Wednesday, March 25, 2020
The Destructiveness of the Covid-19 Shutdown.
Unforeseen Contingencies' own Charles N. Steele in The College Fix and The Federalist!
Perhaps the Covid-19 threat is so great that the shutdown is warranted. I don't know, and the epidemiologists don't seem to either. Perhaps it is necessary, but I do know that it is destructive. And so are the the completely unnecessary implicit price controls and threats of prosecuting price "gouging." I've already addressed price controls here (Detroit News) and here (Economists' Petition).
The Detroit News piece attracted some attention, and College Fix reporter Brianna Kraemer interviewed me for nicely done piece on the subject. A few of my lines:
"Not letting prices rise is destructive and wasteful. For government officials to begin investigating firms for ‘charging too much’ is pernicious. It’s socially harmful. It hurts consumers...People are already upset by the threat of coronavirus. Now we add to that shortages and economic chaos...Our perverse dislike of free markets, the one thing that could help reduce the chaos, leads us to restrict them even more. Government pursuit of 'price gouging' and calls for price controls are helping to make a bad situation much, much worse."
But even worse will be the economic effects of the shutdown. I'll not go into detail, but people without paychecks and firms without cash flow cannot survive long; the longer this goes, the more will suffer financial ruin. Restarting the economy won't be easy, and the political ramifications will be very dangerous.
I cover this in a piece published today by The Federalist.
Read, learn, enjoy!
Perhaps the Covid-19 threat is so great that the shutdown is warranted. I don't know, and the epidemiologists don't seem to either. Perhaps it is necessary, but I do know that it is destructive. And so are the the completely unnecessary implicit price controls and threats of prosecuting price "gouging." I've already addressed price controls here (Detroit News) and here (Economists' Petition).
The Detroit News piece attracted some attention, and College Fix reporter Brianna Kraemer interviewed me for nicely done piece on the subject. A few of my lines:
"Not letting prices rise is destructive and wasteful. For government officials to begin investigating firms for ‘charging too much’ is pernicious. It’s socially harmful. It hurts consumers...People are already upset by the threat of coronavirus. Now we add to that shortages and economic chaos...Our perverse dislike of free markets, the one thing that could help reduce the chaos, leads us to restrict them even more. Government pursuit of 'price gouging' and calls for price controls are helping to make a bad situation much, much worse."
But even worse will be the economic effects of the shutdown. I'll not go into detail, but people without paychecks and firms without cash flow cannot survive long; the longer this goes, the more will suffer financial ruin. Restarting the economy won't be easy, and the political ramifications will be very dangerous.
I cover this in a piece published today by The Federalist.
Read, learn, enjoy!
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The other day on CNBC, some energy "analyst" was making the case that the United States had a moral responsibility to cut back on oil production to push up oil prices to "help out" OPEC. What was shocking to me was that they weren't speaking in some mealy mouthed proclamation full of euphemisms and clothed in some dubious notion of ethics - this is what they were literally arguing. It seemed almost satirical, like it belonged in an Ayn Rand novel as some expository device to display to the reader out how backwards things had become. Also, like they had completely forgotten all the jobs, not to mention the mountain of corporate debt, in the energy industry that are at risk.
# posted by 
: 18:36
: 18:36
I was just thinking today about Rand's contention that the villains are consumed by "the hatred of the good for being good." She identified exactly what motivates them. The "bailout" spending, as constructed,is death for the productive and awards the unproductive and the looters. Small businesses are being destroyed. If they take the payroll protection money their workers can quit claiming simply that they were scared of viruses, and make more from unemployment with the bonuses. Small enterprise is on the hook for the repayment and has no workers and no chance of hiring any since unemployment has been extended. Governors in some states -- Michigan, Wisconsin, and maybe Minnesota -- are obviously *trying* to wreck small businesses. Genuine evil.
I think Rand was/is right on point. Her grasp of human nature was remarkable. On a side note, her essay "The Comprachicos" completely changed my perspective of the world.
However, what confuses me is what the primary motivating factor for the looting actions of our leaders and intelligentsia is. Are they mostly under the false impression that they are saving the less fortunate by sacrificing the productive or are they consciously doing so in order to punish those they envy and salve their insecurity. I tend to think it's, at least mostly, the latter.
I work with the pharma and biotech industries and it's pretty well-known that there's little love between the scientists who stayed at University or went into government and those who went into the private sector. I really think that's one reason why there has been so much emphasis from NIH, CDC, et al. that we must wait for a vaccine before reverting to normal, rather than try and open up the economy and mitigate the worst damage with drugs like Gilead's remdesivir to treat critical cases. Vaccine research and development frequently involves academia and government, where most other drug research is handled largely by the private sector and academia (to a much lesser extent).
However, what confuses me is what the primary motivating factor for the looting actions of our leaders and intelligentsia is. Are they mostly under the false impression that they are saving the less fortunate by sacrificing the productive or are they consciously doing so in order to punish those they envy and salve their insecurity. I tend to think it's, at least mostly, the latter.
I work with the pharma and biotech industries and it's pretty well-known that there's little love between the scientists who stayed at University or went into government and those who went into the private sector. I really think that's one reason why there has been so much emphasis from NIH, CDC, et al. that we must wait for a vaccine before reverting to normal, rather than try and open up the economy and mitigate the worst damage with drugs like Gilead's remdesivir to treat critical cases. Vaccine research and development frequently involves academia and government, where most other drug research is handled largely by the private sector and academia (to a much lesser extent).
# posted by : 09:07
: 09:07
I do not understand why the USA suffers so much from the lockdown. Here in Bulgaria (so far, 2408 identified COVID-19 patiens, 126 deaths for a population of 7 million), we are now emerging from a 2-month-long lockdown. Businesses complain, but without the sense of panic that is felt during financial crashes. There is some government program to help affected private companies, but I don't know how it works, because nobody I know intends to apply. Maybe the tradition to save whenever possible and not to go knee deep in debt helps. Moreover, parents know that the Universe has not promised to babysit their own children, and have a Plan B what to do if the preschool/school is closed because of a renovation, strike or another event. Banks of course market their credits aggressively, but most customers resist. Credits are widely regarded as a satanic plot by the banks to rob you of your home.
Interesting, Maya. I don't know the circumstances of Bulgaria's lock down for comparison, but in the U.S., the businesses that need regular cash flow for overhead have been hard hit. Restaurant industry is one, hospitals another, airlines yet another. With no cash flow, rents & capital expenses accumulate and can't be made up when the economy reopens. This is why bankruptcy is a threat. Credit is another problem. Commercial credit fosters a much more productive economy -- but yes, it is vulnerable if then it is forcibly shut down. Consumer credit -- I think the skepticism of consumer credit you mention tends to be a good attitude. Borrowing for consumption is a terrible idea.
Without knowing a great deal about the Bulgarian economy, I note that per capita GDP is less than half of the U.S. (PPP adjusted). I suspect the dissimilarities explain.
Also, it's possible Americans are less accustomed to adversity.
Thanks for your comment.
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Without knowing a great deal about the Bulgarian economy, I note that per capita GDP is less than half of the U.S. (PPP adjusted). I suspect the dissimilarities explain.
Also, it's possible Americans are less accustomed to adversity.
Thanks for your comment.
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