How to cope with scarcity in a time of disaster

If a disaster wipes out a lot of inventory, that scarce or non-existent inventory has a higher value with more dollars chasing fewer goods

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Very few researchers document the positive effects of disasters. But a few do note that a disaster also injects a lot of new money into a region.

It’s a tough way to get a little economic activity going but the imperative is to repair.

Per L. Bylund is one of the rare birds who explores this in his book The Seen, the Unseen, and the Unrealized. The subtitle is How Regulations Affect Our Everyday Lives. I think the book is about much more than regulation, but subtitles are sometimes the product of the publisher, not the author.

The book is a readable account of the economic decisions entrepreneurs make when deciding to go into a business, sell their product or consume a product. We “produce in order to consume.” If I eat an apple, I’m forgoing the eating of a pear and I forgo trading that apple for something else. That’s opportunity cost.

Bylund sustains this Dick and Jane analogy for 173 pages without getting pedantic. He shows how nothing is free. We see the apple, we don’t see the hypothetical pear, and we can’t see what would have happened if we’d done something else all together – the unrealized.

This is his case against government subsidy, because the government took the money out of the economic system to put it somewhere and that creates a whole bunch of unintended consequences.

But back to disasters, which are a dramatic case of scarcity, and supply and demand theory. If your city is wiped out, you need food, clothing and shelter far more than shopping for a winter vacation. The clothing is anything you can get, rather than the latest Brooks Brothers jacket.

disaster creates a “different consumption pattern.” A disaster is different than “other radical change” because it may not be anticipated and it affects “most or all goods across the board.”

Who cares about opportunity cost, comparative shopping or anything else in a disaster? You need what you need. Even if you have no money, you obtain necessities with charity, volunteerism, debt or any way you can.

Bylund is right, as a professor of entrepreneurship and free enterprise might be. Since he’s at Oklahoma State University, he must also have seen a few severe weather events.

But my interest is in prevention, not just analysis. I’d like to build on the author’s sound analysis, to get to a solution.

If a disaster wipes out a lot of inventory, that scarce or non-existent inventory has a higher value with more dollars chasing fewer goods. If the inventory is the necessities of life, the chase takes on an urgency unparalleled in normal times.

What shall be done? It seems axiomatic to me that we maintain inventory levels, remove scarcity and slow down the chase.

Walmart did this. Bylund documents that it closed “two of its distribution centers and 126 of its stores“ after Hurricane Katrina hit New Orleans in 2005. Half had no power, some flooded and 89 had damage. Within 10 days, “121 of those stores were open again“ after herculean work by the retail chain. I bet their prices didn’t change much, if at all.

Does Walmart have some secret way of reacting to a disaster? Can municipal employees not learn this or ask?

Cities can require businesses, buildings and sports facilities to maintain inventories of food, medical supplies and other necessities, including even cheap, disposable paper jump suits. There can be cheap foam to sleep. There can be co-management agreements with other cities to get supplies and responders on site quickly.

This would reduce the scarcity, lower prices, decrease the time getting back to normal.

How about trying to get this going in your city?

 Troy Media columnist Dr. Allan Bonner has consulted on some of the major planning and public policy issues of our time on five continents over 25 years. He is the author of Safer Cities. 

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

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