Hey, I too read Bruce Schneier on security, I’ve even corresponded with the Great Man while researching a piece some time ago. But why it is that people who are indeed expert in one field think that this knowledge and specialisation flows over into economics?
Economics being its own specialty with its own expertise of course. Take this:
For decades, we have prized efficiency in our economy. We strive for it. We reward it. In normal times, that’s a good thing. Running just at the margins is efficient. A single just-in-time global supply chain is efficient. Consolidation is efficient. And that’s all profitable. Inefficiency, on the other hand, is waste. Extra inventory is inefficient. Overcapacity is inefficient. Using many small suppliers is inefficient. Inefficiency is unprofitable.
But inefficiency is essential security, as the COVID-19 pandemic is teaching us.
No, this is entirely wrong. The incorrectness flows from the use of that word “inefficiency”. What he means is redundancy, or perhaps security, indeed he mentions these later:
Sometimes we need redundancy. Sometimes we need diversity. Sometimes we need overcapacity.
Yes, fine, there’s no problem with any of that. It’s this part that’s wrong because he’s using the wrong word, even the wrong concept, inefficiency, to describe those things:
The market isn’t going to supply any of these things, least of all in a strategic capacity that will result in resilience.
Well, think about the food system, one of the things he thinks should become more inefficient. As he says:
We need our old, local supply chains — not the single global ones that are so fragile in this crisis.
Well, have there been any shortages of food? Sure, certain supermarket shelves have run out of stuff but that’s a result of it taking time to get the truck from the distribution centre to the store. In terms of actually running out of anything for any period of time?
Well, China’s got that horrible pork disease so they’ve been buying pork in from around the world. Which rather indicates the opposite, doesn’t it? That a global supply chain is more resilient than a local one – even if local here means within one of the largest countries in the world.
And that’s what’s wrong with that specific thought about food supply chains. Gaining our food from multitudes of agricultural areas is the very resilience that Schneier says he desires and we should. So what is this nonsense about gaining resilience from local supply chains? Track that down to absurdity for a moment, what happens to the breakfast cereal if the local milkman is our local supply and it’s him that gets Covid? Quite, it’s the international supply chain that is the resilience.
And what is it that the market has provided over these past few decades? That international supply chain and that resilience.
But back to the wrong word, inefficiency. It’s entirely possible to agree that we desire safety – to a certain degree – and resilience – to a certain degree – and so on and on. But we want all of these things to be provided efficiently. At least loss, that is, to all of the other things we want in this life. Thus we don’t want inefficiency at all, we want to still have that basket of desires at the lowest possible cost. Even if the components of that basket have changed we still want it all efficiently.
And as we know – and Schneier agrees – it is markets that provide human desires efficiently. For, as he says:
First, we need to enforce antitrust laws. Our meat supply chain is brittle because there are limited numbers of massive meatpacking plants — now disease factories — rather than lots of smaller slaughterhouses. Our retail supply chain is brittle because a few national companies and websites dominate. We need multiple companies offering alternatives to a single product or service. We need more competition, more niche players.
Well, what is that other than markets providing that resilience that we desire with greater efficiency by having more markets in their provision? That is, it’s not more inefficiency we want, and certainly not less markets, but more markets so as to increase efficiency once again.