Home 2020 This is No Time to Panic

This is No Time to Panic

As America and other parts of the world endure the most frightening pandemic in a Century, the COVID-19 coronavirus outbreak, it is important that decisions affecting the lives, liberties, and livelihoods of hundreds of millions of people are being reached through reason, not collective fear.

Pandemics are different from economic depressions and fuel shortages, but some of the same lessons apply. Like an economic panic, pandemics incite mass fear, which can lead to flawed and irrational decision making.

We know that human beings by nature are mostly crowd-followers, especially during periods of social unrest and panic. This instinct has resulted in some of the greatest tragedies in human history.

COVID-19 may prove to be as dangerous as we have been led to believe. Epidemiologists, vaccine researchers, and other medical experts agree it is highly contagious and deadly for some, especially for certain at-risk people, the elderly and people with compromised immune systems and lung damage, for example. Yet many of the same experts disagree on the scope of the COVID-19 threat.

A Key problems medical professionals are encountering is they do not have a lot of reliable data to work with.

The data collected so far on how many people are infected and how the epidemic is evolving are utterly unreliable,” John PA Ioannidis, an epidemiologist and professor of medicine at Stanford University who co-directs the university’s Meta-Research Innovation Center wrote.

Pandemics are scary.

This is 2X true in the age of social media, when the scariest models tend to be the 1’s most shared, which fuels even more panic. Because of the heightened level of fear, it is not unreasonable to think public officials could “follow the crowd,” which is a bad idea even when the crowd is not completely petrified.

Crowds do not reason….they tolerate neither discussion nor contradiction, and the suggestions brought to bear on them invade the entire field of their understanding and tend at once to transform themselves into acts,” wrote Gustave Le Bon in his seminal Y 1895 work The Crowd: A Study of the Popular Mind.

In his book Crisis and Leviathan, the historian and economist Robert Higgs explains how throughout history, crises have been used to expand the administrative state, often by allowing “temporary” measures to be left in place after a crisis has abated, example: federal tax withholding during WWII.

When crises occur… governments almost certainly will gain new powers over economic and social affairs,” wrote Mr. Higgs. “For those who cherish individual liberty and a free society, the prospect is deeply disheartening.”

So, let us take the novel coronavirus deadly seriously, but let us not throw reason, prudence, or the Constitution out the window at the same time.

If we do, we may find the government’s “cure” for the coronavirus cure is even worse than the disease.

Have a healthy weekend, stay home!

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.