In economics

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, hoarding is the practice of buying up and holding resources so that they can be sold to customers for profit.

Definition

Under capitalist theory

Capitalism

Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

, if this is done so that the resource can be transferred to the customer or improved upon, then it is a standard business practice (eg buying up a bunch of wood to turn into a house); however, if the sole intent is to hold an otherwise unavailable resource it is considered hoarding.

Causes

Hoarding behavior may be a common response to fear, whether fear of imminent society-wide danger or simple fear of a shortage of some good. Civil unrest or natural disaster may lead people to collect foodstuffs, water, gasoline, and other essentials which they believe, rightly or wrongly, will soon be in short supply.

Economically

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 speaking, hoarding occurs due to individuals obtaining and holding assets thought to be undervalued and build up reserves of it in hopes to profit or save money later. Examples include times when price controls were in effect as in the case of Germany

Germany

Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 after World War II

World War II

World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

, communist countries, or after natural disasters when goods are in such short supply that consumers

Consumer

Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

 stockpile (this is sometimes compounded by anti-price gouging

Price gouging

Price gouging is a pejorative term referring to a situation in which a seller prices goods or commodities much higher than is considered reasonable or fair. In precise, legal usage, it is the name of a crime that applies in some of the United States during civil emergencies...

 laws which prevent the supply and demand

Supply and demand

Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

curves from functioning). In these cases the hoarding disappears after the price controls are removed.

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. So then, why is this practice used ? 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 it's lot is filled with customers from others, the signs would be beneficial to that business, even if others did the same.)