16 Mar The Top Economic Takeaway of the Coronavirus Panic
Intellectuals who write regularly for non-specialized publications are expected to dispense clever opinions about almost everything, and certainly about topics that are in the day’s headlines. Unfortunately for me, I know next to nothing about pandemics in general, or about the coronavirus specifically. And so on this matter I have no extended thoughts to offer that would be worth anyone’s time to read. I content myself to recommend these excellent essays by Brett Dalton and Bruce Yandle, by Steve Davies, by Peter Earle, by Matt Ridley, and by Jeffrey Tucker.
I can, however, offer two smallish and hopefully worthwhile observations, each prompted by the coronavirus and people’s reactions to it.
Uncertainty, Fear, and Immediatism
Unusual levels of uncertainty fuel unusually intense fear. And the more uncertain and fearful people are, the more they focus only on the immediate here and now. Tomorrow and the long run are ignored; all eyes, ears, and brainpower are trained on today and the short run.
This reaction is understandable, for it surely served our ancestors well. If you and your family discover that you’re surrounded by a pack of hungry wolves, surviving the present is all-important. Intellectual and physical resources should in their entirety be devoted to the effort to escape immediate annihilation. Under such circumstances, to coolly plan for the extended long run is suicidal.
But this human response typically makes for very bad government policy. Except for extreme situations in which all of humanity, or a sizeable chunk of the population of a nation, truly faces the prospect of being killed within a matter of days, society will survive indefinitely – until well past tomorrow. And so policies designed with only today in mind will make the lives and economic well-being of people worse over the long run.
Even in normal times, government is biased against attending appropriately to the future. Politicians’ time-perspectives extend only to the next election. And so when a panic such as that caused by COVID-19 sets in, this bias toward the present – we might call it “immediatism” – intensifies. Cries arise for policies that are believed (correctly or not) to improve matters immediately – we’ll deal later with later.
This immediatism spawns calls today, for example, for government to increase workers’ access to paid leave – efforts that, in this case, while ensuring harm to workers over the long run will, ironically, do little to help them even in the short run.
Immediatism also is one reason politicians cater to the foolish public demand to stop so-called “price gouging.” The fact that keeping prices of the likes of bottled water, toilet paper, and canned soups artificially low today dissuades suppliers from bringing more such supplies to market tomorrow is ignored. Today – now – is all that matters. Or so politics in times of panic make it seem.
Wealth is an Ongoing Flow of Effort
A potential upside of the COVID-19 outbreak is that people are prompted to ponder more seriously the workings of the modern economy. In normal times, no one thinks about all the effort that occurs daily to ensure that supermarket shelves remain full and that restaurant supplies are always large enough to serve all customers.
We take for granted that whatever we wish to pick up today at Safeway, Kroger, or Target will be available in whatever quantities we fancy. Likewise, we treat as an enduring feature of nature our ability to wander whenever we wish into a restaurant and to be served whatever menu items we order.
But the viral spread of COVID-19 – by drawing widespread attention to the likelihood that many workers will not show up for work – hopefully will provoke more of us to realize two facts about our material prosperity: first, this prosperity requires a massive division of labor; second, this prosperity is the result of an ongoing process of efforts.
Most of what constitutes our prosperity is a flow of finely coordinated activities each performed by highly specialized workers. In normal times this flow of activities is largely out of sight. It’s the daily production and delivery of soap, of toothpaste, of aspirin, and of beef, bread, beer, and blueberries. Items such as these don’t fall manna-like from the heavens onto retailers’ shelves. Nor for many goods are months’ worth of inventories lingering in warehouses idly waiting to be accessed. Every moment of every day hundreds of millions of specialists – from CEOs to accountants to factory workers to retail clerks – work to ensure that prosperity is continually produced and flowing.
Our wealth, in the end, isn’t the amount of cash we have stuffed into our purses or deposited in our banks. Nor is it the number of numerals to the left of the decimal point in our 529 plans and 401(k)s. Ultimately, our wealth consists chiefly in the ongoing willingness and ability of millions of strangers to work for us daily. Any obstacle to large numbers of people performing their daily jobs means hardship for us all.
This fact is true for Jeff Bezos just as it is true for you and me. Yes, Bezos surely has stockpiled more food, fuel, and medicines than now sit in ordinary Americans’ pantries and basements. But even Bezos, despite his billions, would soon find himself impoverished if the unheralded daily creation of wealth grinds to a halt.
My hope is that this coronavirus pandemic will inspire greater cognizance of our enormous dependence on the daily activities of countless specialized workers, every one of whom is a stranger to the vast majority of people with whom he or she works and that he or she serves. Such cognizance might then, in turn, rouse more people to realize that wealth isn’t a heap of stuff created easily, permanently existing, and housed in some mysterious location simply waiting to be “distributed.”
I’m not optimistic that my hope will be realized. But if it is, COVID-19 might prove in the end to be an inoculant against a far more dangerous ailment: economic ignorance and the statism that it makes virulent.
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