The year 2020 gave us a huge amount of evidence about the relative merits of government intervention and free markets. The bottom line is that government failed massively and free markets triumphed spectacularly (with one major exception) within the constraints that government placed on them. The one apparent exception to government failure is Operation Warp Speed but, as we shall see, that apparent exception may not be an exception at all.
This is the opening paragraph of David R. Henderson, “Markets Work, Government Doesn’t,” Defining Ideas, January 7, 2021.
An excerpt:
Yet a look at the evidence as of January 4 gives little basis for the view that lockdowns reduced deaths. It’s true that the COVID-19 death rate for locked-down California, at 675 per million residents, is well below the 988 and 1,029 for, respectively, Texas and Florida, which are relatively open. But the death rates for locked-down Michigan, New York, and New Jersey, at 1,341, 1,980, and 2,180 respectively, are well above the rates for Texas and Florida. To be sure, a more careful analysis that sifts through the data and accounts for factors other than lockdown—maybe climate matters—is needed. But on their face, the data give cold comfort.
Moreover, what if a more careful analysis did show that lockdowns prevented COVID-19 deaths? That’s not a slam-dunk case for lockdowns because the costs of lockdowns are huge. They are shattering the careers and livelihoods of hundreds of thousands of restaurant workers, haircutters, gymnasium workers, and others. One might argue that the sacrifice is worth it, but isn’t it easier for vulnerable people, most of whom are old and have co-morbidities, to stay home? They would have to stay home anyway, so why insist that others who are younger and have fewer co-morbidities also stay home? Interestingly, California’s Secretary of Health and Human Services, Mark Ghaly, let the mask (pun intended) slip on December 9 when he admitted that the newly imposed ban on outdoor dining was “not a comment on the relative safety of outdoor dining.” You read that right. What, then, was his and Newsom’s purpose in putting tens of thousands of restaurant livelihoods at risk? Ghaly ’fessed up that the measure had to do “with the goal of keeping people at home.” But wouldn’t he and the other officials need to know what people prevented from dining out would do? What if a number of them instead went to other people’s houses and dined in? We were told again and again that policy decisions must be based on science, only to learn that many such decisions were made by politicians and bureaucrats who had no scientific basis for their decisions.
Another excerpt:
Consider, by contrast, the private sector. One reason that millions of people have been able to stay at home is that companies like Zoom have made our work from home possible. Note also that one reason we have Zoom is that years ago the US government allowed the founder of Zoom, Eric Yuan, to immigrate from China. If you want to count that as a success of government, you should note that the US government denied his visa applications eight times. The ninth time was the charm. And one reason we have been able to buy items when stores are closed is that Amazon has heroically stepped up to sell us items over the web and, although deliveries are slower than they were, presumably because of volume, they are still relatively quick. In case you’re worried that Yuan and Amazon pioneer Jeff Bezos are getting rich off us, they are. But our wealth from them is forty-five times their wealth from us. In 2004, Yale University economist and Nobel Prize winner William D. Nordhaus found that innovators keep for themselves approximately 2.2 percent of the value they create and that the rest goes to consumers.
Read the whole thing.
The list of government failures and market successes in the article is not nearly complete. Both areas are target-rich.
READER COMMENTS
Jon Murphy
Jan 7 2021 at 7:39pm
Great read.
Let me ask a question: why have experts been unable to realize their policies have failed? By their own measurements and arguments (as you document well), their policies have failed.
So, why has the conversation been only about perpetuating the policies rather than refining or repealing them?
I have an answer, but I want to hear other thoughts
Phil H
Jan 8 2021 at 1:17am
I’m rather worried that you’re talking about a strawman. I don’t know who this group of “experts” is. I’m fairly sure they don’t all speak with one voice. I’m sure you can point to any single “expert” and find something they’ve said that is wrong, and contradicts other experts. All that means is that there are many people working on the problem in many different ways! So I doubt that your question has any validity.
Nonetheless, there is a very simple answer to it: empirical experience.
