The Solution is Inaction

I’m try­ing to get my cur­rent men­tal model of the Covid crisis in writ­ing, to see both where it leads and where it is in­cor­rect. This is an eco­nomic model. Sec­tion 1 is defin­ing the prob­lem and vo­cab­u­lary, sec­tion 2 is a de­scrip­tion of my men­tal model, and sec­tion 3 is com­par­ing my model to re­al­ity.

A cou­ple as­sump­tions I’m mak­ing: I as­sume that we can­not over-iso­late (i.e. we should so­cial dis­tance as much as pos­si­ble, and not worry about over­shoot­ing); I as­sume that this crisis will last about 2 months in its cur­rent form, by which time (as in China right now) the situ­a­tion will look differ­ent enough that there’s no way to pre­dict and no use in fore­cast­ing now; lastly, de­spite be­ing gen­er­ally fairly liber­tar­ian, I see a strong cen­tral­ized gov­ern­ment like own­ing Vol­cano In­surance in Iowa, it’s gen­er­ally a waste of money but when Yel­low­stone erupts it’s a good time to soak them for ev­ery last dol­lar.

Let’s sep­a­rate the Amer­i­can work­force into three groups. The first group is re­mote-work­ers. Th­ese peo­ple are gen­er­ally able to main­tain their eco­nomic out­put while main­tain­ing heavy so­cial iso­la­tion. Not only can they work re­motely, their cus­tomers can uti­lize their product re­motely. I imag­ine most in the LW com­mu­nity are in this cat­e­gory. While out­put may be re­duced by hav­ing to work from home, work con­tinues to get done, and we can in prin­ci­ple ride this thing out for a few months with­out too much in­ter­ven­tion or life-de­stroy­ing change. Note that e.g. re­tirees and the long-term un­em­ployed count as re­mote-work­ers, vac­u­ously.

The sec­ond group is es­sen­tial-work­ers. Th­ese peo­ple can’t stop work­ing. They are farm­ers, gro­cery-store cashiers, Ama­zon de­liv­ery­men. I would hate to be one of them right now, be­cause their needs will in­evitably be the last con­sid­er­a­tion.

The last group is non-es­sen­tial non-re­mote work­ers, or Eloi (from H.G. Wells, I know Eloi are sup­posed to be up­per class but the point is they are worth­less and vuln­er­a­ble and rem­nants of an ob­so­lete eco­nomic model). The Eloi will de­stroy our econ­omy. They are the 30% un­em­ploy­ment rate I’ve heard pre­dicted. They can’t have any eco­nomic out­put for the next two months.

How should we deal with these differ­ent work­ers? The op­ti­mal thing is for all the Eloi to go into hi­ber­na­tion for a while, nei­ther work­ing nor buy­ing any­thing. Every­one sits in the room they are cur­rently in for two months, wait for this whole thing to blow over. It’s hon­estly kind of perfect, since they can­not la­bor but also can’t buy much with their wages any­ways, they can’t go out to eat or catch a movie, they can’t go on trips, they can’t go shop­ping, so why not hi­ber­nate? The prob­lem of course is that hu­mans need at least food and shelter. Okay, so we shut down the whole econ­omy for a while, where there used to be Amer­ica there is now a bunch of farms mak­ing eggs and bread and milk, truck drivers trans­port­ing them to cities, and gro­cery work­ers hand­ing them to Eloi. The Eloi sit in bed and eat all day. No one is paid, the es­sen­tial-work­ers keep feed­ing the Eloi, and in two months the gov­ern­ment snaps its fingers and ev­ery­thing goes back to the way it was. Oh, the re­mote-work­ers keep work­ing this whole time (why not?), for them ev­ery­thing is nor­mal, and if the lack of cus­tomers makes them use­less, we just keep des­ig­nat­ing more peo­ple as Eloi un­til there are no more re­mote-work­ers or un­til the crisis dies down/​changes fun­da­men­tally.

