 As the coronavirus pandemic caused panic shoppers to clear out whole supermarkets of toilet paper, rice and canned vegetables, two brothers set out on a 1,300-mile road trip through the back roads of Kentucky and Tennessee. Matt and Noah Colvin loaded up a U-Haul with all the hand sanitizer and antibacterial wipes they could find, and they attempted to resell the goods on Amazon at a massive markup. Then the online retailing giant banned the practice, state attorneys general started cracking down, and the Colvins were shamed in the media. They ended up donating the items. But is so-called price gouging always a bad thing? Michael Munger, who teaches economics, political science and public policy at Duke University, argues that prices contain vital information about supply and demand. When governments attempt to mandate cheap goods, he says, they end up causing more shortages than they solve. And this is especially true during a crisis. I spoke with Munger via Zoom about how the 21st century is testing libertarian ideas about limited government and individual freedom. Michael Munger, thanks for talking to me. It's a pleasure to be on the show, Nick. Okay, and it's nice that it's a show now, you know, because the one great thing that the coronavirus has done is destroy all standards of what is, you know, I don't know where we go after this, but you know, I'm happy to get in the car and drive and pay for gas to get there. Michael Munger, you are trained as an economist. You talk, you teach public policy and political science as well. You are an unapologetic defender of price gouging. Can you explain what you, why in a circumstance such as we're in now, where there is a lockdown, the government says you're not allowed to do certain things, you can only do other things here and there, why should we not suspend market mechanisms on the cost of things ranging from N95 masks to toilet paper at the grocery store? It's not clear that I would defend price gouging in all instances. Let me, let me take a step back. Most of us are not defenders of cutting open someone's abdomen with a razor blade. By and large, you shouldn't do that. But if they will otherwise die and the surgeon can give them an appendectomy, you would say, we're going to make an exception. This is a really bad circumstance. Under these limited circumstances, we would be better off cutting open this person's abdomen with a razor blade than not doing it. So I think price gouging is terrible. And much of what we call price gouging is like a guy coming in telling an elderly person, this tree in your yard is going to fall down. We'll cut it for you for $300 and they give them a bill for $2,000. So much of what is enforced as price gouging is in fact fraud. So let's take out fraud and recognize that we're in a circumstance of really great scarcity. And let's think about what the price mechanism does. So if the price of something goes up and there's a shortage, three great things happen. The first is that consumers buy less. They look at that price and they say, you know, somebody else must need this more than I do. And so they leave some from the person behind them. The second thing is that producers try to find ways to make more. And the third thing is that entrepreneurs try to find ways to make substitutes. And the thing is that if you use the price mechanism, you don't have to announce any of that. All of it happens automatically and in a decentralized way. So the price mechanism is a signal of scarcity. It's not the cause of scarcity. It is a consequence of scarcity. And so there's people that would say that if you live near a fire station, I hear sirens all the time, it's really upsetting. We ought to outlaw sirens. Well, no, the problem is the fire. It's not the sirens. So focusing on the price means that if you want to keep prices low, I walk up, I see low prices. I say, you know, I can take all I want. And so the reason why people take all this stuff is the prices low. Wait, wait, wait. But that, you know, to push back on this, you know, that isn't what happened a couple of weeks ago at grocery stores. When people were like, there is a good chance that we are going to be told not to leave our houses again. There is a good chance that trucks are not going to be replenishing grocery store shelves. We went to buy toilet paper because we were like, we don't know the next time we're going to get it. We did that with meat. We did that with rice and grain. So that is not, you know, is it a fairy tale to say, oh, well, you know what, the price mechanism, this mystical, you know, invisible hand or invisible fist is going to coordinate all of this stuff 72 hours from now, three months from now, whatever, how long, I don't know how you come up with substitutes for toilet paper or, you know, who shifts out of, oh, you know what, right now I'm making computer paper. I'm going to start making toilet paper. How many months does that take to gear up? So can we talk about things in a moment where, you know, a storm is coming down and you have a great story about the long forgotten hurricane Fran from the ages ago, 20th century, and about how shortages and whatnot played out there. But, you know, when a hurricane is coming and we know we've got 24 hours to get stuff, and then it's all going to be gone. Is it wrong to say to people, you cannot charge $10 for a $1 bottle of water, or is it wrong, or is it a totally different thing to say, you know what, we're not going to mess with the prices, but you can't take the entire aisle of toilet paper out of the grocery store right now. We're going to limit you to two or three. You asked a couple of different questions. So first let me accept the premise of one of your questions and then quarrel with the premise of one of your questions. So the premise of your question, and it's a very good one, is suppose that you're in a situation where the things that I've talked about are unlikely to be able to happen. Because economists call this the supply elasticity. It's the responsiveness of the amount of stuff. So if this is really all that we're going to have, it means that all of the second and third things that I said were good about prices, those can't happen. And all we've got is up front, we're trying to allocate a scarce resource among a bunch of people who want it. And then there seems like a pretty good objection that only rich people can buy it. So we really want a system that says only rich people. Again, I'm a rich college professor. I have tenure. I still have income. Of course, I'm going to advocate a system that benefits me. I want stuff to still be at the store and have a really high price. So if there's a circumstance when this really is all there is, I can see an argument for some other mechanism for rationing. And one way of rationing would be, and some stores have done this, no more than one or two containers of toilet paper. On the other hand, the premise of your question is we don't know when we're going to get out again. Nobody told you you weren't going to get out again. And you can still go to the grocery store. And if you've been to the grocery store lately, at least in Raleigh, where I live, there's plenty of toilet paper. There's plenty of