Ceiling Prices

We run though the day
And stare at the night
Is your head full of noises?
For me, well, it's just like
The Fourth of July
--Roger Daltrey

Among the dumbest of economic policies pursued by politicians is the price ceiling. The thinking is typical authoritarian. Think prices are too high? Then simply declare them lower. Set a maximum price for transactions on the market. Punish those who engage in transactions at a higher-than-mandated price.

What happens when producers are forcibly restrained from selling output at higher prices? Supply leaves the market. Shortages develop. 

Not only does present supply leave the market, but future sources do as well. Entrepreneurs are less motivated to develop marginal or substitute sources of supply when the profit signal of higher prices is suppressed.

Over time, prices are likely to be much higher--particularly if it takes a long time to replace capacity once it is taken off the market by the caps.

Cogitate on that as G-7 bureaucrats mull price caps on Russian oil.

Public Health Philosophy

Sometimes you're better off dead
There's a gun in your hand 
And it's pointed at your head
--Pet Shop Boys

Robert Malone proposes that public health policy is built on two philosophies: utilitarianism and Malthusianism.

Utilitarianism posits that the morally right action is the action that does the most good. It is a form of consequentialism--the correct action is assessed solely in terms of results produced. 

Utilitarianism fosters what these pages have deemed 'greater good accounting.' If a program is deemed to help more people than it hurts, then it is deemed a winner.

Malthusianism springs from the writings of political economist Thomas Malthus, who believed that population growth would outstrip food supply and other scarce resources, consequently triggering global poverty and death. 

The central implication of Malthusianism is population control. Limit the number of births so that future standard of living won't be compromised by too many people walking the planet.

Two hundred plus years, and billions of people, later and the world has yet to hit Malthus' dreaded upper bound of population. Why? More people produce more, which alleviates the scarcity that worried Malthus. Moreover, those people innovate, applying capital in manners that improve productivity even more.

Meanwhile, countries that have seen birth rates decline significantly, such as Japan, face major demographic headwinds likely to restrain standard of living in the years ahead.

None of that matters to public health officials, or climate alarmists, or socialists in general. The ingenuity that flows from liberty must be restricted in favor of utilitarian and Malthusian central planning. 

Never mind the misery and chaos that such planning creates... 

Administrative Overhead

Brantley Foster: What's this department? What do they do here?
Fred Melrose: Who knows? This place is a zoo. Nobody knows what anybody else is doing.
--The Secret of My Success

Administrative staffing (a.k.a. 'overhead') generally increases with organizational size. Small organizations are characterized by decision-makers who wear 'many hats.' A manager might make a production decision one minute, then an HR or accounting decision in the next.

As organizations grow, it usually makes sense to divide up decisions among specialists. Specialists focus on a narrow functional domain, such as R&D or marketing, which increases their decision-making productivity as they benefit from learning effects and lower switching costs. 

Moreover, sheer size and complexity makes large organizations difficult for any one person to understand. The number of decisions that must be made on a daily basis could number in the tens of thousands and easily exceed any single decision maker's capacity for rendering them. 

There are technical reasons, then, why we should expect more staff and administrative overhead as organizations get larger. More staff can improve productivity.

However, staff could also grow for social reasons. Because they seek to maintain or improve legitimacy in their institutional environments, organizations seek to score points with external social entities. Stated differently, organizations might add staff to 'look good' rather than to 'do better.' 

Coercive social pressures might drive organizations to hire regulatory or compliance personnel. Think environmental, safety, and legal departments. 

Social pressures might also be normative in nature, motivating organizations to staff in manners that signal awareness and caring about particular social issues and causes. For instance, many organizations have recently staffed departments of diversity and sustainability in response to those popular movements.

Meyer and Rowan (1977) seminally observed that administrative additions of this type may not be accretive to the organization's technical core at all. Adoption of staff for legitimacy reasons is instead largely ceremonial in nature. It is meant to satisfy the social needs of outsiders rather than the economic needs of buyers.

This is the price to be paid for increased social standing. More resources that could be invested toward productive ends, such as process and product development, are allocated bureaucratically for the sake of appearance. 