There are two methods that have successfully contained Covid so far. Only two. Anything else that anyone claims is a dangerous shot in the dark. For example, the libertarian arguments that individual action will work are unproven (Sweden is the obvious example). So while I would certainly agree with you that policies in the US, UK, and mainland Europe have failed, that doesn’t alter the landscape of facts that should guide policy: there are only two methods that have proved successful.
One is complete lockdown followed by heavy restrictions on border crossings (the China method). The lockdown stopped community spread, the almost-closed border prevents reinfection.
The second method is limited lockdowns combined with highly-effective track and trace (Taiwan and NZ).
Both of these proven methods contain lockdowns. Thus for anyone serious about delivering policy options backed by experience rather than ideology, lockdowns are a no-brainer.
DH’s advanced arguments for above for why the knock-on effects of lockdowns might be more serious are great – good theoretical approaches to counterarguments. But theory isn’t going to cut it among those with a serious chance of affecting policy. They need to see empirical backing for an approach before they can credibly present it to government.
Todd Kreider
Jan 8 2021 at 2:25am
We don’t really know what happened in China and Asia almost certainly has much higher prior immunity compared to the West. A study concluded that when China locked down a region during the H1N1 outbreak in 2009 it was not successful.
2. Taiwan and New Zealand are islands that managed to almost entirely keep out coronavirus early on. It’s easy to track and trace if their are so few cases in the beginning.
Phil H
Jan 8 2021 at 3:58am
I know what happened in China – I live here. Everyone’s at work. Kids go to school as normal. The hospitals are empty.
I’m sure there’s a lot of detail that I don’t know, but those are the headlines. The numbers of new daily cases here are counted in single digits or tens.
Jon Murphy
Jan 8 2021 at 9:38am
Which is the big problem. More and more data is coming out that China simply isn’t reporting their numbers.
Jon Murphy
Jan 8 2021 at 9:32am
Agreed. That’s part of my hidden point. There is no unified “group of experts.” And yet, countless people cry for “just listen to the experts.” Read the comments section on this blog any given day.
Indeed. And the empirical evidence shows quite overwhelmingly that lockdowns are not working. You cite three examples: China, New Zealand, and Taiwan. Of the three, only Taiwan supports the case for lockdowns. It’s becoming increasingly obvious that China simply isn’t reporting COVID numbers (one report has them under-reporting by an order of 10). New Zealand keeps reporting more and more cases every time they lift lockdown.
Likewise, the US has had incredibly severe and long lockdowns. By the very measures used by our expert advisors, these lockdowns have failed. But rather than admit the policy has failed, they repeatedly claim that we need more of the policy. Kind of reminds me of this comic.
So, the empirical evidence is there that lockdowns don’t work. Why are they being perpetuated?
Phil H
Jan 8 2021 at 11:12pm
” China simply isn’t reporting COVID numbers (one report has them under-reporting by an order of 10)”
You know what’s sad, though? If that report is right, and China is underreporting by an order of magnitude, it’s still outperforming the USA (and the UK) by an order of magnitude.
The USA did lockdowns badly, and they failed. China did a lockdown well, and it succeeded. These are the basic facts from which any analysis must start.
Jon Murphy
Jan 11 2021 at 8:33pm
I’m not sure wielding people inside their homes and forbidding outside communication qualifies as “well,” but that’s a judgement call.
But I disagree that those are the relevant facts from which an analysis must start. I think we also need to look at the fact virtually the entire world locked down, and yet COVID has still run rampant. But likewise, places like Korea did not lockdown and have been fine.
Alan Goldhammer
Jan 8 2021 at 9:10am
Great numbers of Americans fail to heed common sense public health measures: wearing masks and physical distancing. If you don’t do those two things, SARS-CoV-2 keeps on replicating in the population.
As the COVID tracking project at The Atlantic notes, “…hospitalizations, our most stable metric through the holidays, continue to march upward. There are now more than 132,000 people hospitalized with COVID-19 in the United States—more than were hospitalized at the peak of the spring and summer surges combined.” I’ve commented numerous times to various posts here that focusing on mortality is the wrong way to look at this.
