Free Market Control of Epidemics
by Michael S. Rozeff
by Michael S. Rozeff
The contest and the contestants
My focus is the necessity of state action. Is a public authority with power necessary to deal with sanitation and contagious disease? Are free markets able or not able to deal with this problem?
I will argue that not only can and do free markets handle sanitation and contagious diseases, but also they handle these matters far better than states can or do.
By free market I mean a set of uncoerced exchanges made by uncoerced individuals or by groups and organizations of individuals who freely choose to associate. In a free market for health care, there are no state mandates of any kind. In an entirely free market society, the state is entirely absent.
Contagious disease is a public health issue. The term public health simply means the health of a community or large set of people. As such, public health has no necessary connection to the state.
It is clear that medical services deteriorate in quality as well as become more costly when the state interferes with free market exchanges. Public health is desirable, but the state's coercive influence on and provision of public health are undesirable. Public health can be achieved by free markets without the state's interference, and free markets can do a far better job achieving it.
Yet it is a fact that those concerned with public health issues almost automatically turn to health departments of states and state laws to achieve their aims; so much so that in today's world, favoring public health is associated closely with favoring state-mandated health care. Public health has unfortunately come to mean general health care coercively influenced by large and centralized government bureaucracies.
The sanitation and contagion problems
The state's role in public health historically began with concerns over sanitation and contagious diseases. Those are still the basic red flags that are waved in order to solidify the idea that public health must be enforced by the state's coercions. They are the basic stakes driven into the heart of free markets in order to prove the latter's inadequacies and justify erecting a huge state enterprise devoted to public health. That is why I focus on sanitation and contagious diseases in this article. When we understand that free markets are the real solutions to these public health concerns and that states make matters worse, then will evaporate the bogeyman of public health fears that must be assuaged by the state. We will no longer feel the need to turn to the state.
When epidemics occur, the traditional solution is quarantine. Later on, I discuss quarantine and how free markets can create uncoerced quarantines. But even before reaching the point at which quarantine is needed, free markets greatly reduce the necessity and frequency of quarantines by attacking the diseases that are their causes. The next few sections discuss the ways in which free markets accomplish this and contrast the state's negative effects.
Free markets, operating through science and the profit motive, greatly alleviate the necessity of quarantine by controlling or eliminating diseases at their sources. They do what no state has done.
Because of the profit motive, free markets encourage the discovery of knowledge about perils, methods of dealing with them, and the dissemination of products and knowledge that help people cope with them. Science and businesses directed at understanding, treating, and preventing disease is part and parcel of free market operation. Soaps, cleaning products, antiseptics, insect killers, rodent killers, hot water heaters, indoor running hot water, garbage collection, sewage disposal, clean water, toothpastes, antibiotics, drugs, screen doors, fresh air and sunlight in the home — all of these and more enhance sanitation and fight diseases.
Other things equal, more wealth provides greater means to avoid perils. Free markets enhance a community's wealth. They therefore lead to greater wherewithal to buy or create protections. People can better afford to live in areas that are safer or less disease-prone. They can afford higher levels of cleanliness. They can afford higher levels of education about perils. They can afford lower population density. They can afford more research on disease.
The wealth effect is powerful, especially over long periods of time. If America had retained its relatively low level of government of 1875 until the present, its growth rate of wealth would have been far higher. The average net worth of a family today might easily have been half a million dollars higher in 2007 had the state not interfered in free markets, taxed huge amounts of wealth, and wasted huge sums on a variety of domestic and foreign wars. The capacity to purchase protection against perils would have been greatly enhanced.
There are plenty of people who like to do research for its own sake. They often need money to finance it. Hundreds of years ago, rich nobles and merchants provided financing. They also would finance the education of bright students. Today, rich businessmen and others do the same. Wealth is a means to fight disease, among other things, and free markets generate wealth.
Living in a clean community reduces disease and the potential for epidemic and quarantine. Cleanliness can't be achieved unless others keep the place clean. State coercion is neither necessary to achieve this end nor is it sufficient to make it happen. Why not? First, cleanliness is in our own interest. This alone brings about a reasonable degree of cleanliness. Second, if in a free market economy we dispose of waste on someone else's property, we become liable. Third, property owners in a free market economy can demand that those who enter their properties be clean. Since it is in the interest of both business and individual property owners to socialize with clean people, unclean people will not be able to carry on normal activities unless they are clean. Fourth, ethics help enforce norms like cleanliness. Fifth, civic-minded persons provide free education in matters like cleanliness. Communities, clubs, churches, and other associations often engage in cleanliness campaigns. Sixth, free markets bring down the cost of keeping clean. Businesses have an incentive to maintain clean premises and provide convenient washrooms and bathrooms. Consumers quickly note when establishments have filthy washrooms and avoid patronizing them.
