Congress and the President quickly produced one of the most expensive spending bills in history, a bill that, tragically, will pay tens of millions of workers more to be unemployed than to work. The politicians claim that their spending is “stimulus,” but it’s not and it can’t be. A government cannot stimulate production that it has forbidden.
The only way to stimulate the economy is to liberate it. The people, all of us, need emancipation from the lockdown. And we need it now.
Many people fear the consequences of letting tens of millions of people go back to work. I’m afraid. But we can’t continue as we are. Some say that we need to discuss when to free up the economy. No. We needed to discuss it long ago. The time for discussion has passed. We are surrounded by wreckage. It should not last one more day.
This is from David R. Henderson, “Liberation from Lockdown Now,” American Institute for Economic Research, April 13, 2020.
Another excerpt:
As for the disease itself, we’re pretty sure that social distancing works to slow the spread. But most state governments didn’t give voluntary social distancing more than a week to work. Could the power of citizens’ imaginations be unleashed to produce sufficiently effective social distancing at lower cost than what governments mandate? Federal official Dr. Deborah Birx has commented on how thrilled she is by widespread American support for social distancing. Yes, of course, people respond well to better information. That’s the whole idea of freedom: people adapt, even without coercion.
Do read the whole thing, especially if you want me to respond to your comments.
READER COMMENTS
Dylan
Apr 13 2020 at 6:55pm
David,
I read your full piece, and (I feel like I’ve been saying this a lot today) while I agree with a lot of what you write, I feel like you still failed to make your case because you ignored the most relevant objections to your position.
You do this in a few places, and they are kind of all intertwined, so hard to take point by point, but here’s a few quick takes before I have to go on a call.
1) You don’t mention the externality argument. There’s the old saying about your liberty to swing your arms ends at my nose. Well, being in public these days means a lot of people wildly swinging their arms and having no idea they even are doing it, let alone who they might hit.
2) As you mention, much of the social distancing was happening voluntarily already, which means that the status quo isn’t necessarily an option, even if all the legal restrictions were relaxed. True, it would let people determine the right balance for themselves personally weighing risks and benefits, but see #1, they aren’t only, or even primarily, a threat to themselves, but to other people.
3) Governments relaxing restrictions at this point sends a powerful message to people that it is OK to go back to your lives, which might not be the message you want to send, could lead to powerful rebound. Ending the “UI on steroids” will incentivize even those at the most risk, to get back to work, which puts them, their family, and everyone else they come into contact with at risk.
4) I’ve asked the same questions on your drug approval suggestions multiple times, but haven’t gotten an answer. Guessing they just haven’t been seen, but the short version is, I’ve got a lot of skepticism that removing the requirement to prove efficacy would lead to more efficacious drugs making it to market, and instead think we would get a lot more “observational” trials that are little better than anecdote.
Like I said above, I don’t necessarily disagree with your overall point, those risks might be worth bearing, especially if we get more data coming in that suggests the disease isn’t as fatal as we thought it could be. But, I think you should try to address these (and other points) head on, and I didn’t see that here.
BC
Apr 14 2020 at 4:45am
What is the argument that we should require efficacy before approving an intervention? Now, apply that argument to the non-pharmaceutical interventions (NPIs) that Henderson thinks we should end. For example, should we require that government-mandated closings of businesses be proven effective relative to the control group of voluntary business closings and other measures informed by CDC guidelines and recommendations?
Henderson advocates not requiring NPIs that haven’t been proven effective but not preventing private firms and individuals from using them either. He also advocates allowing doctors and patients to try drugs (PIs) that haven’t been proven effective but not requiring use either. What is the argument that *requiring* people to try things that haven’t been proven effective (NPIs) is better than *not preventing* people from voluntarily trying things that haven’t been proven effective (PIs)?
Chris
Apr 14 2020 at 9:19am
Because the NPIs have proven effective in other countries and are highly recommended by experts in the field, and no one is arguing that they are less effective than voluntary measures; just that voluntary measures might work just as well. For what it’s worth, I have only seen economists arguing that the voluntary measures will be effective enough to limit the spread; not pandemic experts.
