Counterfactual: What If Government Had Not Intervened?

“The Pothole” is the title of episode 16, season 8 of the classic television series Seinfeld. In this one Jerry accidentally knocks girlfriend Jenna’s toothbrush into the toilet, only for Jenna to use it before Jerry can tell her about his accident. This rated a plotline given Seinfeld’s known aversion to germs. Readers can imagine where the story went. Seinfeld was surely a comedy defined by manufactured situations “about nothing,” but one reason the show was so popular (and still is) is that people could relate.

Certainly they could relate to Seinfeld’s obsessive aversion to germs. We all know people like this, or we are those people. These individuals never open doors by the door handle, wipe down tray tables and armrests on airplanes, and particularly if they have young kids, they require all visitors to wash or disinfect their hands upon entering their house or apartment.

In a work sense, most readers can probably remember their first job, or jobs. They paid hourly. If so, no doubt some can remember how holiday work paid double the hourly wage, or sometimes more. Eager to remain open for customers whose wants and needs didn’t and don’t cease on holidays, businesses pay workers extra to make sure they’ll serve their customers on days when most aren’t working.

These anecdotes have come to mind a lot while witnessing the mass shutdown of the U.S. economy on the city, state, and national level.  As this is being written, California’s 40 million residents are on lockdown per the order of Governor Gavin Newsom. The mayor of Hoboken (NJ) banned restaurants and bars from serving food, plus instituted a 10 pm to 5 am curfew. As all too many already know, Austin’s mayor canceled South by Southwest, thus devastating local businesses. On the national level, President Trump has ascribed to himself “wartime” powers, plus the federal government he leads is in the process of voting itself over $1 trillion to hand out to individuals and businesses.

About this extraction of enormous wealth from the U.S. economy, it barely rates mention that the Founders wrote the Constitution to severely limit the power of the federal government to do anything. Where then, is the outrage over a federal government set to spend $1 trillion?

In fairness to the American people, it’s arguable they’re too stunned to protest after seeing politicians on all levels so rapidly take from them their ability to work and enjoy the fruits of their work. They’re told the crushing of the economy by the political class is “for their own good,” and that they should respect the “science” informing their decisions. Don’t the American people get it, politicians are fighting to save our lives! Since they are, we apparently must forfeit our liberty and prosperity.

Seemingly lost in all this alleged governmental beneficence is that people broadly get it. See once again Seinfeld. The episode was relatable because we yet again know all-too-many people who are exceedingly careful about being around the sick or those they presume to be germ carriers. This is true even in times free of viruses like Covid-19. Translated, people are self-regulating when it comes to their health. They don’t need a law.

That they don’t raises at this point a counterfactual question: what would have happened on the city, state and national levels if politicians had quite simply done nothing in response to the spreading virus? If so, does anyone seriously think that the death rate would be substantially higher, and that information about this potentially lethal virus wouldn’t have reached a population increasingly connected to the internet all day, and every day?

To the above, some might reply that rural types don’t always have internet access similar to that which cityfolk do, but then per demands of politicians around the world, they’re already isolated or socially distant. If our political minders are to be believed, their chosen isolation would make their being exposed to the virus highly unlikely assuming what’s even less likely: that they wouldn’t have been informed of the spread of a health-sapping virus well ahead of time.

So what of cities, and suburbs of cities? No doubt the risk of exposure would be greater for a variety of reasons, but then it’s safe to say that germaphobes in the best of times would be positively OCD in times like this. Not needing a law, they would socially distance themselves simply because that’s what they already do when viruses aren’t spreading.

Some will respond that others wouldn’t or won’t do as politicians demand. Yes, that’s true. And your point? Heroin is illegal, so is cocaine, but people still consume both. Lockdowns or none, some will disregard the risks that come with contracting Covid-19 much as they disregard the much-reported-on risks of heroin and cocaine use. Laws don’t factor with these individuals, at which point their interactions with one another, and potential infection with the virus, would have and realistically will provide crucial information about how rapidly the virus spreads, how lethal it is, etc.

