If you’re not sure why schools should be reopened immediately, read this thread by Rory Cooper. He begins:
“Public health and pediatric health experts overwhelmingly are advocating for children to return to schools full-time. They recognize that the risks are far outweighed by the damage currently being done. Here are just some examples:”
Cooper links to 14 articles and op-eds by (or quoting) pediatricians, pediatric disease experts, psychologists, and others in favor of reopening schools. Literally thousands of experts in pediatric medicine are represented at these links, as well as professional associations. Also in the thread, Cooper provides direct quotes from eminent pediatric infectious disease experts on the wisdom of reopening schools, both because the risk is low and the harm from failing to do so is massive.
If you remain unconvinced and believe that in-person instruction represents a mortal threat to teachers, perhaps you’re under the sway of specious arguments made by politically powerful teachers unions. Most teachers (including my middle school teaching daughter) know know it’s safe to return to school, but union leaders are intent on holding public education hostage. As I wrote last month, the hoped-for ransom consists of massive commitments for increased public funding and prioritized vaccination ahead of those at substantially greater risk. The naked politics of this putsch is revealed by instances such as accusations of racism against proponents of reopening, when in fact minority students are suffering the most from school closures. This shameful episode must end now, but too many politicians are beholden to the teachers unions and dare not cross them.
The other day a friend told me “your data points always seem to miss the people points.” He imagines a failure on my part to appreciate the human cost of the coronavirus. Evidently, he feels that I treat data on cases, hospitalizations, and deaths as mere accounting issues, all while emphasizing the negative aspects of government interventions.
This fellow reads my posts very selectively, hampered in part by his own mood affiliation. Indeed, he seems to lack an appreciation for the nuance and zeitgeist of my body of blogging on the topic… my oeuvre! This despite his past comments on the very things he claims I haven’t mentioned. His responses usually rely on anecdotes relayed to him by nurses or doctors he knows. Anecdotes can be important, of course. But I know nurses and doctors too, and they are not of the same mind as his nurses and doctors. Anecdotes! We’re talking about the determination of optimal policy here, and you know what Dr. Fauci says about relying on anecdotes!
Incremental Costs and Benefits
My friend must first understand that my views are based on an economic argument, one emphasizing the benefits and costs of particular actions, including human costs. COVID is dangerous, but primarily to the elderly, and no approach to managing the virus is free. Here are two rather disparate choices:
Mandated minimization of economic and social interactions throughout society over some time interval in the hope of reducing the spread of the virus;
Laissez faire for the general population while minimizing dangers to high-risk individuals, subject to free choice for mentally competent, high-risk individuals.
To be clear, #2 entails all voluntary actions taken by individuals to mitigate risks. Therefore, #1 implies a set of incremental binding restrictions on behavior beyond those voluntary actions. However, I also include in #1 the behavioral effects of scare mongering by public officials, who regularly issue pronouncements having no empirical basis.
The first option above entails so-called non-pharmaceutical interventions (NPIs) by government. These are the elements of so-called lockdowns, such as quarantines and other restrictions on mobility, business and consumer activity, social activities, health care activities, school closures, and mask mandates. NPIs carry costs that are increasing in the severity of constraints they impose on society.
And before I proceed, remember this: tallying all fatal COVID cases is really irrelevant to the policy exercise. Nothing we do, or could have done, would save all those lives. We should compare what lives can be saved from COVID via lockdowns, if any, with the cost of those lockdowns in terms of human life and human misery, including economic costs.
Economic Losses
NPIs involve a loss of economic output that can never be recovered… it is gone forever, and a loss is likely to continue for some time to come. That sounds so very anodyne, despite the tremendous magnitude of the loss involved. But let’s stay with it for just a second. The loss of U.S. output in 2020 due to COVID has been estimated at $2.5 trillion. As Don Boudreaux and Tyler Cowen have noted, what we normally spend on safety and precautionary measures (willingness-to-pay), together with the probabilities of losses, implies that we value our lives at less than $4 million on average. Let’s say the COVID death toll reaches 300,000 by year-end (that’s incremental in this case— but it might be a bit high). That equates to a total loss of $1.2 trillion in life-value if we ignore distinctions in life-years lost. Now ask this: if our $2.5 trillion output loss could have saved every one of those 300,000 lives, would it have been worth it? Not even close, and the truth is that the sacrifice will not have saved even a small fraction of those lives. I grant, however, that the economic losses are partly attributable to voluntary decisions, but goaded to a great extent by the alarmist commentary of public health officials.