Mark Z
Apr 14 2020 at 8:51am
One doesn’t need to require efficacy to start treating in order to do more than observational studies on drugs. And I think that the observational studies, with enough patients (we have no shortage of those) become considerably more valuable, both because a larger ‘n’ is good in itself, but also because it allows one to control for more confounders. An observational study with 5,000 patients is probably more valuable than a ‘proper’ clinical trial with 50. Perhaps I’m not so much saying observational studies are underrated (though being large does help a lot) as that clinical trials are overrated in terms of their esteem relative to observational studies.
Otherwise, I think you raise a good point about the tension between, ‘the lockdowns are strangling the economy’ and ‘we don’t need the lockdowns because people will socially distance as much anyway.’ The one retort I can imagine is that the lockdowns prohibit some innocuous activities; e.g., they eliminate ‘keyhole’ solutions, like restaurants staying open but severely limiting the number of customers, which might reap most of the effectiveness of shutting them down. I suspect this isn’t a huge deal economically though. A restaurant or bar that can only have a few customers at a time probably won’t recover its costs and won’t bother operating anyway.
Chris
Apr 14 2020 at 9:36am
In Illinois, the bars and restaurants were a major driver of the stay at home orders, as many bars and associated patrons refused to follow social distances recommendations. Even after the order it took fines to make many close down and keep people from packing together in a small space. People are often foolish, many in the media have spent the last few months convincing people this is a hoax or won’t effect them, and many simply do not care that they may transmit the virus to someone with a weaker immune system than them.
Dylan
Apr 14 2020 at 3:42pm
You raise a good point on observational studies. I was implicitly assuming observational studies of the same or smaller size than what we see with clinical trials. The kind of trials where we only enroll the healthiest patients, stop treating the ones that seem to be getting worse or die, and then report the results at 100% success rate at curing the disease. There are certainly much better designed observational trials than that though, and some can get you useful information. I’m probably too cynical though, after having seen plenty of drugs have amazing results in an observational study, only to completely disappear under a properly designed clinical trial.
Agreed that there are probably a number of ways to allow more individual flexibility while still being effective. And there’s definitely large areas of government overreach that are doing nothing to stem the spread, the laws on essential activities in Michigan being one of the most obvious.
There’s a definite tension in relaxing the restrictions though, as I think any sign by the government that we’re past the worst of things, combined with peaking hospitalization rates in NYC, will probably cause people to overly relax and take more risks than they should. This is one of the issues with the long incubation time, you don’t know the results of any relaxing until it is too late. Seeing a bunch of new cases in Wuhan a week after restrictions were lifted should be worrying to all of us.
Mark Z
Apr 15 2020 at 11:00pm
I’m not sure if I’m being less cynical or more cynical, because of some of the drugs I’ve read about that passed the trials then turned out to not work or be harmful. I think medical researchers tend to systematically underestimate the number of samples they need to reach firm conclusions, which is somewhat understandable given how hard it is to find samples.
I fear you’re right about people relaxing too much once things start to look slightly better. This is also why I suspect everyone may be being a bit too hard on epidemiologists for the wild swings in the projections their models make. Part of that is just a consequence of modelling an animal that can understand and react to your model. Economists should be sympathetic to this.
Chris
Apr 14 2020 at 1:30am
An issue with your proposition that people would figure out a compromise for social distancing is that very few people have the freedom to make a choice in where/how they work; those choices are defined by management. By enacting the stay at home orders, states are effectively forcing management to address the coronavirus rather than forcing their workforce suffer through unsafe conditions. My wife works for a local government and her manager, even with city and state stay at home orders in effect, continuously pushes people to come back to the office despite them being allowed to work remotely. Without the stay at home orders, my wife would be in an office that has already had multiple cases, despite a health condition that endangers her.
Another issue I see with your article is that, I believe people are taking this thing more seriously because of the stay at home orders. I observed a distinct change from people joking about the virus to teleworking, wearing masks and staying at home that correlated directly with the orders. Inversely, when the government lifts the orders, many people will foolishly stop all precautionary measures.
