Cassandra Redux

I have previously compared the inner life of a libertarian to that of Cassandra; cursed to always tell the truth about the future, but never be believed. See here. The present situation in United States is a good illustration of this.

Six weeks ago, libertarians predicted that in phase 1 of the coronavirus crisis, the government would do everything wrong. Because we have read Bastiat and understand both public choice economics and the incentives in a democratic political system, we predicted that the politicians would act on the immediate visible consequences of the pandemic without due consideration for the remote, unseen effects of their actions, would ignore trade-offs in the rush to be seen as “doing something,” and would impose single, one size fits all solutions that would defeat all experimentation with different ways of addressing the problem. Sure enough, we got unemployment compensation that pays more than 100% of workers' salaries, so that furloughed workers have no reason to return to work; people being cited for playing ball with their kid in a park or jogging alone; doctors and nurses being laid off and hospitals be driven toward bankruptcy as their revenue generating “elective” procedures are banned while they stand empty waiting for covid-19 patients; carelessly drafted laws that sent aid for small businesses to the Los Angles Lakers, Ruth Chris, and Shake Shack and that allow banks to steer the money to their favored clients; and misallocation of resources from ventilators to toilet paper to hand sanitizers due to suppression of the price system and competition.

Libertarians also predicted that because government lock downs were not sustainable, they would not be sustained, and in six to eight weeks the lock downs would begin to decay. We are now entering phase 2 of the crisis; the Hayekian, trial and error phase in which reality catches up to government policy. As the centrally planned governmental response collapses, individuals will begin to experiment how best to adapt their particular activities to the new environment. Restaurants, gyms, and small retail businesses will try different approaches designed to attract customers and reassure employees concerned about contracting the virus. What works for gyms is likely to be different than what works for restaurants, and both are likely to be different from what works for clothing stores. Some of these attempts will fail. Some will succeed and be copied by others. Some may increase the infection rate, and will be abandoned entirely. Pretty soon, we will learn what is the best way to continue our lives until a vaccine for the virus is available, all without epidemiological models or scientist experts telling us what to do.

This will be followed by phase 3, which is when people have adapted to the presence of the virus and figured out the proper balance between convenience and safety in their businesses, daily lives, and leisure activities. In this phase, the politicians will claim credit for rescuing the country and vanquishing the virus by imposing lock downs or banning travel from China in January or passing the CARES act or invoking the Defense Product Act or . . . . The public will accept this because the efforts of the politicians were visible and can be seen. The Hayekian, trial and error learning process cannot be seen and will be ignored. The Democrats/Progressives and Republicans/Conservatives will then fall to squabbling over who saved the country and who failed miserably, whose policies resulted in so many unnecessary deaths and whose destroyed or saved the economy. Finally, because history is written by the victor, which of the competing stories prevails and becomes the accepted history will be determined by the outcome of the next Presidential election. The only thing that both sides will agree on is that the market failed and that the pandemic is an indictment of laissez-fair capitalism, or neoliberalism, or libertarianism which demonstrates the need for more government power to prevent such a thing from ever happening again.

Libertarians will then predict the economic disaster that is coming unless the markets are freed to generate the wealth that the government just dissipated. And be completely ignored.