meat. Also the case in New York City. I have friends who live in various parts of the country. I know of virtually no one who is saying, you know what, the shells ran out three weeks ago and they haven't been restocked. Yeah. So there's an old North Carolina joke about this. And it actually had to do with the hurricane you mentioned, Hurricane Fran. But after the hurricane, apparently some guy goes into a 7-Eleven and sees that they have cases of water for $30 and says, $30, that's too much for water. And the guy says, well, yeah, you know, there's not much. We're running out. And the customer says, but the guy across the street, water is $7. Okay, go across the street and buy it there. Well, he's out. And so the store owner says, tell you what, as soon as I run out, I'll charge $7. The point is the only reason he had any was that he was charging $30. The question is, are you better off $30 or a price of infinity, which is what you have when all the prices are empty? Now, that's still the premise. And you asked the right question. What if it's true that the supply elasticity, meaning what if it's true that this really is all we're gonna get? If we're not going to get more with a higher price, there's a good argument for rationing. I agree with that. It's just that it's hard to think of a circumstance, although there are some. And that is masks and hand sanitizers for frontline healthcare workers. I think there's an excellent argument for declaring that those things are, there's a national or state reason to control those. We're not going to allow them to be sold. We're not going to allow rich people to buy them because they're the only ones who can afford them. And we can't make enough more of those. The stockpiles are gone. So for masks in New York City, yes, those should not have high prices. Those should go to frontline healthcare workers and first responders. That's absolutely right. What is the, how do we know what the elasticity of supply or, you know, I guess at the same, by the same token demand is in a given situation. And this is where in the current situation, things seem a little bit more unclear than in a classic kind of hurricane situation where we know there's a storm coming and it's going to cut off all the roads, all the supplies. How do we deal with something like this? And what were your first thoughts when you heard, you know, mayors, governors, you know, federal officials saying, okay, you know what we have to put in price controls immediately because of, you know, we know there are going to be shortages. I think from a political perspective, it was a genius move because they can't do anything that actually helps on the virus or access to healthcare. They don't have enough testing kits. They screwed this up. So what they can do is say, you know what, we're going to protect people against price gouging. My own senator, Senator Tom Tillis, who I've had lunch with and has told me to my face, you know, I'm a libertarian. Yeah. Tom Tillis, I mean, he stuck you with the bill or what? One way or the other, right? I'm sure he is introduced a piece of federal legislation to outlaw federal price gouging. So not only is ignore the 10th amendment on local police being able to control price. So this is a federal price gouging law. It also ignores the fact that high prices in one state are likely to bring because not all states are equally affected by this. Right. States need more toilet paper. Some states really are desperate for some of these items. High prices say, bring it here. We need it more than you do. And people will use the implied profit to say, all right, we will incur extra expense. We'll get it there faster and we'll get more of it. So prices nationally are an important signal. Now, if this were true that everywhere we were all out, everyone was dying, then we probably should have a national rationing scheme. But the way that it is where different states are different prices the fastest signal to increase the amount of this stuff. So I think particularly at the federal level of price gouging law is a mistake. Locally, if I were in New York, I would fully support a price gouging law and the claim that we should use rationing that doesn't involve prices. That makes sense. Can you talk a little bit about in New York City right now? They're trying to get nurses and other medical professionals to come here. They've done what was unthinkable even a month and a half ago, which is they're suspending or waiving various kinds of certification rules saying, you know, like you're certified to help people in New Jersey. It's a totally different world in New York. So you have to go through a bunch of regulatory hoops and all of that. They're saying, okay, screw that. And we're going to pay you something like $100 an hour as opposed to maybe $30 or $40 an hour. Why do we not in general think of labor as a source of gouging as well? Because when contractors, you know, in hurricane situations, things like that, we kind of immediately reach for the idea that if we pay more money, we'll get more of a supply. It's really an interesting distinction and I cannot claim to understand it. In the case of the healthcare workers, they're also being subjected to additional danger and you're trying to get them to commute from far away. So it makes perfect sense, but people never say it the way you said it, which is we're using price increases to attract more of the needed thing. In this case, it happens the needed thing is labor. So we seem to have a blind spot for the use of price for commodities, even though a higher price does the three things that I said, but it's okay for labor. So I wouldn't say it's not okay for labor. That part we have right and those people are taking great risks. I hope they get paid more. They probably are still underpaid, but we should use the price mechanism for other things where it's possible provided it is, we're now seeing an increase in the production of toilet paper. There's a lot of these commodities. We're going to come online with the production of hand sanitizer and masks pretty soon. So there is a market response to this. Can you talk about the ways in which government in a way that it's not always credited often creates these bottlenecks in production and consumption? So with something like hand sanitizer, I've read distilleries are switching over to do hand sanitizer, but there are rules about denaturing alcohol so that people don't use rubbing alcohol to drink or something like that. What are some of the hidden ways in which the government kind of steps in to say, okay, we're going to help with this, but they actually are also part of the problem at the same time? It's probably unavoidable because we were asking a system that is set up to operate with things arriving just in time because storing things are expensive. So we don't have big stockpiles and then to blame the government for not having stockpiled things seems excessive, but the government is also intentionally, unintentionally providing a bunch of roadblocks in the form of just enforcing the existing rules. The hard thing is we probably don't want bureaucrats able to suspend these rules at a whim because they'll reward their friends. And so the