The full depth of losses is far worse than the dollars and cents comparison above might sound. Output losses are always matched by (and, in value, are exactly the same as) income losses. That involves lost jobs, lost hours, failed businesses, and destroyed careers. Ah, now we’re getting a bit more “human”, aren’t we! It’s nothing short of callous to discount these costs. Unfortunately, the burden falls disproportionately on low-income workers. Our elites can mostly stay home and do their jobs remotely, and earn handsome incomes. The working poor spend their time in line at food banks.
Yes, government checks can help those with a loss of income compete with elites for the available supply of goods, but of course that doesn’t replace the lost supply of goods! Government aid of this kind is a palliative measure; it doesn’t offset the real losses during a suspension of economic activity.
Decimated Public Health
The strain of the losses has been massive in the U.S. and nearly everywhere in the world. People are struggling financially, making do with less on the table, depleting their savings, and seeking forbearance on debts. The emotional strains are no less real. Anxiety is rampant, drug overdoses have increased, calls to suicide hotlines have exploded, and the permanence of the economic losses may add to suicide rates for some time to come. Dr. Robert Redfield of the CDC says more teenagers will commit suicide this year than will die from COVID (also see here). There’s also been a terrifying escalation in domestic abuse during the pandemic, including domestic homicide. The despair caused by economic losses is all too real and should be viewed as a multiplier on the total cost of severe NPIs.
More on human costs: a health care disaster has befallen locked-down populations, including avoidance of care on account of panic fomented by so-called public health experts, the media, and government. Some of the consequences are listed here. But to name just a few, we have huge numbers of delayed cancer diagnoses, which sharply decrease survival time; mass avoidance of emergency room visits, including undiagnosed heart attacks and strokes; and unacceptable delays in cardiac treatments. Moreover, lockdowns worldwide have severely damaged efforts to deal with scourges like HIV, tuberculosis, and malaria.
The CDC reports that excess mortality among 25-44 year-olds this year was up more than 26%, and the vast bulk of these were non-COVID deaths. A Lancet study indicates that a measles outbreak is likely in 2021 due to skipped vaccinations caused by lockdowns. The WHO estimates that 130,000,000 people are starving worldwide due to lockdowns. That is roughly the population of the U.S. east coast. Again, the callousness with which people willfully ignore these repercussions is stunning, selfish and inhumane, or just stupid.
Excess Deaths
Can we quantify all this? Yes we can, as a matter of fact. I’ve offered estimates in the past, and I already mentioned that excess deaths, COVID and non-COVID, are reported on the CDC’s web site. The Ethical Skeptic (TES) does a good job of summarizing these statistics, though the last full set of estimates was from October 31. Here is the graphic from the TES Twitter feed:
Note particularly the huge number of excess deaths attributable to SAAAD (Suicide, Addiction Abandonment, Abuse and Despair): over 50,000! The estimate of life-years lost due to non-COVID excess deaths is almost double that of COVID deaths because of the difference in the age distributions of those deaths.
Here are a few supporting charts on selected categories of excess deaths, though they are a week behind the counts from above. The first is all non-COVID, natural-cause excess deaths (the vertical gap between the two lines), followed by excess deaths from Alzheimer’s and dementia, other respiratory diseases, and malignant neoplasms (cancer):
The clearest visual gap in these charts is the excess Alzheimer’s and dementia deaths. Note the increase corresponding to the start of the pandemic, when these patients were suddenly shut off from loved ones and the company of other patients. I also believe some of these deaths were (and are) due to overwhelmed staff at care homes struck by COVID, but even discounting this category of excess deaths leaves us with a huge number of non-COVD deaths that could have been avoided without lockdowns. This represents a human cost over and above those tied to the economic losses discussed earlier.
