As noted above, the argument against central planning is even more general than the argument about prices. It also applies to government policy during a pandemic. Among the important factors that governments do not have nearly enough information about are people’s health, their resistance to disease, their attitudes to risk, or their financial circumstances to decide which industries, which jobs, or which sectors of the economy to shut down or limit. Health, for example, varies widely, as do people’s attitudes to risk. Governments cannot take all these factors into account when making overall plans for an economy. This is true whether the central planning is by federal governments, state governments, or local governments.
Although Hayek argued that even if there were no problem of incentives under socialism it would not work, there are in fact major incentive problems under socialism, which Hayek never denied. And the massive incentive problems with central planning to deal with COVID-19 became apparent early on.
This is from David R. Henderson, “The Abject Failure of Central Planning During COVID,” in Donald J. Boudreaux, COVID-19: Lessons We Should Have Learned,” Fraser Institute, 2022. It was published online earlier this month.
Another excerpt:
It’s this kind of experimentation that was not allowed in most states or in any provinces or territories. One might think that allowing such freedom would put at risk people who are afraid of the virus. It would. But they are free to isolate themselves. Which is better? Isolating everyone by force or the threat of force, or letting people choose whether to isolate or not?
Moreover, when individuals and firms make decisions to deal with COVID, they can take account of local information. They also have better incentives: if their plans don’t work well, they bear a substantial portion of the cost. So, for example, if a hairdresser in California had been allowed to stay open (for the first many months they were not so allowed), she and her clients could learn from experience just how risky the transactions were. Many customers would be paying close attention and, especially with modern technological innovations like Yelp, many potential customers would have paid attention also.
And finally:
It never makes sense, in a world of millions of goods and services, to try to minimize one thing, in this case, COVID infections and deaths. Tradeoffs are huge and important. To analogize to the case of socialist central planning, it would be as if an economy’s central planners decided to maximize the amount of bread—and forget about eggs, other foods, home heating, transportation, clothing, and health care.
Read the whole thing.
The picture above is of Anthony Fauci. He wasn’t literally a central planner because he had little power. But for at least the first few months of COVID, most governors in the United States followed his and Deborah Birx’s advice, shutting down major parts of the economy and regulating other parts of the economy.
READER COMMENTS
Grand Rapids Mike
Dec 28 2022 at 11:36am
To me the knee jerk reaction to impose drastic, unfounded Covid protection measures projected the totalitarian instincts of too many politicians and the DC bureaucratic ruling class. The media, including Silicon Valley leftist, effectively blocked any real discussion of alternative measures. Only now with the liberation of Twitter is the massive control tactics of the Government are being made known. This event illustrates that central planning in all its failures depends on the support of media and compliant citizens, indoctrinated or bullied to believe what they are told.
Will add this tactic is being implemented in the Global Warming control tactics spanning the globe.
Hayek was right to title his book “Road to Serfdom, which I am now re reading.
Monte
Dec 28 2022 at 6:37pm
The Covid-19 public health crisis provided the cover bureaucrats needed to conduct their socialist experiment. They’re constantly looking for weaknesses in our free enterprise system to exploit in order to gain power and control. Like the velociraptors attacking the electric fence in the movie, Jurassic Park, socialists “never attack the same place twice. They test for weaknesses, systematically. They remember.”
David Henderson
Dec 28 2022 at 7:00pm
I love the analogy.
I wonder, though, what weakness they found in the free enterprise system. In my view, it wasn’t so much a weakness as an unwillingness of free enterprise’s traditional defenders to defend it strongly. Many of us did, of course, but some others were AWOL.
Monte
Dec 28 2022 at 8:29pm
Maybe it’s traditional defenders in government became intoxicated with the power accorded them under the guise of a “public health crisis.”
Now, you and I might argue that free markets are mostly self-regulating, but democratic socialists like Bernie Sanders are capturing the imaginations of our younger generations by claiming its weaknesses consist mainly of the profit motive, monopolistic competition, inequality and poverty.
steve
Dec 29 2022 at 10:59am
I see this occasionally but it seems like code. What experiment was run?
Steve
Monte
Dec 29 2022 at 11:32am
A simple internet search for ample proof of this is, like mine, at your fingertips.
“I can see nothing, Holmes!”
“On the contrary, Watson, you can see everything. You fail, however, to reason from what you see. You are too timid in drawing your inferences.” – The Adventure of the Blue Carbuncle. – Arthur Conan Doyle
Monte
Dec 29 2022 at 4:52pm
It’s not just “code” or “conspiracy theory.”:
Responding to COVID-19 Through Socialist(ic) Measures: A Preliminary Review
“The pandemic represents a rare but narrow window of opportunity to reflect, reimagine, and reset our world.” – Klaus Schwab, World Economic Forum
steve
Dec 29 2022 at 10:58am
Actual covid policy as carried out was mostly run by the states, as you eventually point out so it was not centralized on a national level. How long and to what degree individual states followed Fauci/CDC advice was highly variable. Regardless, I am having a hard time seeing why following advice is the same as centralized power. Each individual states had its own public health people and could follow as they wanted. Further, in the states of which i have knowledge, and I suspect all states, individual towns/cities followed or did not follow that advice. We had stores in our smaller towns with signs saying that no one with a mask on would be allowed to enter.