Some have argued that organizations must strengthen their legitimacy in the eyes of others in order to acquire the resources necessary to achieve greater economic performance. However, it is straightforward to theorize that excessive attention paid to looking good robs resources from the technical core, thus decreasing the likelihood that socially conscious organizations will do better and survive over time.

Perhaps this pathology increases with the strength of the institutional environment.

Reference

Meyer, J.W. & Roward, B. (1977). Institutional organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83: 340-363.

One for Two

I'm falling down a spiral
Destination unknown
Double crossed messenger
All alone
--Golden Earring

Yesterday the Supreme Court blocked the federal government's vaccine mandate for large employers while upholding the mandate for health care organizations receiving federal funding.

The judges were one for two.

Private employers, i.e., those with no strings attached to government, should be able to set the terms for using their property. If those terms include a requirement for employees to be vaccinated against a particular pathogen, then private employers are within their rights as property owners to do so. 

Stated differently, employers should be allowed to discriminate as to how their property is utilized. They can discriminate between vaccinated and unvaccinated individuals--just as they should be able to peacefully discriminate on any other factor--including race and skin color. If this discrimination is ill-advised, then markets will punish their poor decision-making.

It is, of course, completely within worker rights to discriminate as well. Individuals can discriminate against producers with vaccine mandates by not seeking work with these employers, or by resigning when their employers pass distasteful policies. 

While private enterprises can establish their own internal health care mandates, the state has no standing to forcibly impose its own mandates or interfere with the rules governing private labor market transactions. 

Of course, it is questionable whether many 'private' enterprises are truly private anymore. When businesses receive resources from government (e.g., government contracts or subsidies), or are subject to favorable regulatory treatment, then they are by definition receiving government support or sponsorship. The more beholden organizations are to government, the more likely they are to do the bidding of government in exchange for political favor.  

This brings us to the second part of yesterday's ruling. The high court declared that health care facilities that receive federal funding must comply with federal vaccine mandates. Health care organizations that receive federal funding are poster children for organizations that are beholden to the feds.

Because of their dependence on federal government resources, health care organizations are extensions of the federal government acting as de facto government agencies. 

The Bill of Rights gives such federal agencies far less leeway to discriminate compared to private entities. Whereas a private employer can justly create policies that favor particular groups, federal government entities cannot. Doing so would violate individual rights to religion, speech, assembly, association, privacy, et al--all of which are expressly protected from federal government interference under the Constitution.

Thus, a federal mandate that requires vaccination for employees of organizations beholden to the federal government is blatantly illegal and unjust, regardless of what six high court justices claim.

Traction History

Seven, that's the time we leave, at seven
I'll be waiting up for heaven
Counting every mile of railroad track
That takes me back
--Doris Day

Great repository here on the history of railroads in Cincinnati. Info and pictures document large railroads, medium interurban rails, as well as streetcars. Fabulous map too.

Amazing how long these rails were in existence and growing before change, and then how quickly most of them disappeared with the advent of highways/cars.

Lots of the infrastructure is still there, although sometimes you have to squint to see it.

Provides perspective on just how far we've come, and all of the people that advanced progress along the way.

Defending Shortages

Arthur Castus: What is his punishment for? Answer me!
Ganis: He defied our master, Marius. Most of the food we grow is sent out by sea to be sold. He asked that we keep a little more for ourselves, that's all. My ass has been snappin' at the grass, I'm so hungry!
--King Arthur

Transportation secretary defends widespread shortages, claiming that they are a product of a strong economy. Textbook central planner rationalization. 

The truth is that prolonged shortages occur only when markets are not permitted to freely function. In unhampered markets, increased demand motivates producers to increase prices. Higher prices signal opportunity to producers, who subsequently increase production rates and, in some cases, add capacity so that higher demand is met with more supply. 

Shortages persist if this process is impaired. If prices are not permitted to rise, or if producers are restrained from increasing supply (through, for example, regulations that slow supply chain activities), then demand continues to outstrip supply and shelves go bare. 

