Wednesday, March 18, 2020

Tyler Cowen Thinks Coronavirus Could Be This Generation's World War II

By Peter Suderman - March 18, 2020 at 09:19AM

How exactly should we respond to the threat of COVID-19, the deadly disease caused by the novel coronavirus that has, in a matter of weeks, upended much of daily life across America and the world? In many ways, the answer to that question depends on just how big of a threat you think it is. And George Mason University Economist Tyler Cowen thinks it's a very big threat indeed.

"I think there's a good chance…that this becomes like this generation's World War II," he tells Reason, "a totally formative event that shapes how people see the world." This is a once-in-a-lifetime emergency, and Americans need to be "prepared for it being very serious." Cowen, for his part, has been "devoting pretty much all of my efforts every day to putting the United States in the best possible position to respond."

For Cowen, that means a two-track approach—one private, one public. First, through the Mercatus Center, the libertarian think tank he chairs, he's sponsoring the Emergent Ventures Prizes, an extensive set of financial rewards for innovators, explainers, and responders whose work helps to combat the virus. There are prizes for journalism, for social media analysis, for policy, for social distancing innovations, and for rapid treatment plans. The prize pool starts at $1 million, and he's soliciting donations to make it even larger. 

"The purpose of the prize is to incentivize and also get money to people who are solving the problem, and in fact they're doing so well or they're so busy they wouldn't have time to apply for a grant or even know that it existed." With a rapidly spreading virus, time is of the essence, which makes prizes a particularly valuable form of incentive. 

"By some estimates," Cowen says, "the number of actual cases [of COVID-19] could be doubling every five to seven days. The longer we wait, the harder it gets to address the issue. So the nice thing about prizes is their start-up costs are very low—you just announce the prize."

Cowen says he's already given out at least one of those prizes, and although he wouldn't provide a name, he said it was to "people who just literally needed money to make a purchase transaction so they could start building testing kits."

For Cowen, the prizes are an important extension of his belief that the private sector has a substantial role to play in responding to the crisis. What's more, he argues, is that it already is.

"I think big business has actually done phenomenally well," he says. "If you look at Amazon, Walmart, many other American businesses, they were not necessarily expecting this to be as dramatic as it was. But they had the size, the scope, the scale, the talent to pull off provisioning Americans in a major way. Internet providers, Zoom or Skype, which is now owned by Microsoft. Those have been the essential backbone of our adaptation." 

That's the first track. But Cowen is an economist and a studious analyst of American politics and policy. And he's trying to make a difference there as well. 

Cowen recently released a brief outlining what he calls "the best economic plan against the coronavirus." In it, Cowen calls for a package of measures, from expanding unemployment insurance to reducing tariffs to loosening labor rules to sending every American a check for $1,000—a giant fiscal stimulus that Cowen acknowledges would "mean a much higher budget deficit and higher inflation rate." 

Cowen doesn't relish this outcome. With deficits already set to run more than $1 trillion annually for the foreseeable future, he says "we were already taking a big chance, which made me nervous. We're now taking a much bigger chance in what is a more fragile global economy. But I think you have to ask what are the relevant alternatives." The goal, he says, is "to do those things that infringe upon liberties the least" and to avoid even worse policies down the road. Spending that results in tax hikes, or that somewhat increases the existing risk of a debt crisis, he argues, presents "a relatively low degree of harm." 

"We already have taxes," he says. "It's bad if they're higher in the future. But we're not locking people up, we're not nationalizing sectors of the economy. We're not ruining that much." Without an infusion of cash into the economy, there's a risk of systemic meltdown: large numbers of people who can't pay their rent, who can't get food, and resulting problems with the court system. And that, in turn, could result in policy responses that are even worse. "I think you would end up with a lot more government than if you just send people some amount of money now."

And yet, the recent history of emergency policy interventions, from 9/11 to the financial crisis, suggests that rapidly introduced, large scale interventions often have significant drawbacks—at best, as with the stimulus plan passed under President Barack Obama, they work less well than intended. But in many cases, as with the creation of the Transportation Security Administration, they leave legacies of dysfunction that can linger on for years. 

Cowen doesn't disagree. And he doesn't necessarily think that this time will be different. "I think it's absolutely fair to expect policy will get worse and that will be with us for a long time," he says—under any scenario.

And yet he sees a glimmer of hope. For even if much of the response to the current crisis is flawed or misguided, it might also help wipe away some of the policy detritus of decades past. As an example, he points to the Trump administration's recent announcement that doctors would be freer to conduct patient visits online, over internet video services. "In essence, telemedicine is being deregulated," Cowen says, and as a product of the current sense of urgency, "it can just happen. I think it's possible, probably even likely, it just stays that way forever." 

Beyond that, he points to universities that are doing more of their classes online. A substantial reform of the Food and Drug Administration, whose old regulations and procedures gummed up initial efforts to develop testing for the coronavirus, is now likely. "I don't know how far that will go, but I would say there's at least a scenario where we reinvent ourselves. And at least in some areas, but certainly biomedicine, I think we'll be freer and more able to do things than we would have been without this crisis." 

Once again, Cowen brings up World War II as the precedent. America faced a "very difficult, very tragic, pretty terrible set of choices with different details, different tradeoffs." The war, he says, "did restrict liberties in significant ways. I don't just mean people fighting, but just Americans at home having their consumption restricted or their opportunities limited. But nonetheless, America in the 1950s was a much freer place in the world as a whole, was much freer than if we had done nothing."


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