Governments claim to maintain public health. But they do none of the preceding. Instead, governments churn out disinformation such as misleading food pyramids. They subsidize science that is misdirected and wastes resources. They provide inspection services that frequently are corrupt and inept. One day after an inspection of the New York City KFC-Taco Bell, rats were photographed in the restaurant: "It doesn't look like the inspection that was done Thursday met our standards," said Geoffrey Cowley, a health department spokesman. "I don't want to prejudge that. We're concerned and we're going to carefully revaluate [sic] that inspection."
State inspection systems undermine the free market incentives to compete for higher quality and cleanliness. It becomes in the interest of every restaurant operator merely to meet the minimum inspection standard when the public comes to believe that a restaurant is acceptable because it has passed the government inspection. In a free market, the restaurants would compete to produce a higher standard and the customers would have a higher incentive to monitor restaurants. In the regulated market in which customers are lulled into passivity, any such effort is penalized because the restaurant has to persuade the public that it is better than what they believe has been passed by the state as acceptable.
An epidemic is a chance or random occurrence. It is a peril, like being drafted and sent to war, being struck by lightning, being inundated by flood, being struck by a car, or contracting pneumonia. It is basic behavior to wish to survive and carry on one's life. We therefore seek protection against perils like disease. A tremendous amount of behavior is directed toward the end of safety.
In seeking safety, we assess the chances of a peril happening under varying circumstances and the costs it imposes on us when these conditions occurs. For example, if we drive a car across the country, there is a risk of accident. There is a different risk if instead we fly. We have a higher risk of yellow fever living near a tropical swamp than living in a northern climate. Trimming trees is less safe than selling books. We choose how and where to live in part based on the expected costs of perils. It may cost us more to live in a low-crime area, but we may pay that price. It may cost us more to live in an area with excellent sanitation, but we may pay that price to avoid disease One method of health protection is to live in an area where a disease is not frequent or where its expected costs are low.
By free market choices, we arrange our individual lives according to our individual values and risk assessments; diseases being one of the many perils we evaluate and wish to avoid. We make health, job, location, sex, marriage, and other choices in ways that essentially buy us safety according to our individual tastes. In addition, we also buy insurance against perils, and the rates we pay vary according to the risks we take. The amounts we buy depend on our individual risk preferences.
Individual knowledge and incentives
Who should have the decision rights to make all these choices that affect safety and the chance of disease? The individual or the state? From a moral standpoint, the individual should make these decisions. Any other course involves coercion and theft. From an economic standpoint, the individual also should make these decisions. The individual possesses the unique knowledge of his own values and risk assessments; the state can never obtain this information since it is widely dispersed within individual heads and is not publicly available. It finds no expression until we act upon it. The individual can materialize or realize his values in a market by his own exchanges. Furthermore, the individual has the incentive to make the optimal choices for himself because he gets all the gains and bears all the losses from such choices.
The state has sub-optimal incentives because it does not get the individual gains and bears none of the individual losses. If the state chooses in place of the individual, in the vast majority of cases its decisions will be sub-optimal. The state's members will substitute their own values and the individual will be worse off. The state's choices will be influenced by special interests. The state will end up, for example, subsidizing such risks as building homes in flood-prone areas, herding people into unsafe structures, failing to make dikes safe that are its direct responsibility, thwarting private safety initiatives such as gun carry, and putting people through useless inspections.
Speaking more broadly, free markets generate more and better knowledge of perils, including disease epidemics. People who know more about perils will, other things equal, cope with them more effectively. Free markets bring down the cost of education while improving its quality, and this acts to improve the knowledge of perils and the means of handling them. Huge amounts of health information are dispersed in the free market media. Insurance companies often engage in educational campaigns and take an interest in research on perils. So do charitable organizations.
At the same time, whereas the free market silently and efficiently allocates resources among competing alternatives, the state cannot. Would the public have benefited from less space flight and more research on diseases? The government is incapable of answering such questions and allocating resources because it is unresponsive to the profit motive. It is also unresponsive to the charitable choices of free individuals as reflected in disease-fighting charities. The state's operations impede the beneficial free market processes from operating and impede them by absorbing resources that could otherwise have been used in free markets.
Typhus is spread by bacteria in rats and mice. It's carried also by humans through lice, fleas, and mites. Suppose there is a typhus outbreak in a region A. If the rodents, animals, and human carriers in that area travel within area A or move to area B, they transport the disease.
Healthy people in areas A and B don't want the rodents and infected people in area A spreading the disease to them. Can they prevent this from happening without using force? Can they use legitimate force without using the state's power? These are the questions to be solved by uncoerced free market exchanges.
The traditional solution is to use quarantine. After recognizing and diagnosing the problem, public authorities quarantine area A and then try to exterminate the rodents. They quarantine people who have typhus so that they cannot spread it further within A or by travel to B. Exit from the area might require inspection and/or delousing. The effectiveness of the quarantine depends on its tightness. If some rodents or people slip through, then they can endanger many people.