Those who defend shortages are typically the people who create them.

Risks of Specialization

Max Kellerman: You and me, Tito. We've seen it all, eh? Bubba and Zedda serving the first pasteurized milk to the borders. Through the war years, when we didn't have any meat. Through the Depression, when we didn't have anything.
Tito Suarez: Lots of changes though, Max. Lots of changes.
Max Kellerman: It's not the changes so much this time. It's that it all seems to be ending. You think kids want to come with their parents and take fox trot lessons? Trips to Europe, that's what the kids want. Twenty two countries in three days. It feels like its all...slipping away.
--Dirty Dancing

Previously we discussed the benefits associated with specialized work. What about potential downsides? One risk is restriction of trade. In order to realize gains from specialization, specialized producers must be able to trade with each other. By engaging in trade, specialists can satisfy needs that they are unable to fulfill themselves. They also benefit from the increased productivity of other specialists. Prices should be lower and quality should be higher when specialists trade.

When trade is restricted (e.g., tariffs), then specialists must either forego some needs or diversify. Either way, standard of living is likely to decline. 

Another risk is obsolescence of one's specialty. Due to competition, technological change, or evolving buyer preferences, certain lines of work may longer be valuable on the market. To adapt to such disruptive change, specialists must learn new skills.

While the 'switching costs' associated with changing jobs may be relatively low for some specialists, they may be extremely high for others. Much retraining may be required. If large commitments were made to build previous now-obsolete skill sets (expensive schooling, investment in expensive narrow-purpose tools, etc) then those specialists may have difficulty justifying a career change due to high sunk costs. Moreover, the repetition associated with specialized tasks can be habit forming...and old habits sometimes die hard.

How can workers cope with the risk:reward trade-off associated with specialization? We'll discuss in a future post.

Imitation Gone Awry

"Hey, check out the Dukes over there. They must know something. Let's get in on it."
--Floor trader (Trading Places)

Although institutions are commonly viewed as people (the president of the United States), places ('institutes of higher learning'), and even dates (holidays), institutions are better seen as laws, customs, and other norms produced, practiced, or symbolized by those 'things.' A primary, but certainly not singular, purpose of institutions is to provide a stable social backdrop for human interaction.

Institutions operate by exerting 'isomorphic' pressure for sameness in behavior. Per their seminal work, DiMaggio and Powell (1983) elaborated three types of isomorphic pressure: coercive ("Do this or go to jail"), normative ("This is how we do things around here"), and mimetic ("Follow the leader"). Although these categories are often useful for analytical purposes, they are often blended in practice.

A common hypothesis in institutional theory is that, when uncertainty rises in the environment, mimetic pressure often dominates the landscape. Simply stated, when people don't know what to do, they copy the behavior of others who they think might 'know' something.

There is certainly some validity to this premise. It is hard to dismiss that much of the behavior during the CV19 pandemic seems to be driven by mimetic isomorphic pressure. For example, once an influential organization decides to mandate vaccines, other organizations quickly do the same. People see others wearing masks, so they put masks on too.

Mimetic isomorphism can lead to obvious dysfunctionalities. Imitating others is the basis for herd behavior. The 'blind may be leading the blind'...perhaps over the cliff.

It seems plausible that mimetic isomorphism can only 'work' for so long. If copying the behavior of others doesn't produce positive results within a reasonable amount of time, then people will being to discard this strategy in favor of something else. Probably not all at once, but gradually as people slowly conclude that their imitation strategies are not producing desired results. 

People more prone to think for themselves are likely to be early dissenters and strike out in search of alternatives. Those alternatives may take the form of non-isomorphic behavior entirely. Entrepreneurship, innovation, et al. This is sometimes called 'active agency'--i.e., pursuing interests that do not align with prevailing institutions (Oliver, 1991).

Perhaps much of the pushback to the new round of CV19 mandates that we're currently witnessing results from active agency driven by imitation gone awry.

Reference

DiMaggio, P.S. & Powell, W.W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48: 147-160.

Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16: 145-179.