Degraded Education and Health
Lockdowns have also been destructive to the education of children. The United Nations has estimated that 24 million children may drop out of school permanently as a result of lockdowns and school closures. This a burden that falls disproportionately on impoverished children. This article in the Journal of the American Medical Association Network notes the destructive impact of primary school closures on educational attainment. Its conclusions should make advocates of school closures reconsider their position, but it won’t:
“… missed instruction during 2020 could be associated with an estimated 5.53 million years of life lost. This loss in life expectancy was likely to be greater than would have been observed if leaving primary schools open had led to an expansion of the first wave of the pandemic.“
Lockdown Inefficacy
Lockdowns just don’t work. There was never any scientific evidence that they did. For one thing, they are difficult to enforce and compliance is not a given. Of course, Sweden offers a prime example that draconian lockdowns are unnecessary, and deaths remain low there. This Lancet study, published in July, found no association between lockdowns and country mortality, though early border closures were associated with lower COVID caseloads. A French research paper concludes that public decisions had no impact on COVID mortality across 188 countries, U.S. states, and Chinese states. A paper by a group of Irish physicians and scientists stated the following:
“Lockdown has not previously been employed as a strategy in pandemic management, in fact it was ruled out in 2019 WHO and Irish pandemic guidelines, and as expected, it has proven a poor mitigator of morbidity and mortality.”
One of the chief arguments in favor of lockdowns is the fear that asymptomatic individuals circulating in the community (and there are many) would spread the virus. However, there is no evidence that they do. In part, that’s because the window during which an individual with the virus is infectious is narrow, but tests may detect tiny fragments of the virus over a much longer span of time. And there is even some evidence that lockdown measures may increase the spread of the virus!
Lockdown decisions are invariably arbitrary in their impact as well. The crackdown on gyms is one noteworthy example, but gyms are safe. Restaurants don’t turn up in many contact traces either, and yet restaurants have been repeatedly implicated as danger zones. And think of the many small retailers shut down by government, while giant competitors like Wal-Mart continue to operate with little restriction. This is manifest corporatism!
Then there is the matter of mask mandates. As readers of this blog know, I think masks probably help reduce transmission from droplets issued by a carrier, that is, at close range. However, this recent Danish study in the Annals of Internal Medicine found that cloth masks are ineffective in protecting the wearer. They do not stop aerosols, which seem to be the primary source of transmission. They might reduce viral loads, at least if worn properly and either cleaned often or replaced. Those are big “ifs”.
To the extent that masks offer any protection, I’m happy to wear them within indoor public accommodations, at least for the time being. To the extent that people are “scared”, I’m happy to observe the courtesy of wearing a mask, but not outside in uncrowded conditions. To the extent that masks are required under private “house rules”, of course I comply. Public mask mandates outside of government buildings are over the line, however. The evidence that those mandates work is too tenuous and our liberties are too precious too allow that kind of coercion. And private facilities should be subject to private rules only.
QED
So my poor friend is quite correct that COVID is especially deadly to certain cohorts and challenging for the health care community. But he must come to grips with a few realities:
The virus won’t be defeated with NPIs; they don’t work!
NPIs inflict massive harm to human well-being.
Lockdowns or NPIs are little or no gain, high-pain propositions.
The rejection of NPI’s, or lockdowns, is based on compelling “human” data points. As Don Boudreaux says:
“The lockdowns and other restrictions on economic and social activities are astronomically costly – in a direct economic sense, in an emotional and spiritual sense, and in a ‘what-the-hell-do-these-arbitrary-diktats-portend-for-our-freedom?’ sense.”
This doctor has a message for the those denizens of social media with an honest wish to dispense helpful public health advice:
“Americans have admitted that they will meet for Thanksgiving. Scolding and shaming them for wanting this is unlikely to slow the spread of SARS-CoV-2, though it may earn you likes and retweets. Starting with compassion, and thinking of ways they can meet, but as safely as possible, is the task of real public health. Now is the time to save public health from social media.”