Free market quarantine
A range of free market actions creates quarantine.
First, in epidemics, self-interested people enforce their own quarantines and take appropriate measures by avoiding areas and persons they suspect of infection. They take measures to kill rodents and insect carriers and prevent their ingress. They wear masks, gloves, and wash more frequently.
Second, people voluntarily take vaccines to build immunity. They take preventive medicines.
Third, companies will want to profit by looking ahead to disease possibilities and producing for a possible market. This may mean producing new vaccines to be used ahead of time or it may mean readying capacity to produce vaccines if an emergency transpires. In markets unhampered by the state's regulatory apparatus, these activities will be greatly enhanced. As matters now stand, companies have withdrawn from these markets because of regulatory and anticipated legal liabilities.
Fourth, in a free market, companies that offer rodent removal services might spring up very quickly in the case of an epidemic. They would not face the current time, regulatory, and cost barriers to start-ups that are imposed by states.
Fifth, in real free markets property owners can enforce quarantines without fear of legal liability for infringing on some imaginary rights of public access that the state has constructed. Private property owners can restrict entry to people that meet conditions they post. They could easily exclude people who are disease carriers. They could create the quarantines. And with cooperation among them, these could cover substantial areas.
Sixth, people buy protection against a peril like typhus when they buy life insurance. The insurance company then has an incentive to promote measures that prevent typhus and control potential outbreaks. Competing companies might cooperate to produce industry education and ads. They might cooperate also to assure that contiguous areas all will be subject to quarantine should an epidemic occur. Insurance companies may also have incentives to exterminate rodents and coordinate cleanliness campaigns.
Seventh, if cleanliness is important, then housing and rental contracts may contain cleanliness terms. In this manner, people can live in places they wish to. This can create voluntary segregation between clean and dirty people.
Eighth, since there are no state schools in a free market society, the schools provided by free markets become more sensitive to the demands of their customers for safety and sanitation measures. In an epidemic situation, we can expect competition to produce more rapid and thorough measures to reduce the peril.
Even in free markets, there may still be cases where force is required to quarantine infected persons and prevent their mobility. In this case, common sense, the common law, and sensible libertarian reasoning all point in the same direction of allowing quarantine. Gary North has written: "Consider a contemporary individual who has contracted a contagious disease. He has become a threat to the community." Indeed, the infected person's body presents a tangible threat of physical aggression against others.
Libertarians can agree that this threat justifies reasonable restraint that is proportional to the threat. Who will do the restraining? Who will be held liable if disagreements arise? Individuals will have to purchase protection against the peril of infection via epidemic from their protection agencies. Only in that case do the agencies gain the legitimacy they require to restrain infected individuals. This means, no doubt, that in order to purchase insurance, individuals may have to agree at the outset that they may be subject to quarantine if they should come down with certain contagious diseases, or else not obtain insurance. This free market solution eliminates the coercive element from quarantine.
I briefly touch upon this subject because of its relation to contagious diseases. In recent years, forced vaccination has become a contentious issue because of potential health hazards of mercury, aluminum, and other foreign agents in vaccines.
There will be no state-imposed vaccinations in a free market society. Individuals will assess the risks and make their own vaccination decisions. Given the dynamics of free markets, we can anticipate that companies will cater to the demands of various sub-markets and produce safer vaccines. With companies freed from the regulatory cartelization and difficulty of entry produced by the FDA, we expect a large improvement in vaccine offerings.
Unlike the case of quarantine where a threat is actual, there is no libertarian case that can be made for imposing vaccinations in order to reduce prospective threats. There is no physical presence of a contagious disease in a person's body prior to being vaccinated, and so there is no physical threat present.
Despite the fact that individuals can make their own vaccination decisions, it may turn out that their insurance premiums will rise if they elect not to be vaccinated. They may also decline if vaccinations of some sorts increase health risks. Indeed, the premiums charged for insurance with and without vaccinations will reflect a company's best assessment of the risks.
I'll be brief inasmuch as this article is already lengthy.
When public health concerns are limited to sanitation and disease issues handled at the local level of government, as they often have been, the local role at least tends toward the free market solution even if it is not equivalent to the free market outcomes I have outlined here.
But in today's world, the trend is toward ever-broadening the scope of public health's concerns and centralizing them at the national level. This takes us in precisely the wrong directions. We then see public health turning into tyranny that is far removed from free market outcomes.
There is absolutely no need or justification for thinking that public health issues require state solutions. Even in the classic issues of sanitation and quarantine, I've shown that free markets address them in far superior ways than states do. I've also shown that when states make the health decisions that individuals properly should make, we end up with worse public health.
March 14, 2007
Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.
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