New Dark Age

Dark side's calling now
Nothing is real
--John Cafferty & the Beaver Brown Band

The defining characteristic of a 'dark age' is stagnation, or lack of progress. In the medieval Dark Ages, general conditions of isolation led to lack of trade--of both goods and ideas. There were few written volumes or inventions. An intellectual darkness.

Today we have the opposite of isolation. The world has never been so connected. Yet, while much is being written, it seems that production and trade of ideas is in decline. Groupthink abounds as people plug into the echo chambers of social networks. Dominant logics shout down plausible rival hypotheses and evidence that conflicts with prevailing views. 

This time around intellectual darkness seems to be falling because of too much connection rather than of too little. Theory posits that institutional pressures for isomorphic behavior increase with connectedness (Oliver, 1991). 

Could conformity and compliance that flows from over connectedness be driving a different sort of intellectual darkness--one that leads to a new dark age?

Reference

Oliver, C. (1991). Strategic responses to institutional processes. Academy of Management Review, 16: 145-179.

School Daze

We don't need to education
We don't need no thought control
--Pink Floyd

Yes, socialists are trying to destabilize the system. But some of their tactics are downright headscratching. One is the effort to defund police. Socialists need strong armed agents to enforce their agenda. They need to buy, not sell, police force.

The other is the effort to shut down schools--particularly public schools. Socialists seem to be focusing on the disruption that shutting schools will create chaos for children who need socialization with their peers as well as for working parents who depend on schools as a day care service.

National Poll: 40% of Families More Likely to Homeschool After Lockdowns Endhttps://t.co/YWAT2r5mxM#coronavirus

— Larry Elder (@larryelder) July 30, 2020

What socialists don't seem to be factoring in is the possibility that many people will seek education alternatives. Homeschooling plus innovative perhaps tech driven ed alternatives might rise to meet demand and render the public school model obsolete.

If this were to happen, then socialists would lose a primary channel for indoctrinating young minds.

New Progressive Era?

"The only time you come out of the ground is when you smell a profit."
--Big Joe (Kelly's Heroes)

A professor wonders whether the 2020s might usher in a new progressive (a.k.a. socialist) era. The possibility certainly cannot be ruled out. State power has been shooting higher at the expense of social power.

Meanwhile, people are fearful. Under conditions of threat, people are likely to restrict information processing channels and centralize decision-making authority.

Stated differently, when frightened people tend to ignore creative solutions to problems that require voluntary cooperation and, instead, favor single-minded remedies enforced by strong armed agents.

That, my friends, is a situation ripe for progressivism. And statists can smell it.

Public Property and Liberty Lost

I don't know where to start
Or where to stop
My luck's like a button
I can't stop pushing it
--General Public

If you're a socialist, then how do you advance your agenda in a society that values private property rights but also tolerates some public ownership? Simple. Gradually push for more public ownership in order to gain more control and authority over people's lives.

The possibilities of this strategy have been well demonstrated over the past months. A primary justification for the coronavirus lockdowns was that we needed to 'flatten the curve' so that hospital capacity would not be overwhelmed. Trends toward 'socialized medicine' have increasingly framed hospitals as utilities that must be managed as open access public goods rather than as private enterprises subject to natural laws of supply and demand.

Consequently, rather than a dynamic system where hospital managers would work in creating more supply (e.g., flexible capacity) in the face of a spike in forecast demand and having the pricing system ration scarcity, socialist planners were able to convince citizens that everyday behavior had to be forcibly restricted to preserve a static institution incapable of dynamic response.

And people have largely bought into it.

The more property placed in public sphere, the greater the loss of liberty.

Vanishing Capacity

There is freedom within
There is freedom without
Try to catch the deluge in a paper cup
--Crowded House

Capacity in service sector operations is often difficult to accurately pinpoint. It depends less on facility area and more on operating constraints imposed by managers. For instance, the number of customers that a thousand square feet of restaurant space can serve depends on the number of tables positioned in the layout--something that prior to the current pandemic was primarily at the discretion of the establishment's managers.

