Economic freedom accelerates pandemic recovery

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The political response to the Covid-19 pandemic has strangled the global economy in what Gene Epstein calls “the Great Suppression”. If we are to emerge from its crushing weight, we would do well to embrace economic freedom. This is the conclusion reached in a new article in Contemporary Economic Policy by economic historian Vincent Geloso of King’s University College in London, Ontario (also my colleague at the American Institute for Economic Research) and economist Jamie Bologna Pavlik of Texas Tech University. Geloso explains more here.

They come to this conclusion by studying how economic freedom mitigated some of the effects of the 1918 global flu pandemic. The measure of economic freedom has a long and venerable history, and in a 2016 paper by the economic history revieweconomist Leandro Prados De La Escosura introduced historical measures for OECD countries.

Economic freedom, above all, gives people the flexibility to adapt to changing conditions on the ground in real time instead of waiting for permission from regulators or elected officials who during the Covid-19 pandemic have actively impeded people’s efforts to cope with the new reality.

Communicable diseases are classic examples of “market failures” in that the actions of one person affect others. If you get a flu shot, for example, you reduce the likelihood that people around you will catch the flu even if they don’t compensate you for it. If you go out to a restaurant or other public place, you risk spreading germs that infect people you won’t have to compensate. According to the theory, people are getting too few flu shots and spending too much time spreading their germs.

However, this should not be a pretext for command and control policies. Many people were already taking action to buy masks before the CDC discouraged it (later, of course, CDC guidelines would make masks more or less mandatory). I took a Covid-19 home test last week as a condition of returning to my office (it came back negative). It was hard not to think of the March headline “San Francisco Startups Suspend Sales of Children Testing for Coronavirus at Home After FDA Issues Warning”.

The global responses of free people with free minds cooperating in free markets will by no means be perfect if we have the best world we can imagine as our standard. As Geloso and Pavlik show in their study of the 1918 influenza pandemic, they are better than the regulatory alternative.

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