Economists rarely get to run field experiments for the whole economy. And thank goodness for that, because field experiments can be very damaging. But the coronavirus that every American has been dealing with for the last month has given us as close to a field experiment as we’re ever likely to get.
In particular, we have seen how government reacts with a heavy hand that often makes things worse, and how private individuals and businesses have moved nimbly to fight the virus and help the needy.
These are the opening two paragraphs of my piece at Hoover’s Defining Ideas, “COVID v. Capitalism,” April 8.
Two paragraphs from my section on the private sector:
Consider, by contrast, the private sector. In an April 5 feature article in the New York Times titled “How New Jersey’s First Coronavirus Patient Survived,” reporter Susan Dominus tells the amazing story of James Cai, the first New Jersey coronavirus patient who was, fortunately, a nurse practitioner. Cai’s boss, Dr. George Hall, got in touch with doctors in China who had dealt with the disease and had produced guidelines on how to treat it. Hall spent 12 hours translating the guidelines to English, and Cai’s doctors were able to follow them. Important in the treatment, incidentally, was Gilead Sciences’ experimental drug Remdesivir. Cai recovered, thanks to his boss, some Chinese doctors, U.S. drugs, and the Internet.
American businesses and many American workers have shown amazing generosity. Robert Kraft, owner of the New England Patriots football team, sent the Patriots’ team airplane to China to pick up 1.2 million of the Chinese masks to donate in the United States. This was no mean feat, as the flight crew had to quickly get visas and the plane was allowed to be on Chinese soil for only 3 hours. (China’s government is pretty messed up also.) Total time on the ground: 2 hours and 57 minutes.
Do read the whole thing, especially if you want to comment.
READER COMMENTS
Brad Kirby
Apr 9 2020 at 6:59am
Hi David,
I read every word of your piece on Hoovers prior to posting. Honestly, I relate to your struggle, but I would recommend rewriting this piece (or splitting it into different pieces). I recognize your attempt to position this pandemic as both instiutional failure and an increase in economic freedom – any libertarian’s dream – but stating that both are being achieved in the same breath is beyonf greedy.
As a Prime member, the first N95 mask I can order from Amazon is 4 weeks from now on May 7th. And in the open market, masks are marked up 1000%. Here in Canada, a reputable gourment store (reference at end) tried to mark up hand sanitizer by 1000% and the head of our provincial government – a right wing politician, Premier Doug Ford -stepped in to intervene. Many actions being taken by people oppose economic freedom and amplify our greeed, but upholding laws such as anti-price gauging (of which hold up at the constiutional level in USA) are essential for the operation of free markets. Loosening these would erode economic freedom, as would encouraging many other major micro decisions that are being made by virtually everyone on the planet without interference or oversight.
The testing in Seattle is a great example. But Mark Cuban paying 6 home games is not. Your wife’s amazon order is not. Your article quickly degrades into a piece of toilet paper, one which you may very well sell for $1,000 in 2 years. But perhaps a roll of toilet paper will cost you more by 2022 (or whenver the Greenback’s inevitable demise becomes a harsh reality (for both you and I).
https://nationalpost.com/news/world/covid-19-doug-ford-slams-disgusting-pusateris-for-charging-30-for-lysol-wipes
Jon Murphy
Apr 11 2020 at 10:42am
Anti-price-gouging legislation is an anathema to the operation of free markets. They prevent the essential mechanism of the free market, price adjustments, from happening. They corrupt the information participants in the free market use to make decisions. Further, since free markets tend toward a state where there are no (or limited) shortages/surpluses, the perpetual shortages caused by anti-price-gouging legislation necessarily means that the free market is hindered, not protected.
Furthermore, the “free” in “free market” means free from political interference. It is akin to the “free” in “free speech.” Thus, when politics interferes in the marketplace via price legislation, the market is, by definition, not free.*
In reference to your exact example of a reputable store wanting to increase the price of hand sanitizer 1,000%; this does not imply a breakdown of the values of a free market. Any seller can sell at whatever price he wants. Any buyer can buy at any price he wants. But unless the price the buyer is willing to pay and the seller is willing to sell, no deal will go through. Pusateri’s selling Lysol wipes for $30 (which, as an aside, I think there’s an error in your comment; a 1,000% mark-up would imply they were selling the wipes for $0.03 before. I’ve never paid less than $3 for wipes) does not imply people will pay $30 for wipes if they do not want. If they do want, then they will pay $30. To interfere is to frustrate the purpose of the free market, which is to connect buyers to sellers and move goods from low-valued uses to high-valued uses.
A personal story: I was shopping for face-masks. The county next door to mine just banned going shopping without a mask and my county would likely follow suit. I went on eBay, found some masks at a reasonable (to me) price, and bought them. The next day, I get an email from eBay: they canceled the order “to protect [me] from price-gouging.” To be honest, I’d rather be protected from COVID. Since eBay is under pressure from state and federal governments to block these voluntary and mutually beneficial transactions, this is a violation of free-market virtues and makes the world a little more dangerous.
*NB: Political intervention of this sort is different from the rule-enforcement role of government that enhances freedom. When a government enforces a contract or prevents theft, that is not comparable to a government dictating the acceptable terms of an agreement.
john hare
Apr 9 2020 at 6:24pm
So you have a choice between buying at 1,000% mark up from normal times or doing without. Just as the entrepreneur has the choice of risking acquiring these items at any price he has to pay and doing whatever it takes to deliver the product.
Have you factored in the higher prices the entrepreneur has to pay for the items in the first place and the extra expense of making delivery in uncertain times? Have you factored in that the entrepreneur may be spending double what the items are normally worth and risking the bottom dropping out of his market at any time?
I might be willing to spend three dollars acquiring and delivering a one dollar item if there is major profit against the risk that my inventory may be worth 1/3 of what I paid tomorrow. Or risking that the government might confiscate them for a total loss. No way would I attempt that for a 10% potential profit. So do without or find another supplier. Otherwise you are just hammering the only source of your life saving supplies.
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