Regulations for post-lockdown reopening of businesses are dramatically reducing operating capacities in many facilities. In particular, social distancing rules that force more space between employees, customers, et al. are effectively decreasing potential for productive output from many service sector operations.

Sticking with the restaurant example above, some facilities are being forced to remove every other table from service in order to comply with social distance requirements, effectively cutting the number of customers that can possibly be served in half. In addition to restaurants, many retailers, schools, healthcare, and other service sector operations that previously thought they had plenty of production space are now discovering that they don't have enough.

Capacity is vanishing.

It should go without saying that these regulations upset the economics of many service sector enterprises. Yes, many businesses are now being permitted to open. But if the rules restrict operating capacities below the minimum efficient scale necessary to recoup costs, then one of two things is likely to happen.

Either prices of many service sector outputs are going up, or many service sector operations are going under.

Madison's Sorrow

Always searching for the real thing
Living like it's far away
Just leave all the madness in yesterday
You're holding the key when you believe it
--Michael McDonald

When the governor of Ohio announced what amounted to a state lockdown of all 'non-essential' businesses a month ago, I happened to be patronizing a small business in the area.

Lamenting about the forced closure that would go into effect at 9 pm that evening, my proprietor friend speculated that lawsuits would arise challenging the constitutionality of the order. I agreed, although I wondered whether states might have more discretionary police power than the federal government to manage acute situations in their local jurisdictions.

Judge Nap believes that they don't.

Mirroring the US constitution, each state constitution mandates separation of powers between the legislative, executive, and judicial branches. Devised by James Madison and other founding ancestors, separation of powers requires each branch to stay within their assigned borders of authority. The legislative branch writes laws, the executive branch enforces those laws, and the judicial branch interprets them. This mandated division of labor prevents one branch from assimilating power.

It is important to note that Madison et al. stipulated no exceptions to this rule. There are no riders that state, for example, that the requirement for separation of power is negated during crisis situations.

Unfortunately, the genius of this design is turning into Madison's sorrow.

To counter the COVID-19 pandemic, state governors and other officials have been crafting various 'orders' mandating or restricting various individual behaviors. Stay at home, close your business, don't go to the park, keep 6 feet of distance between you and others. The Judge argues that these orders are NOT laws. They cannot justly carry a criminal penalty for violation. Governors can no more legally craft law or assign punishment for noncompliance than courts can command the military or police.

Moreover, even if governors were enforcing orders to close churches, businesses, etc. passed by state legislatures, such laws would be profoundly unconstitutional. The First Amendment firmly establishes freedom of religion and freedom of assembly as fundamental liberties. The Fifth Amendment, per its Due Process clause, firmly establishes the right to be left alone and to engage in voluntary exchange with others.

No constitution gives governors the authority to decide what human activities are 'essential.'

The Judge notes that states may have cause to impair fundamental liberties, but measures must meet what is called a strict scrutiny standard. Strict scrutiny requires that a 'compelling state interest' must exist, and that the interest must be pursued by the 'least restrictive means' possible.

While there is little question that fighting a pandemic is a compelling state interest, there are far less restrictive means to combat a pandemic than broad lockdowns that shutter businesses, churches, and prevent voluntary trade.

At the 'least restrictive' end of the countermeasures spectrum, a state might advise citizens of the dangers at hand and recommend ways to reduce illness or contagion--particularly among those who may be most at risk. By letting the people decide, liberty is preserved as individuals make free, personalized choices for navigating the situation.

Instead, governors are violating their oaths to uphold the Constitution. They are overstepping their legal boundaries when they create orders that are the purview of state legislatures. Moreover, those orders violate constitutional rights. Even when combating pandemics, states must pursue their interests using means that are least restrictive to essential liberties. Plenty of countermeasures to the COVID situation exist that are less restrictive to liberty than those currently imposed.

This is why lawsuits that my small business owner/friend envisions--those that challenge draconian lockdown orders--should win the day in just courts.

Let the People Decide

Sybilla: What becomes of us?
Balian of Ibelin: The world will decide. The world always decides.
--Kingdom of Heaven

Editorial by Mises editors says it more eloquently than I can. Not only does government lack the legal authority to shut down American life, but the far reaching harms brought on by this authoritarian action will surely do more harm than the virus itself.