Jon Murphy
Jan 8 2021 at 9:25am
According to the CDC, YouGov, and many other data gatherers, that’s incorrect. Mask wearing in the US is around 90% and social distancing is pretty much ubiquitous.
Alan Goldhammer
Jan 8 2021 at 6:09pm
and according to the polls the Democrats were going to pick up seats in the House and Senate back in November (aside from the Georgia victories). I continue to see lots of people that don’t wear masks. Certainly the mask adherence was nowhere close to 90% in Wednesday’s demonstration at the Capitol. We had an big outbreak of COVID-19 among workers in a neighborhood hardware store to the degree they had to shut down.
If public health practices were so robust we would not be seeing the levels of infection that are presently in society. Number of hospitalizations don’t lie.
Jon Murphy
Jan 8 2021 at 10:04pm
As a scientist, I’m surprised you favor anecdotal evidence over empirical evidence.
Why, pray tell, can we trust the CDC to set policy when you say we cannot even trust their data?
Alan Goldhammer
Jan 9 2021 at 10:20am
@Jon Murray – those are observational studies from who knows where. I don’t count that as ‘scientific evidence.’ The other day when I went to the Post Office to check a PO Box, two people not wearing masks went in to mail parcels.
Jon Murphy
Jan 11 2021 at 8:36pm
We do know where: the CDC, the ECDC, YouGov, Pew, and lots of other places.
Ok. Neither is your statement about the Post Office. FWIW, I’ve spent significant time in the following states during this lockdown: MA, VA, MD, RI, NY, and CT. Since March, I’ve seen exactly 2 people not wear masks. So, if your Post Office data is relevant, mine is more relevant and supersedes yours.*
*My sentence here is tongue-in-cheek
Jon Murphy
Jan 11 2021 at 8:37pm
By the way, Jon Murray is the professor who sometimes comes in to teach my classes. He always earns bad reviews from the students
Kevin Dick
Jan 7 2021 at 10:31pm
@Jon Murphy. I think there are at least five psychological factors here:
– Confirmation bias. “My recommendations were based on this being very dangerous. Lots of people died. So it was very dangerous.”
– Cognitive dissonance. “Either my recommendations were wrong or it was actually even more dangerous than I thought and we should be following my recommendations even more strongly.”
– Social proof. “Nobody else (or very few) in my circle of respected colleagues is admitting they were wrong, so we must not be wrong.”
– Action bias. “We have to do _something_ in proportion to the danger and my recommendation was/is the best of the available proportional actions.”
– Status quo bias. “There is no irrefutable proof that acting differently will produce a better outcome so we should stay the course.”
All this is layered over seen/unseen errors. Confirmation bias focuses on whatever small wins there are in the seen realm. Cognitive dissonance makes ignoring/dismissing the unseen the most comfortable path. Social proof allows the group to agree that the seen is what matters. Action bias focuses on immediate see consequences. Status quo bias privileges the original focus on the seen.
Jon Murphy
Jan 8 2021 at 9:33am
I think all those factors certainly play in.
Jerry Brown
Jan 7 2021 at 11:23pm
I liked that 1200 dollar check- that worked for me at least and I don’t see evidence that it caused anyone else much problem. So that is a government intervention that worked to some extent. Or at least hasn’t failed massively so far.
Jerry Brown
Jan 7 2021 at 11:36pm
Government policy might have worked well against influenza this year even if it wasn’t designed for that purpose.
With only 4 confirmed cases in the province, Quebec halts flu vaccine campaign | CBC News
Phil H
Jan 8 2021 at 1:20am
We noticed that. When the schools were closed here (China) in the first half of 2020, we all spent a blissfully flu-free flu season. Schools are virus cesspools.
