Big government is not the solution; it's the problem
By Scott Sumner
I went into this pandemic with a low opinion of government. But even I never could have imagined the extent to which the crisis would discredit arguments for big government. The ineptitude of the US government seems almost beyond belief.
On January 23rd, I was trying to buy surgical masks in New Zealand and found all the pharmacies were sold out. At roughly the same time, here’s what was going on in America:
To be clear, it is not that they [economists] want the public to miss out on life-saving products. Quite the contrary. They believe that soaring prices stimulate greater output, and that policies to cap costs might limit supplies and so do more harm than good. In 2012 the University of Chicago surveyed 32 eminent economists about legislation that banned price gouging during a weather-related emergency. Only three supported the ban; more than half criticised it. Similar views have been aired in recent weeks. An economist with the Cato Institute, a conservative think-tank, lamented the “madness” of anti-gouging rules, saying that profits are what entice firms to meet rising demand for safety equipment.
Yet a closer look at one key piece of equipment—masks—during the coronavirus crisis shows that this standard view needs revamping. Economists are normally loth to tamper with prices, the most basic element of any market. But little about this pandemic has been normal. Price signalling alone would have been inadequate to the challenge of ensuring vast increases in supply.
“We are the last major domestic mask company,” he wrote on Jan. 23. “My phones are ringing now, so I don’t ‘need’ government business. I’m just letting you know that I can help you preserve our infrastructure if things ever get really bad. I’m a patriot first, businessman second.”In the end, the government did not take Bowen up on his offer. Even today, production lines that could be making more than 7 million masks a month sit dormant.