Economics in One Virus (2021) - 2021 Book #14

Last week I finished reading the 14th book toward my goal of 50 for 2021 – Economics in One Virus: An Introduction to Economic Reasoning through COVID-19 by Ryan A. Bourne.

The book was just published this month. According to Amazon, it has a print length of 306 pages. I started reading it on Monday, April 12, and finished it on Friday, April 23. It took me 11 days to finish, again unfortunately well off the pace I need to read 50 books this year.

As the subtitle implies, Bourne uses COVID-19 to explain fundamental economic principles. He dives heavily into supply, demand, and prices. He builds from the idea that we all try to maximize our economic welfare, which involves more than just dollars and cents.

Mr. Bourne is the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute. The book, as you might imagine, forges a strong libertarian, i.e. free market, path. I recommend the book, and below I’ll explain how I personally respond to the libertarian lean of the book.

What Economics in One Virus is about

As I mentioned, Mr. Bourne uses the book to explain important elements of economics as they relate to the ongoing COVID-19 pandemic. In the introduction, Mr. Bourne notes his book is inspired by Economics in One Lesson, a core conservative economic treatise written by Henry Hazlitt and originally published in 1946. I also recommend Economics in One Lesson, where again just below I address how I respond to the strong libertarian lean.

Why did I choose Economics in One Virus

One of the blogs I follow regularly is Marginal Revolution, written by Tyler Cowen and Alex Tabarrok, both economists at George Mason University. I can’t recommend the blog more highly. I believe it was Tyler Cowen that praised Economics in One Virus. And since I’ve personally seen so many armchair analyses of the virus and its aftermath, I was curious in exploring a more polished account.

Why you would like Economics in One Virus

If you want to read more about the coronavirus and its connection to public policy, you would like Economics in One Virus. If you like thinking about free market economics from first principles, you would like Economics in One Virus. If you like to consider cost and benefit analyses of specific government interventions in the economy, you would like Economics in One Virus.

Why you would not like Economics in One Virus

If you do not enjoy reading libertarian-focused lines of economic argumentation, you would not like Economics in One Virus. If you want a data-heavy look into COVID-19 and its aftermath, you would probably prefer the deeper dives you’d find elsewhere. If you’re looking for a thorough critical investigation of the US federal government’s response to the coronavirus pandemic, you would probably not like Economics in One Virus. It’s much more about the economic principles at play, rather than detailed assessments of specific policy options.

Specific passages that captured my attention

I’ll start with a bit that helped me put the whole book into proper context

The really important point here, though, is that economic welfare is clearly not the same as financial well-being, even though the two are often used synonymously in public debate. “The economy” is, in fact, “us” and the choices we make. It is not just about our incomes or even formal activity that occurs in markets with prices.

I find this really important, particularly as I weigh the libertarian arguments throughout the book.

Free markets can work great when information is widely available, transactional costs are low, and the benefits and costs resulting from the transaction are constrained to the parties to the transaction. When these elements start to break down, free markets function less efficiently. And then add the idea that our “economic welfare” involves many elements for which no pricing exists, e.g. our chosen partner, and I quickly recognize that free markets alone won’t get us where we want to be.

Still, I find the libertarian view of the economy a useful starting place. If we understand how markets would function if they were free of government intervention, then we can debate what role we want the government to play, and what interventions make better sense than others. That’s part of the reason I like both Economics in One Lesson and Economics in One Virus so much. They’re both very helpful in understanding how free markets would function if left alone. They’re useful starting points for more involved debates around public policy.

The second excerpt is important, because it shows the nuance around the notion of “lockdowns”. Many businesses and other institutions “locked down” in advance of any government orders. Many of the imposed restrictions remained, or continue to remain, past the lifting of these government orders. Government fell down in many ways during the pandemic, but blaming “lockdowns”, and all their related consequences, entirely on government action is not a helpful way to assess our collective performance.

In short, overwhelming numbers of businesses and nonprofits embraced radical social distancing in the form of business premises closures and working-from-home arrangements before government mandates compelled them to close. Yes, we can find businesses and activities that did not voluntarily close and that would have remained open were it not for government lockdowns. But to a large extent, lockdown regulations in the form of stay-at-home orders and nonessential business closures codified changes that had already begun in much of the market sector across the country.

The last excerpt I’ll share landed closest to my personal thinking through the pandemic. I was shocked at how weak our testing infrastructure was – too few tests administered too infrequently. Mr. Bourne does a great job of explaining how we could overcome small testing inaccuracy with greater testing frequency. Yes, the costs were in the hundreds of billions of dollars, but it could have changed our trajectory through the pandemic, which was ultimately worth trillions of dollars.

Presuming regular, accurate testing was feasible, to test everyone in the United States twice per week for a year using a $10 rapid test would have brought an upfront cost of just over $340 billion (328 million people multiplied by $10 mutiplied by 104). Yes, that level of testing would have brought huge administrative costs and have required an unimaginable production scale, so it may have been unrealistic for the whole population. But that calculation shows that, relative to the economic welfare losses we have experienced through this pandemic, transformative regular testing would have been a relatively low-cost way of reducing the risks associated with the virus.

My overall impression of Economics in One Virus

If you still have an appetite for COVID-19 reading, I recommend Economics in One Virus. It’s a novel way to learn about our economy, the forces of supply and demand, and how our economy manifests from the decisions we do and don’t make on a daily basis.

As I mentioned, the story is told from a libertarian, i.e. a free market, perspective. I find this perspective useful as a jumping off point for economics conversations. We can get a sense of how markets would behave with no government intervention. Then we can decide what, if any, government intervention is necessary.

Of course I expect some folks to already have their fill of COVID-19 material. If that’s the case, move along. The economics bits alone won’t be worth the lengthy discussions of the pandemic and our reactions to it.

I just started reading Foodopoly: The Battle Over the Future of Food and Farming in America by Wenonah Hauter. However, just today my friends and I agreed to do our book club discussion of N.T. Wright’s Paul next Tuesday. So I’m going to put Foodopoly down, and get on my horse to try to read Paul by next Tuesday. (I haven't started it yet.) I’ll have reviews for both of those sometime in the next couple of weeks.

As always, thanks for stopping by.