Todd Kreider
Jan 8 2021 at 9:43am
Influenza started to rapidly decline before any lockdowns aside from Wuhan with only 1 percent of China’s population. As an epidemiologist at Johns Hopkins pointed out in March, viruses compete against each other and the new coronavirus was especially dominant.
robc
Jan 8 2021 at 8:50am
How does flu+covid compare to flu last year? If the numbers are close to the same, this year may be a bit safer, at least for young people.
robc
Jan 8 2021 at 8:48am
It caused your great-great grandchildren harm. They probably don’t exist yet – mine don’t (still 3 generations away from that) but I still care about them (mine, not yours, but who knows, they may be the same people).
Phil H
Jan 8 2021 at 1:23am
I agree with DH that private enterprise stepped up magnificently in 2020.
The other big lesson was that the Republican Party really is not fit for purpose. Obviously that’s been dramatically reconfirmed in the last couple of days. But for all of 2020, when the President was failing to get a grip on the situation, what were his colleagues doing? I asked a little while ago on this board if the GOP’s recent record on selecting presidential candidates didn’t make it look like a failed institution. Everyone pooh-poohed the idea. I’m afraid you were all wrong. That party is broken.
Jon Murphy
Jan 8 2021 at 9:37am
It’s incorrect to blame the Republican Party for several reasons:
First, as Fauci himself has stated multiple times, the President was following his advice.
Secondly, the Biden Administration has already stated they intended to continue the Republican-led policies of this pandemic.
For these two reasons alone, I do not think one can reasonably say a D-led government would have performed any better. Coupled with the fact the outbreak has been worse in D-led states, like NY, NJ, and CA, it suggests to me the issue transcends politics. IOW, political failure is a symptom, not a cause.
(I’d also add that much of the civil unrest over the past 10 months or so was caused by the lockdowns, but that’s a discussion for another time)
Jerry Brown
Jan 8 2021 at 2:30am
David, would you agree that the higher per capita death rates that states like New York and New Jersey, and my own state of Connecticut have suffered are in part due to the extreme novelty of the disease in March and April (at the time of our highest death rates) due to not really knowing much how to treat it initially? It is obvious that many mistakes were made in retrospect- but that does not mean that the measures that the governments took to try to reduce personal interactions did not work at all.
I think you are making a mistake to compare those death rates to those in other states that might have experienced the virus a bit later and were able to benefit from the knowledge that came from what happened in this area.
robc
Jan 8 2021 at 8:53am
The governors of those states (not sure if CT did this) intentional chose some policies that were already known to be bad – like forcing nursing homes to take covid positive patients. And derides policies that they later adopted, such as when states tried to ban NYers from traveling to their state. NY would later adopt the same policy in reverse.
So no, they don’t get any break from me for being first in line. Plus, they werent. WA was probably first and they did much better than NY and etc.
robc
Jan 8 2021 at 9:08am
Also, currently in “new deaths-y day average”, CT is worse than NY, CA, FL, TX, and SC (the states I looked at). NY is worse than TX and FL.
So the explanation of getting hit early in no way explains why they are doing worse right now.
robc
Jan 8 2021 at 9:09am
7 day average. Sorry about the typo.
Jerry Brown
Jan 8 2021 at 4:28pm
Yes mistakes were made early on. Point is some of them were able to be avoided later when it became apparent they were serious mistakes. Case fatality rates were much higher in the spring of 2020 than since, probably because doctors learned something about treatment and governors learned something about which really, really bad policies to avoid- like sending covid patients back to nursing homes. That should have been an obvious policy to avoid even early on. But the hospitals really were stretched beyond capacity in certain areas like New York City. And sometimes mistakes get made in crisis situations and that is what happened then.
On the other hand, cases per million population in Connecticut is around half of what North and South Dakota have experienced. And N.Y., N.J., and CT are all below the infection rate per million of the US as a whole. At lest according to Worldometer stats. So that might be an argument that those state policies did actually reduce the spread after the initial surges.
United States Coronavirus: 22,357,059 Cases and 376,682 Deaths – Worldometer (worldometers.info)
David Henderson
Jan 8 2021 at 5:43pm
I looked at your source, and it’s the one I look at regularly. Ir doesn’t give the infection rate per million. It does give the cases per million, but, as I think you know, cases are not the same as infections. Indeed, one of the points I made in the article is that infections are a multiple of cases.
