‘Externality Argument’ for Lockdown Isn’t as Strong As It Seems, Argue Economists
Since the start of the pandemic, one of the main justifications for lockdowns – at least in democratic Western countries – has been the “externality argument”. This is the argument that government is justified in restricting our freedom in order to prevent us from harming others – which we might do by transmitting a deadly virus.
As the scientist Richard Dawkins stated back in September:
You can argue over whether masks, handwashing, banning groups etc are effective. What you can NOT argue is that you are personally entitled to take the risk as a matter of individual liberty. You risk other lives as well as your own. It’s just elementary epidemiology.
Proponents of this argument sometimes appeal to John Stuart Mill’s harm principle, which states, “the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others”.
While the “externality argument” does have merit, the situation is more complicated than its proponents would have us believe. In a recent article for the Southern Economic Journal, the economists Peter Leeson and Louis Rouanet explain why.
Before getting to their arguments, it’s worth explaining what an “externality” actually is. In short, it’s a cost imposed on someone who did not agree to bear that cost. The classic example is pollution. When a factory releases toxic waste into a lake, this may poison the water, leading to illnesses or deaths among users of the lake. Since the lake users did not agree to be poisoned, the release of toxic waste is an externality. And most people would say it justifies government intervention.
However, the externalities associated with COVID-19 aren’t quite like this, as Leeson and Rouanet point out. First, when one individual transmits the virus to another, this has both negative and positive effects. It has a negative effect on the person who catches the virus. But it has a positive effect on vulnerable people who are self-isolating, since each infection reduces the time until herd immunity. And the sooner herd immunity is reached, the sooner those people can return to the community.
Second, COVID-19 externalities are often self-limiting. Since most people would prefer not to catch the disease, they have an incentive to avoid behaviours that increase the risk of transmission (such as attending large gatherings). This is in contrast to the factory example, where the owners have an incentive to release as much waste into the lake as possible. And indeed, evidence suggests that voluntary social distancing has much more impact on the epidemic’s trajectory than mandatory lockdowns.
Third, many interactions that result in transmission occur on privately owned sites that individuals enter voluntarily (e.g., shops, restaurants, cinemas). Absent force or fraud, there is therefore no on-site externality. What’s more, since businesses compete for customers, they have an incentive to take measures that reduce customers’ risk of infection (e.g., increasing ventilation or imposing capacity limits).
Fourth, the main externalities associated with COVID-19 are actions taken by individuals at one site that affect the infection risk of others at different sites. For example, if someone attends a party that results in a super-spreader event, he and all the other party-goers impose costs on society by increasing the general level of infection. This requires individuals and businesses to take measures to reduce the risk of infection they and their customers will face.
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