Building a big government is thought to be a luxury that prosperous nations can afford, but such efforts have a systematically negative effect on their ability to generate income, much as eating the seed corn delivers a farmer to poverty. Daniel J. Mitchell puts it bluntly in a piece entitled “Rich Nations That Enact Big Government Don’t Remain Rich“. This is nowhere more obvious than in Argentina and Venezuela, two nations that were prosperous 50 years ago and are now economically feeble, or in Venezuela’s case, imploding. Government, in the final analysis, extracts resources from the private economy, often contributing negatively to productivity. Yet the idea that government is a tonic for economic growth persists, and it persists even in the face of weakness induced by excessive government.
Government statistics on Gross Domestic Product (GDP) exaggerate the contribution of government to income in at least a couple of ways. To understand why, it’s necessary to distinguish between spending aggregates and income aggregates, which add up to the same total GDP. The former include consumption, investment, and government spending. Income aggregates are the other side of the GDP “coin”: payments made to factors of production, which represent GDP as a measure of output value.
A dissociation between these alternative views of GDP with respect to government’s contribution is that government payments count as spending and income regardless of the recipient’s contribution to output. Even if nothing is accomplished, nothing is produced, it is measured as income and spending and it is an increment to GDP. Payments to dig holes and refill them contribute to GDP as long as the government does the “job”. By contrast, if a worker in the private sector is paid but produces nothing of value, the firm’s owners suffer a loss of income corresponding to the worker’s pay, and GDP is unchanged! So increased factor payments by government cause an implicit bias in the measurement of output.
A second government bias implicit in GDP statistics is that public spending and government labor payments are often not subjected to a “market test” of value. The activity is “mandated”, so there is no correspondence to a willingness to pay or real value. Public employee unions exaggerate these distortions. There are generally no competitors for government provision of services, few incentives for efficiency, and often little discipline in government procurement processes. So the pricing of government transactions tends to be inflated. And yet when the government gets ripped off by overcharges or cronyist kickbacks, the excess payments contribute positively to GDP. In contrast, when a private firm gets ripped off, its income is correspondingly reduced and the transaction generally will not contribute to GDP.
It takes taxes to fund government, either immediate or deferred, and the taxes are either explicit or implicit in the form of eroded purchasing power. This creates negative incentives that retard private investment incentives, work incentives, and thereby private economic growth. Redistributional efforts retard work incentives as well because welfare–state beneficiaries often face high marginal tax rates on earned income.
Does big government represent a good investment for the wealth of a prosperous nation? In view of the above, one can hardly trust official statistics in rendering a judgement on that question. But despite these distortions, big government and measured economic growth are still negatively correlated. Mitchell provides more detailed analysis of government and economic growth at Heritage, including a set of references to academic papers on the topic.
One important way that government may contribute to economic growth is through the provision of physical infrastructure, which theoretically improves efficiency in private production. However, public infrastructure spending is subject to the same upward cost pressures discussed above, it is often tied to bumbling industrial policy efforts, its utilization by the public is usually mis-priced, and governments are congenitally inept at operating facilities efficiently. It is not clear that private developers could be counted upon to fill the void without some form of partnership with government, however, which has its own pitfalls. There are certainly reforms that could make private and public infrastructure investment and operation more viable, such as eliminating regulatory roadblocks to the installation of new facilities.
Another area in which government may generate a positive economic return is public investment in education, but that return is far from guaranteed. The success of public education investment depends on a wide range of cultural, political, and economic factors. For example, Cuba has the third largest proportion of government education spending to GDP, but the country’s ability to profit from that investment is severely crimped by its totalitarian economic and political system. I have been a frequent critic of public education in general, and I am not persuaded that education is truly a public good, despite some degree of spillover benefit. And while education may be a worthwhile national priority in many circumstances, it is not clear that government should necessarily fund education, let alone “run” education. Public education spending certainly doesn’t automatically translate to effective education outcomes, and it does not guarantee economic growth.
