Skin in the game challenge: Covid-19 edition

Over the years I have written a lot about the ‘skin in the game’ challenge associated with public policy.  Many times the loudest voices are those with nothing to lose and those with the most to lose – get drowned out.  Intuitively, you would think it should be the opposite.

An example might be the debate over oil and gas development.  The strongest opponents tend to be those not benefiting from the industry in any way or living in a community that benefits from the industry.  In other words, they have nothing (or not much) to lose*.

It also works the other way.  When we debated shale gas development in New Brunswick those in communities where the industry would be located complained the strongest voices in favour of the industry were in the cities and nowhere near the development.  In that instance, the opponents to shale gas – those with skin in the game – won a decisive victory.

We have to be careful not to see Covid-19 as an exact parallel because health and economic impacts are different but it does look to me like many of the loudest voices against opening up the economy are retirees and folks in secure employment (i.e. nothing to lose from lock-downs) and those pushing hard for opening – e.g the Maritimes bubble, etc. – are business owners and workers in affected industries (i.e. those with the most to lose economically).

Again, this case is different because of the potential health impacts but it still remains that you have a large constituency that is hurting and many small business owners teetering on the brink of bankruptcy, if they are not already there.  Their voices should have some weight when contrasted with those who are arguing for the strictest controls on bubbles, education, gatherings, etc. but are not impacted at all (at least economically).

In general, those with skin in the game – or those with the most to lose from public policy decisions – should get more weight than those with nothing to lose.  I’m not suggesting this principle is sacrosanct, but we can’t have those with nothing to lose deciding the fate of those with everything to lose.

That has the potential to create an incredibly unstable society.

Besides, the guy who immortalized the skin in the game argument, Nassim Taleb of The Black Swan fame, says if we all wear face masks in public and keep our hands sanitized the risk of ongoing transmission drops to close to zero. And he has charts and graphs to prove it!

 

*Of course they believe (as do I) that they have a lot to lose generally in the long run from the impact of climate change but in the short term they have very little if anything to lose by strenuously opposing oil and gas development and in some cases have a lot to gain (if they are pushing alternatives).