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Tuesday, May 12, 2020

Cuomo's Wager

Pascal’s Wager is a familiar idea. It goes something like this: regardless of what you may think about the existence of God, rational cost-benefit analysis says you should sign on. After all, if you do and you’re wrong, what have you lost? But if you don’t and you’re wrong, uh oh — you’re in big trouble, buster. (I’m not saying this makes sense, by the way.)

Something similar has gone on with the coronavirus pandemic and the draconian economic policies embraced by many governors in the United States, best exemplified New York Gov. Andrew Cuomo and California Gov. Gavin Newsom. They have made a wager sort of like this: if we don’t shut the economy down and the pandemic fulfills the worst-case scenario, we are all in big trouble; but if we do shut the economic down and the pandemic falls closer to the best-case scenario, what will have been lost?

For those with their eyes open, the answer to this last question is simple: a lot. Forbidding most economic activity has to impose substantial hardship — material and otherwise — on countless people, not to mention future generations. I won’t go into detail, and I shouldn’t need to. Just think about it for a few moments. (See David Henderson’s “End the Lockdowns Now.”) And I haven’t mentioned the future harm from government’s so-called solutions: enormous deficit spending, money creation by the Federal Reserve, and the ratchet (specifically, the Higgs) effect from precedents set.

The point is that it’s easy to “reason” to the policy outcome you want if you list only the real and imagined benefits and ignore all the burdens. This was what Frédéric Bastiat was getting at in his brilliant essay “What Is Seen and What Is Unseen.”

The blunt-instrument policies adopted by many governors were chosen in the dark. Flawed statistical models seemed to shed light, but knowledgeable people questioned the validity of those models from Day One. At any rate, we know more now (though not nearly enough), so it’s time for the lockdown orders to be lifted, liberating society’s widespread entrepreneurial problem-solving process to do its thing.

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