There is great exaggeration regarding the success of certain nations that have allowed government to absorb a large share of resources. That includes many of the European states, for which average incomes are roughly comparable to the Mississippi Delta. Only Luxembourg, Norway and Switzerland have income levels that are respectable relative to the U.S., and Norway relies heavily on oil extraction. Attributing economic power to government in the Nordic countries is especially misleading because the strength of those economies has always stemmed from their fundamentally capitalist underpinnings. Sweden built its wealth on capitalism, but it has cannibalized that strength over several decades with a burgeoning welfare state and high taxes. It only recently has begun attempting to reverse course.
Economic progress is unlikely to be achieved by “investing” in a larger public sector. Instead, encouraging private activity via positive incentives and minimal regulatory interference is a better route to success. The measured economic benefits of government spending are illusory to a significant degree. Even those activities thought to be the most productive avenues for government involvement, like investment in infrastructure and education, are plagued by cost inflation and incompetent execution. Finally, cross-country empirical evidence confirms that a more dominant public sector is associated with lower income growth. And yet there will always be a faction subscribing to the infantile, “free-lunch” belief that big government can deliver growth, and deliver it in excess of the predictable damage it inflicts on the private economy.
Like children asking their peers to exchange quarters for nickels, advocates of a “living wage” hope that the government and voters will agree that workers should be paid by private employers at a rate the activists deem appropriate, regardless of skills. (The “living wage” is left-speak for a very high minimum wage.) Even worse, those advocates actually believe that such a trade can be justified. Or do they? The simple economics of the claim is undermined by assertions that a living wage is simply a matter of social justice. But social justice cannot be served in this way unless one’s definition is so bound up in virtue signaling that you don’t know the difference. It’s even too charitable to say that the left’s definition of social justice is simply bound up in the present and the short-term interests of specific groups. The unfortunate truth is that the “living wage” sacrifices the very well-being of a large number of individuals in those groups, now and in the future. Here’s why:
Suppose the government mandates a “living wage” as well as a series of measures intended to neutralize all of its unintended consequences. These measures would include a complete prohibition of involuntary terminations, investments in automation, price hikes, movement of capital abroad, and immigration. The measures must also include subsidies for failing employers. Just imagine the burden of compliance costs related to these measures, and the complex task of carving out exceptions, such as the allowable price hike in the wake of an increase in the cost of raw materials. What about the additional workers who would enter the labor force to seek employment at the higher wage? Should they be prohibited from doing so, or should employers be required to hire them, or should they be subsidized to hire them? And how will taxpayers afford all of these government subsidies?
Clearly, the situation described thus far is not sustainable. Both the initial wage hike and many of the other steps, ostensibly intended to cushion the blow on various parties, represent flagrant abridgments of private property rights, or rather, property takings! Of course, the real intent is for private parties to pay for the “living wage”. Presumably, employers are to pay the costs, especially large employers and their wealthy investors, like you when the value of those shares in your IRA, pension or 401k plan begins to tank. The reality is, however, that the unintended consequences will spread the cost in a variety of unpleasant ways.
Those in the coalition for living-wage legislation have not given much thought to the reverberations of such a change. At the most basic level, some people cannot command a high wage because they lack higher-order skills. Some have not learned the importance of reliability, of making sure they arrive at work by a specific time every day. Some have not learned the importance of concentrated work effort, of demonstrating that effort and avoiding excessive slack time. Some communicate poorly, or fail to comport themselves in a manner that commands trust. Some have a sketchy work record, presenting a risk to prospective employers. Living wage advocates assert that all of this is irrelevant, but it means everything to an employer.
