Saturday, April 25, 2020

Economics of lockdowns video

Cato took some comments I made in a recent event and produced it into a nice short video, 8 minute overview of where I am, or was last week, on the economics of lockdowns.  I clearly need to work on the visuals.


  1. Great video. I think one of the challenges is that if we're also having to consider how to restructure how the economy functions in areas that rely on large social gatherings: bars, restaurants, sporting arenas, conventions, and businesses that have waiting areas where people wait inside in some fashion. Already grocery chains have set up lines to enter the store, monitoring how many can be inside at a time. Well, that doesn't work too well for the other businesses/economic activity I mentioned.

    Reopening the economy I think will require a restructuring of how these businesses function, if at all. We might see a massive reallocation of capital into businesses that mitigate the spread of any virus while abandoning the older models.

    We're going to have a lot of idle human capital waiting and desperate for work. What will that look like, the response? A new New Deal? Public works into infrastructure? Expansion of high speed internet? These are good things that support the functioning of the economy. Let's also invest in education.


  2. I started viewing this video clip, and quickly ended the viewing session. Expecting to see and hear a learned piece on "economics of the 'lockdown'", I heard what is essentially a 'blame the bureaucracy' screed. I was disappointed to say the least.

    There is little doubt that 'globalization' facilitates the spread of disease, but it is not the primary cause of the disease.

    That the U.S. government and its agencies were not prepared is hardly a surprise given the nature of the republican form of government and the actions of politicians within that government, in both the administrative and the legislative branches. But no western government was exquisitely prepared for this--it simply wasn't in view.

    If blame is to be apportioned, then the blame settles on the electors for voting in politicians who spend more time on rent-seeking activities than they spend on preparing for pandemics. Who can blame them?--it's the system of government.

    The old adage from the age of the 'robber barons' still holds an abundance of truth, viz., "If you can't buy a politician, what good is she?" But this is not limited to republican forms of government nor is it necessarily an unique aspect of the republic--it is human nature to seek rents wherever available. One could say that rent-seeking is the essence of politics. The corollory to this is that in a republic, rent-seeking is pre-eminently the activity that drives interest, and interest that drives politics.

    Economics studies the allocation of scarce resources. Rent-seeking drives the allocation of those resources towards those who have the greatest interest and the most effective organization devoted to garner rents. The general public interest is an after-thought. If bureaucracy ("government by 'bureaus' or departments) is intended to serve the general public interest, then it will be an after-thought and a low-priority until it is labelled a scap-goat and used to deflect blame from rent-seeking politicians and interests.

    What was one looking for in a video titled "The Economics of Lockdowns"? Well, for a start, economics--i.e., a statement of the cost-benefit tradeoffs driving the present 'lockdown', a statement of the consequences not of past decisions but of future decisions, and a statement of effects of the distribution of wealth on the social fabric of the nation and how this will play into the promotion of private interest over the general welfare of the nation.

    An exploration of the question of "passports" for those who have, seemingly, immunity to the effects of the virus versus those who have not and those who dare not risk obtaining that immunity by contracting the disease in order to participate in the re-opened economy.

    There are ethical as well as distributional issues which challenge us--what is equitable versus what is economically efficient? Do we write-off the older generations in order to save younger generations' economic prospects, or do we sacrifice younger generations' lifetime earning potential to save older generations from the disease which hits them harder?

    What heroic efforts are we prepared to undertake, what expediencies are we willing to accept? What can we afford to do? What should we do? How should the issues be framed, economically and ethically? Who decides?

  3. "What Shape Will the Rebound Take?: 'Don’t count on a V-shaped recovery. Up, down, up and then flat is more likely, alas.'" By Andy Kessler | April 26, 2020

    "* * * The yo-yo stock market just performed the double feat of an insta-bear 37% drop followed by an up-26% insta-bull. It’s confused. Provide some clarity by ending the work disincentive of unemployment benefits that exceed pay. Don’t shovel stimulus money like manure on a garden, but instead encourage businesses to hire and expand with targeted tax breaks that last a few years. We don’t have a bottomless well of stimulus funds. Deregulate by default.

    "It’s time to ease the economic suicide of lockdowns. Open stores, even if it means no shirt, no mask, no service. Fear and loathing are already the norm, so social distancing is here to stay. The faster we get back to an uptrend, the faster we make up for lost time. Wealth and well-being compound, and any time we’re not growing—no matter what shape—hurts society from bottom to top."

  4. Let's? You mean American tax PAYERS? We are already in inexcusably terrifying levels of liability for mindless spending, leading to printing of money and the threat of runaway inflation or deadly taxation. The last thing I will approve of is more "progressive" SMARTEST RULERS "New Deal" central control Animal Farm insanity. And "education"???? Only as it should be... My property taxes run my local schools, but the Federal bureuucrats and law writers I did not elect confiscate and re-distribute my money, with terrible "strings" used to make my Admins and Teachers into their puppets. This is now a Free Market Libertarian & Conservative army versus your "progressive" Marxist U.N. & W.H.O. & DNC hit squad battle.

  5. John --- you make too many excuses for the president. It is his job to set the strategy for public health preparedness for this type of disease. Unless you are going to give states and localities that do invest in public health the right to shut off travel from states that do not, this is a Federal issue. It is true that state and local agencies have to execute the plan in the same way that Sergeants and grunts have to execute any military plan, but that does not excuse the commander in chief for an incredible failure to set strategy.


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