As they reengage their brains and begin to think clearly, many people are coming to realize that 'the cure will be worse than the disease.'

The correct solution is never a top down central plan implemented by force. Rather, the solution is always bottom up and de-centralized based on voluntary cooperation. Ingenuity and trade with respect to ideas, resources, production, and trade that overcome adversity and enable adpatation.

As the editors state: "The American people--individuals, families, businesses--must decide for themselves how and when to reopen society and return to their daily lives."

Let the people decide.

Pandemics and Politics

But at night
When all the world's asleep
The questions run so deep
For such a simple man
--Supertramp

Personal observation suggests that beliefs about the severity of the COVID-19 situation and about the extent to which draconian countermeasures (i.e., shutting down the economy and forcing people into the homes, etc) are more pronounced toward the progressive side of the political spectrum.

If there was such a relationship, then what might explain it? Perhaps it's simply the Trump Derangement Syndrome at work. Progressives who can't shake their Trump-related cognitive dissonance/psychosis  may perceive all social and economic problems as being worst case scenarios and exacerbated by the president. They might also see opportunity in crashing the economy in hopes that voters will take it out on Trump at the ballot box.

Of course, socialists all the way back to Marx have believed that torching social and economic fabric somehow works to their advantage. Because they expect that a utopian socialism would somehow rise from the ashes of societal breakdown, they don't mind lighting some fires.

Or perhaps it's a cognitive thing. Maybe progressive ideals appeal to fast thinkers who are more prone to reactive, emotional decision-making. Under conditions of threat, fast thinking progressives might be more likely to narrow information channels and rely more on central authority, and are less likely to visualize dynamic, adaptive responses to problems that are enacted voluntarily rather than coercively. As fast thinkers, they would be less likely to weigh the costs of various alternatives to combat a public health threat.

In any event, survey/polling research in this area might yield interesting findings.

Reason Awakens

Jared Cohen: This is weird. It's like...a dream.
Sam Rogers: Oh, I don't know. Seems like we actually may have just woken up.
--Margin Call

My sense has been that hysterical, fast thinking related to COVID 19 will wane as people begin to engage their more analytical slow thinking processes. There is evidence that this is occurring.

Perhaps most important is growing realization that resources should be focused on the most vulnerable rather than on the masses. Congressman Thomas Massie:

Can we focus on a strategy that protects the most vulnerable, while allowing healthy individuals under 50-60 to carry on productive lives, until the virus has circulated such that it can’t find enough viable hosts in the general population to infect those over 50-60? 2/x

— Thomas Massie (@RepThomasMassie) March 17, 2020

And even sports show host Clay Travis:

“There’s a lot of talk about social distancing right now, and what is most important is to keep young people away from old people. This is the best way to stop the spread of the virus as 97% of all of Italy’s victims of the coronavirus have been over 60 years old.”—@ClayTravis pic.twitter.com/T5mDdp7bu3

— Outkick the Coverage (@Outkick) March 16, 2020

As Travis notes, the economic costs of across-the-board quarantines and shutdowns must be considered (particularly in highly leveraged systems such as ours):

“My concern is we are making major economic decisions without considering all the costs. The smarter play is to allow everyone under the age of 60 to go about their normal lives while everyone above 60 should be self-quarantined for 2-6 weeks.”—@ClayTravis pic.twitter.com/RZVcdBz8d5

— Outkick the Coverage (@Outkick) March 17, 2020

There is also growing realization of the size of the COVID 19 'pandemic' vs common cold, flu, and the adaptive response and flexible capacity of the health care system to the current situation:

Happening now: @MorningsMaria @FoxBusiness @ClevelandClinic ceo "we have tested over 1400 people, only 3.5% tested positive. Flu & common cold still worse. But the measures to contain shd be followed. The hospitals have the capacity to treat this"

— Maria Bartiromo (@MariaBartiromo) March 17, 2020

Finally, interesting perspective by a Nobel laureate who forecast the slowdown in Chinese COVID 19 infection rates. His basic premise, similar to one advanced in these pages, is that parabolic epi curves are unlikely to last. One interesting twist in his explanation is the idea that, because people have limited social networks in a physical sense, infection rates wane after those people who routinely interact get exposed. People are unlikely to meet new people outside of their routine networks at the same rate as inside their network, causing infection rates, after a peak, to fall.

