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Does Gov. Cooper want more supplies or not? Mixed signals from his executive order

As North Carolina deals with the coronavirus pandemic, Gov. Roy Cooper’s March 10 Executive Order gives mixed signals on ensuring North Carolinians will be able to access the things we need. The governor is taking good steps to ensure we have access to health care professionals and medical equipment. He’s taking the opposite approach to other necessities.

What’s happening right now is that people are worried about being able to get necessary goods, so they’re hoarding such things as toilet paper, cleaning supplies, bread, water, etc. Grocery shelves are emptying almost as soon as they’re restocked, and that’s exacerbating the panic. Meanwhile, we are on the cusp of people needing more health care than usual and society needing more health workers available to test people for the virus.

In the language of an economist, the short-term demand for health care professionals and medical equipment as well as for such goods as toilet paper and cleaning supplies has shifted up, but the supply of such things hasn’t changed. The market prices for these things are due to increase perhaps dramatically unless additional supplies can be brought in.

That’s where we are. What does the governor order?

Cutting regulatory costs to supply more health care workers

With respect to health care professionals, Cooper is reducing regulatory burdens including especially time costs (time is of the essence in being able to test and treat people). It waives expensive and time-consuming licensure requirements for health care and behavioral health care professionals licensed in other states. It also lets physicians, physician assistants, and nurse practitioners designate qualified employees and other personnel (such as medical students) to help collect swab specimens from people for the purpose of COVID-19 testing.

Cooper’s order also reduces regulatory burdens by waiving several transportation restrictions for bringing in medical supplies and equipment. They include driver hours, vehicle height and weight restrictions, trip permits, quarterly fuel tax reports, and others.

Lowering the costs to supply additional health care work and medical equipment should bring in additional workers and equipment right as we need them.

Imposing a price ceiling on necessities

What about toilet paper, cleaning supplies, and so forth? Cooper’s order prohibits “excessive pricing” and activates the state law against “price gouging.” Effectively, Cooper has imposed a price ceiling on goods set at their levels before the order.

Rather than cut the costs to supply more of a needed good here, Cooper has cut the benefits to supply the good. To understand why, you need to understand that a price isn’t attached to a good the way the color red is attached to male cardinals. A price is information. A price ceiling is bad information.

A market price is an indicator of the relative scarcity of a good. If we have the same amount of a good as we always have, but we suddenly want more of it than we used to, then we are going to be competing against each other more fiercely for it. The market price tells us how fierce that competition is. But — and this is important — it also tells suppliers how desperate we are to have some.

With higher demand for the same supply, a market price goes up. That tells consumers to have a rethink about buying too much (hoarding). It also tells suppliers who aren’t supplying over here now (when it wasn’t worth it) to think about bringing more stuff over here (they can make money now).

The temporarily higher prices in an emergency will make people less likely to hoard (shortages less likely), which will invite more supplies in, quicker (shortages less lengthy), which will allay people’s fear of running out of supplies, bringing short-term demand back down, and bringing prices back down sooner.

The anti-“gouging” law, however, enforces prices that give bad information. They tell consumers to get while the getting’s good. They also tell suppliers and potential suppliers there’s no benefit to bringing more supplies here — and maybe to prioritize those places without anti-“gouging” laws.

The anti-“gouging” law makes shortages for necessities more likely and probably more extensive. I wish Gov. Cooper would’ve approached the supply problem for necessities the way he did the supply problem for health care workers and medical equipment.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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