Is Deregulation the Upside to COVID-19?
By Peter Calcagno
During the current pandemic, government officials at all levels have asked us to self-quarantine and practice social distancing. Each state has set its own guidelines, as they have shut down non-essential businesses. These orders have forced businesses to close or convert to curbside or delivery services. Almost all governors and many mayors have given shelter in place orders and have locked down public places like parks and beaches. These shutdowns have created tremendous unemployment and imposed hardship on many people that will take some time to resolve. In addition, this effective house arrest has forced many people to work from home and home school their children,
The struggle to pivot to this new environment of social distancing and rampant uncertainty are in large part due to regulation, and could have been easily prevented. We know that the FDA and the CDC were slow and ineffective to get tests prepared to detect the virus. Many farmers and wholesale food providers cannot nimbly reallocate food from restaurants and schools to grocery stores where it is needed because of labeling regulations. Where we have seen progress during this crisis, it has been due to capitalism, entrepreneurship, and deregulation.
Most people think that businesses hate regulation and fight to keep them from passing. This is far from true. Over thirty years ago Bruce Yandle introduced us to Bootleggers and Baptists and how businesses use moral cover to pass regulations that benefit them. The story is a common one in public choice theory; special interests have incentives to be well informed and pursue regulation that will have concentrated benefits, while the costs to voters-taxpayers are widely dispersed. Most citizens are rationally ignorant of the regulation, or if they are aware of them, realize that the costs of attempting to change the regulation are higher than the costs they incur. And sometimes they fall sway to the moral cover of the “Baptists.”
However, during this pandemic, many state officials have had to relax some regulations to accommodate the shelter in place rules pandemic-caused closures, strictly to save lives. These regulations range from the mundane such as relaxing liquor license rules to easing restrictions on medical professionals’ licensing requirements.
Let’s start with the less severe deregulation of liquor licenses. In an effort to assist restaurants that have had to shift to takeout only, state governments all over the US have relaxed their rules to allow restaurants to sell beer and wine directly to consumers. Liquor stores, which are run as state monopolies in many states, will now have competition as consumers can buy a bottle of wine with their takeout at their neighborhood restaurant.
Many parents are facing the challenges of working from home while homeschooling their children as schools have been closed for the rest of the academic year. While this poses a host of challenges to families, the question it will force is whether or not homeschooling on a wide scale is a viable alternative. School boards and teachers unions around the country have fought to prevent school choice options such as homeschooling, charter schools, and vouchers. However, much like after hurricane Katrina in New Orleans, there exists an opportunity to start over with schools as the pandemic may make parents realize that public schools can be improved and reformed.
In my home state of South Carolina, like in many others, the state government has been relaxing the renewal of licensing for a variety of occupations. We don’t yet know how many consumers will receive services from some of these professionals whose licenses have lapsed or been waived due to the pandemic. However, for those who do, we hope they will ask if the service was dramatically different, or if they felt unsafe with an unlicensed professional. Many of these occupational licenses create significant barriers to entry and mobility that this crisis might demonstrate are unnecessary. Again, these industries operate as special interests receiving concentrated benefits of restricting supply that allows them to charge higher prices than if the market was fully competitive. Consumers all pay a little more and are told it is for their safety and protection if they are even aware of the restrictions.
The need to reduce these restrictions and the costs they impose are nowhere more evident during this health crisis than in the medical profession. Shortages of health professionals due to licensing became quickly evident in areas hit hard by the virus. This emergency makes it clear that the restrictions on licensing across states impede healthcare professionals from helping patients, and demonstrates why reform is important. With the recommendations to engage in social distancing, how does one visit their health professional? The administration has loosened HIPPA requirements that expand the use of telemedicine. Federal, state, and local governments have all waived a variety of regulations regarding medical professionals to help patients during this crisis. Reciprocity has been granted to doctors licensed in one state to practice in another to easily move where they are most needed. Fortunately, state officials are recognizing that during a pandemic, continuing to cater to the special interests of the medical profession can have dire consequences, and are at least temporarily reforming regulations.
The real question is when this pandemic is over will consumers realize that the concentrated benefits of these special interest groups are not worth preserving? The upside to the pandemic may be it is putting these regulatory issues front and center. Will patients saved by doctors from out of state be upset that the doctor was not licensed in their state? Will consumers recognize the ease and convenience of telemedicine? Will we recognize that nurse practitioners have many of the same skills as doctors and can treat patients without a doctor present? Now that we have seen what life can be like without these restrictions and people continue to receive high-quality care can we put that genie back in the bottle?
While many parents will be happy to see the school year come to an end, will they realize that alternative schooling options are not necessarily harmful to their children? That unlicensed teachers- even parents- can teach their children and that a widespread conversation about school choice is worthwhile? On a simpler note will consumers realize that being able to buy wine or beer when they get takeout from their favorite restaurant or bar has not caused widespread alcoholism? Perhaps this pandemic will allow the normally unorganized citizens to put pressure on politicians to make these temporary regulations permanent. That is, if loosening regulations during a pandemic did not cause us any harm, then maybe it is ok for deregulation to persist when we return to normal times.