Reasoning minds are waking up.

Dynamic Response

Dr Peter Venkman: Ray has gone bye-bye, Egon. What have you got left?
Dr Egon Spengler: Sorry, Venkman. I'm terrified beyond the capacity for rational thought.
--Ghostbusters

A motivator of coronavirus panic is fixation on the epidemic, or 'epi,' curve. The epi curve shows the cumulative count of virus cases over time. Because of network effects associated with transmission of infections, most epi curves take on a parabolic shape in the early going. Here is one from a recent WHO COVID 19 situation report:

Rest assured that epi curves for influenzas assume similar shapes as flu seasons commence.

Because human tendency is to extrapolate past trends into the future, epi curves plotted during early phases of illness transmission are prone to provoke fear. "At this rate, millions will be infected soon," the analyst is tempted to conclude.

Unfortunately human minds, particularly ones operating under conditions of uncertainty and threat, are prone to static analysis. They assume the current situation keeps unfolding as the current picture projects. Fast thinking minds have limited proficiency for dynamic projections--i.e., accounting for path-altering future changes, many of them adaptive in nature, to the situation.

In the case of COVID 19, such dynamics might include:

People choosing to alter their social behavior to reduce probability of transmission.

People taking action to protect those most vulnerable to the disease, which btw would render an epi curve based simple on total infection counts less meaningful as infection:mortality ratios drop.

Hospitals and other care givers creating flexible capacity (e.g., special temporary treatment centers with concentrated care resources) to enable handling more acute cases than many pundits forecast possible.

Other sources of innovation that improve treatment processes in significant ways.

Warming weather that reduces viral seasonality effects.

Mutation of the virus into less potent forms.

Greater recognition of dynamic responses inevitable to pandemic situations would likely attenuate the hysteria flowing from fixation on the parabolic shape of the early COVID 19 epi curve.

Less Trade, Higher Prices

We stand to lose all time
A thousand answers by 
In our hand
--Yes

To answer your question, Liz, yes. Two natural forces in particular have been keeping price increases at bay over the past couple of decades--despite escalating inflationary policies of central banks seeking to do otherwise. One has been the broad integration of several powerful innovations, particularly with respect to info tech, into production processes. Small computers, the internet, wireless, et al have dramatically improved worker productivity. As output/hr goes up, there is downward pressure on prices.

For those who believe globalization has been a significant force bringing and keeping inflation down globally ... do you believe deglobalization could represent upside inflation risk (if not near-term, longer term)?

— Liz Ann Sonders (@LizAnnSonders) February 27, 2020

The second natural force has been expansion of global trade, which allows world economies to realize gains from specialized production. When division of labor increases, learning effects and lower switching costs boost productivity. When specialized producers exchange their output, those productivity gains are collectively shared. Those shared productivity gains exert downward pressure on prices.

Restraints on global trade, whether those restraints come from protectionist tariffs, bans to quell the spread of illness, or other sources, eliminate a big source of downward price pressure.

As such, a big wind in the face of aggressive central bankers seeking to 'create inflation' ceases to blow, and higher prices of goods and service become more likely.   

Info Tech Growth

"Here's the deal. Gary and Wyatt...they created me on their...computer."
--Lisa (Weird Science)

Growth rates of various information technologies shown below. One takeaway is just how quickly some of these technologies moved up the curve toward maturity. It took radios and TVs decades. Smartphones reached an 80%+ usage rate in just a few years.

The other takeaway is that take-up rates of all these technologies are leveling out. On the upswing, info tech was a tremendous contributor to productivity improvement which, in turn, kept price inflation at bay.

Now that these technologies are maturing, their positive effect on productivity is declining and their brake on inflation goes away.