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Pain and Hope

Nine-year-old Janari Ricks spent his final moments playing with his friends in a fenced-in area behind his mom’s row house in Cabrini Green, blissfully unaware of the evil that would soon befall him. His story is not unique. More than 430 people have been murdered so far this year in Chicago alone. Twenty-five children under the age of 10 have been shot as of this writing. Chicago is not the only city experiencing a surge of violence this year, either, but it has been the most drastic and the impact has been indiscriminate. A lack of trust in the police in conjunction with insufficient protection for witnesses that come forward means that the law is unable to effectively pursue perpetrators in many cases as well.

Darrel Johnson is 39. He has two young children with a third on the way. He walks with a limp as a result of a gunshot wound to his ankle many years ago. He parked his car a couple blocks from the back yard where Janari Ricks played and he limped up the alley, peering through the fence in search of a man with whom he has a standing feud. Janari laughed with his friends while neighbors watched over the children and Darrel Johnson pulled a .40 caliber handgun from his jeans. Darrel spotted his man, but the bullets found Janari Ricks instead.

Hours earlier, dozens of children marched and a man known as Dreadheadcowboy rode astride his horse in a parade for ‘Kids Lives Matter.’ Families and dance groups joined them to call for an end to the violence. They plead for the shootings to stop and hope for a day when no more children are caught in the crossfires of a feud they know nothing about. If a child never watches his friend die senselessly again, it will be too soon. The endless cycle of revenge has settled like a noose on the necks of many low-income communities across Chicago’s South and West sides, but no amount of street justice will bring anyone back.

Janari’s mother screams, begging the life not to leave her child’s body. The boy is rushed to nearby Lurie Children’s Hospital, but the bullets have already done their work. It’s too late. There is nothing left to save. Her life feels so much emptier without the bright smile she loved so dearly.

Janari’s friends will never be the same. They watched hot lead tear through his body, pouring hot red blood onto hot asphalt under a beautiful blue sky in their own back yards.No peace will come. They will no longer feel safe in their own homes. Fear will grip them tightly and make growing up that much harder. How could life ever be normal again? Who could focus on their math homework when the vivid details of their friend’s death are always in their mind’s eye?

Communities beset by violence are always under a cloud of fear. You don’t have to be directly involved in it to feel the heat of its flames. The mere fact of its existence is enough to drag everyone down. Very few people don’t think about taking advantage of new opportunities or learning new skills when they have to think about the possibility of a stray bullet finding them when they walk home from the grocery store.

Treja Kelley saw her cousin shot down last year and decided that she had to do something. She had to deal with that same fear; she knew the risk she was taking when she stepped forward. Nonetheless, step forward she did. She decided to bring her cousin’s killer to justice and she went on to testify in an act of unusual courage. A bounty was soon placed on her life. Months later, a pregnant Treja Kelley was walking down the street, talking to her boyfriend, when she was gunned down. Insufficient protective measures were taken by police to prevent something terrible from happening to her. She was 18. Aside from the tragedy of the loss of life, these kinds of events have a lasting impact on trust in the care the police and by extension the government have for brave souls such as Treja.

Trust is difficult to come by under any circumstances, but the police in Chicago have a sordid history of aggressive and unsavory tactics. Just a few decades ago, a scandal broke over police beating people until they confessed. Witnesses getting picked off by gangs after testifying undercuts any attempt to build on the scarce supply of trust. The problem is certainly complicated enough, but policing without the trust and cooperation of the community becomes a nearly impossible task. Adding even more dimensions to that complexity from a policy standpoint is the fact that police officers are people, too. They are not automatons that are capable of responding to a call about a kid getting shot and not being affected by it. This was one of the things that brought previous iterations of dedicated violent crime response units to an end. Officers in that unit came to see the people they were meant to protect as the enemy and flagrantly excessive uses of force came to the surface on multiple occasions. The unit was disbanded in disgrace. This only serves to exacerbate the problem as community members come to fear both gang violence and police violence. Is it any wonder that many struggle to function in school or at work under such stress?