Food and Drug Administration for nearly a month, the entire month of February, enforced the rules assiduously about testing kits. So no new testing kits were approved for a full month and there were a number that probably would have been okay, but they had to do field testing. And so the Food and Drug Administration was doing the job and had been assigned to do and that's a disaster. But the reason is bureaucracy is actually designed to move slowly and methodically to avoid things like, and we always use the same example, phyletomite. United States because it had the FDA didn't have the phyletomite because it was slow and methodical. So this is actually just a feature of bureaucracy. I wouldn't say that it's a bug or something that's good. It's the way bureaucracy works. Sometimes it saves us from precipitate decisions that would have been bad. And in this case, it's frustratingly preventing us from being able to have access to the stuff that we need. One thing that economists try to do is look at the costs and benefits of particular policies and the way they play out. It seems to me that in the current discussion about the coronavirus, and this may make sense at this stage, but virtually the only thing we're talking about is the potential cost in terms of human life and the benefits of saving as many people as possible or flattening the curve, whatever phrase you want to use. When is it proper to start factoring other economic issues? In such as we're looking at something, I was reading headlines that over 6 million people have applied for unemployment benefits, which is almost double what the initial estimate was going to be. And we're looking at, we might be looking at 25% or 30% unemployment. This is depth of the Great Depression level. How do you from a kind of public policy perspective factor in economics, the larger economy versus the immediate public health claims on attention and things like that? It's one of the most difficult problems. And when I talk to students about this, it's shocking to them, but I tell them that a public policy analyst, particularly one who teaches from the PPE perspective, I'm the director of philosophy, politics and economics. From that perspective, you have to realize that you are not in favor of zero deaths. And then it gets real quiet. I'm in favor of a number of deaths that exceed zero. If you add up the total of the deaths from COVID and the deaths from starvation or not having access to economic resources or just the stress of not knowing where you're going to work, those are always going to be a lot more than zero. I don't know where the minimum is, but it does seem like we have been biased in favor. At first, we were biased in favor of the economy. A lot of things did not shut down. We didn't get any kind of distancing. If you look at the curves about rate of growth, we blew right through China and we're about to catch Italy. So the rate of increase of deaths in the United States, it's going really badly. And it seems that now we're likely to react in the other direction of overemphasizing social distancing in a way that really wrecks the economy that may leave a legacy of years. So the consequence of that is that we have mismanaged this. I think it's not like I expected anything like this to happen. The effects on the economy are going to be very hard to gauge. And I do worry that there's going to be a centralization of economic power and planning. And the idea of transfer and bailing out based on political power. Some industries are going to get very substantial bailouts. Some industries may get almost nothing. Having that kind of discretion in the hands of government means that not only are we not going to take care of the economy as much as we might have, but there's going to be disparate treatment within different industries. And that's just a giant rent seeking contest. So it really is about as bad as you can imagine. What, you know, a week ago, basically, Congress passed and the president signed what is generally considered or acknowledged to be the single biggest spending bill in American history, probably in human history. You know, $2 trillion plus in direct money being shoveled at various things. What is your sense of that? And what is the role? And this is a separate thing. From a libertarian perspective, from an explicitly libertarian perspective, what is the role of the federal government in a situation like this? We're going to be able to talk about this now for the rest of my life in class, because this is the best example I've ever seen. I don't know the answer to your question. What's interesting is that I think that bill is way... What is the libertarian response, or from a libertarian perspective, what would you be comfortable with the federal government doing? Well, suppose that there is an emergency of such great extent that you're going to see dominoes, where a bunch of restaurants who own money to people who sell meat are unable to pay their bills, and then all of those are unable to pay their debts, and the banks go down. So there's this cascade, maybe because we've overreacted, but for whatever reason, the libertarian response... My libertarian response is I'm a utilitarian and I would like to try to minimize the total number of debts. And I don't know where the minimum of that is. We're trying to make a guess. I would say that the bill, the legislation, is actually far better than I expected. It's more decentralized. Well, you've got a condition that on my expenses, on my expectations. My expectations were really bad. This is mostly going to go to large corporations. A lot of it is going to go directly and immediately to small businesses without having to go through an application process through the Small Business Administration. So they may be able to keep some people on their payrolls. The big expense is if people get laid off, and then we have to go through this really difficult process of rehiring people. So given that we were going to do it, I don't know the answer to how much should a libertarian think the federal government should do. Given what they've done, this is actually pretty decentralized and pretty non-bureaucratic. Is there going to be fraud? Absolutely. But a lot of this money is actually going to get out pretty quickly. And this is a way better bill than I expected. What was your feeling about the bailout after the financial crisis? Is this relative to that? This seems to be better because it's going to smaller businesses and individuals? Or is the function the same? There, that was an idea. And I think that was over-hyped beyond belief. But the idea was that the economic system was about to collapse. We don't really have that sense here. Right. I think that's a good analogy. The problem that I would say is it depends if you ask me when. So if you ask me in the fall of 2008 and the early spring of 2009, did we have to do the bailout that we did? Probably yes. Toxic asset release program, relief program, we probably did have to do because the expectations that they would be bailed out were built into the way that all these assets were capitalized. If we could have made a credible commitment in 2004 not to do a bailout, then none of that might have happened