Market Structure

An exchange between women on the streets of Lisbon some forty-five years ago seems straightforward enough. Very free market! But there is more to the story than the image of one women clutching a porte-monnaie and another wrapping the fresh catch of the day. More than likely these two have known each other for years, perhaps the families have known each other for generations. Over those many interactions standards have been set, expectations established and met, and even some pricing adjusted if one had run into hard times. The social component of this exchange is in that picture too.

When I was a girl, I used to love the chaos of open markets like the Addis Mercato. The mish mash of it all. The skill of barter. My parents always ask for local advise before heading out in order to know the going ‘foreigner’ rate of things. That way we’d at least have some idea of an appropriate price to pay. A market brings together buyers and sellers who agree to an exchange. In this setting it is money in trade over a rickety wood stall for some durable good.

With Covid on everyone’s mind, it was recently asked: “What is the nature of a marketplace for a vaccine?” When it comes to health and saving lives we always get a little squeamish about accounting for things, for seemingly putting dollars to lives. But even if only in a hazy subconscious way, people still make these choices which involve resources.

Who is at the piazza for vaccines? The buyer is the worldwide citizenry, starting with the most susceptible and to those who have the greatest chance of being a spreader, to everyone else. Who benefits from the trade? Everyone. Who is the seller? Here’s the tricky part. The sellers are a collaboration of the scientific facilities who research and develop, the drug manufactures and some type of government agency.

If you question whether these are linked by an overlay, try to separate them. The researchers have knowledge but need funding. The pharmaceuticals can produce with knowledge, but can’t afford the researchers. The government representing the will (in theory) of the people and can use their money to pay the researchers, but is denied the ability to be a producer as history has shown that this is best left to the pharmaceuticals. But something is different in the mechanism of the interaction between these three. They are operating in a separate economic sphere.

So we’re stuck with all of them. Mother Nature has done a great job of providing the researchers the need they usually have to demonstrate. Hence, the funding process has gone well. Now the two other collaborators are weighing their investments, risks, and tradeoffs. The formal representatives of the people know the profits to the people from a fast turn around on a vaccine is high. There is a large and immediate benefit from scaled-up vaccine production.

Something is different for the pharmaceuticals. For although they share the umbrella objective of providing lifesaving Covid-19 vaccines, their stand alone sphere of economic activity is one that operates in the realm of the profit motive with assurances of property rights. Remember that, at least in the US, they do business in the private market sphere by design. Their incentives and risks are no longer in step with the two public sphere entities.

At these juncture points, where the two systems meet, it can be uncomfortable. At these seams, resources can by hijacked, which makes people warry. And this is true through the ever cascading layers of economic behavior within a system. Which explains the necessity to pull the players apart and figure out which stage is hosting their production.

If the women of Lisbon could figure it out, I’m sure we can too.

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