To combat the issue, we need to build the trust. It means more than throwing money or police at the issue. It means we need a targeted plan to build trust and rehabilitate communities. When witnesses such as Treja Kelley come forward, we need to make sure we do everything we can to keep them safe. When entire communities participate in their own safety, people are not going to be committing brazen acts of violence in the middle of the day. When people are greeted with compassion instead of punitive action for nonviolent offenses, the downtrodden will be more willing to come forward. When investments are made in poor communities, good jobs will be more attractive than joining a gang. A virtuous cycle is possible, but it starts with involving the community in the promotion of their own safety and showing them that the goal is their well-being, not punishment. With trust established, the truly violent criminals will be much easier to locate because we will have the help of the people that live there.

There are still rays of hope. The witnesses of Janari’s murder came forward and an arrest was quickly made. The man who committed that heinous crime sits behind bars today. The key was the help of the neighbors.

The result of all this violence is more than the tragedy of the individuals harm. People need more than just freedom to pursue happiness for innovation to spring forth. They need to feel secure while doing so. Economist Lisa Cook showed the impact of violent racial incidents in the early 1900s on patent applications from blacks. That will hold no less true for the impact of violence perpetrated within these poor communities. People have a much harder time working effectively when they are preoccupied with their own or their children’s safety. Children struggle to open their minds to learn when weighed down heavily by stress, fear, or anger. The cost is in both lives and the future of disadvantaged communities.

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School’s Out For(ever)

Lost amidst the deserved lambasting of Education Secretary Betsy DeVos for her ‘reopen no matter the consequences’ attitude towards schools is the pernicious effect on disadvantaged students of the loss of a year of learning. Parents lucky enough to be able to work from home and students whose parents can afford a fast, reliable internet connection may be inconvenienced, but the situation is not particularly dangerous. Only about sixty percent of Americans are able to work remotely; that leaves many parents scrambling to find ways to care for their children while they go into work. We also have evidence that children, particularly young ones, are less susceptible to the disease. However, keeping teachers safe becomes more of an issue, especially when we take into account the fact that teachers skew a bit older. The correct policy response is going to be more nuanced than something you’ll find on a 24-hour news cycle (and orders of magnitude more complex than anything Betsy DeVos is talking about).

Feasibility of any policy has to be the first step. It’s all well and good to talk about ensuring proper education, but we cannot open schools up without specific procedures in place and plans ahead of time for closing upon a certain number of infections. Our Secretary of Education does not appear to have anything in place, so states and municipalities are going to have to come up with their own plans. A plan must have two aspects: prevention and mitigation. Prevention will involve policies such as wearing masks, keeping students distanced, and minimizing contact between adults. Mitigation is a ripcord that will be pulled at a preset moment that closes schools back down at a certain number of infections. That part of the plan must also include virtual learning.

Ideally, we would never have to pull that ripcord. Effective preventative measures will keep that number down. Some measures may be a bit too expensive for lower-income communities to bear the cost, so Federal and State governments must step in to help. Keeping students distanced means reducing the number of kids in classrooms. Air filtration must be included so that central air doesn’t become a vector for transmission. Ideally, Plexiglas or something similar would be placed on desks. A proper set of guidelines would go a long way and funding them would ensure they are undertaken.

Inevitably, though, sometimes this will not be enough. The human element, especially when dealing with children, means compliance will not be 100% and, even if it is, there will still be some infections. When that happens, we need to make sure we know what comes next. If we make sure that students only are interacting in one group (their class) and teachers only go to their own classroom, we can quarantine an entire class if a teacher or student in that class contracts COVID. If it starts to spread among more classes, the entire school would probably have to go virtual again for a while. Clearly defining what that point lets us act quickly if things start to go wrong. Meanwhile, we can prepare for virtual learning when it is necessary. Students will need some sort of computer with access to the internet, video chat, and learning materials. Unfortunately, that will vary wildly in difficulty among students from differing backgrounds.

Virtual learning seems like an obvious route to take for those of us with reliable home internet and a computer. For the thirty-nine percent of students without access to the internet at home, this presents a problem. Some families may have multiple children and one (or no) computer. I know of one young person who had to use her father’s phone as a ‘hot spot’ for data in order to take a coding class. That’s well and good for a little while, but cell phone data can get expensive pretty quickly if you’re not on an unlimited plan. Everyone is going to need internet access if we want to provide equal access to education.

