People started hoarding out of hysteria. Which creates shortages for no reason. Which drives the prices up for no reason. Which benefits and encourages hoarding. Which encourages yet more hoarding out of speculation.
Which means resources needed at this instant are instead sitting idle, at best awaiting higher prices at some arbitrary future date. And earnings, rather than going to producers, are wasted on pointlessly destructive arbitrage. So in crisis, the market has led us into a soviet style toilet paper shortages for no reason. Not to mention far more important critical supplies.
@TomMckenny, is there a resource that speaks to this economic theory of yours? Because the sources I cited here: https://hackertimes.com/item?id=22815572 reflects mainstream economic theory and what I have learned in my economic courses at university.
Mainstream economics understands the flaws in markets such as panics, run on banks, imperfect information, monopolies, cost to enter a market, lag in ramping up production, transportation time and bubbles. All of which are at play at the moment.
I can't know what was said in your classes. Assuming no control on prices in a crisis, did they say how holding a large stockpile of a rarely needed item for the long term with it's associated storage cost and risk is in some way more profitable than simply cornering the local market on the commodity at the time it is needed and indeed helping those prices rise rather than fall? In honesty, that may be a hidden assumption against price gouging more than an ideal market example used in a classroom.
At any rate, few if any mainstream economists suggests that sudden monopolization of emergency commodities that are needed immediately but briefly during a crisis would be remotely a good thing. It is more a Cato institute / libertarian position driven by ideology rather than real world data and history which consistently refute it. It is also why no sane society allows it in emergencies on crucial goods.
As if to prove the point, the theory has just been tested yet again: there are no world wide government price caps on toilet paper and yet there is an enduring shortage at the moment.
If interested in this, here is a Nobel prize winning economist writing right now on the issue:
Which means resources needed at this instant are instead sitting idle, at best awaiting higher prices at some arbitrary future date. And earnings, rather than going to producers, are wasted on pointlessly destructive arbitrage. So in crisis, the market has led us into a soviet style toilet paper shortages for no reason. Not to mention far more important critical supplies.