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The case for coercion is weaker than it looks

Summary:
There is a case for government coercion in certain situations, including an epidemic. And it is possible that coercion might be beneficial right now. But here I’d like to point out that the case for coercion is weaker than it looks, and that the amount of coercion we actually adopt is likely to be more than the socially optimal amount. The case for coercion right now is obvious. And epidemic spreads by people infecting other nearby people. That infection imposes an external cost on others. Social distancing can reduce the spread of an epidemic. Standard economic “externality” models suggest a role for the government in discouraging encouraging social distancing. The optimal policies are actually likely to be taxes, not bans, but let’s suppose that for some reason

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There is a case for government coercion in certain situations, including an epidemic. And it is possible that coercion might be beneficial right now. But here I’d like to point out that the case for coercion is weaker than it looks, and that the amount of coercion we actually adopt is likely to be more than the socially optimal amount.

The case for coercion right now is obvious. And epidemic spreads by people infecting other nearby people. That infection imposes an external cost on others. Social distancing can reduce the spread of an epidemic. Standard economic “externality” models suggest a role for the government in discouraging encouraging social distancing.

The optimal policies are actually likely to be taxes, not bans, but let’s suppose that for some reason taxes are infeasible. Are bans the way to go? Maybe, but that’s not at all clear.

There is also a powerful force suggesting that the free market might engage in too much social distancing. Americans tend to be excessively fearful of hard to understand risks, such as flying in airplanes, living near nuclear power plants, eating non-organic foods, having free range children, legalizing drugs, having Covid-19 quarantine facilities in their town, having nuclear waste dumps under mountains far from their city, and many other risks. In contrast, we probably are not fearful enough of things we think we understand, such as driving cars.

The coronavirus is much more like those mysterious, hard to understand risks than it is like driving a car. So pure theory doesn’t tell us whether government coercion would move us closer to or further from the optimal amount of social distancing, there are good arguments both ways.

Just to be clear, I strongly believe that the optimal outcome right now would be lots of social distancing. I am not advocating a “do nothing” approach. Just the opposite. Rather I am considering what role should be played by government coercion.

For instance, in this crisis the private sector sprung into action even before the government. Private schools often closed before government schools. The NBA shut down while the federal government was still asleep at the wheel. So it’s not like a lack of government coercion is identical to no social distancing. Americans are rapidly becoming afraid, and many are demanding that their employers allow them to work at home.  I’m already seeing a lot of excessively fearful behavior, without any government coercion.

Nor am I arguing that government has no role to play in the epidemic. Perhaps more generous unemployment insurance is called for, or more funding of medical research, or subsidies to ventilator manufacturing. (Note the government can also help by removing regulations that inhibit a quick response, so it cuts both ways.) I’m addressing the specific question of coercion and social distancing.

China has achieved success in controlling the epidemic with a lot of coercion. But it’s also worth noting that other East Asian countries have had some success with much less coercion. And it’s also worth noting that the Chinese case first got out of hand due to government coercion that prevented doctors from warning Wuhan residents about the problem.

At the top I claimed that we are likely to end up with too much coercion. That’s partly based on my reading of history. In similar situations like WWI, WWII, and 9/11, we pretty clearly ended up with a level of repression that now seems excessive. There were pointless limits on free speech during WWI, we put Japanese-Americans into concentration camps during WWII, and we passed the Patriot Act after 9/11.

I encourage readers to question “realists” who tell you that everyone must get on board with the program during this crisis. We should certainly all behave responsibly, but we do not all have to support any given government policy, especially a coercive policy. Russ Feingold (from my home state) was the only senator to vote against the Patriot Act. Only two senators voted against the Gulf of Tonkin resolution, which led to our involvement in the Vietnam War. It’s hard to stand up to a frightened and angry mob of fellow citizens.

It’s important for people to push back against the natural human instinct for repression during periods of crisis. Even if a very modest amount of repression is optimal in a few cases, we are likely going to end up going too far.

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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