical holiday profits. Whether or not to categorize such organizations and profits within the “profit off of” or “profit during” category depends largely on what types of products we consider necessities, how those goods get marketed to consumers, and who benefits.

Whether or not we believe profiting during the pandemic is immoral depends largely on if we interpret these profits to reflect adaptation or exploitation. And that perception likely rests on whether or not we believe the sale of those products tends to produce the most good for the most amount of people. Our answers to these questions go a long way in determining if we truly believe there exists a moral distinction between these “crisis capitalizers.”

The Ethics of Panic Hoarding

photograph of empty shelves at a grocery store

Future historians are going to face a difficult time figuring out whether our current times should be called the coronavirus epidemic of 2020 or the great toilet paper shortage of 2020. Amidst the WHO’s declaration that the COVID-19 outbreak now constitutes a pandemic, border closings, and “self-isolation” in order to prevent the spread of the virus, many have decided that the prudent thing to do is to purchase large amounts of toilet paper in addition to hand sanitizer, and non-perishables. In the United States the run on toilet paper has caused shortages. In Canada, despite attempts to prevent similar outcomes, grocery stores were flooded with consumers buying entire shelves. Marc Fortin of the Retail Council of Canada advised customers that “You don’t need a supply of toilet paper or rice for months,” adding, “Let’s not fall into panic mode.” Certainly, some of what we have seen this week is panic, and an important issue we should consider is when panic regarding the outbreak is morally acceptable and when it is not?

First, we must consider what we mean by the term “panic.” Typically, acting in a panic is contrasted with acting reasonably. As I write, the US government recommends cleaning your hands often, using hand sanitizer, avoiding close contact with people that are sick, and distancing yourself from others if the virus is spreading within a given community. They also recommend staying home if you are sick, covering your coughs and sneezes, and disinfecting touched surfaces daily. The Canadian government recommends similar measures; wash your hands frequently, and cover coughs and sneezes. They also suggest changing routines to help prevent infection; shop during off-peak hours, exercise outdoors rather than indoors. We could assume that recommendations of the government, often made on expert advice, are a reasonable standard. However, the government also specifically recommends purchasing essential materials without “panic buying.” This includes having easy-to-prepare foods like dried pasta, canned soups and vegetables, as well as having extra hygiene products. Unfortunately, they do not explain what is meant by “panic.” How does one know if purchasing that 10th bottle of hand sanitizer or that 5th pack of toilet paper constitutes panic buying?

One way to understand panic is that it is a way of acting without reason. For example, if one is driving and faces an oncoming car that has suddenly swerved towards them and they close their eyes and turn the wheel in any direction hoping to avoid an accident, this could be called panic. In his study of practical reasoning, philosopher John Dewey defined reasonableness or rationality as an affair of understanding the relationship between means and the ends they produce. If one pursues goals, for instance, with no connection to the means available and without reference to the obstacles that will prevent one from meeting said goal, they are acting unreasonably. By contrast, we could define panic as an action that does not consider the relationship between means, goals, and obstacles.

Therefore, if one goes into a grocery store upon hearing about the dangers of COVID-19 and because of this they purchase items at random because they feel they need to, this would constitute panic. Certainly, there are at least some people who chose to purchase large amounts of toilet paper or food they would never eat simply because of sheer panic. Some have suggested that this kind of behavior may be caused by anxiety combined with a desire to copy the behavior of others. Such action, while understandable, is not reasonable. While this definition of panic would preclude the idea that such actions are justified, they aren’t necessarily ethically wrong. According to Michael Baker, a professor of public health, hoarding and bulk purchases may be a way of handling anxiety by establishing a feeling of control. While there is nothing ethically wrong with falling into this pattern, panicked shopping can lead to shortages of important items for others. We can end up purchasing things we do not need and, in the process, make things worse off for others in legitimate need.

However, it is not likely that the vast majority of such cases are sheer mindless panic. After all, if one does purchase excessive accounts of food or toilet paper, they could still be considering how these can serve as means to goals like potentially having to quarantine oneself. One may act with a certain degree of reason and still potentially panic. As mentioned, the Canadian government suggested that one may wish to stock up on certain items, not necessarily because they will need to self-isolate but in order to ensure one doesn’t unnecessarily expose oneself if they are sick. However, there is a difference between making sure that one has a few days of food and toiletries and hoarding. One can “do the math” behind such considerations, establishing a relationship between means and ends, but could still go overboard.

While the concept of “moral panic” is generally tied to cases like the Salem Witch Trial or the panic of Satanism in the 1990s, it was originally defined in the 1970s in a broader way to include reactions to peoples, groups, and events. A common feature to these definitions of panic includes the idea of disproportionality; one may act in a panicked way if their actions are disproportionate to what is needed. Of course this is difficult to measure as well. It certainly requires an adequate idea of the problem, and this can be difficult in the case of the epidemic because of the “overabundance of information” available. Regardless, given that toilet paper is not especially more important than other general household items that governments and other institutions are suggesting that people stock up on, it is still unclear why there is a disproportionate demand for it.

There is also the matter of inductive risk. What if the experts are wrong? What if the outbreak gets unexpectedly worse? What if grocery stores close? As some have pointed out, making sure that one has toilet paper if they have to be confined to their house (in other words, planning for the worst) may not be unreasonable. This, in addition to the unclear relevance of information and inconsistent messaging, has led to calls that we should not mock those who engage in hoarding. While mocking may not be the most helpful or considerate reaction, that doesn’t mean that panicked hoarders should be let off the hook either.

Hoarding, whether understandable or not given the anxiety and stress of the situation, still leads to harmful effects. For example, empty food shelves have made it difficult for charities to get food to the disadvantaged. It has also opened room for price gouging, something that again will hurt those worst off. While things could get worse, purchasing enough cans of tomato soup to last for years is not proportionate to the problem, nor is purchasing food that you would never eat anyways. Worse yet, by purchasing things you do not need while making others worse off, and only to help ensure that you feel more secure against unlikely outcomes, is an act of selfishness. Anxiety, stress, and fear do not absolve people from the moral consequences of their panicked behavior. If you are buying for a potentially long stay in your home, ask yourself questions like “Will this item actually help if I get the virus?” “How much will it help?” “How long should I reasonably expect to have to stay at home and given that, how much food and household items will I need?” And “Can I imagine others need these things more than I do?”

Price Gouging: Noble Virtue or Necessary Evil?

A row of multicolored gasoline tank nozzles

Hurricane Harvey has barely receded in Texas. Irma has devastated parts of Florida. Jose is on deck. Katia has already hit Mexico. Lee never really got going, but Maria is building strength. If we survive, this season promises us a hurricane Ophelia. It’s a good year for inland weather buffs, and for people selling emergency supplies.  

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