COVID-19, Market-Failures and Free-Riders
Keywords: Economics; Morality; Climate Change; Market Failure
“And the days are not full enough And the nights are not full enough And life slips by like a field mouse Not shaking the grass."
- Ezra Pound
As the days go by, it seems to become ever more distressing to articulate any thoughts around the COVID-19 pandemic. Not only do the infection and death toll appear to show no sign of slowing down (Bing, 2020), but also the backlash in economic damage is now swiftly unraveling with dreadful implications (Rainey & McCaskill, 2020). If this wasn't enough, scientists are now also warning of an exponential rise in the number of people becoming increasingly aware of what an exponential function is (The Derringer, 2020).
Much has been written in the past few weeks about SARS-CoV-2 (coronavirus) and what it means for the future of our economic system (Alexander, 2020), sustainability (Irvine, 2020), climate and pollution (Gerretsen, 2020), and the chance to remake a 'new normal' (Baker, 2020). I take all of these positions with the seriousness they warrant and would add my two cents.
COVID-19 has shaken the globalized and interconnected foundations of our civilization and thrown our immature inclinations for transhumanism out the window (for the time being at least). Similarly, this virus is lifting the veil and revealing the full extent of our hubris in assuming that Homo sapiens had been divorced from the laws that constrain biological life. When the dust settles, if there is a lesson to learn from this crisis is that there are always consequences to unrestrained growth (more on this in Where's Wally? (Abegão, 2020)).
In the face of all of the adverse sequela from this virus, I would still argue for the existence of one obscure blessing in disguise.
Previously, I had invited some reflection into the question of "should we fly in the age of climate change? (Abegão, 2019). Beyond pure theory, I began to challenge the need for frequent flying, especially for whimsical and frivolous reasons, such as weekend sightseeing. As a result, it has been almost two years since I took a flight, and during that time I engaged in something called a 'market failure.' Allow me to clarify.
In economic circles, a market failure occurs when individuals acting in their rational self-interest do not produce the optimal or desired outcome for the collective. In other words, a market failure takes place whenever the individual in a group ends up with a worse result than if they had not acted in rational self-interest. This can occur either because the individuals are subjected to too many costs or receive too few advantages (Chappelow, 2019a).
Let us return to the example of voluntary abstention from international air travel. Individuals who forego these high impact CO2 actions (Wynes & Nicholas, 2017) are committing themselves to the collective challenge and responsibility of restraining the emission of greenhouse gases that build up the detrimental effects of climate change (Rieder, 2016). When I choose to relinquish that flight and decide to stay home for the weekend, I renounce my opportunity to experience a distinct culture and human history. I waived my freedom of mobility, in exchange for a moral commitment.
Now, none of this would constitute a market failure per se, if everyone was doing the same thing. However, that certainly isn't the case, as the growth of global air traffic demand has been steadily on the rise for more than a decade (2009 witnessed a recession and 2020 will likely see one as well) (Statista, 2020). Rather, for the time I and others voluntarily exempted ourselves from any flight-related GHG emissions, many others flocked to the airports to reap the benefits and negate them many times over with their voluntary decisions to fly. This is called the Free Rider Problem, and it is one form of market failure (Chappelow, 2019b).
A free-rider problem occurs when some members of a collective, fail to contribute their part by consuming more of a shared resource (the carbon budget (Carbon Tracker, 2018)), or paying less (this would compare to a failure of abstaining from flying since carbon offsets are mostly ineffective or fraudulent (Anderson, 2012; Ellsmoor, 2019). To put it another way, to the free rider, there is no incentive to adequately contribute to safely manage the exploitation of a shared resource since they can enjoy the advantages invested by others without restraint on their part. As a result, it isn't just the carbon budget that is being exploited, but also all the individuals who yielded their freedom to fly.
With this economics class in mind, how does it relate to COVID-19? Chances are, that anyone reading these words is currently under a prescribed house arrest. Then again, if we weren't under the threat of an invisible and almost ubiquitous pathogen, in all likelihood, people wouldn't be confined to their own homes. Owing to this, an argument could be made that SARS-CoV-2 is like a Great Leveler (borrowing the term from the historian Walter Scheidel (2017)), in the sense that everyone's freedoms were put on hold during this epidemiological emergency. The lopsided ratio of voluntary non-flyers and free riders was effectively corrected, to an extent.
In a final and more personal analysis, there is still a propensity for schadenfreude or self-satisfaction for the market correction that is currently taking place between the two parties. As people are chained to their couches and compelled to stay home, the quarantine protocol for the virus appears to emerge as a sort of agent for the equality of access to high-impact activities such as flying. Obviously, this isn't to claim that we require this crisis to continue ad infinitum to maintain the correction, as the consequences for loss of human life and welfare will be tremendous and possibly long-lasting. However, this shouldn't prevent a sober analysis of any possible perks materializing from this predicament.
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