How A Stateless Society Would Deal With A Pandemic Like Covid-19. Incentives Matter.

in #libertylast year

The freedom of the individual is at stake, and very publicly so. The overwhelming majority is seeking solutions from the government, which in turn vows to deliver.

In times where individual freedoms are slashed with unprecedented rigor and speed, I'd like to offer a potential scenario about how a society without central control could handle such a situation.

I will not discuss the severity of the pandemic itself. The following ideas are valid even in extreme scenarios like gross under / overestimation of the situation.

Incentives matter

To make good and reasonable decisions, reliable information is key. What incentive does the decision maker have to acquire high quality information? Does the decision maker have to bear the consequences of his decisions?

In the case of governments making decisions for millions of people, these incentives are very low. The primary incentive for a politician is to be popular and to get reelected (and that's not an evil thing, it's just the incentive structure in place). Also, state-financed institutes have no incentive to provide reliable data as their financing is independent of the outcome of their suggestions. And so we are in a very dangerous situation, because nobody has any incentive to gather objectively accurate information. The reaction to a small problem could be overblown and a real emergency could be played down.

In a stateless society, there would be no monopoly on health services. Hundreds of companies would be competing for customers, just like supermarkets do today. Different models would exist, from 'pay-as-you-go' to universal insurances. Free services would also be provided to those in need, either financed by charity or equally likely as a means of marketing (just look at all those companies offering their services free of charge in the face of Covid-19 - building your reputation for the time after).

So now, how could such a system combat a pandemic?

Let's first understand the incentives for these health service provider. They want to make as much profit as possible, just like any other private company. Thus, they are interested in offering the highest possible quality at a low price (otherwise customers would go elsewhere).

Let's assume an extremely virulent and deadly pandemic is about to spread, requiring a dramatic rise in intensive care. This would be an absolute nightmare scenario for all health service providers, as costs would go through the roof and customers monthly fees wouldn't be anymore sufficient to cover them. There would be every incentive in the world for them to stop it very early.

They would probably seek the best, unbiased information out there to judge the situation.

Health service providers have an explicit contract with every customer that can be enforced by both sides. They would probably include some of the following lines into such a contract:

We reserve the right to terminate the contract with immediate effect if ...

'you refuse to wear a mask in the public if we instruct you so'
'you refuse to stay inside your home if we instruct you so'
'you have contact to a person outside of your household'

You see, those drastic measures can be realized in a voluntary society, at least if you don't want to lose your insurance. Companies could also react by not letting persons onto their property violating these terms. But nobody will restrict your freedom to still roam freely. You can also try to find another health service provider with less strict terms. There are endless possibilities.

Let's assume the reaction of a specific health agency is overblown. This will probably be costly, as customers will switch to other agencies that do not implement these restrictions.

There will be competition to gather the best available information. Providers can't be too strict nor too loose as they will lose money in both cases if their information deviates from reality. Health agencies have to get this right.

The biggest difference between centrally planned health care and a market-based system is the incentive structure.

Government health care has no incentive to muster an efficient and spot-on response to Covid-19. They don't bear the costs and don't go out of business. And it seems like some authoritarian politicians are even putting it to 'good use'.

Health care providers on the other side want their customers to be healthy. Otherwise it would cost them dearly.