North Dakota Ag Connection - Economics Spotlight: COVID Renews Debate on Legislating Externalities

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Economics Spotlight: COVID Renews Debate on Legislating Externalities
By: Cheryl Wachenheim, NDSU Agribusiness and Applied Econ - 06/05/2020

I was an early adopter of COVID-19 precautions.

Although it would raise no eyebrows today, I received considerable good-natured ribbing from the family when I purchased a dozen facemasks in preparation for our yearlong adventure in China. I was acting with an abundance of caution spurred by the dozens of articles sent to us by well-meaning friends about air quality issues in our host country.

Given the dire warnings, we were pleasantly surprised at the near-pristine air during our initial weeks in Beijing. We assumed the clear blue skies were reflective of the weather, still warm enough that the coal-burning plants that produce heat during the winter still were idle. New to the idea of a centralized government, we were a bit slow to recognize that our fortunate air quality environment was the result of a carefully planned and implemented mandate that limited air pollution and all but guaranteed clear air.

The Chinese government ensured clear skies in Beijing through a number of widely implemented mandates, including reducing to half the number of cars that could be operated and shutting or restricting operation of hundreds of industrial firms. These efforts were in preparation for their 70th anniversary World War II parade, which would be televised throughout China and showcase China's military to a worldwide audience.

A centralized government, influence over media and a populace that places relatively strong trust in its federal government facilitate rule changes and implementation in China and mitigate pushback from citizens. In contrast, changing legislation and associated rules in the U.S. typically involves considerable discussion, debate, negotiation and even adjudication.

This can be especially true when those changes affect civil liberties. In fact, prior to COVID-19, a model where federal, state and local governments would impose significant limitations on resident behavior and economic activity was hard to imagine.

Of course, we have plenty of laws and rules that guide our daily lives and these continue to evolve through time as new information comes to light and societal perceptions about what should be and what should not be, and about the tradeoff between personal liberties and the good of society, evolve. These changes, however, are typically incremental and take time.

And, while we have common federally incentivized state laws (for example, adopt this law or your state will lose highway funding) such as a 21-year-old minimum drinking age, many others are left up to the states (for example, mandatory seatbelt use). Thus, we are relatively accustomed to having different rules as we move across state borders.

Back to China. Once the as-defined critical need for pristine air quality in Beijing passed, conditions quickly returned to air quality index numbers deemed "very unhealthy," and I pulled out our still-packed masks and instructed my children to wear them when outside. From their reaction, I might as well have asked them to toil in hard labor.

As is sometimes true with those not yet teenagers, they took my instruction as an invitation to negotiate. Their sales presentation to leave the masks at home centered around the notion that "it is my body and I can do what I want," with an emphasis on the assumption that they would only be hurting themselves by not wearing a mask.

My attempt to change their way of thinking rather focused on the impact their additional health-care needs in the future would have on society. In other words, I introduced their wearing of masks as a positive externality; that is, a benefit for the greater good that they had not considered in their decision.

I was not surprised that an argument that limited their personal liberties as a tradeoff for a theoretical long-term benefit to society was not terribly effective. I was, however, encouraged by my daughter's innovative and thoughtful reply, which pointed out that firms creating the smog, a negative externality, should be punished, not them. She had a good point, although it did not provide an immediate solution.

Fast forward five years to the always satisfying moment when a parent can say, "I knew these would come in handy someday." We found ourselves digging through the linen closet looking for long-forgotten face masks so my Italian exchange students could fly home safely. Yet still early in the COVID-19 pandemic, we were very surprised that travelers would be required to have face masks to use public transportation on the journey home. That surprise did not last long.

Under COVID-19, we have a new paradigm that reconsiders personal liberties on many fronts and at levels most residents have never experienced. Individuals are being told or asked to stay home, to limit the number of individuals with whom they can gather, even in their personal residences, and, yes, to wear masks in public.

Firms are being required to close their doors or severely limit their activities. In other words, positive externalities to society, such as flattening the curve, have been deemed important enough to immediately restrict personal liberties; a situation that is new to the vast majority of our population.

The liberty of deciding whether to cover one's face in public has largely been retained. It is Centers for Disease Control and Prevention recommended. This is guidance that has been disseminated widely and often through many communication channels, including those about which I am only aware of because of my two-month homestay with teenagers.

While sometimes polar differences occur in thoughts on the wearing of facemasks, the debate does not seem to be over whether wearing a face mask is an effective or appropriate action or whether doing so generates a positive externality, but rather about whether the size of the externality outweighs personal liberties.

It bears repeating that our own democratic form of governance generally results in considerable discussion, debate, negotiation and even adjudication, and therefore time, before changes that affect civil liberties can be enacted. COVID-19 did not give us that option.

To a society that is used to debating the balance of externalities and personal liberties in contexts as varied as whether a person is free to raise chickens in their back yard or if vaccinations should be required, the current speed of changes affecting liberties and the noted lack of resident-level discussion can be understandably destabilizing.

I am proud of our communities as we have stayed positive and gracious to one another, and continue to use the time-proven techniques of appealing to individuals to act in the greater good and speaking of societal norms while recognizing that residents without facemasks are behaving in a manner that is within the letter and spirit of the law. In the words of the oft-shared message, we can only know what is best for us and cannot hope to know the situation of others. Continue to be kind to one another.

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