This model has prob­lems, ob­vi­ously. What are they and how can we fix them? Well, first of all, why do the es­sen­tial-work­ers keep work­ing? They can just quit their jobs, stay at home, and the gov­ern­ment will take care of them. This is just the well-known welfare trap! The solu­tion is to give them free rent and gro­ceries as well, and in ex­change for work­ing they are given ac­cess to some of the cushy re­mote-worker econ­omy (e.g. they can or­der lux­ury goods on Ama­zon).

This model seems roughly rea­son­able to me. There are de­tails about how to get the right num­ber of peo­ple into the right cat­e­gories, but we only have to hold it to­gether for a cou­ple months and in the worst case sce­nario, the gov­ern­ment can just hold es­sen­tial-work­ers at gun­point. I’m not too wor­ried about civil liber­ties, if the crisis lasts too long the gov­ern­ment will be over­thrown any­ways (and any civil liberty they vi­o­late in the fi­nal days will definitely get cov­ered by the new con­sti­tu­tion, so there’s kind of an up­side).

Okay, so that’s not ac­tu­ally all that rea­son­able. The gov­ern­ment isn’t just gonna de­clare all gro­ceries free. That much rad­i­cal change would have in­calcu­la­ble down­stream costs. How can we jerry rig our ex­ist­ing cap­i­tal­ist sys­tem to ap­prox­i­mate this emer­gency-econ­omy I’ve de­scribed? Well, it looks roughly like what we’re see­ing out of Wash­ing­ton right now, so that’s good.

Imag­ine an Eloi that used to work at a bar that is now closed. He needs to pay the Krogers and his land­lord.

1) Either the gov­ern­ment de­mands that Krogers and the land­lord give him free stuff,

2) or the gov­ern­ment gives him free money,

3) or the gov­ern­ment de­mands that the bar con­tinue to pay him (but the gov­ern­ment pays the bar).

Th­ese are of course all equiv­a­lent, mod­ulo de­tails. The sec­ond op­tion looks like the pay­ment-to-Amer­i­cans plan that Congress is work­ing on right now (re­mem­ber, it’s very im­por­tant that they pay es­sen­tial-work­ers as well to avoid the welfare trap, but phase-outs for re­mote-work­ers in­clud­ing the un­em­ployed can be thought of with the nor­mal eco­nomic frame). The third op­tion looks (as far as I un­der­stand it) like what the fed is do­ing with in­ter­est rates, or like the bailouts peo­ple are talk­ing about.

On a tan­gent, I’m hon­estly not sure why we can’t do op­tion (1) with re­gard to rent, but for Ch­ester­ton’s Fence rea­sons, I as­sume that land­lords have to burn a cer­tain amount of money per month in offer­ing to the Elder Gods or else we will all die.

Now, the bar that our hy­po­thet­i­cal Eloi works at pre­sum­ably has other costs. The cor­po­ra­tion needs to pay rent, it may need to keep up main­te­nance of some sort, though it won’t be pay­ing dis­trib­u­tors. For this rea­son we need to fun­nel some money into small busi­nesses, even if gov­ern­ment checks take over their pay­roll.

A lot of the crit­i­cism of the gov­ern­ment’s re­sponse com­ing from cer­tain cir­cles seems to be pred­i­cated on the usual cir­cum­stance where the gov­ern­ment’s goal is to spur eco­nomic de­vel­op­ment. The goal is to stop eco­nomic de­vel­op­ment in its tracks (at least for the Eloi and, in part, the es­sen­tial-work­ers) so the cur­rent strat­egy seems mostly spot-on to me. The true goal is to main­tain sta­sis in such a way that startup costs are min­i­mized when the econ­omy does get go­ing again.

My crit­i­cism of the gov­ern­ment’s re­sponse is that, if I were a small busi­ness owner right now, I wouldn’t be sure if I should fire my em­ploy­ees so they can take ad­van­tage of un­em­ploy­ment, or keep them on with re­duced wages sup­ple­mented by gov­ern­ment checks (all of their wages are paid by the gov­ern­ment, the only differ­ence is an agree­ment that they will come back to work when it’s over). I think the most im­por­tant thing now is for the gov­ern­ment to ar­tic­u­late a clear plan so peo­ple know what they should be do­ing as we tran­si­tion out of the econ­omy and into the, well, what­ever this is.