This news headline caught my eye:
Trump: It’s my decision when to reopen U.S. economy
Actually, President Trump does not have the power to reopen the economy, and that’s a good thing. The men who wrote the Constitution understood the danger of giving too much power to any one person.
There are good arguments on both sides as to when and how fast to reopen the economy. In my view, the answer will vary state by state and industry by industry. There’s also an enormous amount of uncertainty as to exactly how to determine the optimal policy. In that environment, there’s a great advantage to having these decisions be made at as local a level as possible. Thus, while I suspect that Sweden’s current policy is not optimal, that Nordic country is doing a great service to Europe by providing evidence on the consequences of an alternative policy path.
Giving too much power to any one person is dangerous, especially when that person might be influenced by political considerations that go beyond the best interest of the country as a whole:
In phone calls with outside advisers, Trump has even floated trying to reopen much of the country before the end of this month, when the current federal recommendations to avoid social gatherings and work from home expire, the people said. Trump regularly looks at unemployment and stock market numbers, complaining that they are hurting his presidency and reelection prospects, the people said.
That’s not to say Trump’s views are necessary wrong; rather that the procedure he uses to reach decisions is not reliable. Thus I’d still favor local control even if in one particular case you could convince me that the views of the person who happened to be president at the time were superior to the views of the average mayor or governor. In the long run, competition between states will produce better governance than central planning.
READER COMMENTS
Alan Goldhammer
Apr 14 2020 at 2:38pm
Big Thumbs Up to this post!!!!
TMC
Apr 14 2020 at 4:03pm
Yep. Leave it to the states.
Tom
Apr 14 2020 at 4:49pm
I was on the phone with a colleague in Denmark today. He said that schools will be reopened next week, because “the curve is too flat” and there’s excess capacity in the healthcare system. Allowing children to mingle and spread the virus aught to increase the spread in a controllable way. I’ll be interested to see how that experiment fares.
Here is Massachusetts, I think our government has done a decent job so far, but I worry we will overly conservative about when to open the economy back up. Luckily, I’m sure more adventurous states will be more eager to reopen and we can follow once that’s proven successful.
Thaomas
Apr 14 2020 at 6:02pm
At the moment it seems a shame that we don’t have decentralized monetary policies. The Fed is being negligent in crating inflation expectations that are even roughly consistent with NGDP targeting. Five year expectation remain below 1% pa.
Mark Z
Apr 15 2020 at 10:49am
Interesting thought, we could bring back private note issue. I think George Selgin has argued that the gradual centralization of banknote issuance in the late 1800s exacerbated the money supply problems of the era.
Weir
Apr 15 2020 at 3:55am
The economist Scott Grannis asks the right question: “If we had known at the outset that the virus would end up being far less lethal than it was predicted to be, and instead only somewhat more lethal than the ordinary flu, would we have agreed to surrender our liberties and allow the government to order tens of millions to stop working?”
Because we can’t frighten all of the people all of the time with that busted story about all the hospitals being only days away from being over-run.
We can’t deny that people have been frightened into suffering at home with their illnesses and their injuries and their mishaps, scared of going into hospital when they ought to.
We can’t pretend there’s no overlap in the Venn diagram of people who would have been included among this year’s flu victims and the people who will be included among this year’s Rona victims instead.
Next year’s Rona victims, and the Rona victims in the year after that, shouldn’t be entirely pleased that the Social Democrats in Sweden, alone, were level-headed enough to let their society achieve widespread immunity instead of pursuing this destructive and misguided policy of suppression.
There are long-run consequences to inflicting so much unjustifiable harm on 18-year-olds and 26-year-olds and 12-year-olds, making them spend their entire working lives paying for the ill-informed suppression policy, and making them pay for the neuroticism and short-sightedness of their authoritarian governments.
Thaomas
Apr 15 2020 at 7:41am
Do we know that Covid 19 sans preventive measures IS less deadly than predicted? And you make a specific leap between predictions and specific forms of preventive measures? Would better early predictions have led to Korea-like or Sweden-like policies?
Weir
Apr 15 2020 at 11:57pm
Preventive measures were baked into the cake back when the IHME came out with their crazy predictions. Same with Neil Ferguson’s numbers. Suppression was factored in from the start.
If we’d been working with better early predictions? We’d have seen both Korea-like and Sweden-like policies. (Sweden isn’t Korea and Korea isn’t Sweden.) But bad predictions will lead to bad policy, as a rule. Calamitous events require calamitous actions. Have I got the phrasing right? Catastrophic emergencies call for catastrophic responses?
The infection fatality rate, it appears now, is only 0.37.
Robert Schadler
Apr 15 2020 at 12:19pm
Think much of this discussion is “off” or “not quite right.”
It is easy to think that closing down the economy and then opening it back up are comparable if opposite actions.
Dont’ think they are:
Closing down was top-down (federal and state) with specifics: only essential stores, masks, distancing, etc. Compliance was largely voluntary and fear-based (aka death)
Opening up is quite different. Will employees show up? Will customers? That is, a closed business neither makes nor sells. And open business …. may or may not have any business. That depends on bottom-up reactions.
DJT wants credit for saving lives (say 60K not 2.2. million), handing out vast amounts of money, and then letting businesses go back to business.
Governors want credit for “saving lives” and managing pandemic so it is less than it might have been. They have no money of their own. And a delay in opening may ruin a lot of businesses.
Not yet clear whether praise or blame will be the larger focus in most minds.
MSM wants to give DJT almost all the blame (a tiny bit to “nature” and maybe China).
If they re-open but don’t have customers, who will they blame? China, themselves, DJT, the governor, customers????
In sum: closing a market, such as the stock market, is a huge distortion of the existing marketplace. Once closed for a period of time, the subjective valuations of unknown millions of prospective buyers and sellers of specific stocks, is changed. Thus, both the objective marketplace and the subjective valuations of participants have been changed.
Lorenzo from Oz
Apr 15 2020 at 10:59pm
Well, quite. But Scott, you view public policy as a discovery process. Lots of people don’t, which is why more centralism is “obvious” to them.
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