Alan Goldhammer
Jan 8 2021 at 6:13pm
David – best source of data is The Atlantic’s COVID-19 Tracking Project. Best metric is hospitalizations.
Jerry Brown
Jan 8 2021 at 7:09pm
Yes, my mistake. It has a column labelled Tot Cases/1M Pop. Which is different to some extent from the overall infection rate. Mostly in that some number of infections are never symptomatic and never tested for. But CT, N.Y., and N.J. are also well above the average for running tests per million population- so I don’t know if that distinction makes much difference.
So Professor, aside from my mistake in labelling some stats, would you maybe agree that comparing death rates from early in the epidemic to rates later might not be the best way to make your argument?
Andre
Jan 8 2021 at 10:13am
Too much policy is based on headlines, which aren’t evidence based.
As far as I can tell, the benefit we have now that we didn’t have a year ago is that we know it’s better to be less aggressive about ventilator use; also, that certain cocktails early on appear to be highly beneficial to disease progression – though there has been a lot of dismissal of low-cost treatment options that may make a big difference if administered early on, I imagine because they don’t fit the narrative of being a perfect cure and no one benefits financially from them.
Certainly, we knew before it hit the US that the virus was (and remains) extremely selective, picking the old and infirm to do the vast majority of damage. This was obvious from aggregate Worldometers data in February. Therefore, the nursing home policies were knowingly genocidal.
The virus is airborne and highly contagious. The CDC itself points out that going into a room previously occupied by an infectious person can give you Covid. A mask isn’t going to prevent that. It can help with momentary droplet exposure, but probably isn’t reliable protection against prolongued exposure in indoor settings.
The only way to avoid this is to silo oneself and wait for the vaccine or until her immunity kicks in.
Andre
Jan 8 2021 at 10:15am
*herd, lol
Andre
Jan 8 2021 at 10:55am
The “read between the lines” takeaway is that lockdowns don’t eliminate spread. Not unless they are total lockdowns have no exceptions whatsoever – no going to the store, no exception for any in-person businesses, etc.
For a ~99.8% survival rate bug whose primary targets aren’t part of the workforce, total lockdown makes no sense.
Lockdowns reminds me of security theater at airports. Government has to be seen doing something, even if it isn’t particularly effective.
And to point out what should be obvious, the alternative to lockdowns is not virus orgies.
Thomas Hutcheson
Jan 8 2021 at 5:02am
If Gov Cuomo, to take an example, suddenly came to agree with Henderson on every point, how would Cuomo’s policies on “lockdowns” have been different? Would there be zero mandatory restrictions on commercial and social interactions? If not zero how does he go about restricting?
I have some ideas, but I’d like to hear others.
robc
Jan 8 2021 at 11:51am
Here is what WHO was recommending in 2006 (bolding is mine).
Full link is here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3291415/?fbclid=IwAR28LOfVw0kSFR7F36i1FoFJW26ibkTFPzqYdnQHg4B9RtTevx4ZUvMESA0
By the time covid was in the US, we were in Phase 6 (I had to look up their definitions of phases – 6 is when it has spread to two WHO regions).
David Seltzer
Jan 8 2021 at 4:48pm
I did my MBA at Chicago, 1970 to 1972. I took two econ courses taught by George Stigler. In class, he questioned the impact of regulation on market competition. He postulated the idea that industry acquires regulation for its benefit. Stigler’s work, with Claire Friedland, found rules written to prevent market failures and protect consumers yielded negligible price differences between regulated and nonregulated industries. Is there a need for regulation at all? I suspect many will say yes.
Lawrence
Jan 11 2021 at 11:42am
Thank you for summarizing 2020 accurately. I suspect you are also acting in a prophetic manner for 2021 given what we’ve seen so far!
David Henderson
Jan 11 2021 at 10:44pm
You’re welcome, Lawrence.
Comments are closed.