Preparing for the next crisis: How to secure the supply of essential goods and services

CEPR Policy Insight No 106

Natalia Fabra, Massimo Motta, Martin Peitz

The COVID-19 crisis has demonstrated the importance of preparing for pandemics and other catastrophic events that require the quick availability of some essential goods and services. Relying only on private incentives and market forces would be insufficient. Instead, governments and preferably supranational institutions should design and implement prevention, detection and mitigation measures. This requires putting in place competitive mechanisms to accumulate essential goods, establishing rationing protocols, and facilitating the ramping up of production when the crisis hits. In particular, public institutions should secure the provision of essential goods in sufficient quantity and quality at a reasonable cost. This Policy Insight argues that the economics of electricity capacity markets provides important lessons for such a provision.