Hoarding (economics)

In economics, hoarding is distinguished from storing as a normal part of business and storing for speculation.

Hoarding may mean private individuals storing hoards of gold, jewels or money for their own use, with an implication that they do not intend to use or dispose of it.

In economics, it usually refers to private individuals keeping unusually high stocks of goods for their own use, rather than relying on the market. They may see this as a way of attaining food security in a high-risk situation. Hoarding has been perceived to be extremely important in wartime and in famine situations, where it can lead to significant amounts of food and other products being removed from the market, so that people cannot buy them at a time when enough exists to supply the market at the normal price. In hyperinflation situations, they may hoard any non-perishable goods in the belief that they will no longer be able to buy them at future prices. Less dramatically, people may hoard sugar, say, if there is a rumour that the supermarkets are running out of, with the effect that the supermarkets, which keep low stocks, do in fact run out for a week or two. Governments frequently launch anti-hoarding campaigns in such circumstances, suggesting that hoarding is unnecessary, unpatriotic, or anti-social, so the word has emotional overtones. There is often an implication that hoarding occurs because individuals do not believe that the market will operate efficiently in current or expected conditions.

Example

A feature of hoarding is that it leads to an inefficient distribution of scarce resources, making the scarcity even more of a problem. An example occurs in cities where parking is inadequate. In such a case, businesses may post signs indicating that their lot is for their employees and customers only, and all other vehicles will be towed. This prevents businesses from allowing their parking to overflow into neighboring lots when their capacity is exceeded. Thus, when the capacity is reached at one business, there may be no legal place to park, while there would have been, if hoarding had not occurred. If a single business posted those signs, it would, indeed, improve the parking situation at that business, as they could continue to park at adjacent businesses, while the others could not park in their lot. However, when everybody posts such signs, the problem becomes worse for everyone. (This example assumes all of the lots are sometimes inadequate for their businesses; in a case where a business has sufficient parking for itself, but its lot is filled with customers from others, the signs would be beneficial to that business, even if others did the same.)

See also

• Gresham's law
• Artificial scarcity