Here is also where we should delineate between young children and teenagers. The data I spoke of in the introduction was for children aged ten or younger. Older children will have an easier time learning online those under ten and we should allow or even encourage older children to go to school virtually, but you need access to the internet to learn on the internet. Instead of earmarking stimulus money towards F-35s, Congress should look towards our future. Children in households unable to afford internet access can ill afford to lose a year of education if they want to be upwardly mobile.

No plan will be perfect and, as the great philosopher Iron Mike Tyson once said, “Everybody has a plan until they get hit.” We are going to get hit, so our plans are going to have to be flexible. We need a plan B, C, and D. We also need to allow states and municipalities to create plans that work best for them. The US is a big, diverse country and should be governed as such. What works in Chicago may not work in West Virginia or Atlanta. The best thing we can do is create an environment that will make succeeding easier for all school districts.

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100 Days and Counting

We are just one hundred days from the general election, so I thought it would be a good time to revisit the stakes. This moment has taken on enormous significance because it is not just about right now. It’s not just about the next four years. It’s about how we rebuild after our country has been ravaged. Old companies are dying by the dozen and millions have lost their jobs. What we do now will echo forward in time. We will set in motion the economy of the future, catapulting us to new heights and cementing us as the leader of the free world or we will try to reanimate the decaying corpse of the economy of yesteryear and we will fade away. People will speak of Pax Americana and the pre-eminence of a free society as a golden age of years past or they will revel in the new places it will take us.

President Trump has both changed the global image of us and weakened us to the point that the US is scarcely recognizable as the country it was 4 years ago. His administration has pushed to weaken environmental standards and subsidize dying industries. The future is an uncertain place, so he looks to grasp at the fading past. Rather than solving problems, he wishes only to blame others. Even in a moment bigger than anyone could have imagined, he has spent more time trying to deflect responsibility than deflect a deadly disease from infecting American citizens. Other countries are beginning to recover while we are plumbing new depths. If he is re-elected, our prospects are dim.

Vice President Biden is not a new figure on the political scene, but he has released a new plan that is what this moment requires. He would seek to modernize our infrastructure and spur growth in new clean industries that are rising to prominence at the expense of those Trump would attempt to revive. By investing in these industries now, we will ensure that we have the skilled workers to implement and improve them later. We will keep the intellectual property here and the innovation here. We will set ourselves up for success no matter what else happens because we will be investing in the human capital of our own citizens and attracting the best and the brightest of global citizens to come live here.

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Keep the Fear at Bay: Extend Unemployment Now

With a new surge in coronavirus cases underway, I want to dive back into the economics of the pandemic. It’s driving home an underrated axiom in the discipline. The expectations we have of the future determine how comfortable we are spending money now. We saw a brief burst of unbridled optimism when states began re-opening, but new Gallup polls show that has given way to extreme pessimism in the wake of exploding case numbers. Expectations have, in fact, reached new lows. This will lead to a downward spiral in economic activity in contrast to the recently improving numbers. Explicitly promising continued consumer support is the only tool we have to keep the fear at bay. Meanwhile, Congress is quibbling over details for extending the benefits package due to expire at the end of July.

Unlike many concepts in economics, the impact of expectations is fairly intuitive. Just to briefly go over it, I’ll use an example. If you have a salaried job with a regular paycheck and you have some job security, you’ll be a lot more willing to get that new dishwasher, buy that new car, or take on a new mortgage than if you rely on sporadic bursts of cash from freelance work. By that same token, if people are worried about losing their jobs or unclear on the duration of their unemployment benefits or reliant on a stimulus check, they will pinch pennies so they won’t find themselves evicted or foreclosed on when it ends. You will want to save as much as possible until you feel like the bad days are behind you. Economists euphemistically call this ‘consumption smoothing’.

With that in mind, the new Gallup polls showing overwhelming pessimism look like the tip of the iceberg for our economic fate. In just a few short weeks, the proportion of people saying that the situation is getting worse went from 30% to 65%. Expectations are a leading indicator, which means that you see the impact before the actual activity happens. In other words, those rosy economic numbers you’ve been seeing are going to turn a much more ugly shade. You can see it in the headlines; corporate bankruptcies have been plastered across the headlines pretty consistently lately. United Airlines is going to be laying off 36,000 people.

