Feeding the beast: Ammo shortages and the human sense of fairness

  It's been months since I've seen .22LR ammo on the shelf at any of my local shops. Online stores list "OUT OF STOCK - NO RESTOCK DATE" on large swaths of their ammunition listings. Since President Obama was elected the first time, gun and ammo consumption in the US has been climbing - and since his re-election in 2012, people have been panic-buying all of the components they can get their hands on because "0bammma gunna git yer gunz!"

  We were in one of our favourite local stores last week, and took a quick swing through the Sporting Goods department. One of the employees asked if he could help us, and my wife inquired about the availability of .22LR - she'd seen the .177 HMR on the shelf a moment before and had thought from a distance it was .22LR (the Holy Grail of ammo in our lives). He told us that their last shipment of .22LR had come in a few weeks previously and was tiny. The shipment before that was three months previously and he had no clue when his distributor might send more over.

  It's important to note that ammo makers are working three shifts, turning out millions of rounds of ammo a week. Many are in the process of adding additional plant capacity to handle the demand. The ammo is rolling out of the factories, it's just evaporating to consumer demand before it gets a chance to rest on the shelves.

  Frankly, this buying and hoarding is pissing me off. I'm fortunate that Mama Bear and I have sufficient stores of .22LR ammo, and I'm getting into reloading the bigger stuff. It's not a huge concern for us. Outside of my vintage Savage Model 99 chambered in .303 Savage, I have at least a half-box of rounds for everything we own.

  This morning, an interesting article came out of NPR, entitled "Demand For Ammunition Is Up. Why Aren't Prices?". In it, author Marianne McCune points out that under modern economic theory, there shouldn't be a shortage (especially one this protracted) - prices should rise to the point that stores are never depleted for long. That's called "Market Equilibrium" and it's one of the cornerstones of our entire free enterprise system. Supply and demand should always be roughly in parity, so as demand increases, so do prices to compensate. If demand falls, prices usually follow.

  Why, then, aren't prices astronomical on ammo? BiMart might not have it available, but their shelf still lists 500-round bricks of .22LR for between $14 and $18 - the same price they've been for three years. Bob Viden, head honcho of Bob's Little Sport Shop in New Jersey tells Ms McCune, "We don't want to do that. We want to be fair."

  That just warms the cockles of my black heart. We don't want to do that. We want to be fair.

  Sure, there are people buying up large stocks of ammo and reselling it at a tidy profit. These scalpers are ever-present in almost any economy, but the retail sellers - Wal-Mart, BiMart, Cabela's, and the million and one small independent sellers aren't raising their prices. Overwhelmingly, the answer lies in fairness - more importantly, in the PERCEPTION of fairness.

  Viden says that if he raised his prices, he fears that people would think he was trying to squeeze more money out of them, and profit unfairly. This is a refrain heard from other quarters as well. Customers are willing to buy at a premium from scalpers, because they understand that the scalpers are in it for the money. However, if traditional retailers followed suit, the consumers would feel a sense of betrayal and look for other sources. As many consumers buy more than just ammo from a retailer, the loss of an economic relationship can have severe repercussions.

  McCune references a 1986 study by Daniel Kahneman, Jack Knetsch, and Richard H. Thaler entitled "Fairness and the Assumptions of Economics" (originally published The Journal of Business, 1986, vol. 59, issue 4, pages S285-30). In this paper, the authors confront the traditional model of economics that assumes a sociopathic model of "agents" moving in an economic system, working solely to their own benefit regardless of the consequences to others.

  Intrigued, I tracked down the study and dove in. It's 17 pages, but I highly recommend it. The second paragraph knocked my socks off:

"The absence of consideration of fairness and loyalty from standard economic theory is one of the most striking contrasts between this body of theory and other social sciences - and also between economic theory and lay institutions about human behavior. Actions in may domains commonly conform to the standards of decency that are more restrictive than the legal ones;  the institutions of tipping and lost-and-found offices rest on expectations of such actions. Nevertheless, the standard microeconomic model of the profit-maximizing firm assigns essentially no role to generosity and social conscience or even to good will or indignation. The economic agent is assumed to be law-abiding, but not "fair" - if fairness implies that some legal opportunities for gain are not exploited. this nonfairness assumption expresses a resistance to explanations of economic actions in moral terms that has deep roots in the history of the discipline. the central insight that gave rise to modern economics is that the common good is well served by the free action of self-interested agents in a market"

  Think about that for a moment. Our ENTIRE ECONOMY is based on a model where everyone is expected to take every advantage they can of every opportunity - even as it costs other people in the market opportunity. There is no room for generosity, fairness, indignation or conscience. In this model, if it's legal, it's fair.

  Which makes certain disturbing public events make a lot more sense - even as they remain unsettling. It's a model that specifically says that helping others is a bad thing. If there is no economic reward, then it should not be done.

  Fortunately, that's not how it works in the really-real world, and that's what Kahneman et al. were addressing. We do feel a sense of fairness, of generosity, of indignation when we perceive someone taking unfair advantage.

  One of the most interesting pieces of this paper shows that humans - dirty, random, irrational, beautiful humans - are willing to pay a premium to punish perceived unfairness. That is absolutely FASCINATING to me. Our own internal sense of right and wrong can drive us to intentionally make choices that benefit us less IF that choice also punishes someone who has done something we perceive as unfair.

  I need to point out that punishing unfairness is not necessarily a universal human trait, but is likely an artifact of Western civilization and culture. When Joe Henrich traveled to Peru in 1995 to play the Ultimatum Game (the same Ultimatum Game cited in the Kahlman et al. paper) with members of the Machiguenga tribe, he got almost exactly the opposite result. The tribespeople couldn't understand why anyone would turn down FREE MONEY and took the split in nearly 100% of cases, even when the offer was vastly unfair by Western senses. “It just seemed ridiculous to the Machiguenga that you would reject an offer of free money,” says Henrich. “They just didn’t understand why anyone would sacrifice money to punish someone who had the good luck of getting to play the other role in the game.”

 Still and all, there's a very clear indicator that fairness plays an important role in the decisions we make in the market.

  As someone who makes a conscious effort to participate extensively in my local economy, this is something that resonates inside my head. I am willing to pay a premium to get my goods and services from local sources, rather than head into a big box store or chain service. Sure, my paper towels may cost a quarter more at BiMart, but that's worth it to me to not give a single penny to the Walton family and their evil business empire. I am willing to pay $5 for a single bar of soap made from local, organic ingredients as opposed to 99 cents for a bar of Dial brewed in a chemical tank, shipped in from China and sitting on the shelf of Target.

  Someday, the ammo shortage will go away. I don't think that this is the new normal, and that I'll be able to walk into a store on a whim and walk out with a box of pretty much anything I want sometime in the the not-too-distant future. In the meantime, it's reassuring that prices haven't rocketed into the stratosphere as per our basic economic model.

 We don't want to do that. We want to be fair.