in the first place and no bailout would have been required. But when we did not, when we failed to bail out Lehman Brothers, there was a catastrophe. There really was a very substantial decline. So I guess I kind of think of if you have an alcoholic relative, the question is how much do you enable them? It's absolutely true that if they get caught drunk driving and wrap their car around a tree, should you go bail them out or should you leave them in jail? Well, you probably go bail them out. But the question is, was there something before that, some kind of intervention that could have prevented it? So you've enabled them all this time and then you say, well, we have to help them now. That's the wrong thing to think. But what you need to think is, how can we prevent that from having happened in the first place? We did not make a credible commitment. In fact, if you look at Dodd Frank, it specifies, like a list, it specifies what is a systemically important financial institution or CEPI and says, we will not bail these out. If I were Solomon Brothers, I would say that's my to-do list. What I want to do is accomplish. I want to make sure I'm systemically important. Whereas the restaurant on the corner is not systemically important, but it's locally important. There's five people who work there and bailing them out means that there's a pretty good chance that those five people will continue to have jobs that scales up in a way that paying off a few people at the top doesn't. So that explains why you are more comfortable with the current, the CARES Act that went into effect last week. We're comparing levels of hell. One is the fifth level and one is the seventh level of hell. But yes, that legislation is better than I thought and the two reasons are it's more decentralized and it's less bureaucratic. What do you expect to happen to the economy? And part of this depends on how long we're in lockdown for. But over the next two or three months, what is likely to happen and then say, come around Christmas time, where do you think we'll be as an economy? I have such a history of bad predictions. I do have to say that in November of this past year, I took all of my 401K and my wife's 401K and converted it to money market. So we have been in cash in short-term bonds since November and I felt like an idiot for three months. And now for two months, I felt pretty smart. But it's not because I knew anything. It was because it just looked like the system was unsettled. And so I think now everyone agrees that the system is unsettled. It's going to be hard to find money to invest. The hospitality industry, restaurants, hotels is just wiped out and they may not be back anytime soon. There are thousands and thousands and thousands of people in every state who work in the hospitality industry and they're not going to be able to spend money at Christmas time. This past Christmas in some ways was not that great. Next Christmas may be a catastrophe. So I don't know, we're going to test a lot of the theories that Keynesians have about ways to try to spur the economy. So we may see a big increase in the rate of growth of the money supply. We may see an attempt to start a bunch of fiscal policy and we're probably going to get one or more of those things wrong. So a big increase in debt or a big increase in inflation are quite possible. What is, you know, are there historical episodes that we can look to not for, you know, predictive value but for at least some kind of analytic orientation? World War II, you know, and I'm thinking back to, you know, our mutual friend and your regular podcast partner and whatnot, Russ Roberts, talking about the way he described World War II. As an undergrad who took economics classes in the 1980s, I was taught that, you know, the New Deal was a good attempt to use Keynesianism to restart the economy, but it wasn't big enough. But then, you know, World War II and all of the money and, you know, the entire shifting of the American economy to war footing is what finally got us out of the Great Depression. Russ Roberts and other people say, you know, it didn't do that at all. When you look at economic growth and also economic freedom, you know, nobody had anything. Everything was rationed and you couldn't do anything. And then in fact it was after World War II and an absolute steep decline, you know, by, I don't know, like two thirds or something of federal spending in the 40s, that's when the economy took off. You know, can we look at World War II and the effect both under lockdown and then post war as some marker for what's going to happen or had, you know, how do we even come up with scenarios that are not just wish, you know, fantasies here? I cannot think of an analogy. The closest analogy I can think of to, for people living almost under lockdown was the polio epidemic of the early and mid fifties. So in many parts of the Midwest, people just stayed home. In fact, they had to stay in their own bedrooms. If you, you know, polio was only for young people, but it was catastrophic. So before the Salkvast vaccine became widely available. And the, if you look at the economic effect on states where there was, where the polio vaccine was running wild, it was terrible, but it was relatively brief. It was a couple of years. And by then it moved on to somewhere else. The World War II question is it is true that an awful lot of resources were employed. In fact, in the rap video, if you, if you spend all your money on the army and fleet, you have full employment, but nothing to eat. Right. So you're not actually producing anything, but there still was income. So people did have income. There was full employment here. We're not going to be producing anything and people will not be employed. So they won't have any source of income. Even if it's fake income, like it was in World War II, because there was nothing I could buy, things were rationed. We may move to rationing some things if people don't have enough money to buy essentials. So I guess that my, my big worry is in big cities like New York, if the unemployment rate is 30 or 40%, we're probably going to move to soup lines and ration coupons where you can get things like wick coupons, except now it won't be women and infant children. It'll be anyone who's unemployed. So the, the, we will, we will move towards rationing of a more socialist kind because the alternative is revolution and the cities will be on fire. Do you think it's likely? I mean, and, you know, God, we're only a few weeks into any of this, but the productive capacity doesn't seem to have slowed down. As we were talking about, you know, the grocery store shelves are full again. Do you think if this continues that actually we won't be able to grow food or bring it to market or things like that? Or is, are we talking about something different here where it's, the food will be there and it's just that a large number of people, an unfathomable, unfathomable percentage of people won't have any money to buy stuff with. Yes, that it is the, the, the production part of the economy is behaving pretty well. And we are restocking the shelves that we're going to have a, we're going to have a problem in the fall because there's not enough