The COVID-19 pandemic is a wet market for central planners. But road maps for exiting the crisis are meaningless when there are no perfect or final answers.
Originally published in The Australian Financial Review
Nobel prize-winning physicist Richard Feynman famously said, “I would rather have questions that can't be answered than answers that can't be questioned.” As the coronavirus response becomes routine, citizens used to regarding themselves as free are restlessly questioning the length, extent, and logic of their confinement. These are good questions and should be asked. Governments are also asking themselves the same questions and their decisions are neither perfect nor final.
The virus response has raised many more questions and these also don’t have perfect or final answers. All the more reason to keep asking them. When dealing with complexity, timely questions are more valuable than dogmatic answers.
The most challenging question governments are now facing: how to reanimate an economy that has been thrown out of whack – into “disequilibrium” – by the public health shutdown.
There are questions of intergenerational compact: are older people the chief beneficiaries of the fight against the virus and should they in some way repay the cost of protecting them, borne largely by younger cohorts? What would it mean to our social fabric if the intergenerational quid pro quo were to become more explicit, even mandatory?
And there are questions of proportionality: are we even using the right metric to close the economy when we obsess about infection rates? Surely the better questions are what the recovery rate is, and whether our hospital system has capacity. Are people requiring urgent non-COVID-19 hospitalisation still able to get the life-saving treatments they need? By all accounts, Australia's emergency departments are quiet. If COVID and non-COVID patients are adequately served, isn’t it time to loosen up economically damaging social restrictions?
The question of the right public-private sector balance is also being raised: while the private sector suffers widespread job losses and pay cuts, the public sector has accepted a tokenistic temporary pay freeze, stoking resentment in some quarters and leading others to call for an increase in secure public sector roles.
As long as we’re printing money, the distinction is a nicety – a large taxpayer-funded workforce as against a largely taxpayer-funded workforce. Nassim Nicholas Taleb’s warning about “those who become antifragile at the expense of others” springs to mind. The bureaucratic and political classes become more secure and powerful in volatile times because the private sector is exposed to downside risks.
There are the aspirational questions: should we use the upheaval as an opportunity to change? The world was hardly perfect before coronavirus struck, could it be perfected? The serious Utopians have an eye to seizing the moment to implement their visions. From nation-statehood to modern monetary theory, the crisis is a wet market for a new century of central planners.
'Cryoeconomics' is coincidentally also suggestive of how many business owners feel about abstract economic theorising right now.
From a practical perspective, one of the best questions being asked is what this new concept of economic “hibernation” is, exactly, and whether it is possible for an economy to be stopped and started like a machine. A cabal of free market economists is suggesting a better analogy would be cryogenics, which attempts to hold a complex system in stasis for reanimation. Darcy Allen et al are calling their attempt to answer the question of how to defrost an economy “cryoeconomics”, which is coincidentally also suggestive of how many business owners feel about abstract economic theorising right now.
The first chapter of Cryoeconomics is already available online as a teaser of the more extensive work to come. It asks whether economics, which has to date dealt with kick-starting sick or sluggish economies using fiscal and monetary stimulus, is equipped to freeze and revive the deeply complex relationships, connections and contracts that constitute the real economy – a system which is “no more a collection of resources than a human being is a bag of chemicals”.
This is the question that business people are asking themselves, too. When the shutdowns first started to affect the economy, policymakers encouraged business to take on cheap loans to retain their staff until the economy could be reopened. It’s somewhat concerning that they didn’t twig earlier that a business that goes into debt without the expectation of a return on risk is a lousy bet for lenders, but thankfully the notion was soon scrapped in favour of the JobKeeper scheme.
The JobKeeper safety-net has been a huge relief to eligible businesses and their staff. It is not, however (as the federal Education Minister has pointed out), a licence to let our brains go to mush. Individuals and businesses that hibernate will wake to a world that has moved on without them.
Which brings us to the most challenging question governments are now facing: how to reanimate an economy that has been thrown out of whack – into “disequilibrium” – by the public health shutdown. The truth is, nobody knows. Road maps are meaningless.
But from cocktail deliveries to medical manufacturing, innovation has flourished wherever regulation has been removed to allow business to respond rapidly during the crisis. Perhaps the best question of all is what all that red tape was for in the first place, and whether there are more such barriers blocking the way of a speedy recovery.