After the horrifying homicide of George Floyd, the anti-racism movement Black Lives Matter has returned to national headlines. There are many arguments supporting and attacking the tactics used in the movement. However, I will not be delving too much into those. Instead, the focus of this article is on the economic aspects of the protests involved in this movement.
Even though there is no direct consumption and production involved here, many economic concepts can be applied to protests. Primarily, as IB Economics HL students would know, there is a "moral hazard" in this situation. Moral hazard is when an entity has the incentive to increase its exposure to risk because it does not bear the full costs of that risk. In the case of protesting, protestors have been subject to some forms of police brutality, however, many other costs are present and are not borne by those who protest. Thus, this is one of the incentives that drive protestors to execute their movements. However, what would the rational decision be? To protest or to not protest? Usually, rational decisions are based on evaluating the benefits and costs of a decision and only executing that decision when the benefits outweigh the costs. The determination of both is complicated in nature. Costs - The costs for the individual would include potential danger and a negative effect on the productivity of the economy. However, some protestors do not realise the extent of the potential danger, and thereby will be undervaluing the costs involved in protesting. Benefits - The benefits are more societal based. Gaining collective solidarity and a possible societal change is the benefit for those (for some the benefit will involve better living standards in the future, and for some, it is just the sense of satisfaction). Taking a further look at the costs and benefits, one can notice that the costs are more short-term oriented and the benefits are more long-term based. Therefore, it really depends on the individual, their mindset and their circumstances. What about non-protestors? In Market Failure (a topic studied in all High School Economics curriculums), the concept of the 'free-rider problem' is important here. Most of the non-protestors will not be bearing any significant costs during these protests; however, they will reap the same long-term benefits (since they are external benefits). Moreover, the 'free-rider problem' is only present for public goods (goods which are both non-rivalrous and non-excludable). Does this mean that 'protests' are actually a public good (with the difference being that one does not use protests, instead one participates in them)? Finally, something to think about is the more macroeconomic side of things, protests would reduce productivity, increase labour costs, and could even result in Cost-Push Inflation. Moreover, this black lives matter movement is taking place during an economic downturn due to the COVID-19 PANDEMIC. Therefore, with a predicted recession, and now a chance of inflation, could stagflation occur? To conclude, these are a lot of economic aspects to think about, for those involved in the protests, those affected by the protests, and those who are just mere witnesses to this.
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