workers to be able to harvest crops. But, but, but for now, we're still in last year, we have plenty of food to be able to distribute. But if you're not able to pay your rent, then you can have a law for a little while that there'll be no evictions. But that's a really short run problem because the landlord is going to get evicted. The landlord has to make the nut on the note that the landlord is paying every month. And in the big cities that in New York, that in Washington DC, San Francisco, that's a lot of money. So, and that is just, we could decree that no one can be evicted. So they still have housing for a little while. They have absolutely no way of buying food. They have no hope of getting a job to buy food. And in fact, they can't leave their apartment. So I, I do think that in terms of what's going to break the binding constraint is not we're going to run out of things to buy. But people are going to get tired of not being able to buy them. Not having any income 30 or 40% unemployment with no income coming in. You get $1,000 from the government. That doesn't help very much. Do you how likely do you think that scenario is? I would guess that in the large cities, we will have rationing. We will have rationing of the sort to ensure that people with no money can get basics, rice, beans. When vaccines come online for this, is there a strong argument, you know, you were talking, we started out talking about how price signals help, you know, create more of a supply, which ultimately lowers the prices. So a spike in prices now can actually guarantee or help, you know, people have ubiquitous access to a good later. When a vaccine comes online, should that be free or should or should it be free to the person getting it? Should that be something that the government actually makes sure gets to everybody? One solution might be to pay people to get the vaccine. So we can have a because the developing herd immunity as fast as possible is our goal. And the having a vaccine in combination with a test to be able to tell whether you've had it. So if we have a test that could detect the presence of antibodies, because some people are going to have it and not know it, they don't need the vaccine. So if we can develop two things, an effective vaccine and a test to find out whether people have antibodies present, and we can make sure that 97% of the population has met one of those two conditions, the disease is over. We're done. Although it may be that it comes back in a year or two, it's not clear how long the antibodies last for coronavirus. So it's it's not like chickenpox where basically you have immunity for years and years afterwards. But if we can have those two things in tandem, I would say that the vaccine, probably we should pay people to take the vaccine and have as many people as possible. You know, one of the one of the hopes I think of the current moment is, you know, just as the FDA and the CDC and various local and state authorities are giving up kind of stupid regulations that don't seem to be working at all, that we're going to experiment a lot and do that. I mean, realistically, I mean, you're you're talking about a major shift from in the past that was you cannot come in here unless you can certify that you have been inoculated against something. We have kids, you can't go to schools unless you show a vaccination list and all of that. Now suddenly you're talking about paying people to get vaccinated or to, you know, take a test to show that they're in. Realistically, are we really going to change, you know, 200 years of public policy in America over this kind of stuff? And if so, how do we how do we grease the skids for that kind of activity? I think that economic misery is going to make people a lot more susceptible to it, because again, just as we said, there's going to be deaths no matter what, there's going to be economic costs no matter what. So is there a way we can choose that will minimize the total economic misery? And I think this will be less expensive than letting the thing run its course. And not the longer this goes on, the longer we extend the period in which we're economically inert. And there'll be a there's no fundamental problems. Dynamically, we should start to respond on the other end. There's be a lot of pent up demand for all sorts of home repairs, construction, people will want to go on vacations. So the sooner we can get through that, the better. Now I realized that that sort of argument is always made by the left. And I feel a little odd making it that no, it's going to pay for itself. That if we do this, we're actually going to make money by spending this. But it's actually true that herd immunity is a different kind of public good. If we can get to 97%, we're in a fundamentally different world than if we're at 80%. Talk a bit about whether or not, you know, this moment, which, you know, we're about the same age we're in our late 30s, right? With 30 years experience. Yes. And but, you know, this is certainly the most, I was going to say the most unique. It is a completely novel and unique experience. It's not like the financial crisis. It is not like 9-11. It's not like the Cold War and at various hot points there. This is a weird black swan. You know, one hopes it's a black swan and it doesn't become just the new normal. All of this, you know, how does this affect your libertarian predispositions? Does it fundamentally challenge things or does it, you know, magically as often as the case for any ideological persuasion, you know, have all of your, you know, political commitments suddenly been validated by what's going on here? Talk, I mean, and I guess I'm starting to go on it so long as a prologue to this, you know, immediately upon this first becoming recognized as a problem, you know, you started seeing headlines saying there are no libertarians in pandemics. And then, you know, I know reason at other places, published stories almost immediately the first, you know, time a rule was suspended and people were like, I'll just go out your business. It was like, no, there are only libertarians in pandemics. Where are you on any of this, Michael? Almost everyone has seen their predispositions validated by what has happened. And so we use, we use the evidence selectively to support what we believed already. But I have to admit, I came to realize that I had a view on this. January 1, my good friend Tyler Cowan wrote a piece on state capacity libertarianism. And I recently wrote a coming out story of my own how state capacity libertarianism makes a lot of sense. It seems to me we need to have a healthy skepticism about the scope of the functions of the state. And the state has metastasized into so many areas where it has no business. So as a result, it does a pretty bad job in almost all of them. So it's trying to do everything and as a result can't do anything. Can you Right. And we need it to do something now. Right. I mean, this is, you know, I'm broadly in the same camp that, you know, I'm not an anarchist. I think the government is legitimate. And it should do fewer things well rather than everything kind of in a half ass way. Can you put some meat on those bones? What are the things the government should be