IDEAS: When a nation does not enforce its laws evenhandedly, it erodes entrepreneurial incentives

Head waitstaff Laurie Mitchell, places cleaned ketchup bottles together at Rodd's Restaurant, Thursday, Dec. 10, 2020, in Bristol, Conn. Small restaurant owners in Connecticut are taking out loans, forgoing their paychecks and charging on credit cards to remain in business as the coronavirus pandemic continues. But with winter putting an end to indoor dining and increased cases scaring off customers, some are uncertain what other financial tricks they can turn to.  (AP Photo/Jessica Hill)
Head waitstaff Laurie Mitchell, places cleaned ketchup bottles together at Rodd's Restaurant, Thursday, Dec. 10, 2020, in Bristol, Conn. Small restaurant owners in Connecticut are taking out loans, forgoing their paychecks and charging on credit cards to remain in business as the coronavirus pandemic continues. But with winter putting an end to indoor dining and increased cases scaring off customers, some are uncertain what other financial tricks they can turn to. (AP Photo/Jessica Hill)

Credit: Jessica Hill

Credit: Jessica Hill

Note from Community Impact Editor Amelia Robinson: this guest column by Cedarville University Associate Professor John Tarwater appeared on the Ideas and Voices page Sunday, Jan. 31.

During this pandemic season, we have witnessed an unprecedented attack on numerous freedoms.

Despite being in a country that touts religious and civil liberties, churches have been forced to close their doors, individuals have been forced socially to distance, businesses have not been allowed to operate. What makes this pandemic especially difficult, however, is that these restrictions have not been enforced impartially; it has been obligatory only for some churches, some individuals and some businesses.

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John Tarwater is an associate professor of finance at Cedarville University where he teaches courses in finance and economics. He is the author of various articles in professional journals and edited volumes in fields of both finance and ethics.
John Tarwater is an associate professor of finance at Cedarville University where he teaches courses in finance and economics. He is the author of various articles in professional journals and edited volumes in fields of both finance and ethics.

The Heritage Foundation, for instance, recently published a list of 50 reported instances of local, state and federal officials who violated their own mandates or restrictions.

When a nation does not enforce its laws evenhandedly, it erodes entrepreneurial incentives and decreases productivity. Owners spend more time protecting their property than investing and using it. Economic growth, consequently, stagnates and individual incomes fall. Hence, we have seen the enormous economic expense as a result of the lockdowns.

By arbitrarily forcing only some businesses to close their doors, the government hinders the market from being free and competitive. Moreover, it also leads to less freedoms, which we have witnessed.

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In a free-market economy, consumers have liberty to choose, which has economic consequences; it may lead consumers to purchase fewer hybrid cars or shoes made in America.

To counter these economic outcomes, governments may seek to increase demand for these items by introducing restrictions on the importation of shoes from foreign countries and taxes on certain vehicles. However, these policies subsequently result in less freedom to consumers who are now forced — strongly encouraged — to buy other products.

The decisions by government officials to increase demand for particular goods and services means that the laws are not being applied evenhandedly. It would be akin to enforcing traffic laws on drivers differently. Imagine what would happen if one group of drivers were not required to obey traffic lights.

The decision would benefit members of that group, allowing them to arrive at destinations more quickly, but it would negatively affect all other drivers, forcing them to pause at green lights for fear that the “chosen” group might be approaching the intersection. All traffic flow would be affected.

When others see the government artificially propping up certain businesses, whether it is through taxes, quotas or selectively locking down competitors, they likewise begin to clamor for similar protections — wheat farmers in Iowa, steel workers in Pennsylvania, autoworkers in Michigan and sugar farmers in Louisiana. As more and more businesses receive protection from having to compete for consumer patronage, economic growth slows dramatically and government officials feel pressured to expand their protective powers. Accordingly, the consumer is left with fewer and fewer freedoms.

In this pandemic season, many government officials have unevenly applied the law. Some businesses are free to open while others are forced to shutter. Even when the decisions are made from pure motives and a good heart, they still result in less freedoms for the consumer and a weaker economy. As Friedrich Hayek wrote in his “Road to Serfdom,” security for one group necessarily leads to insecurity for the rest.

The economic effect of the lockdowns has been strongly felt in the short run. How long will we experience the effects of disappearing freedoms? Rarely do governments rush to return liberties once they have discovered the power that comes from taking them.

John Tarwater is an associate professor of finance with doctoral degrees in both finance and ethics. He is the author of various articles in professional journals and edited volumes in both fields.

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