Please explain, if you don't mind.

I straddle the protect-the-consumer vs let-the-markets-decide chasm. The best heuristic I can come up with is "it depends". Not very useful.

To wit, here's some disjoint things I've been pondering:

A- Disaster preparedness is a tension between price (or efficiency) and resilience. We don't want to waste resources. But we also don't (or won't?) manage risk very well.

B- Why are different states bidding against each other for scarce resources? I thought it was illegal to charge different people different prices for the same stuff.

C- Something like price controls are preemptive. Are there rear facing anti-incentives? Something like windfall taxes? Let's say a scarce resource becomes very expensive in a bursty fashion. Spinning up N95 production capacity is capital intensive. So though price goes (way) up, but profit margins don't. I'm ok with that. But if profit margins skyrocket without any other changes in the fundamentals, that's a problem for public health.

A. Resilience costs money. Just in time and other business practices which trade resilience for profit result in more fragile systems. If a business can charge more for a product when people need it more, then there is an incentive to build extra capacity into a system. If there are laws which prohibit raising prices when the need is greater, the capacity won't be built and/or surplus production won't be created and stored.

B. Because of the incompetent actions of the federal government. But even given that, why wouldn't you expect different actors to bid against each other? It's not illegal, in general, to charge different prices to different entities. In any case, that wouldn't apply to foreign companies.

C. Price controls lead to shortages. Anti-incentives lead to shortages. "Rear-facing anti-incentives" or the uncertainty of not knowing whether the capacity you build today will be confiscated in an emergency leads to shortages.

Also see: https://marginalrevolution.com/marginalrevolution/2017/02/pr...

But how do you fight against profiteering we saw in the beginning with Amazon resellers of PPE. They would scour stores, creating scarcity, then resell at large profit to the same people who would normally buy from the very same stores that the profiteers emptied out.

Heck this is the reason we don’t have onion futures in the commodity market. People corner markets under stress and profiteer without adding any efficiency or price discovery.

If there was a market clearing amount of PPE, the situation you describe wouldn't exist. In order to be in a situation in which there is that amount of PPE requires allowing the price to rise when it is needed most. This will incentivize building extra manufacturing capacity and/or storing the goods for those times. Controlling prices leads to shortages/rationing.

Regarding the onion futures: I don't know the story behind that, but there are plenty of commodity futures traded for commodities which you'd expect to have less physical product than onions. Like mustard seed, guar gum, coriander, etc.

Thank you for following up.

That video is ok primer for price discovery, substitution. I'm not an economist, so I don't know how to articulate my questions.

The idea knocking around my head is to create some kind of insurance to address supply arbitrage situations.

Our nations have strategic reserves for many commodities (oil, cheese, whatever). How do policy makers figure out proper amounts? Whatever that calculus, can we generalize it?

Some way to extend NPV to account for risk and volatility.

Surely this must already exist.

A- My go to example are the chip supplies. IIRC, a tsunami wiped out the production in Thailand. Seems to me some customers would have paid a small premium to better weather supply shocks. But I don't know what that'd look like.

C- What to do about hoarding? I've been stuck on ticket scalping for a while, which is my analog for today's PPE. Obvious remedy is to increase supply. But it doesn't happen. Another analog is famines are generally caused by hoarding, not lack of supply.

Of course, a lot of current woes are because key people ignored the early warnings, and then messed with the production and supply. I don't know how to counter balance those two phenomenon.

Thanks again.