The result was higher death rates in places that did not follow CDC advice, but that was their choice and maybe that had positive effects that they preferred.
Steve
Jon Murphy
Dec 29 2022 at 11:11am
“Centralized” refers to decisions being made by a few centrally placed planners, rather than many dispersed planners. The fact that states dictated COVID policy for their jurisdictions is still a form of centralized planning. People could not judge for themselves the merits of various reactions to COVID.
steve
Dec 29 2022 at 1:11pm
And as I pointed out that then devolved to each individual municipality/county/city. Reality is that we had no centrally planned and enforced policy. We had guidelines from the CDC. We had general policy set by the states and modifications of that policy at the local level. Enforcement was at the local level. I guess you could claim that still having a town of 5000 enforcing its own determined policy is central planning but the term starts to become meaningless.
Just to be clear, it appears that you are advocating that for any public health issue we should always leave the choice up to individual citizens. So we should stop requiring vaccinations for kids to go to school?
Jon Murphy
Dec 29 2022 at 1:14pm
And as I pointed out, that is irrelevant (also, as often the case, incorrect. In many states, counties, towns, etc had to follow directives set by the state government).
Jon Murphy
Dec 29 2022 at 1:46pm
Let me put it another way:
The US had many instances of centralized COVID planning. Every state issued various mandates and regulations. Local and county governments had to obey at least those; they could go more strict, but they could not go less strict. They could not experiment.
steve
Dec 29 2022 at 4:08pm
Not true. Many counties/cities ignored state mandates. In my state when masks were mandatory it was supposed to be $10 ticket and local DAs often ignored it and did what they thought made sense. You would only get a ticket for not wearing a mask if a business asked you to leave for not wearing a mask and you did not. AFAICT this was pretty much what every rural county in the state did. It was OK to ignore mandates as long as no one else made a fuss over it, and most the time no one made a fuss. Heck, there are plenty of notes on blogs and social media by people who opposed mandates about how it was nice to get out of the big cities and go where people ignored the mandates.
https://www.timesonline.com/story/news/local/2020/07/27/beaver-county-police-poor-mask-behavior-could-be-disorderly-conduct-trespassing/42088613/
Steve
Jon Murphy
Dec 29 2022 at 5:31pm
The mere fact they had to ignore state mandates is proof of centralized planning
robc
Dec 30 2022 at 12:06pm
After separation of school and state, each school could decide their own rules on vaccinations.
So, yes. And no.
David Henderson
Dec 29 2022 at 12:15pm
You write:
Following advice is NOT the same as centralized power. But your second sentence I quote above explains my point. As Jon Murphy points out in response to you, there was centralization at the state level. Public health officials, as you note, could follow as they wanted. The people who couldn’t follow as they wanted were the citizens of those states.
Mactoul
Dec 29 2022 at 8:26pm
If covid had death rate 10 or 50 times higher, would you still object to central directives?
In other opinion, the problem with covid directives was that they were wrong and unsuited to the actual circumstances, and not that they were directives.
Monte
Dec 29 2022 at 10:02pm
Yes. An appeal to extremes argument doesn’t make central planning work any better.
Jon Murphy
Dec 30 2022 at 10:37am
I cannot speak for David (although I can guess his answer), but to me the deadliness of the disease is irrelevant. If Covid were 10x deadlier, a multitude of plans (as opposed to just one) would still be better. People adjust to information they recieve. If COVID were deadlier, people would take more precautions as that information was revealed. In fact, there is evidence people were already reacting to COVID without the central planners needing to tell them what to do (I have a short lit review in a forthcoming paper. You can find an ungated version here).
Part of the issue with the central planning of COVID is that the planners were operating on bad information and refused to adjust as new information came out. People could not act on the new information because of the central planning. Thus, errors were compounded.
steve
Dec 30 2022 at 3:58pm
That may make sense to an economist or an ideologue but makes no sense to someone trained in biology and medicine. History shows that no matter how deadly the disease some groups will not take any precautions or actions and those people are then a source of risk for everyone else. It also shows that some groups will always minimize responses and some groups wont take actions until it is too late to stop a large surge so those groups will be a risk to everyone else.
Look at that we are facing now. People are rejecting childhood vaccinations so we are seeing outbreaks of childhood diseases we had not been seeing before largely among those not vaccinated with some of them among people who had been vaccinated since herd immunity has been broken.
Sorry, the reality is that people adjusted all along. They may not have followed your preferences but that does not mean they were not adjusting. Were they wrong? Probably sometimes, it was a new virus but largely the correct actions were taken from a public health POV.
Steve
Jon Murphy
Dec 30 2022 at 5:14pm
Yes, I agree. They were. All the more reason why central planning fails; it frequently fails to take into account the fact that people are people.
I’ll also note that your final paragraph stands in contradiction to the rest of the comment. Were people adjusting and those adjustments correct (whatever that means) or were they not adjusting and then at risk because of the virus?
Comments are closed.