The sad thing is that we don’t need to be in this situation. President Trump has been denying the seriousness of the situation and holding indoor rallies with thousands of people. He’s helped spread the virus more quickly with his misinformation campaigns and with his actions. Contrast that to the response of South Korea. They have not been in the news because their situation has not changed; the virus is still under control. The result is that they have avoided a recession. People are confident that the situation is under control and will remain under control, so they are spending money.

There’s no use in crying over spilt milk, though, and that’s not our situation (and there’s no turning Trump into a reasonable human being). We need to find a way to show people that they will be supported until this is all over. The virus will prevent them from doing some activities, but if people are confident that they will be supported by unemployment, they will spend money on other things. The types of purchases may change, but the only way we can ensure our economy will continue to run is to support consumers and explicitly say that we will do so. Congress needs to take action now. Increased unemployment benefits expire at the end of this month.

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Immigration is the Bedrock of American Growth

This week, President Trump suspended work visas for the remainder of the year including work visas that would go to skilled workers. It’s his most extreme anti-immigration push yet. This is a response to that.

America is not just the land on which we stand, nor is it the blood and bones of our ancestors. If those were the things that made our nation, we would be nothing, for many of our ties to the land are weak. As a nation, we are young. Most of us have, at most, a couple hundred years of ancestry here. The Old World measures these years in the thousands. No, what makes America great is the idea of America. It’s the idea that no matter who you are, no matter how rich or how poor your parents are, no matter what you look like or the color of your skin, you can make yourself anything you set your mind to if you work hard enough.

‘We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.’ The idea is simple. Provide people with the freedom to carve their own names into the tree of life in any way they would like, and the progress that we have made because of that, not only as a nation, but as the human race, has been nothing short of spectacular. The sheer power and variety of all the accomplishments here are breathtaking, and it’s all made possible because of an idea. Yet, there are threats to the continuation of this open society. Authoritarian governments are on the rise again and these new forms of Kings and Queens would like nothing more than to see America, the world’s oldest Democracy, falter.

This we cannot abide. We must, as we always have, recruit new soldiers in the War for a Better World. If we do, we will be the greater for it and we will rise, nay grow, to the challenge. Our qualifications as Leader of the Free World are undisputed. These qualities are what magnetize us; people will fight to come here because of them.

Donald Trump would have you believe that the threats to our Democracy are new faces, but I am here to tell you that the threat comes not from those who wish to pledge fealty to American Ideals, but men like Xi Jinping and Vladimir Putin who see the world not for what it could be, but what they can take from it. We should not fear newcomers because it is their help that will deliver us to the greatness we so desire.

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(A Matter of) Trust

Chronic underinvestment in poor communities has contributed to high crime rates. Last week, we talked a little bit about the potential for reallocating some of the money in the police budget. This week, I’d like to talk about what that might look like.

Let’s start with how investment flows into communities. Businesses invest to chase money which grows with human capital. Human capital is most easily expanded via education, but education doesn’t work without buy-in. Buy-in, in turn, can only come with some degree of institutional trust. Dizzy yet? It may seem like we’re going in circles, but there’s a point here. If the government wants buy-in from the governed, it must show both good intentions and competence.

It sounds like a simple enough concept, but it turns out that creating trust is incredibly complex. As important as it is, it’s devilishly difficult to measure. As Justice Potter Stewart famously said, “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description, and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.” Justice Stewart was referring to porn, but it applies about as well to institutional trust as it does to porn. There’s an aphorism that goes “what gets measured gets managed,” and we just cannot seem to measure it. We likely will not be able to collect any quantitative information on institutional trust, either, but that isn’t what we care most about, anyway. We want buy-in from the community, which can be measured in a number of different ways, and that serves as a good enough proxy as-is.

