Coase and Covid: The Spectrum

By Lyle D. Albaugh & Donald J. Boudreaux.

"To deal effectively with Covid-19 we endorse what we called in our previous essay “the individualized option.” That is, while we recognize both the danger posed to many people by the coronavirus, and the fact that persons infected with this pathogen can spread it when coming into proximity with others, we argue that the least-cost method of keeping harm to a minimum is for each individual to take whatever precautions he or she chooses. 

If we’re correct, no justification exists for government to restrict individuals’ movement or activities.

We’re aware that our proposal to put responsibility for protection from covid exclusively on each individual sounds extreme, and perhaps downright kooky. But testament to the plausibility of our proposal is perhaps found in a commonly held attitude about a covid vaccine.

A common understanding is that there will no longer be any need for government-enforced lockdowns and other restrictions on social interactions if and when a safe and effective vaccine becomes widely available and taken. Some people might believe that the benefit of a vaccine lies in its being taken by other people: Jones is no longer afraid of crowds because he’s aware that vaccinated strangers can’t spread the disease to him.

But surely many other people recognize that the more direct benefit of a vaccine is that it protects each vaccinated individual from becoming infected, regardless of whether or not other people are vaccinated.

If Smith can at low cost protect herself from covid with a vaccine, there’s no need for government to compel other people to shelter-in-place, to “socially distance,” to wear masks, or to otherwise refrain from going about life normally. Access to a vaccine means that each individual becomes what economists call “the low-cost avoider of harm.” If Smith chooses not to take the vaccine, or carelessly fails to do so, she – not anyone else – is correctly regarded as the cause of whatever harm she suffers as a result.

Note further that with an effective vaccine, there’s no reason to mandate that it be taken. If Smith doesn’t get vaccinated, she thereby chooses to assume the risk of being infected by any contagious carrier of the virus. Because Smith can easily vaccinate, Jones’s refusal to vaccinate cannot be said to impose any harm on an unvaccinated Smith.

A Wide Range of Possibilities 

As a matter of economics, protection by a vaccine is simply at one end of a long spectrum. At the other end of the spectrum is the possibility of protection only by government-enforced lockdowns and related mandates.

We admit the theoretical possibility that a pathogen might emerge that’s not only unusually lethal but that also can easily penetrate masks and any other protective gear that individuals might wear. Under such extreme circumstances, the case for government-enforced lockdowns would be stronger. No individual would have any reasonable prospect of protecting himself or herself from pathogens emitted into the atmosphere by others.

Yet as we move along the spectrum toward more realistic situations, the ability of each individual to protect himself or herself from the virus, at reasonable cost, increases. At some point the lowest-cost means of protection from the virus involves no government-orchestrated collective actions but, instead, only voluntary individual actions. Becoming vaccinated is only the ideal and most obvious of these latter sort of actions.

The relevant question today is: Where are we now on this spectrum? It’s true that protection provided by widely available personal protective equipment (PPE), as well as by each individual’s ability to choose if and by how much to self-isolate, might not be as ironclad as is the protection that would be provided by a vaccine. Nevertheless, the fact is that each individual already does have the ability, at relatively low cost, to obtain for himself or herself a substantial degree of protection regardless of what other people do. Therefore, government-imposed restrictions on work, schooling, travel, shopping, partying, and all other forms of social gathering are justified only if the costs of such restrictions are lower than are the costs of relying upon each individual to protect himself or herself.

We argued in our previous essay that the costs of relying on individuals to protect themselves almost certainly are far lower than are the costs of government-orchestrated restrictions on social gatherings. We understand, however, that complexities can be introduced to call our conclusion into question. For example, what if strict lockdowns for, say, a month would completely eliminate the virus? Might not the cost of such a lockdown prove over time to be lower than having those among us who are especially vulnerable or risk-averse self-isolating or donning PPE indefinitely into the future?

Possibly. A practically infinite number of different such hypotheticals could be listed, with many of these showing the possibility of lockdowns being the lowest-cost – the “best” – method of dealing with the virus. But while public policy can never be made with perfect foresight, it also ought never be made on the basis of hypothetical possibilities. The range of what’s possible is vastly larger than is the range of what’s plausible. And public policy should be made only in light of what’s plausible.

Is It Plausible? 

Is it plausible that government officials have sufficiently accurate and detailed knowledge about how mandated restrictions on socializing will affect the economy, especially over time, such that these officials can be trusted to mandate only those restrictions that produce benefits greater than their costs? Is it plausible that, even if lockdowns in the specific case of Covid-19 pass some cost-benefit test today, the resulting expansion of governments’ powers will not be abused tomorrow? And is it plausible that a people bridled, broken in, and subjugated as never before by the Covid-19 lockdowns will retain enough of a sense of personal responsibility and desire for freedom that they will resist government overreach in the future?

We’re confident that the answer to each of these questions is an emphatic ‘No!’ We can find no plausible reason to believe that the same government officials who routinely refuse to look beyond the next election – who regularly display utter ignorance of the most basic economic realities – who habitually sacrifice the public welfare on the altar of special-interest groups – and who are known often to lie and dissemble are, in any real-world situation, likely to use the terrifying power to lock down in ways that pass a cost-benefit test. When we take account of the full costs of lockdowns and related mandates, including the pernicious precedents these inevitably set, it’s clear that the lowest-cost – the best – source of protection against disease such as Covid-19 is personal responsibility."