A Behavioral Economics Perspective: Why People are Perfectly Rational for Going to Work Amidst COVID-19

A Behavioral Economics Perspective: Why People are Perfectly Rational for Going to Work Amidst COVID-19

Tensions surrounding the COVID-19 lockdowns are exceptionally high. Protestors across the US, Germany, France, and Spain—to name just a few—have rallied en masse to demand the lifting of legally-imposed quarantines. Now that economies have begun to reopen, social media has become its own battleground with many urging—even outright shaming—others to stay home and not go to work.

So why hasn’t rational self-interest kept people at home anyway? It would seem that people would want to stay home amidst a pandemic. Why, then, do they seem so eager to go to work and risk sickness and possibly death? It is here that my own work in behavioral economics may provide some answers. More than just an understanding of why, simple insights from behavioral economics may even cultivate a little empathy.

It should be no surprise that people have a whole range of goals in life. People have basic goals—things we associate with survival like food, shelter, water, and rest—and people have more abstract and far-reaching goals—things we associate with aspirations like education, philanthropy, or even fame. Drawing from Maslow’s hierarchy of needs, behavioral economics predicts that people will allocate their resources toward survival goals first, and only once those needs are met will they begin using resources to pursue more abstract needs. In my own work, I show how people should go about maximizing the probability of achieving their goals—whether as basic as survival or as aspirational as building a business.

In the face of a pandemic, where the chances of sickness and death are considerably higher than normal, we should find that people voluntarily moderate their behavior to maximize their probability of survival by gathering in large groups less often, or by working from home where they can. Indeed, in countries that have not pursued extreme lockdown measures, like Sweden, we have observed people voluntarily distancing themselves.

For the more than three-quarters of Americans who live paycheck to paycheck, however, work is the primary source of survival. Without an ability to convert their most valuable resources—time and expertise—into food and shelter, the probability of survival decreases significantly. This fact must be weighed against the increased risk of infection and death. Though that risk is considerably higher in a pandemic, it is not certain. In the context of survival, when faced with certain failure or probable failure it is irrational to choose certain failure.

To be fair, people appear to discount their own risk of infection (also predicted by behavioral economics). Not everyone carries equal morbidity risk, of course: age and underlying conditions significantly increase the risk of death. Not to mention that without intervention the probability of death for everyone also increases because medical facilities can become overwhelmed and infection rates substantially increase. There is an argument to be made for significant intervention, especially on behalf of those at higher risk.

This individualized real-world tradeoff is the argument for free choice. For those who find themselves with higher risks, moderated behavior—even self-imposed quarantines—may indeed be worth missed work and foregone income. For others who carry lower risks or who are in a higher immediate need for work, this sacrifice may be too great. It is this variation in personal situations and risk tolerance that calls for the free action of individuals acting in rational self-interest. Governments, by their very nature, can only prescribe a one-size-must-fit-all solution to an immensely nuanced and consequential question.

Freedom, as it turns out, is incomparably equipped to handle this nuance and its consequences.

At the very least we should acknowledge that many have seen their lives ruined—not by disease or their own poor choices, but by a legal prohibition of their only means of survival. Those of us who are inclined to caution (and have the luxury of indulging it) should check ourselves before judging our neighbors who go choose to go to work. Those who are not so cautious might do well to acknowledge the concerns of people with higher risks. After all, we are all acting in our own rational self-interest.

But outright shaming people for trying to survive, whether avoiding disease or starvation? Well, that just isn’t in anyone’s best interest.

Written by: Franklin J. Parker, Free Enterprise Analyst