How, then, does this tie in to police budgets? Police are the primary touchpoint between the government and the communities we are talking about. They are effective at reducing some of the symptoms, but they cannot actually treat the disease. The police are hammers, but only a small portion of the community are nails. We need to buy a Phillips-head for the rest. When we show all of the members of a community that we distrust them (and it certainly must feel that way given the frequency with which they are accosted), they are unlikely to trust that the government cares about them. By placing more trust in individuals, we may miss the occasional petty crime, but we strengthen the relationship between the community and the government, which will reduce crime in the long run.

Let me show you what I mean with a couple examples. The first is Norway. A 1980s change in prison policy away from focusing on punishment and towards rehabilitation halved recidivism rates (rates at which released prisoners are convicted of new crimes). They established trust with prisoners, and the prisoners rewarded them. Another example may seem less relevant, but I promise I’ll get to the point. A recent experiment on Swarthmore minority economics students found a 20% rise in course completion for those sent an email showcasing the diversity of ideas and researchers in the field of economics (One email! That’s it!). The result is stunning for such a small treatment. The point? If we show (not tell) people a path to becoming something more than they thought they could be, they are much more likely to believe themselves capable and thus take that path. Seeing success breeds more success, and that, in turn, will lower the number of people that feel they need to turn to crime to gain agency over their lives. The only thing that makes that possible is trust.

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Defund the What Now?

“We’re asking cops to do too much in this country. We are. Every societal failure, we put it off on the cops to solve. Not enough mental health funding, let the cops handle it. Here in Dallas, we got a loose dog problem; let’s have the cops chase loose dogs. Schools fail, let’s give it to the cops. … That’s too much to ask. Policing was never meant to solve all those problems.”
-David Brown, Chicago Police Superintendent, former Dallas Police Chief

Defund the police? It has been a slogan circulating social media, but it has no consistent platform. The phrase itself calls to mind images of anarchy. Many who have espoused the view say it only means reallocating some of the dollars in police budgets away from there to other methods of promoting public safety. That is not what the message implies, though, and it’s not where it started. A fringe movement to ‘abolish’ police sowed those seeds.

The leaders of the movement seem to mean something completely different than all but the most ardently ‘progressive.’ When Minneapolis’s city council president was interviewed on CNN to talk about the city council’s vote to dismantle their police department (it remains unclear what this will mean in practice), she responded to a question about a hypothetical scenario of a person’s house being burgled by calling the ability to call the police in such a situation a ‘privilege.’ In an opinion piece published to the New York Times, a community organizer makes clear the movement does literally mean abolish the police. She claims that police only make communities more dangerous using a couple anecdotes while failing to city any data.

I’ll fill in that gap for her. Steve Levitt, a University of Chicago economist (and deliverer of my favorite lectures when I was there), conducted a study on the effect more police officers had on crime. If you don’t want to read a paper, I’ll sum it up for you: more police translates to fewer crimes committed. Common sense prevails!

It was unsurprising, then, that Joe Biden, the Democratic nominee for president and leader of the party, quickly distanced himself from the calls for defunding. The messaging needs more work because it is off-putting to a majority of voters. People calling for defunding the police when they really mean reallocating some of the police budget to new teams of practitioners in social work or the like so that police can focus on crime should find a new slogan. The current one is self-defeating.

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Healing Starts with Reform

Several incidents of blatant racism have been highlighted by continued protests which now engulf cities not only across America, but globally. I cannot pretend to know what racism feels like, so I’m going to focus on what I do know. Looting and vandalism accompanying the protests have subsided and with their fading has faded any impetus for a discussion on ending them; we can focus on something more important. What’s left? We have a problem in the equal dispensation of justice in this country. Our black community members do not even feel safe around law enforcement.

Unfortunately, we cannot flip a switch and turn off racism. There has been progress on the issue, but it is slow. Changing cultural biases takes generations. Generations of black and brown people should not have to wait on being treated the same way as white people. The good news is that there are things we can do right now to mitigate the effects.

The first step should be to eliminate all language in police union contracts that protects officers who behave irresponsibly or with undue aggression. Many contracts build sunsets into reprimands. Chicago’s includes a clause about expunging records after 5-7 years, even in the case of a complaint about use of force. Rather than wait to negotiate new contracts, municipalities and, even better, Congress, should make it illegal to include such things in the contract in the first place. Further, clear guidelines on prioritizing de-escalation and using any force should be enforced with strict penalties for violations. This should be encoded into law.