doing? And what are the things that should say, you know what, we, we got to, we got to just leave this to the markets or to nonprofits or something else. Well, there's a short run and a long run. So let's think about the short run for a second. Suppose that, like many of my libertarian colleagues, one believes that the food and drug administration is unnecessary. Brand names, brand names, trademarks, reputation that could solve all of that problem. We could have something like underwriters laboratories, a private organization that will check to see if drugs work. All right, you can believe that we have the FDA. The question is, does starving the beast help? Should we cut the budget of the FDA? Does that get us closer to Libertopia? No, given that we have the FDA, given that that's the system, the FDA needs to be well funded and to have these other rules eliminated. So that that's actually consistent with the libertarian view. We should liberalize the rules at the FDA, but it should be well funded. It should have a lot of experts. It should be an exciting place to work. People who want to commit to public health. But isn't that what the CDC, you know, that has always given high marks for a government agency and it's explicitly designed to help stave off exactly what we're in. And, you know, Donald Trump may have tried to defund certain aspects of it, but its budget continues to go up and it's, hasn't it been shown to be, you know, not just an effective but cock-blocking other people who were actually trying to get something done? Yep. I'm willing to say that, and that's the second part, in the short run, we should not just be across the board trying to cut. I have many libertarian friends that say anything that's smaller government is better. That's not true. That's just not true. We need to be selective. In the long run, we do need to try to say we need to have a serious conversation, particularly about expansion. I would like to zero out the budget of some agencies in some activities. What is an agency that you would say you're done? Well, in the long run. The TSA should be private. Other countries, the air traffic control should be private. Most other countries, again, don't have Homeland Security. Many parts of ICE should not exist. There's no reason for us to have domestic spying to have interrogations of people that are hundreds of miles inland. If we want to control the border, okay. We could argue about the extent, but they're just enforcing the law. But we have a lot of enforcement and spying activity as a result of the aftermath of 9-11, the expansion of the Patriot Act. So there's a bunch of activities that the government engages in. And some of that at the local level is just nannyism, where it might not even be money. It isn't so much spending as the scope of regulation. Attempts to make sure with local zoning that you cannot build houses in San Francisco and then complain about the absence of low-cost housing. Have a requirement where you have to have 1.75 parking spaces per new apartment. So there's a lot of regulations we could get rid of. There's a lot of things that we could zero out. And then what's left should be well funded. Right. Let's talk a little bit about your line of work. And you know, regardless of the coronavirus, you know, in a lot of ways the kind of model of a four-year residential college with tenured faculty. I'd say there's a strong argument that, you know, first off, that hasn't been around for as long as people think it's really a post-war. And it's more like a post-increase in state universities in the 50s. Till now it's dying anyway. The number of tenured faculty positions in many areas dying out. But this is a shock. The coronavirus, you know, pandemic and the lockdown is as much a shock to higher education as it is to any possible part of the economy. You have written, I think the last time that we talked at length, it was about your fantastic book about the future of work. The future of labor in a, you know, in a kind of sharing economy and whatnot. Talk a little bit about how your daily work life has changed because of this. And, you know, in the fall is Duke or other colleges, are they going to be open for business as usual? Or is this a moment where, you know, the butterfly was trying to come out of the caterpillars, chrysalis or whatever for a long time? Is this finally the moment where a lot of what we took for granted as higher ed just kind of disappears? We could do a whole hour-long podcast about this. I think it's an interesting question. I just submitted a piece to a national magazine. They haven't accepted yet, so I won't say what. But I just submitted a piece to a national magazine about the future of higher education. I think this is going to be a Rubicon. We're going to cross over. And this experience for many students is going to give the lie to the idea that you have to show up on campus and be educated at a particular time. So there's the tyranny of the clock tower. You can only be educated between 10 a.m. and 11.15 on Tuesday and Thursday instead of having things that are asynchronous. You can watch this video, you can watch it two or three times. I think that we're going to look back on this as a big change in higher education. However, it is true that not now, but two months ago in New York City, in one day you could see a movie in the morning. You could watch Netflix in your apartment in the afternoon and you could go to a live play on Broadway in the evening. So all of these things, doing it live in a group, doing it individually and then watching a video as a group and having a discussion, all of those things can happen. The tyranny of the top universities probably will continue, tyranny is the wrong word, the dominance of the top university because of the signaling value of going to an elite university. But for many, many other people, there's no reason why universities should have the gatekeeping role that they do. We should make education something that's more democratized. Well, and it's become that certainly since World War II, and I'd argue in a weird way, and I guess this is something that a lot of libertarian thought doesn't dwell on, but simultaneously a school like Duke or whatever you want to call it, a top 25 university may have more cachet now, but people have more ways of totally ignoring that than ever before. The New York Times, the people there are paid more, they have higher status than ever, and it's also like the New York Times can't close down, Broadway plays with a shitty review anymore, so we have these things that are moving in the same, in directions that don't seem to add up. Let me ask you this about higher ed though, and particularly when you're talking about certain social sciences and the humanities, we tend to talk about higher ed as if it's only a place where undergraduates go and learn all the best that has been thought and said, all of that kind of stuff. In fact, I would argue that the main function or the real utility of a university, of a research university is the work that the faculty do. How do you see that changing if suddenly people don't have to be going to colleges as much and department budgets? You don't need as many professors, you