The Pandemic and the Malthusian Trilemma
It's never been more satisfying to be on the couch. We might need to update some mental models here.
Last week’s jobs report said that we added 266k jobs in America in the month of April. We thought we’d add 1M. That’s a pretty big miss in the wrong direction so there’s lots of theories running around right now as to why job growth, in a seemingly recovering economy, isn’t quite where we thought it would be.
It’s worth pointing out that last May estimates called for a loss of 7.5M jobs and we ended up adding 2.5M. That’s a 10M job miss in the other direction. Which really only tells us that we don’t really have a great handle on economic predictions at the moment. Which is understandable.
So far the following debate has focused on a few different factors; whether or not the emergency unemployment insurance, scheduled to run out in September, is slowing people’s return to work by paying them not to work; the fact that only about 38% of children are back to school in person full time; the fact that many families received quite large stimulus checks at the end of March that they hadn’t originally counted on; the fact that there is still an active virus floating around.
Politically the camps will gather around debating unemployment insurance (UI). Whether or not people, in general, would rather take handouts than work, is the debate that goes back to cave clans. The actual answer to the slow job growth is likely less sensationally declarative; multiple headwinds in a complex a complex system make for slower progress. No one is beating you in the head with that in a tweet to make their point though.
There are a few interesting thoughts that I think we can pick out of the discussion though. The first I already mentioned. It doesn’t appear that our economic models are great right now. And that makes sense. The pandemic is a variable not remotely defined yet. So we should take predictions with a grain of salt. What is most important is the broad themes. We lost a ton of jobs during the pandemic. We responded with unprecedented stimulus. And the economy didn’t completely collapse as it did in 2008. And now the outcomes appear to be somewhat slower job growth than we’d like in an economy where people are still spending money and stimulating economic activity. Which leads to the second thought.
In 2008 the financial industry I worked in completely collapsed and the firm I worked for that had been in business for a century went bankrupt. I lost my 30 year old self’s life savings when the house I built in 2005 went down to nearly zero value. And I had to get back in the Navy and deploy to Iraq to feed my family. So, I have a pretty well-worn perspective when it comes to which side of failure I’d like America to hang out on. Accidentally figuring out how to modestly over redistribute our excess wealth in a time of crisis is the failure I’ll take if the other option is the hell scape of my early 30s. Assuming of course we take the next right step and start planning on reeling in emergency UI. 6.1 % unemployment isn’t good. Things start to cost too much when people have too much money and there’s not enough labor to make/serve things. And so supply side labor impact is a problem to solve.
The last thought is a little more nuanced. There’s lots of economic literature around the impacts of UI on labor supply. And there is plenty of evidence that people, in general, would rather work than simply sit on the government dole. Some people always won’t. Whether or not you can live with not torpedoing the whole social safety net to make sure edge cases aren’t getting over on you is probably the best determinant on where one lines up politically. As is believing just how edgy the edge cases are. Is it possible that it’s changing with technology? That last part is actually the last thought.
If there’s one thing the pandemic has taught us, it’s that sitting around with nothing to do sucks. But it’s also taught us that it sucks way less than it used to. If you’re not convinced, run through the mental exercise of thinking what the pandemic would have been like as recently as 2005. Or 1990. I’m pretty confident we wouldn’t have been able to restrict public behavior then as we did circa 2020. For one thing, almost no one could work from home. But the other thing is that we would have lost our collective minds pretty quickly. If there’s one thing technology has brought us over the last fifteen years, it’s the ability to be far less bored for far less money.
The overwhelming majority of the spectrum of economic outcomes spend their time in the same places now. Our kids play the same video games that actually are more interesting than going outside and playing at an absurdly low cost per hour usage. There’s no “rich kid Fortnight.” We’re all on our ridiculously capable phones using the same apps. We’re all streaming the same things on our TVs which are relatively huge and movie theater like. And we all have access to the same internet with all the same “free” places to wander into. And we all just came out of a pandemic where the virus took a wrecking ball to enough industries that saying you are out of work is not quite the albatross it was before.
All of this is awesome by the way. To have more people have more access to things that make life more enjoyable is awesome. To make the whole pursuit of happiness a much more successful endeavor is not anti-American. And to make people not feel like a human failure if they lose their job is a public good. Good, good…good.
There’s a catch though. Of course. And it’s that I’m not sure the great Malthusian Tri-lemma of moral restraint, vice, misery hasn’t been a bit upset. Moral restraint and misery are losing to vice because vice scales better today. I don’t at all mean to finger wave at kids these days and moral backsliding. On the contrary. Technology has taken the sting out of stimulating the parts of our brain that vice serves. It’s cheaper. It’s more accessible. And it’s got far less immediately obvious negative consequences. Online content > 19th century brothels. Who’s willing to take the other side of that argument?
All this is to say that I’m not sure our mental models of incentives are keeping up with the pace of technology. Younger generations are getting less driver licenses and having less sex. Older generations see their families more and engage in political debate more from their couches. We can live pretty full lives from our couches. The pandemic has put that into hyperdrive. And I’m not sure we really understand what it means yet. But it might mean that the cost to pay people not to work is less.