- Russia’s Ambassador writes to the New York Times
- What AOC gets that Bernie didn’t Michael Grunwald, Politico
- Coronavirus class conflict is coming Olga Khazan, Atlantic
- Re-centering the United States in American foreign policy TNSR
crisis
Last Time You Heard of “Flattening the Curve”?
We were told that many or most Americans workers had to be idled to “flatten the curve” of contaminations. This means simply that it was desirable to avoid having a sudden upsurge of people infected so that hospitals would not be overwhelmed. Officials – including the president and the Gov of California, Nancy’s nephew – never gave us any other reason for confinement.
Notably, limiting the total, final number of contaminations was not the reason. Instead, and since no vaccine is in our short sights – herd immunity will save us. But the slower the rate of contamination, the later we will enjoy herd immunity. Thus, a policy of confinement may cause more deaths that it avoids. I am not saying it’s the case; I don’t know. It’s just plausible based on the info I am given, including by my government(s).
Well, I am reasonably sure that to-date, C-virus patients have not overwhelmed American hospitals except in New York City. How do I know? The end-of-time loving, Trump-hating media would make sure I would know it if any American hospital were in a catastrophic situation caused by an unexpected influx of patients. That main danger seems past. It does not mean that individuals should not take common sense precautions, including social distancing. I know I do (but I am old).
In the meantime, the American economy is undergoing an unprecedented disaster; I mean, unprecedented in my lifetime. No mystery: When people don’t work, wealth is not being generated. The solution to this problem is as obvious as it seems: More people have to go back to work. In this connection, I think it’s time to discuss something that should also be obvious: Working at close quarters leads to contamination, and thus, for some categories of the population, to death. Economic contraction leads to sectorial poverty which also kills people. Panic also kills people: surgeries and other medical interventions are being re-scheduled all over the country. No doubt, patients are dying as a result, indirect victims of the pandemics. (And many doctors are complaining of loss of income.)
Who should go back to work? A is always the case, this issue must be resolved as close as possible to those most directly concerned. In this case, it’s the employees themselves and their employers. This principle does not necessarily lead to the wisest decisions; it makes bad decisions less consequential than would be the case for decisions taken by government at the federal level. It makes rolling back bad decisions more likely.
During all this confinement period, my fellow-citizens’ general submissiveness horrified me. (I had two postings on this.) It seems that submission is over. There is a mass automobile protest going on in Lansing, Michigan as I write. It’s directed at the governor of that state, an extreme example of schoolmarmism gone mad. (“Why do I have to do it?” “Because I say so!”)
By the way, if you fear the rise of America fascism, don’t look for guns, look for ballpoints.
Nightcap
- The era of peak globalization is over John Gray, New Statesman
- The world after coronavirus Yuval Harari, Financial Times
- A guide for the overwhelmed Bruce Frohnen, Modern Age
- Coordination problems in a post-pandemic world Peter Boettke, Coordination Problem
Nightcap
- Colin Powell: subordinate or statesman? Elizabeth Spalding, Law & Liberty
- Another right abolished by the government’s COVID lockdown Ryan McMaken, Power & Market
- “All our efficiencies melted away in the face of a man-made depression.” Razib Khan, City Journal
- Bread Arrives Patrick Henry, Commonweal
Nightcap
- The challenges of lending to Main Street George Selgin, Alt-M
- What Sweden has done right on Coronavirus Joakim Book, AEIR
- The State Has Seized Many New Powers. It Won’t Let Go of Them Easily. Andrei Znamenski, Mises Wire
- When disease comes, rulers grab power Anne Applebaum, Atlantic
Crisis, governments and the micro-macro conundrum
Layoffs and salary cuts are individual firm responses to a crisis that may make sense from a micro perspective- it is about saving money – but they will have dire consequences on the macro level.
I lived through this in Greece. Ten years ago, every firm was expecting the worst to come from the memorandum. They started making people redundant, pulling out from planned investment and cutting salaries. Unemployment went up, demand collapsed, public revenue went down, more austerity measures were needed and the downward spiral deepened. The country ended up losing one third of its economy in just four years.
Will it now be Greece on steroids everywhere?
The side effects of myriads of micro adaptations appear on the macro level. This is a key problem for economics and is particularly challenging for Austrian economics. Entrepreneurs creatively respond to a crisis by adopting a cautious and defensive approach long before some of them could spot new opportunities for investment and take positive action to exploit them. But if they all choose to first play ‘defense’, they shape the macro-environment in patterns that keeps telling most of them “keep on protecting yourself”, “there are more risks than opportunities out there”. Both supply and demand are on a continuous downward spiral. While some discerning entrepreneurs will spot some opportunities even in the direst of the circumstances, their plans need time to materialise and some may never come to fruition. In the meantime, most economic actors are not well positioned to start what they know to do well, and many have already lost their money in activities that went downhill.