Also, to pick at your article a little more: most of the projections that have reduced mortality rates include continued stay at home orders, mass testing or extensive tracking. As we are not at a place yet to test enough people for the mass testing to be effective, and extensive surveillance is far less liberating than what we have now, we are stuck with stay at home orders. Don’t like it, talk to Trump, who as of this week downplayed the need for testing and pulled funding for testing sites. This is part of why this virus is not a health system problem but a policy problem; our health system doesn’t have the resources to cope with this added load, and to appropriately cope, we need to either continue the stay at home orders or the federal government needs to step up and dump way more resources into the health system and the alternative methods. They have done neither.
You also make a lot of claims that ‘liberating from lockdown’ won’t increase the number of deaths that much, but I have not seen a single report from a disease or pandemic specialist that backs up that claim. Everything I have seen shows that without mass testing, intensive surveillance, or stay at home, the spread will continue and the deaths will continue their upward trajectory. And as Bill Gates noted, it’s hard to start the economy back up and ignore the pile of dead bodies.
On another note, I’m in the construction industry and the orders are also giving a lot of businesses leeway in contracts by allowing for them to claim force majeure. This has been a huge help for some projects where social distancing has reduced productivity.
Honestly, your article feels ill considered, with no real analysis or discussion of what the projections are estimating or assuming, no real numbers backing up your claims of “suffering and death” from the lockdown or discussion of safety net spending packages that could offset that, and no discussion at all on the economic repercussions of increased fatalities when we are liberated and the death toll starts bending upward again. Additionally, you start your article by agonizing over the 100,000 Americans trapped abroad, while spending the rest of the time dismissing the 100,000 or more families separated when COVID kills their loved one because of your liberation.
Our governments and society should find a way to encourage social distancing and other precautionary measures to stop the spread of this virus, while helping those negatively impacted from incurring lasting financial hardship, and also preparing for the next step efforts. Your proposal merely addresses the financial hardship by increasing the death toll and does nothing to address the financial, economic and personal repercussions of that increased death toll. We need stronger safety nets, stronger sick leave policies, stronger medical leave policies, significant government spending and direction on medical supplies and testing, strong and consistent government direction on how to stay safe. Once all of that is in place, we can consider loosening restrictions. As of now, Republicans at the state and federal level have pushed back on most of those items for years, and continue to do so now, going so far as forcing Wisconsin voters to vote in person in the height of a pandemic.
Mark Z
Apr 14 2020 at 8:36am
I think you’re probably right that lifting lockdowns would increase mortality rate, as that’s the research on from China comparing locked down to ‘unlocked down’ regionas seems to suggest a significant effect (though the effect of lockdowns in the US may be smaller since the lockdowns are less stringent and less enforced). It’ll be interesting to
I don’t think, however, that employers will respond the way you suggest. Most major white collar employers if anything seemed to have been way ahead of the curve, suggesting or requiring working from home well before the states started requiring it. This is predictable because employees don’t want to get sick, and even we pretend they have zero choice their employer, it’s a huge cost to the employer. Companies and their employers that provide more necessary goods/services are in a more difficult position. Amazon has caught a lot of flack recently over this, but it’s worth remembering that if these employers shut down and paid their employees to stay at home, then the cost of lockdowns would be far greater that it already is; that providers of necessities continue to work is what enables the rest of the lockdown to go on. The best such companies can reasonably do is hand out rubber gloves and masks and do testing if possible.
And on that point, regarding medical supplies and testing: I would say events thus far have shown we need the exact opposite, far less government direction, which we had a great deal of and it has consistently proved to be an impediment. Rather, we should unleash the market there.
Chris
Apr 14 2020 at 9:46am
The market is free to make the medical equipment now and we are facing a shortage while states pay huge prices for what there is, so I do not believe that the market will save us in this. Existing manufacturing capacity is short of what is needed and the risk in building out capacity and maybe not using it enough to recoup costs limits the number of companies able to make the investment. The federal government should be guaranteeing the purchase of some number of masks, ventilators etc to minimize this risk.
