How Idaho may end up with more government, less freedom after coronavirus crisis passes

Rahm Emanuel said, ““Never allow a good crisis go to waste. It’s an opportunity to do the things you once thought were impossible.”

Yes, a crisis allows us to learn things about ourselves and the world, presenting us with the opportunity to do things better. What’s harder to know, however, are all the consequences of our new ways of doing things.

The economic law of unintended consequences states that the actions of people and institutions have effects that are often unanticipated — sometimes bad, sometimes good.

A positive example is when a business owner develops a new product because it will bring him or her great profits. Even if this business owner doesn’t really care about others, everyone benefits. Consumers have a better good or service at their disposal, or simply more choices. The actions of entrepreneurs have positive consequences that may be unintended.

Unfortunately, many actions have negative consequences that are unanticipated. Frédéric Bastiat, a 19th century French economist, distinguished between the “seen” and the “unseen” in any action. Bastiat showed that the danger of many government programs is the unseen consequences. Most everyone knows the obvious and visible consequences of new programs or stimulus spending, but the unseen consequences are many times less obvious and potentially more harmful.

One such example in the U.S. is the Social Security program. Economic research has documented that because this entitlement exists, the level of private savings is lower. The unintended effect of this popular government benefit is lower overall savings and investment in the economy, which in turn, lowers the potential growth rate of the economy.

A potential unintended effect of this current crisis is a large increase in the extent to which the government oversees and regulates businesses. Economist Robert Higgs has documented the growth of government in times of crisis. He refers to it as the “ratchet effect.”

Once a crisis ends, many of the government-imposed restrictions recede, but the level of government intervention does not fall back to previous levels. Over time, government interference in business and other aspects of our lives ratchets up.

COVID-19 may lead to a ratcheting up of Idaho’s government. The governor’s “stages of reopening” plan includes, for example, new reporting rules for restaurants to local public health officials. Hospitals may need additional government funding for the extra capacity they are now expected to build. Unemployment insurance may rise, because recipients now expect higher benefits. The list could be long.

Will we reopen? Yes. But how much of economic freedom will remain? Any less than before would be the real waste of this crisis.

Peter Crabb is a professor of finance and economics at Northwest Nazarene University in Nampa. prcrabb@nnu.edu