Digitization Fueled by Easy Money and Covid Lockdowns Is a Form of Malinvestment
Dr. Pangloss in the present global health emergency is not the poor philosopher of Voltaire’s Candide but a storyteller of the bubble in “pandemic stocks.” The optimistic message is the same—even when disaster strikes, that is for the best in the best of all possible worlds. The bubble’s narrators maintain that the pandemic has powered an acceleration of technological progress, most of all digitalization. Innovatory changes which otherwise would have taken years, in fact decades, to unfold are now occurring within months or less. We should all celebrate.
This makes no sense on two levels.
First, even if it were true that an acceleration of technological change builds prosperity, we should subtract from any gain here the human and economic costs of the pandemic itself. Death, illness, impaired quality of life, many services no longer available or only in highly infection-risk form, resources diverted to defense or attack against the virus, forced idleness—these are all some of the costs which should be chalked up as negatives.
Second, the fact that the pandemic has accelerated technological change is not in itself necessarily a good thing. The pace at which we journey into the forest of the unknown is not always better for being quicker. Indeed, it is one function of the invisible hands to optimize the speed of this journey, which often means slowing it down. If the pandemic unleashes forces which cause these hands to malfunction (or in an alternative metaphor, to corrupt intricate price signaling of the capitalist economy especially in capital markets) then there are grounds for concern.
According to the st
Article from Mises Wire