RYAN BOURNE, CATO INSTITUTE
Maryland Gov. Larry Hogan has followed other governors in ordering all “nonessential” businesses to close workplace sites within his state. But is it so easy for policymakers to judge what is “essential” and “nonessential” business activity?
Take supermarkets. They are essential as the main food source for people self‐isolating or working from home. But if supermarkets and their supplies are essential, so are their goods’ manufacturers, the producers of plastic and cardboard carrying the goods, the company’s accountants and financial advisers, cleaning companies that serve the stores, cleaning products used by said companies, the truckers who ferry the goods, gas stations, rest stops, farms, farm equipment manufacturers, mechanical service stations for trucks and farm equipment, and more.
As you can see when you review the family tree of any consumer‐facing industry, the market economy is a vast network of interconnections, both vertically and horizontally. One of the reasons why even a partial shutdown can be so catastrophic is because of knock‐on effects through supply‐chains or indirect losses of income affecting families, as coming unemployment figures and GDP numbers will surely show.
Hogan’s list of all he deems “essential” shows this clearly. The sheer number of industries thought required for society to function shows that a market economy is a vast tapestry of non‐coercive, interlinked cooperation, far from the picture of dog‐eat‐dog competition painted by its critics.
Firms “excluded” from shutting down include: the chemicals sector, a raft of commercial facilities (including dry cleaning), communications firms (internet, telecoms, cable, broadcasters), a whole of “critical manufacturing” companies, the “defense industrial base,” the energy sector, other utilities such as water, a range of financial services firms, the food and food processing supply chain, pet stores and vets, healthcare and related services, funeral homes, large parts of the transportation sector, sectors in IT, government facilities industries, and staffing and payroll service firms.
A sector here, a sector there, and pretty soon you’re talking about pretty large parts of the economy. Hogan was at pains to point out that this list was “non‐exhaustive” too, with companies encouraged to review additional guidance to check if they were unsure.
My concern is that orders such as Hogan’s are sowing confusion rather than giving businesses clarity. There are good public health reasons why you might think mandated closures for mass entertainment activities– sports events, restaurants, bars, nightclubs, cinemas – are a good idea. There might also be a reason to impose temporary, emergency limits on numbers of people in social gatherings or stores. Both principles have in fact determined many private companies’ responses to this crisis, even prior to government action. A government message encouraging people to work from home may be reasonable guidance too.
But grand declarations that all “non‐essential businesses” should close risks inadvertently shutting down activities that policymakers hadn’t considered “essential” but whose absence will cause real harm to the public health effort or other essential sectors. One person’s non‐essential business might be another business owner’s key supplier. It would surely be far better to avoid the mistakes of bureaucratic hubris and just outline directly which businesses and sectors should cease operations, with the list continually under review when clear problems arise.
Ryan Bourne occupies the R. Evan Scharf Chair for the Public Understanding of Economics at the Cato Institute. He has written on a number of economic issues, including: fiscal policy, inequality, minimum wages and rent control. Before joining Cato, Bourne was Head of Public Policy at the Institute of Economic Affairs and Head of Economic Research at the Centre for Policy Studies (both in the UK). Bourne has extensive broadcast and print media experience, and has appeared on BBC News, CNN and Sky News, whilst having articles published in (among others) the Wall Street Journal Europe, The Times (London) and the UK Daily Telegraph. Bourne holds a BA and an MPhil in economics from the University of Cambridge, United Kingdom.