cut the budget, the professors are expected to teach more, do less research. What is the large impact of that kind of shift? That could really be a big deal because a lot of the research that's done in humanities departments is just done as a means to an end to getting tenure, which is done as a means to an end to having the rankings of your university improved, and it's more like a computer game than anything real. The modal number of references to a lot of these published articles is zero, no one ever reads them. And so the way that we have research structured is because it's a tied good to education, to participating in what it is we do in the classroom. And so breaking those things apart, I'm not sure that there would be that much demand and I'll just stick to my own discipline. If you had to sell research in political science on its own, I'm not sure anybody would pay for that. But we get paid a lot to do research in political science because we're in a political science department at a top university. Don't you think that you're a better teacher because you're actively doing research, whether or not that research is going to produce a patent that you can sell to a corporation besides the point? I mean, there is, I think, a link between smart people doing research being better in the classroom, which then attracts more people. I think that that is true for many of the, it is true that many of the best teachers are also good researchers. However, what I was saying was that a lot of the research that is actually published, it is hard to say what its value is. Sure. So the doing research and staying current in your field is a good way to be better teachers, and that's working fine. I think that I would say that, but that's working pretty well at the top universities. But there's a lot of universities that are large state universities that are, well, we call them, it's derogatory, we call them directional universities. So they have, they have a direction. East Carolina, North, well, let's say you're at Duke, let's say North Carolina. It's a directional state university. Yeah, that is, I've never thought of that before, but I'm going to use it a lot from now on. Thank you. They're teaching four classes a semester, and they do get to do some research. But if we could break that off and have them use a video from a professor who is really great at doing this, something like the equivalent of movie stars, and then have a discussion about it, that might be better than expecting them to do lectures on their own. So we're trapped in this narrative about the sage on the stage. And with the new technology allows us to break that up and have it be more modular. So creativity in teaching might be more important than having research informed teaching that we can probably only afford at the top places. What about other forms of labor? This year started, really over the past year in California, there was a law that was passed to help supposedly Uber drivers and Lyft drivers and people delivering for Grubhub or Seamless or whatever, a law that basically banned freelancing in the name of saying the grand bargain between employer and employee that was hammered out in the fat years after World War II and the great compression. This mythical period that never really existed, but we're constantly referencing that our parents or grandparents worked for one company forever, and they got a fully loaded health benefit plan. They got a Cadillac retirement, and that's how it should always be. In California was leading the way and saying, we're forcing companies to do that again. Your book from a couple years ago, and I'm blanking on the title, it's got 3.0. I knew it had 3.0 and it tomorrow 3.0 was actually extolling the virtues of the gig economy or of more modular kind of individually tailored work arrangements. What's going to happen? Do you think when we're on the other side of this regarding your vision of the future? Well, Andy, it connects with the coronavirus and social distancing because it means that we need more flexibility in labor markets. So last week, I wrote a letter. So again, nothing better for your book than the coronavirus. Yeah, I in demonstrating. You're so selfish, Michael Munger. So precious. I wrote a letter, I'm working with the Independent Institute in Oakland, California to have a letter for California economists and policy analysts to ask the governor of California to suspend Assembly Bill 5. So Assembly Bill 5 was the legislation that basically set a set of requirements, and it really affected writers. The tough thing about AB 5 was that if you published, at first it was more than 20, and then it became more than 32 pieces per year for the same magazine. Well, if you have a weekly column, you're going to publish 30 or 40. You have to be a full-time staffer, etc. Which means that they wouldn't let you write. The reaction was not to hire them as a full-time staffer with benefits. The reaction perfectly understandably was to say, all right, you can't write more than this limit. And so we're going to try to get Governor Newsom to suspend AB 5 for as long as the coronavirus is keeping social distancing because we need people to be able to work in part-time jobs so they can get by until full-time jobs start to come back. They may or may not ever come back. I think AB 5 should be rescinded. But it should clearly be suspended in the short run because ability to use apps and gig jobs to get through are going to be the key to reducing the damage economically. What do you think about the argument that a fairly massive federal unemployment benefits in the CARES Act and the $2 trillion spending bill that was passed plus the monthly stipend essentially going to people, individuals and children in households making under $75,000 a year is actually going to push companies to fire people or to at least furlough them? Do you think are we paying people to not work effectively? And that means that's a pretty good bargain for everybody. I think that companies recognize how expensive it is to hire new people and so they'll probably try to keep them on if they can. But restrictions like AB 5 that mean that there's a high minimum wage you have to continue to pay benefits. If you could keep them on in a furloughed capacity for a longer time, it's more likely you would continue to have a predictable relationship with that company. It is true that some companies may say, you know, you're getting enough from outside. We're just going to furlough you and let you off and not pay you anything. I think that's a hard calculus and there are so many different businesses and different size businesses. I have talked to some people recently that are now, they stayed home for a bit. They took unpaid leave and the company is saying maybe because they had symptoms. The company is saying you have to come back or you're going to be we're going to treat you as if you resigned because you refuse to come to work. They're in a very difficult spot. The companies can't continue to offer benefits for free, but the people don't feel like they can go back to work. Do you know one of the most kind of annoying and frustrating conversations we've had as a nation for 20 years at minimum, it's