Mark Z
Apr 15 2020 at 10:45pm
States and the federal government have been trying to avoid paying higher prices, sometimes suppressing them with restrictions on price gouging, by given that demand is way up, it is appropriate that prices should go up. The governments should pay the higher price, that’s the best way to spur supply. They can clearly afford it given recent legislation. Instead, we get phenomena like this: https://www.forbes.com/sites/daviddisalvo/2020/03/30/i-spent-a-day-in-the-coronavirus-driven-feeding-frenzy-of-n95-mask-sellers-and-buyers-and-this-is-what-i-learned/#76fcf32a56d4. There’s no reason to expect the DPA will actually expedite production. Just redirect some of the hundreds of billions in unnecessary handouts to paying the market rate for medical supplies, and we can mitigate the shortages.
MarkW
Apr 14 2020 at 7:29am
In general I agree with the general thrust of the argument. I live in Michigan where our ban-happy governor has shut down a variety of businesses and activities that could easily be done with safe distancing (golf, tennis, boating, gardening, landscaping) on the grounds that they are not essential. This morning, there was an article in which the local county sheriff was quoted as saying his officers would issue warnings and tickets to people from different households being together in parks even if they are observing the recommended social distancing because meeting anybody from outside your household is not allowed under the stay-at-home order. This is nuts (and will — rightfully — not be obeyed).
However, I think David underestimates how many businesses and industries would be closed down right now even without government mandates. The government didn’t require the auto companies to close their plants — the union demanded it after workers started falling ill (and non-union automakers quickly followed suit). You’ve all probably seen that one of the largest pork-processing plants in the country has just been shuttered due to Covid-19 cases in the work force. Airlines are still flying, but only because of government subsidies — the planes are nearly empty. Hotels are allowed to operate in most states, but almost nobody’s staying in them. Car dealers are open, but very few people are buying or having their cars serviced. Bars and sit-down restaurants were ordered closed, but I am pretty sure nearly all would be closed anyway due to the unwillingness of employees and customers to be indoors in such close quarters.
Again, I agree the government has been heavy-handed and capricious with many of their shutdown orders, but most of sharp contraction in economic activity would have happened anyway without any orders at all due to the (mostly rational) fears of the virus.
Chris
Apr 14 2020 at 10:03am
Your last point is an important one I think. My understanding is that the effectiveness of the cautionary measures is heavily influenced by the totality of them. A small decrease and people following the orders leads to a disproportionately larger increase in death toll. The economic recovery from lifting the orders on the other hand will, at best be proportional to the number of people back to work and likely to be fairly limited in most impacted industries. Essentially, the economy is screwed either way and trying to help the economy right now will have a disproportionately large fatality rate.
MarkW
Apr 14 2020 at 11:20am
My understanding is that the effectiveness of the cautionary measures is heavily influenced by the totality of them. A small decrease and people following the orders leads to a disproportionately larger increase in death toll.
I don’t think we know that. I don’t think anybody (including the experts) really knows much of anything for certain. Florida, for example, has had a relatively light touch (which the governor has been criticized for) along with an older population, and spring-break revelers were on the beaches past the point where other states were locked down. And yet looking at the worldometers data, Florida has a death rate of 1/3 of the national average — 24 per 1M in Florida vs 71 per 1M nationally). And New York has a death rate of 513 per 1M — which is fully TWENTY times higher than Florida (and yet somehow Cuomo is a Covid hero and DeSantis is a Covid zero). Anyway, the idea that we need a full and complete shut down and any small deviation in following whatever orders a given governor has imposed will lead to huge increases in the death toll is just not supported by the data.
Alan Goldhammer
Apr 14 2020 at 10:24am
Voluntary social distance did not work in Sioux Falls, SD where they had to shutter a big Smithfield meat processing facility because of over 300 SARS-CoV-2 infections. The Governor now wants to put everyone on hydroxychloroquine; everyone is a doctor these days.
Thaomas
Apr 14 2020 at 5:37pm
I don’t think that pandemic relief bills should be thought of as stimulus, but rather an effort (misguided in many particulars) to make the impacts of the pandemic less unequal. The increase in the deficit is surely less than what the Fed will need to inject to keep NGDP expectations on track. In that sense, the deficit will have no macroeconomic “stimulus” impact at all.
Thaomas
Apr 14 2020 at 5:44pm
I do agree on the UI point. UI should be available to everyone at a pretty high percentage of their wages (but less than 100%) as long as less than full employment persists.
Scott G
Apr 15 2020 at 11:14am
Love this article. Thank you Dave!
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