What about businesses? What if there had been no lockdowns? It’s safe to say that many would have operated short-staffed as is with germaphobes top of mind. Rather than forced furloughs, it’s not unreasonable to suggest that a good percentage of workers on all levels of the economic food chain would have voluntarily opted out. Others fearful of contracting the virus would have used this time to take a well-needed and rather isolated vacation somewhere, including one of the “staycation” variety.

The main thing is that as opposed to businesses shutting down, it’s not unreasonable to contend that in concert with certain workers opting out or vacationing during the period of greatest Covid uncertainty, patronage of bars, restaurants, movie theaters, amusement parks, stadiums, arenas, hotels, motels, casinos and everything else would similarly decline naturally, thus shrinking the need for fully staffed operations. This would once again materialize not by law, but based on the germ-obsessed and virus-averse choosing to stay at home, or away from crowds. An informed citizenry, one that is better informed than ever thanks to the internet, would revert to relative isolation in a numbers sense to mitigate the close interactions that doctors and scientists say are problematic.

And what if some businesses stayed packed no matter what? If so, high customer demand would have given businesses fearful of morphing into contagion zones a reason to limit customer inflow by yes, charging higher prices for said food or service. Assuming broad aversion on the part of the public to being in public, other business entities would have advertised their adherence to strict customer limits in order to bring in consumers who would have otherwise studiously avoided public places for fear of big crowds.

Still other businesses, perhaps newly opened, would have used this period of uncertainty to stay open while gaining market share that would be harder to attain during periods of normalcy. And if the newer, suddenly busier businesses were to find it challenging to staff for relatively larger customer inflow, they might offer holiday style or hazardous duty pay to attract quality help. The crucial point here is that as opposed to a one-size-fits-all shutdown of businesses that is wrecking the finances and dreams of tens of millions, market forces and market fears would have made it possible for many more businesses to stay open; albeit in a way that wouldn’t imperil workers or customers.

Mentioned earlier were movie theaters, stadiums and sports arenas. Unknown is the why behind the mass shutdown. Here, perhaps absent politics, those staging events and films might have used prices, and in particular high prices, to limit the size of crowds as opposed to canceling events altogether. If the game plan is distance, let price signals arrived at in the marketplace shrink crowd sizes not just in restaurants and bars, but in all manner of venues.

Turning to the federal level, one imagines in a perfect and rather sane world the president doing much less than nothing. It’s shooting fish in a barrel, but government cannot produce abundance. At the same time, it can provide the personal and economic freedoms that lead to abundance.

President Trump was going to be vilified by the major media no matter what. And precisely because they were going to make him out as the devil no matter what, Trump should have made plain that the federal government’s only Coronavirus plan was freedom on the correct assumption that creative, free, profit-motivated minds matched with capital would arrive at a virus vaccine quite a bit quicker than would a team led by Mike Pence.

Trump might have also made plain that his DOJ would file lawsuits in defense of private businesses around the country being shut down by local and state governments. To the latter some might reply something along the lines of “abuse of power,” that states are where policy should be enacted, but it seems these shutdowns amount to a “taking”? Yes or no, the Trump administration could have at least slowed down the horrid vandalism of the economy rather than his administration vandalizing it on its own with a $1 trillion spending plan that, while perhaps good cosmetics in the eyes of some, will logically weaken a U.S. economy already devastated by command-and-control.

To all of this some will yet again respond that a “business as usual” approach doesn’t work in the face of that which is potentially lethal. Such a view is insulting. Implicit there is that absent the guiding hand of government, people would approach what some say has the potential to kill by the millions with no regard for their own individual wellbeing. That’s not serious. In fact it’s obnoxious to presume that Americans need to be forced to protect themselves.

No, there’s a strong incentive for Americans and those of any other nationality to do what’s in their best interest. That this is true speaks to what a tragedy we’re in the middle of, both in terms of liberty and prosperity.

Free people naturally prosper, and they do precisely because their individual wellbeing means so much to them. Had governments done nothing in response to the Coronavirus, individuals and businesses would have done much more, and done so without going out of business. The Ruling Class overseeing this crack-up deserves the mother of all comeuppances that goes well beyond losing in the next election cycle. The architects of this wholly avoidable debacle need to be publicly shamed and ridiculed. 

This piece originally ran at RealClearMarkets

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