Wow! Your paper offers a very detailed and textured discussion. A few comments: You discuss, as part of the resilience externality, that firms can be underpunished for resilience failures because, for example, they have market power so increase prices to ration the result of failure. 1/

Perhaps it goes without saying, there is nothing special about the zero point. Firms might also be outright rewarded for resilience failures, if the loss of quantity sold is more than offset by the increase in price of sale. 2/

Resilience failures, under these circumstances, can be understood as times when circumstances force what would otherwise be forbidden, restraining supply as a monopolist to benefit from high prices. 3/

You wonderfully discuss capital rationing, which is ultimately an industry-level practice. The prospect of pricing power from resilience failures becomes a case for firms to tacitly coordinate on minimizing spare capacity. 4/

That's good for the industry in ordinary times (spare capacity is a cost), and means players will enjoy windfall profits in extraordinary times, when upward demand shocks or downward shocks to some suppliers force juicy price-rationing of output. 5/

A great thing about this tactic is there's a *prima facie* actual efficiency case for it, so it's hard for antitrust regulators to condemn. You are going to insist we build inefficient overcapacity? 6/

It replaces illegal, potentially observable output restriction with deniable, stochastic capacity restriction. It looks like "lean", "just-in-time" supply chains among consolidated industries. Which, perhaps not coincidentally, is what a lot of production now looks like! 7/

In your discussion, you balance a resilience externality against a "business stealing" externality, and point out that empirically the resilience externality seems to dominate. You discuss aspects of industry and industry structure that might affect the balance. 8/

I think you are right that, observing the *status quo* world, the resilience externality dramatically dominates. But it does suggest another avenue of redress not so much discussed in the paper, regulating towards the countervailing externality. 9/

You discuss this a bit with respect to antitrust, though it is distinct from the vertical merger considerations you discuss at length. 10/

Firms in less consolidated industries may be prone to "overinvestment" due to the private, firm-specific risk of loss of share, or the private benefit of "stealing" share. 11/

In addition to regulation and business law, industrial policy encompassing both antitrust and intended to shape other characteristics that might affect the business-stealing externality could help address the resilience externality. 12/

Though as with many of the other tools you describe, getting the titration right will be far from obvious. 13/

You briefly mention finance as a central industry for which resilience is important. It seems like finance might be a particularly illuminating case study. Much financial regulation might fall under "quantity targeting" — capital and liquidity requirements, etc — in your taxonomy. 14/

The Fed broadly targets the price of finance, arguably in the name of resilience. Has the business law surrounding finance groped towards some of your ideas and suggestions as well? 15/

Finance, like the capital rationers I discussed above, is an industry where arguably resilience underinvestment is not only underpunished, but outright rewarded. 16/

Minsky's core insight was that prudent financiers are outcompeted and put out of business by more aggressive ones over the long course of the cycle, before the now infamous Minsky Moment when chickens finally come home to roost. Absent regulation, resilience investment is fatally punished. 17/

I loved the discussion of corporate governance, of shareholders' privately beneficial but often socially destructive preference for high margin over high quantity means of generating profits. 18/

Figuring out how to reshape governance incentives towards high-output, low-margin strategies strikes me as a key desideratum, undoing perhaps the elimination of what shareholders take to be managerial agency costs. 19/

You remark at a certain point that when resilience failures yield systematic crises, they should be internalized even by shareholders. I think that's overly optimistic. 20/

We ration the consequences of systematic crises by wealth (when we are made collectively poorer, what's left get price rationed). And there will always be systematic crises on the horizon. 21/

In finance I think it pretty obvious that shareholders and managers even of plainly "too-big-to-fail" banks put getting rich far before preventing even crises they might directly precipitate, absent extensive supervision and restraint. 22/

Hopefully IBGUBG ("I'll be gone, you'll be gone.") when the very profitable but resilience-impairing deals actually fail. Whether we break the world or someone else does, the important thing is we should have a whole lot of money first. 23/

So, I think that even when failures yield very systemic crises, the resilience externality remains very, very external. 24/

Anyway, a great paper! Thanks! /fin