How would employers attempt to to survive under a living wage? One doesn’t have to think too deeply to realize that wage floors lead to a loss of jobs for several reasons. Those lacking the skills to justify the higher wage will be out the door. Some employers will fail, finding it impossible to pay the hike in their labor costs or to pass it along to their cost-conscious clientele. The living wage is likely to lead to premature automation of many tasks otherwise requiring unskilled to more moderately-skilled workers. The capital investment needed to automate any manual process may well become worthwhile given such a shock to wage rates. Moreover, while some in the living wage movement complain that U.S. employers seek-out lower wage rates abroad, the living wage itself would lead to more of this substitution. The living wage also creates opportunities for those willing to work illegally at sub-minimum wages, including many undocumented immigrants. By driving a larger wedge between the wages of other home countries and the U.S., the living wage creates an incentive migrate In pursuit of the enlarged set of black-market opportunities for labor.
So just imagine having the government mandate a wage that is nearly double the market-clearing level. The quanity of labor demanded declines and the quantity supplied increases, leaving a surplus of workers at the mandated wage. The demand for labor declines still more as the weakest firms close shop. And it declines still more over horizons long enough to enable investment in automation and relocation of production to foreign shores. Add to the mix an expanded flow of workers from abroad. Not all of these surplus workers, native and immigrant, would be willing to take “underground” work at a rate below the living wage, but some will.
So, which of the measures listed in the second paragraph would mitigate the costs imposed by the living wage? In reality, none of them would succeed without spreading the cost more widely. Prohibiting involuntary terminations? Businesses will fail and/or prices will rise. Prohibiting investment in automation? The same. Prohibiting price hikes? Business failures, terminations, and premature automation. Prohibiting movement of capital abroad? An outright revocation of property rights and a distortion of incentives for productive investment, which would also discourage the movement of capital into the country, not just out.
Are there measures that could make the “living wage” a sustainable outcome? Yes, but they cannot be accomplished immediately by decree. Indeed, doing so would thwart the achievement of the objective. In short, productivity must increase. While productivity is multi-dimensional, education, training and work experience all foster improvement in a worker’s ability to add value. Unfortunately, our system of public primary and secondary education has been unsuccessful in producing graduates who can compete in the labor market, even at today’s minimum wage. Wholesale reforms are needed, but even the best educational reforms will take time to come to fruition. In the workplace itself, apprenticeship programs could provide under-skilled workers an avenue toward greater competitiveness at higher wages. Again, apprenticeships may only make economic sense to employers at a legalized sub-minimum wage, as Australia allows.
Second, productivity is dependent on the quality and quality of the capital invested in a business. The key to improving this capital is profitability. It’s ironic that living-wage advocates fail to see that their proposal runs directly counter to steps that would contribute to productivity and wages. Instead, they seem intent on killing the geese that lay golden eggs! Far better to allow those eggs to be transformed into new capital assets that can enhance worker productivity and justify higher wages. Some jobs will be replaced by automation, but capital and new technology tend to create new kinds of jobs and inevitably boost worker productivity. (See “Will Automation Make Us Poor?” by Aaron Bailey.) Employers will still have an interest in seeking out, if not developing, new talent. The automation should take place as part of a more natural evolution, not one prematurely hastened by unrealistically high wage mandates.
The living wage is a prescription for failure and a death-knell for the private economy. It will fail the least-skilled workers and even some semi-skilled workers who cannot compete for jobs at the living wage. It will automate jobs before the natural time dictated by the market-driven process of technical evolution. It will lead to higher prices, which drive down the real value of any wage gains that workers manage to capture. It will lead to business failures, especially among small businesses. It will offer false hope to unskilled immigrants. It will reduce capital investment among smaller firms struggling to meet the higher wage bill. It may well lead to a slew of even more destructive public policies, such as business subsidies and other price controls. And it will create dependency on the state. The living wage is a destructive policy and ultimately a prescription for the death of self-sufficiency. It cannot foster real social justice.
In advanced civilizations the period loosely called Alexandrian is usually associated with flexible morals, perfunctory religion, populist standards and cosmopolitan tastes, feminism, exotic cults, and the rapid turnover of high and low fads---in short, a falling away (which is all that decadence means) from the strictness of traditional rules, embodied in character and inforced from within. -- Jacques Barzun
Sacred Cow Chips 