– August 21, 2020

Why did so many governments lock down economies and societies in response to the not-so-novel coronavirus? According to a recent study, “Explaining the Homogeneous Diffusion of COVID-19 Nonpharmaceutical Interventions Across Heterogeneous Countries,” they did it because other countries did. 

That’s right, nations ignored the perennial warning of mothers everywhere and jumped off the bridge of rational policy because their friendly neighbors jumped first.

Monkey see, monkey do in other words. AIER’s Jeffrey Tucker would have retitled the scientific paper referenced above to “how so many governments behaved so stupidly at once.” Yes, stupidity is a strong term but I cannot reject his hypothesis that the bizarre spectacle of countries with no COVID cases locking down stemmed from “ignorance and stupor.”

If you study the broad sweep of human history and prehistory, as I have, you start to notice that the median human being has never been a brainiac by any stretch. Calling ourselves Homo sapiens (man, the wise) is more aspirational than descriptive. Pan sapiens (wise apes) would be more apt.

Yes, we have spaceships and tall buildings and smartphones and this, that, and the other fancy thing. And we often attribute such wonders to key inventors and innovators like Werner von Braun or Steve Jobs.

As if! In fact, every major invention you can name came out of a complex milieux of innovation made possible by the division of labor and competitive markets: the cotton gin, steamboats, the telephone, automobiles, and even (sorry Al!) the Internet. Do you really think that we would not have lightbulbs or airplanes were it not for Thomas Edison and the Wright brothers? Worst case scenario, without those guys we get the gadgets a few years later.

The same can be said for our earliest innovations as well. 

Fire? Lightning started one day and somebody decided it was worth it to keep it going on a small scale. Then others started to show up with goods that they exchanged for access to it. Firekeeping, probably the second profession after prostitution, was born, due to markets and luck, not individual genius.

Acheulean handaxes? They changed barely at all over hundreds of thousands of years and so were probably instinctual. They did not go beyond what bowerbirds can do with twigs. And they were not even primarily used as axes.

Agriculture and animal husbandry? Ha! Scientists have known for decades that there was no Einstein caveman who woke up one day saying, “I’m gonna plant seeds and pen up wild critters.” Rather, various plant and animal species coevolved with humans because they were rewarded, biologically, for being cute, manageable, juicy, or otherwise irresistible to humans, who in return for their flesh or fruit unwittingly provided them with protection and fecundity unmatched by wild species.

When genius humans have occasionally appeared, their genius was wasted because the rest of humanity was too dull, and supporting markets too underdeveloped, to help them to develop their ideas. The first steam engines, by Heron of Alexandria (1st century) and Taqi ad-Din Muhammed ibn Ma’ruf (16th century), languished for want of work. And look at all the cool stuff Leonardo da Vinci dreamed up but never built because of the lack of markets to aid in their construction, or their use if they had ever gotten past the drawing board.

Once that has all sunk in, consider this: wherever we do not allow markets to function more or less freely we end up with mass chaos.

Socialism? Two words: It sucks.

Social Security? One acronym: FUBAR!

Healthcare? Horrible, except in places like Singapore where markets for healthcare services are unfettered. 

Highly subsidized higher ed? Don’t get Phil Magness, George Leef, or Richard Vedder started! In short, it is whacky as whacky tobacky.

Police violence? It’s most virulent where one party rules. Monopolists, even (especially?) government ones, can be brutal because they are the antithesis of competitive markets.

COVID responses? The worst policies since the New Deal, except in places where decisions were left to markets, like South Dakota. Toilet paper? No problem because the state has no anti-price gouging laws. Want to see fireworks at Mount Rushmore with POTUS? No problem because all the hotels, gas stations, and such were open, if they wanted to be. Want to stay home? Also, no problem. Want to hang out with bikers in the Black Hills? Ditto, because the state essentially allowed a market in COVID-19 responses to flourish rather than aping other states.

But what about financial crises? Those are examples of markets gone awry for sure. No, not so much. The last big one, in 2008, was the fifth in the U.S. triggered by a failed mortgage securitization scheme, a clear failing of our educational and regulatory systems rather than markets.

In fact, the efficiency of America’s financial markets is a prime example of how markets can behave more rationally than any of its traders. Bad investments and investment strategies soon bite the dust while good ones soon attract attention until all investment options fall neatly along the security-market or risk-return tradeoff line. But even this isn’t due to human genius, as the same phenomenon has been observed with chimpanzee foraging strategies. Like I said, Pan sapiens might fit us just right.

In short, we need to rethink our institutions to include more competitive market forces, not fewer. In fact, if I may take some liberties with David Hume’s famous dictum “that every man ought to be supposed a knave:”

“In contriving any system of government, and fixing the several checks and controls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions, than private interest. By this interest we must govern him, and, by means of it, make him, notwithstanding his insatiable avarice and ambition, co-operate to public good.”

Or, to paraphrase James Madison, if people weren’t so stupid, government would not be necessary. But markets would be all the more needed!

We have civilization and prosperity not because we are smart but because we permit the freedom to cooperate toward building smart social and economic institutions. 

Robert E. Wright

Robert E. Wright

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s Financial Exclusion (2019). Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997.

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