On the other hand, the side effects of a large top down intervention such as the global lock down confirms the Austrian critique that central planning is also a risky endeavour. In an effort to control a complex reality, radical top-down interventions can divert investment to the specific activities they prop up, which appear sustainable for as long as this diversion lasts. Restrictive measures can also backfire, such as Greece’s shock austerity that was intended to balance the budget in Greece, or can prolong a precarious environment, such as the debt-fuelled bailouts elsewhere to save the banking system.
The problem is that policymakers do not have the tools to gain a full grasp of any potential unintended or undesired consequences from their actions. When they focus on one range of analysis, such as preventing a spike of deaths during the epidemic, the measures they take can generate a cascade of negative side effects in areas off their alarmed radar which they may have no idea how to arrest or fix.
I don’t see this micro-macro antithesis as an automatic validation of post Keynesianism in the sense that capitalism is always inherently unstable. It is unstable in periods of crisis when the micro and the macro can become a contradiction.
Exogenous shocks periodically happen. But it is worth studying what post Keynesians state: a crisis can emerge endogenously as in the financial markets.
The way out may be to think in terms of resilience rather than stability. I am inspired by Hilton Root’s forthcoming book Network Origins of the Global Economy. Resilience is the capacity of a system to accommodate turbulences and absorb shocks in recurrent episodes of instability. The system is unstable but can withstand the stresses.
Are multiple adjustments by adaptive agents able to bring about resilience in a system? Or do we need a central node to gain control and bring about order? Is a centrally-induced order a structure of relations that can be resilient over time, given that it depends on the health of the central node and knowing that the capacity of governments to understand and predict is limited?
Nightcap
- Another wasted crisis? Chris Dillow, Stumbling & Mumbling
- Come home America, we’re at war Richard Reinsch II, RealClearPolicy
- Vouchers fight pandemics Robin Hanson, Overcoming Bias
- Singapore: the Sino-Semitic connection Adam Garfinkle, American Interest
Nightcap
- Keith Hart (economic anthropologist), RIP Cultural Anthropology
- Do you feel lucky, punk? Robin Hanson, Overcoming Bias
- From nation-states to interstellar civilization Nick Nielsen, Grand Strategy Annex
- “Under the Virus’s Cloak, Trump Pursues Long-Sought Policies” NYT
Nightcap
- The Use of Knowledge in Society F.A. Hayek, American Economic Review
- On conservative nationalism and foreign policy Emma Ashford, War on the Rocks
- Europe’s ‘solidarity’ crumbles in the face of a crisis Kai Weiss, CapX
- Bigger Brother: surveillance capitalism Tim Wu, New York Review of Books
Human Capital Diversification vs Pancake Mix
I went to the grocery store yesterday (late morning) expecting either business-as-usual or empty shelves. I was surprised to see both. I’m currently regretting not taking photos because it probably will be business-as-usual by the time I go back.
Some shelves were empty, and others were full. What I saw was a direct visualization of what my neighbors don’t know how to cook.
Going through my store I could see that my neighbors know how to put jarred sauce on pasta. But I saw the opportunity to blend some canned whole tomatoes and make my own sauce. “International” foods were largely untouched, but anything in the local culinary lexicon was sparse.
The whole Baking Needs aisle was basically fine, except for the pancake mix which was all gone. This is really the whole story. Who buys pancake mix? Culinary illiterates.
(Disclaimer: I’m a biased source when it comes to pancakes. I take pancakes as seriously as 75th percentile Bostonian takes the fact that the Yankees suck.)
It takes a modest amount of skill to make pancakes, but the ingredients are cheap and YouTube wants to help you. Now is a great time to up your pancake game. But even if you just follow the directions on any random pancake recipe you’re stirring together flour, salt, baking powder, sugar, eggs, oil, and milk.
The mix will either give you a crappy shelf-stable replacement for the eggs and/or milk (yuck!) or hold your hand as you stir together some powder with eggs, oil, and milk.
Thinking back to my career as an omnivore, I can recall a time when I’ve bought ingredients I really should have made. I’m not judging people who don’t know how to cook, because I’ve been there.
What I’m pointing out is that those people are always going to have the hardest time when it comes to food shortages. I’d be in the same boat if I was shopping at a store that didn’t sell the limited set of ingredients I know how to use.
