Friday, 24 April 2020

Q: How would a truly capitalist society have handled this pandemic?


Since we don't live in one, folk have been asking how, in a truly capitalist society, the market would have responded to this pandemic here's an answer based on Yaron Brook's thread a month ago.

Even a truly capitalist society can never remove the threat of such a cataclysm. But being more nimble and much better prepared to face any event likely or unlikely makes dealing with such a threat far more peaceful. And without a state central bank having so destroyed the means of exchange that we were already confronting the bursting of an historically high asset bubble (the "everything bubble") at the very same time as this pandemic arrived, businesses and employed folks and families may have arrived at the start line with more savings and liquid assets with which to see the pandemic through ...

So, in a truly capitalist society, here is how the market likely responds: 
  • Health insurance companies have been continually monitoring for health risks (because they have a strong economic interest in maintaining their customers' health). 
  • Having detected a possible outbreak, they warn early -- to minimise their later costs -- implementing plans with hospitals, that have been developed well in advance.
  • Demand from hospitals for extra equipment causes prices to go up quickly. 
  • Market responds by bringing on new capacity quickly -- and by researching the possibilities of new and better equipment. 
  • Prices at supermarkets and shops rise on all goods in high demand, thus reducing "hoarding" and assuring continued supply. (Suppliers are encouraged to move resources to produce more of what's demanded.) 
  • Hospitals (all private, and in a completely private market) activate their emergency plans (for which they have a strong profit-motive) for additional beds (in mothballed buildings, local hotels, or other facilities).  
  • Private pharmaceutical companies and labs rapidly develop tests at the request of hospitals and clinics (motivated by the highest profits going to those developing and supplying the earliest and most reliable testing). 
  • Private clinics start testing en masse.
  • Goverment's job -- being to protect individual rights -- is to make sure those who are a threat or potential threat to others are isolated.
  • Private media and health experts provide objective (non-party political) advice to individuals and companies on how to deal with the pandemic in the context of their own lives, instead of all advice and commentary being poisoned by partisal political interests, and how it might affect their favourite leader's poll ratings. (And they also take time to explain the reasons for the emergency pricing in supermarkets etc.)
  • Testing provides individuals and companies with the kind of information crucial to making rational decisions. 
  • Private labs and pharmaceutical companies rush to innovate treatments and vaccines (motivated by the highest profits going to those developing and supplying the earliest and most reliable test kits, treatments and vaccines).
  • Private testing and certification organisations ("FDA" replacements) ramp up to approve test kits, treatments and vaccines (motivated by the highest profits going to those approving the most most reliable test kits, treatments and vaccines).
  • Businesses adjust to peoples' preferences for safety, installing the necessary protections and conveniences (encouraged also by their own insurance providers, who are motivated to provide and issue objective guidelines). Businesses unable to stay open, or only in a limited fashion, rely on norm loss-of-business insurance and koha. Voluntary friendly societies pick up the slack.
  • People who don't follow the reasonable guidelines suffer social ostracism, and are left to suffer the consequences.
  • Personal, loss-of-business, and life insurance contracts could all be written in ways that say "if you want to be covered, behave."
In short, a truly capitalist society would have acted more swiftly, more effectively, with fewer police checkpoints and fewer blowhards in the press. (And the press would not have been banned from operating.)

Even this epidemic as it has already panned out has frankly revealed that almost any business has an economic interest in monitoring and developing plans for emerging viruses ... unless they figure it’s cheaper to be bailed out.

So why didn't it happen this way, even in the semi-capitalist United States?
  • because even private hospitals in the U.S. are driven by CDC and FDA policy, and by their guidelines on "best practice"
  • because health insurance companies and health providers enjoy near-monopoly protection through regulation and licensing, discouraging genuine competition to motive improvements
  • because no amount of forward planning will be rewarded when govt steps in to change the rules of the game. Or to announce bail-outs all round. Even to abject failures.
And the government's job? The job of government in a truly capitalist society remains the same either in our out of a pandemic: to protect individual rights. So how specifically can government go about that in a pandemic?
  • ensure objective rules and transparent due process in isolating or distancing individuals
  • ensure insurance companies honour all their contracts; and
  • provide incentives -- such as making profits tax-free for whoever finds the cure first.
.

1 comment:

  1. I'm going to stick to the government part, since I think compared to the rest of your article, I don't think you given much thought to it, and how it would play out especially given the current cirumstances.

    1. The due process argument for self-isolation and distancing:
    Based on what we know about the virus, a person could have the virus and be asymptomatic, and could also be passing along the virus, unknowingly. What would be a rational case of due process here? Since if the incubation is 2-14 days, it's very likely by the time an arbitration process has been completed, the person might already would have shed the virus. I think this applies to the second point as well.

    As for the third point, I think you run into the same problem that happens in mixed economies when it comes to Intellectual Property. Many times in history, hell you can even go back to the times of Newton and Leibniz, multiple people can arrive at the same innovation or idea, with little to no evidence of copying or stealing each from one another. It's pretty possible that since there are so many different parties looking for a cure, that multiple people will arrive at possible cures around the same time. Also, not to mention many scientific breakthroughs, like a lot of innovations in tech, are a product of open source access to information. Doesn't incentivizing the first to a cure, lead to more institutions, private or public from keeping data to themselves?

    ReplyDelete

Comments are moderated to encourage honest conversation, and remove persistent trolls.