Tuesday, May 5, 2009

Swine flu, the free market and EI

Those who promote free markets, the invisible hand, the efficient market hypothesis and related topics often neglect the social cost and the meaning of equilibrium.

Imagine applying this model to a pandemic flu by allowing the flu to run its course - no meddling intervention from know-it-all physicians. Eventually the spread of the flu will slow and stop on its own. The survivors will likely be more resistant to that flu strain, have better hygiene or perhaps were just lucky. Pity if you aren't a survivor.

I doubt anyone would let a pandemic flu just run its course without trying to do something. No one would stand for that, it can't even be argued.

Now compare that to the financial pandemic affecting our economy. First, corporations and individuals are very different. Even a single human life is much more valued than any corporation. Corporations are soulless and are expected to die off if they can't compete. But don't forget about the symbionts hosted by the corporation, the employees. Finding another host (job) isn't as easy as it seems.

So how to allow the host to die while protecting the symbionts? Employment Insurance temporarily protects workers between jobs, and offers a chance for re-training to find a new job. Is EI meddling or interfering with a pure free market? Probably if it isn't applied uniformly to all. But it does make it easier to allow companies to fail while protecting the displaced workers. [N.B. To those who think those employees could quickly and easily relocate to another job, I ask 'Where?'.]

So I can't explain why someone who promotes laissez-faire economics wouldn't also support EI and support fair and equal treatment under EI. How does it make sense to preserve a system which is not equal and fair across the country? I guess he figures EI is unfair to the employed who contribute to EI. If we treat individuals like corporations, shouldn't those who can't compete fail and make room for those that can? What a ridiculous statement when applied to people.

We couldn't take the same attitude for a pandemic flu. Working for a failed corporation or catching a flu are both beyond the control of most individuals [N.B. I don't expect everyone has what it takes to be an entreprenuer].