Creating laws and ordinances that specify what cannot be included in a police contract have the benefit of taking effect immediately. Renegotiating a contract with a union could take months or even years. Passing a law making illegal provisions protecting misbehaving cops invalidates a bad contract. Specifying the proper use of force and consequences for excessive action removes any uncertainty about what will or will not be allowed and creates an environment where a police officer will have to think about safety rather than simply subduing a suspect. It shouldn’t change anything for the majority of police, but those who would use their position to act violently will no longer be able to hide behind their badge.

There are, of course, many other pressing reforms to be made. For instance, I believe prison should be used as a way to create better citizens. I’ve written about that here. However, I believe transparency and accountability by police would lead to incredibly powerful results if implemented and I believe that highly focused messaging will end with success while broad messaging ends in platitudes without actual progress. Accountability, in particular, appears to be an issue gaining bipartisan traction with Senators including both Cory Booker and Lindsey Graham talking about it. If we do this right, we could use this momentum to take important steps forward.

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Bankruptcy is Coming

Bankruptcy is going to visit many firms over the coming months, but it does not have to be a mystical, fear-inspiring word. The grim reaper will not come to visit you at night and Rumpelstiltskin will not be coming to take your firstborn if your business goes bankrupt. The full term is bankruptcy protection. It prevents debtors from being pursued after they have gone through the process. So, say the firm you work for (or an important firm in your community) has filed for bankruptcy (protection). What happens next?

Contrary to popular belief, a bankrupt firm does not get swallowed by the ground and turn into nothing. Almost every business has valuable assets; the existence of high levels of debt does not change the value of the assets in the business. Even service businesses have valuable assets such as intellectual property and processes for utilizing human capital. When a firm enters bankruptcy, the pile of paperwork that a corporation really is becomes worthless (it’s more complicated than that, but this is sufficient explanation for our purposes). However, the things that were used by the business to make money are unchanged. Those assets will be sold off to pay back creditors or, in some cases, a new structure is created utilizing the same assets. Regardless, they are repurposed for a (hopefully) more productive new life. There’s a good chance most employees will keep their jobs with the primary difference being that their labor is put to more productive uses than servicing a massive pile of debt. In the event employees do lose their jobs, it is also important that our safety net is strong enough to catch them, but that’s a separate conversation.

Who, then, loses in a bankruptcy? Equity holders, certainly. Most of the time they lose their entire investment. Creditors would also take a hit, but depending on the seniority (priority for receiving payment) of the debt, they could recover most of their investment. This is all natural; equity holders take the biggest risk, but they also have the best upside. It also enforces responsible business practices. Businesses that take on high levels of debt are generally approached with more caution by investors and this is how the market encourages responsibility.

All of this can cause pain. Well-run businesses can be victims of circumstance and the collapse of a poorly run firm can still negatively impact a community. In a perfect world, government steps in and gives people a helping hand while assets get restructured in a business cycle downturn. We do not, unfortunately, live in a perfect world. Rather than helping people and letting poorly run companies die, we prop up the companies and assume they will take care of the people. Firms may be treated differently based on political connections, too, and advantage goes to older, well-established firms in the bailout lottery. There is nothing insidious going on with that. The squeaky wheel gets the oil, after all. It’s not capitalism, though, and what happens afterwards is continued high pay for poorly performing executives (for more on executive pay, check out my post on CEO pay here), and layoffs still come for lower-level employees as cost-cutting becomes the name of the game. So, who is really getting the biggest benefit here? You’ve probably guessed it: shareholders! That includes people with 401(k) retirement accounts and pension funds, but the people with the largest proportion of their money in stocks are those with lots of it. Wealthy people are getting the advantage in this game.

That’s not to say there is no place for intervention. During brief periods of extreme distress, some reassurance is important to keep things like payroll functioning (corporations often rely on short-term debt markets to bridge their needs for cash even if they have healthy books). Still, it’s also important that we do not overuse this tool, because it exacerbates inequality and puts younger firms at a disadvantage. The pace of innovation slows and we all suffer. The danger is turning our market economy into a quasi-command economy.

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Our Economic Destroyer: Virus or Lockdown?