Joshua Gans is a professor of Strategic Management at the Rotman School of Management, University of Toronto.
“It is not easy for a free community to organize for war,” wrote John Maynard Keynes in 1940. He was commenting on something obvious: People do not like to be told what to do. Keynes was frustrated by the inability of political leaders to lucidly explain to the public what needed to be done at the onset of the Second World War in Britain. Resources had to be allocated to the war effort, and after that, a clear statement of how the remainder would be shared among the public had to be made. Instead, politicians were glossing over both issues with superlatives and no clear plan. In 2020, as politicians announce today what they claimed was unthinkable just yesterday (and I mean that literally), it is easy to see where Keynes is coming from, even if the magnitude of the problem seems lower.
The problem we face is that business as usual will not cut it. We have begun to accept this with tough restrictions on movement and a raft of economic pain. But the issue remains: In a few short weeks, demand for health services will well exceed supply. Absent a price increase, which few Canadians would ever think is acceptable, we will have to ration those services. This is not simply a matter of who gets hospital beds and how long we wait to see medical professionals. It will be who gets potentially live-saving ventilators. It will be similar to the trolly problem that college students contemplate, where you are given responsibility for deciding who lives and who dies. But doctors will not have time to contemplate. It will be real for them, all day.
There are two ways to alleviate this problem. The first – reducing demand – is what we are doing by attempting to flatten the curve and prevent COVID-19 infections. It is a blunt and costly instrument. The second – increasing supply – is something that hospitals around the country are trying to do. They can help, but we need a manyfold increase.
As in wartime, decentralized efforts are insufficient. Imagine a situation where we need one factory to produce face masks and another to produce ventilators, but we do not know which one will be able to do each task at the lowest cost. In a market economy, each factory owner might look at the situation and try to work out what to do. One option is that they both jump in and start producing the product they think they will provide most efficiently. But there is a chance that they will both end up choosing the same thing, and we will end up with too many face masks and too few ventilators, or vice versa. Another option is to wait and see what the other factory chooses to do and then do the opposite. In that world, we have both factories waiting to see what happens, and there is a consequent delay.
The alternative is for someone to choose who does what. This is the role of central planning. This prevents both waste and delay, yet does open up another problem: The government may make the wrong choice. It may end up producing both goods at a higher cost than necessary. But, suffice it to say, during times of crisis we do not let perfection be the enemy of the good, and so must resort to centralized resource-allocation and wear the potential productive inefficiency.
We need a war-like resource-allocation mindset. Someone needs to take control and, when it comes to fast and rapid capacity of health care, Canada has an obvious candidate: the military. The army has the capability to mobilize hospitals wherever needed. The means just have to be altered to serve civilian ends. In some countries, this has happened already, with the military preparing and/or building facilities in Switzerland, Colombia, the Netherlands, Italy and France. The United States also redirected hospital ships to California and New York to handle patients with other conditions who might be otherwise pushed out of the system.
The numbers involved, however, suggest that a more comprehensive and aggressive solution will likely be required – not only military provisions but also a means of diverting manufacturing effort to the cause. Much of this is lying idle due to social distancing. A centralized process must unlock that potential and ensure timely provision. In the Second World War, businesses retooled quickly for military production. The same is required here.
Moreover, there likely will be a need for additional health-care workers. Asking retired doctors and nurses to volunteer is a good start, but this too could be a greater mobilization effort (perhaps even supported by conscription). If we are successful, then not one of them will be asked to choose the fate of a victim.
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