longer than that, but especially in the past 10 or 15 years revolving around Obamacare and health care, a lot of us wanted to delink health care and health insurance from employment because just from the employer point of view, they don't know how to run a health care insurance plan and it's difficult. It's a drain on them and they're going to get a crappy deal for their employees. Employees want to be able to move from job to job with that saying, I hate my, I'm working in a coal mine, but the benefits are good, so I'm not going to become a supermodel or something like that. Where are we in terms of delinking that now? Because we have on a certain level, we've been told or the Trump administration has said they're not going to reopen the Obamacare exchanges. Obamacare didn't really get us very far along the line. We can argue about why or why not. The idea that the government should be more involved in a system that had already spent half of the dollars that are spent on and does a kind of bad job in the areas that it directly oversees. How does health care and the relationship to work for government come out of the coronavirus lockdown? This is going to break it. So regardless of which side you're on, I think empirically it's going to break our ability to link them because people like me that have a secure job, I will also have secure health care. A lot of people that really need health care when they lose their job won't have it. And their access to it was not improved that much by Obamacare. Obamacare was basically written by a few elites. We didn't really even then achieve 100% coverage. There's at least one former editor of Reason Magazine who has actually expressed admiration for the French system with a single payer health care system. And I wonder if something like the German system might be a compromise. It would be a big and wrenching change to have individual health care accounts that are tax-free that we then top up. The German system is basically a voucher system. So there's five companies that provide insurance and if you can't pay enough into it, it'll be topped up. But then there's competitive private provision. So I'm worried that we'll move to something like a national health system that we see in England. Whereas the German system, perhaps it's not utopian but it harnesses some good elements like universal coverage but also market forces. Libertarians, I shouldn't speak for everyone, I myself find that a compromise in education is government financing and private provision. So a voucher system. So the German system is universal public financing but competitive private provision. And that may be the best that we can hope for because having a lot of people without health care and having that sense of precariousness also being locked into jobs that happen to have benefits, it is not worked out very well. And the fact that employment is going to be so high means that the question that you just asked, I would guess that that's going to be a national conversation within two months. So just as a kind of final topic of conversation, you know, can you take a long view of, you know, and I know from previous conversations, you grew up under, you know, not exactly plush circumstances and, you know, in the American century, in the meat of the American century, you, like myself, I think, looked forward to the 21st century, you know, this, if it wasn't going to be jet packs, it was going to be, you know, at least this, right? I mean, this is, this is kind of cool. This is Dick Tracy, you know, TV, watches and stuff like that. But it seems like the 21st century, you know, first starting with the kind of nightmare of an election, really, that was basically came down to a coin flip. And then suddenly when you go back and you have to count every vote, and you just realized like, wow, this reality is kind of goopy and filled with all kinds of weird shit going on. Then 9-11, you know, then a nightmare, I mean, with, with, you know, the war is after 9-11, prosecuted by baby boomers of all people who cut their teeth, you know, being anti-war, the financial crisis. Now this, what is your sense of the future of optimism? And, you know, does, you know, does libertarian, does a libertarian sensibility, do you think, actually offer much to a vision of the future? Or is it one of those weird, ossified artifacts of, you know, mid-century prosperity that just, you know, is, is irrelevant to, to what, to the world that our kids and grandkids are going to be paying for it? In 2008, when I was the keynote speaker for the Libertarian National Convention in Denver, the, the theme of my speech was, what are we for? You know, I wanted to ask, what optimistic, positive view of the future are we able to offer? Because libertarians are usually against things. If you were to ask, there's always some laundry list of things that we're against. And I guess I think the optimistic part of the libertarian vision is that we think that there's a lot of human creativity and resilience in the face of catastrophe. And that, left to their own devices, people are pretty cooperative. On the other hand, libertarians tend not to be utopian. We don't think we can accomplish all sorts of things that socialism promises or that other isms promise. We're going to just try to muddle through. So I guess that's a, that's a very limited kind of optimism, but I do think that there's a lot of people that I have talked to have started to think, all right, what happens at the other end? How can we start to plan for this? And we, we're not going to come out of it better than we were. This is going to be a scar and a limitation on what we can accomplish for a decade or more. But the things are rarely so bad that aggressive intervention by the state can't make them worse. All right. Well, is there a particular signal, a bat sign, you know, a bat signal in the air that you're looking for that says, okay, this is the time when we start opening things back up. I used to think that it would happen fairly quickly once quite a few people who have the virus are starting to come out the other end. So once the number of people who are starting to recover approximates the number of new people that are catching it each week, then that's the turning point. But if you look at the, the New York Times has a page that I look at every morning on a log scale and the rate of increase of, of deaths in the United States, it's still linear and linear on a log scale means it's doubling. So it's still doubling every three days. We're a long way from getting to the point, even where we can say we're at the beginning of the end. So we're a month or more even from starting a downturn in the rate of increase. And I, I did not expect that. This is far worse than I had anticipated. Maybe it was anticipatable. Maybe I wasn't paying enough attention. You know, I'm teaching my classes and I'm reading things, but we're a month or more even from the beginning of the end. All right, well, we're going to leave it there. Mike Munger of Duke University. Thank you so much for talking to reason and sharing your thoughts about public health, economics, and the future of work in higher education. It was great to talk to you, Nick.