Wednesday, April 22, 2020

COVID-19 outbreak challanges Libertarianism, and how Libertarianism responds to

Under this currently ongoing pandemic of Covid-19, the public security is thought highly by the populace, and the value of Classical Liberalism and Libertarian (In this essay, it uses Libertarianism for representing both) tends to be undermined. Many sceptics of Libertarianism tend to assume that Libertarianism recklessly ruins the public services and safety net and discourages the public interests. Therefore, these sceptics of Libertarianism tend to accuse Libertarianism for ruthlessly leaving the victims of the pandemic such as the current COVID-19 (Corona Virus) alone by blaming their self-responsibility of each private individual.

Nevertheless, this is the complete misguided prejudice about Libertarianism! Libertarianism is against an authority expanding to suppress individual liberty under the name of the public security. Even though Libertarianism regards highly of individuals' voluntary actions and free will to not only maximise their utility but also tackle with their own problem with life, it also recognises the limited capacity of each private individual and private enterprises to prop up their living environment.


First of all, the political regime under Libertarianism would have implemented the lockdown at fast stage if COVID-19 outbreak had hit during its regime even while losing the short term profits of private enterprises and individuals. Libertarianism is certainly the political ideology encouraging profit maximisation as a virtue whereas it takes account of consequential outcome of both economic and social actions. In case that the risk of spreading COVID-19 is mitigated with the best effort even with some significant costs, the pandemic outbreak is more likely to effectively diminish faster enough to recapture revenue to compensate their temporary loss.

Libertarianism denounces government not balancing their tax on individual citizens and their gain from their tax contribution. When government grows so bigger that it becomes more difficult to maintain the efficiency of resource flows because the administration cost for monitoring and transportation grows bigger. Then, the cost overwhelms the benefit of government redistribution scheme while relying on big government. Therefore, Libertarianism claims for minimising and decentralising government to reduce the administration cost at the optimum level in order to achieve in the equitable balance of individual citizens' contribution and their net benefit from it even under such an emerging pandemic situation without sacrificing their public safety.

The anti-Libertarian big government advocates claim for raising taxes during the stable period to prepare for the public fiscal expenditure for this sudden critical disaster. This policy is politically controversial because it requires a considerably high level of political morality and administration cost for monitoring against embezzlement as well as of economic rationality for knowing the optimum level of tax rate not harming the entire economic and social activities. Furthermore, even if they could establish this economic political administration, it is troublesome to convince citizens to admit increasing tax burden on their income.

On the other hand, using the money supply in case of this emergency case scenario of the negative output gap expansion is considered to be a less politically controversial method than raising taxation to fund the temporary public expenditure. Libertarianism regards highly of taking advantages of the capitalist market economic and political system in order to accomplish its ethical goal. Although some branch of Libertarians may disagree, many Libertarian thinkers admit to use the monetary policy to increase the volume of the publicly traded currency (also called the money supply) at the excessive rate as a temporary countermeasure against a temporary problem.

Some may be concerned with the inflation risk caused by the excessive currency flow against the productivity rate. By contrast, the loss of the longer term productivity rate caused by abandoning human resources losing their income sustaining their life as well as the public infrastructure losing its public funding will trigger the more serious negative inflation called stagflation. There need to be a solution filling the negative output gap caused by the damage caused by the sudden pandemic outbreak because the sudden output gap expansion is quite likely to cause the long term output loss.

The negative inflation occurs when the money supply rate is continuously exceed what the productivity rate suggests in a long term as an addiction of its reliance. By contrast, the temporary expansion of the money supply is seen as an effective compensation for a spontaneously occurring productivity loss as a strong intensive medicine. This medicine, like the chemically derived one, usually induces a negative side effect like addiction and destruction of the long term health meanwhile it is often required for curing the spontaneously caught critical illness. All in all, the prescription for the monetary policy matters the effect of the money supply.


Secondly, Libertarianism affirms that there needs to be a public sector as a certain alternative form. Of course, Libertarians support the market economy composed of private sector majority in order to allow healthy business and cultural competitions among innovative private economic agents to establish the environment naturally stimulating physical as well as cultural development. At the same time, Libertarians realise that there are some industries which cannot be stably developed in a market competition.

Adam Smith, the father of economics as well as one of the remarkable Classical Liberalist philosophers, explained that defence, education, and healthcare are those which cannot be stably developed and sustained in a market basis. Furthermore, in the study of economics, means of transportations, e,g, road, rail, sea & air ways, inevitably needs to be managed by a public sector. These industries are the ones which a considerably high share of the public sector should be involve to manage.

What Libertarianism criticises about the existence of the public sector is that government monopolises the initiative over the decision making processes of its management. Libertarianism puts priority on individuals' voluntary cooperation over the government cohesive involuntary force to prop up the public sector. It is the cooperative where the responsibility of the expenditure is allocated and the management in general are determined by voluntarily participating individuals for this public sector project.

In case that there needs to be an opinion leader efficiently deriving the final decision outcome even with some force, Libertarianism expects this opinion leader must be rational enough to understand the process of maximising the utility of the majority with their determination. One branch of Libertarians called Paternalistic Libertarian claims for an existence of the rational authority whose members are selected according to their ability under a strict meritocratic scrutiny in order to allow them to become the leading position of a particular sector.

All in all, Libertarianism is not negligent about running the public sector; it is cautious about running the public sector which is far from the pressure of reforming their management under competition. The idea from the cooperative from the classical economics can be still referred as a possible alternative of running public sector where more individual citizens are allowed to participate to represent their voices to fulfil their real demand. The government authority running the public sector should be questioned whether or not they are rational enough to run the public sector maximising the utility of citizens.


Regarding the topic of this essay, healthcare is the hotly debated factor under the currently ongoing pandemic situation nowadays so this essay purely focuses on healthcare only to debate about the public sector. The nature of the demand curve for healthcare is notably different from the other majority industries.

Nobody wants to be sick so everyone prevents the possibility of being in the situation of demanding healthcare goods and services so often. In another word, there does not need to be any significantly higher volume of healthcare service to increase the utility of one individual because the essential difference of body nature is insignificant among individual humans. One vaccination is significant for one individual to take to prevent from a certain virus infection, but taking several times vaccination within a short term period does not significant to prevent the infection.

The other characteristic of healthcare which suggests it is not suitable to merely rely on the market competition to be developed and sustained is how the risk premium is set in the healthcare industry. Rich are more able to mitigate the risk of becoming ill with more choices whereas poor have limited choices inducing them to be vulnerable to illness. Therefore, in order to maximise the profit for healthcare insurers in the private sector, the risk premium is set regressive against individuals' income. In another word, rich can afford healthcare with cheap price meanwhile poor can only afford with high price.

This mechanism stagnates the development of both material and spiritual aspects of human beings as long as the healthcare is left alone in the private sector competition. Then, it eventually requires some public sector intervention in order to divert from this regressive direction. Some degree of resource distribution appropriate for healthcare to enable the more progressive distribution of goods and services is then requisite.

The problem mentioned by Libertarianism is that the distribution process conducted by the big government scheme tends to be inefficient. It should require more voluntarily intervention by majority citizens demanding the efficient services. In particular, under such a historically unseen pandemic of virus infection, Libertarians are those who should raise the voice loud to criticise the current inefficient ineffective government action toward COVID-19 spread. The security without oppression shall be the keyword for Libertarianism to fight in the war against COVID-19!!



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