There’s a tension in economics that we don’t pay enough attention to: gains from specialization vs. gains from diversification. At a system level (and in a Principles class) the two go together. But at the level of individual there is a lot to be said for diversification–you’re more robust to change, resilient in the face of problems, and perspectives gained in one domain may have lessons to apply to others.
I’m grateful I haven’t taken my own human capital specialization so far that I can’t make my own pancakes.
I stopped French kissing. (Coronavirus alert!)
About 40 US deaths so far. The French have double that with 1/5 the population. My skeptical fiber is on full. Still I am washing my hands. When I run out of rubbing alcohol, I will use cheap brandy – of which I have plenty, of course. Oh, I almost forgot: I have decided to stop French kissing completely if the occasion arises! Extraordinary times require extraordinary measures! Count on me. I am wondering what the libertarian response should be to this public crises (plural).
My best to all.
Nightcap
- The gory, secret lives of NHL dentists David Fleming, ESPN
- Imam publicly caned for breaking adultery law he helped draft BBC
- The Chinese Communist Party on the worldwide protests Global Times
- Are countries like people? Niall Ferguson, Times Literary Supplement
Government shutdown – private vs. public responses
The recent shutdown of the government in America has caused a midsize crisis for state employees leaving them unpaid for 35 days straight. Although the shutdown ended on the 25th of January, one can still draw a conclusion about the crisis handling from a public and a private perspective.
A failure of government
When you take a closer look at the history of governmental crisis management, you mostly look at a huge collection of mismanagement. In the last few years there has been a tremendous amount of intriguing works dealing with the failures of public crisis responses, especially the case of hurricane Katrina (Wikipedia here lists more than 100 references), which has been one the of most investigated disasters in recent history.
Crisis can provoke the good as well as the bad inside humans. One might think of the countless volunteers after nature catastrophes doing their very best to help. On the other hand, there have also been stories of grieving and plundering mobs on the streets, after hurricane Katrina for example. So, what we can say for sure is that crises push human behaviour to the extremes. Keeping this in mind it sounds reasonable to leave it to the government to set up an agenda of rules to coordinate humanitarian efforts. However, the government fails most of the time to deliver effective responses to crises, whether they are man-made or exogenous.
Not being able to find an agreement over the federal budget indicates that the government also has very limited options to offer to their employees. And indeed, Lara Trump gave some very handy advice to unpaid workers: “Listen, it’s not fair to you, and we all get that, but this is so much bigger than any one person. It is a little bit of pain but it’s going to be for the future of our country. […] Their children and their grandchildren will thank them for their sacrifice right now.” Yes, please explain to your children how you nearly starved to death because of a dispute over a wall. Sounds reasonable.
Whereas Donald Trump’s kind of clumsy attempt to clarify Ross Wilbur’s statement that government workers should take out loans (Maybe a small loan of a million dollars, huh?) was not too stupid at all. He emphasizes that worker should “work along” with local grocery shop owners they know. He was very clear that employees could not expect help from the government, but instead, they should look out for support on a local level. I do not think that this is a good method of communicating this issue, but it is for sure a very honest one.
Mac & Cheese
A 35-day shutdown, so to speak nearly a missed monthly wage, might not sound unbearable for a central European. But keeping in mind the saving habits of many Americans, a huge amount of government workers are facing existential problems. A recent FED survey found out that about 40% of the American population is not able to cover a 400$ emergency expense without selling or borrowing something.
Witnessing the inability of the government to provide payments for their workers, private enterprises reacted in a remarkable way. The huge food company Kraft rented space for pop-up stores in Washington in which they gave away food entirely for free. One of the most demanded products was Mac & Cheese. The celebrity Chef José Andrés provided free groceries for affected government worker through his NGO “World Central Kitchen.” When the government stopped caring, people started to do so.
Learnings
The overwhelming care for the unpaid government workers by the private sector further strengthened the role and importance of individual responsibility. In situations of crises, people tend to be less submissive to authority and focus on voluntary cooperation of human beings. I feel like it is important to mention here that I do not want to praise crises as a suitable method of bringing people together. But when we take a closer look at the history of humanity it becomes evident that instead of governmental decisions, voluntary human cooperation made our modern life possible. And in times of crises, people become clear about the relevance of these values and processes, which normally guide human progress subconsciously and unnoticed. Private responses to crises are a sign to me that humans are capable to display kindness, cooperation, and humanity beyond the borders of government.
Notes On Liberty 