Rules for the Virus

The coronavirus raises what economists call a problem of externality. An externality occurs when an actor does not internalize all the costs of his or her behavior. A company that pollutes, for example, earns a profit for itself but imposes costs on the surrounding community. Hence some social or legal norm is required to prompt the company to internalize these costs and reduce pollution. Similarly, with the coronavirus, individuals do not bear the full cost when they engage in behavior that risks infection, because once infected they become vehicles that infect others.

The hard question for society is how to get people to internalize these costs and thus engage in less risky behavior while shutting down as little productive economic behavior as possible. Currently, many state governments, like that in my home state of Illinois, have used blanket and rigid rules that eliminate all but essential activities. The rules do prevent behavior that leads to infecting others but at great cost to prosperity and, indeed, human flourishing.

While some of these rules may be the best that can be done on short notice and in the short term, they are crude and inefficient in that they shut down some activity that more sophisticated and flexible norms would not. Regardless of the progress of the virus, about which there are many uncertainties, governments need to consider how they can rely on more flexible rules and encourage voluntary social norms that will create better tradeoffs between the risk of infection and the diminution of economic activity.

The coronavirus crisis is thus in part a legal crisis. The serious legal issue comes in matching both the form and content of the norm to the threat we face. And the shape of response needs to evolve over time as we learn more about the nature of the virus.

 Categorical Legal Rules

The typical rule that state governments have promulgated is to shut down all but “essential business” and to restrict the movement of their citizens outside the home. These rules are “categorical rules” in that they define legality by a category of action. Because they are not calibrated to the actual effects of individual action, they are inefficient by some margin. For instance, there are surely some non-essential businesses that can be run without substantial risk of infection. But categorical orders, like the one in Illinois, typically prevent them from operating.

One reason for their inefficiency is that such orders often impose one set of rules for widely differing communities in the state. It seems unlikely that the same set of rules are best suited to dense cities like Chicago and to all the rural areas in Illinois.

Broad categorical rules can be worse than inefficient. They can be self-defeating because centralized decision-makers lack the local knowledge to understand the secondary consequences of the rules. A simple example is occurring in my neighborhood in Chicago. The Mayor closed the park system near Lake Michigan to prevent crowds from gathering. This includes the Riverwalk near my house. But the Riverwalk is a broad boulevard where it is easy to social distance. The effect of its closing has been to increase crowds in the streets around my home. The application of the rigid rule here increases the risk of infection even as it makes it harder to exercise.

A more important secondary consequence appears to be a reduction in people seeking treatments for other serious diseases. If the government’s rules are supposed to save lives, the ones lost in this way detract from the rule’s core purpose. It might be thought that this consequence stems from fear of the virus, not the rules. But draconian rules can amplify fear.

The costs and counterproductivity of broad, categorical rules have yet another serious social downside. They lead many people to think that the government is overreacting and unnecessarily curtailing their liberties. This has already resulted in protests, which may themselves spread the virus, and a more general and diffuse distrust of government at a time when social unity is more important than ever.

Moving to Flexible Rules and Performance Standards

It would be better to move to what economists call performance standards. These standards evaluate the dangers businesses pose for transmission and incentivize them to change their behavior so that they can open. For instance, if we understand how masks and distance reduce the risk of transmission, businesses could open so long as they used the right combination of distancing and masks to reduce transmission. Government could also provide emergency tax credits for this equipment, because businesses are no more responsible for the virus than the people their costly protections will help.  

Because of our limited knowledge about the virus, these more relaxed rules might still have to be top-down regulations at first, requiring masks or social distancing in certain circumstances, though they would still be more flexible than the current blanket shutdown rules. But over time they should evolve to look more like standards that hold businesses responsible for reducing the risk of transmission to an acceptable level. Particularly as we learn more about the virus, these performance standards can return economic activity to what it was before.

The Role of Social Norms

Social behavior is also likely to change over time in ways that will make top-down rules less necessary. Thus, bottom-up norms can reduce infection rates, reducing the need to rely on top-down ones, even the more flexible performance standards. The public did not initially know of COVID-19’s virulence. But once they understood the risks, most would have changed their behavior even without direction from the government. For instance, the handshake has disappeared, replaced by the elbow bump at least for the duration of the crisis. (Indeed, I wonder whether shaking hands will ever recover from this shock!) Handwashing, which is quite sporadic during ordinary times, has become an obsession for many, although the government, of course, cannot enforce a rule on handwashing.

It might be thought that social norms could never reduce the infection rate enough, because people may flout beneficial social norms that are personally costly. But social norms can still substantially reduce the problem of externalities in some situations.

Many of the social norms that can reduce infection rates have small individual costs. Handwashing and even mask-wearing have trivial costs. And most people are willing to suffer small costs for public benefit. After all, even young people who are not much harmed by the virus have older relatives who will be. And these small acts of public benefit can add up to reduce the rate of transmission.

Social Enforcement of Norms

Moreover, social norms can be enforced by social pressure even without direct government action. Those who do not conform to good social norms connected to the virus will endure social costs, like adverse comment and loss of reputation. To be sure, the effect of group enforcement is likely to be stronger in a more homogeneous society than in ours, but all societies will engage in some social enforcement in a time of crisis. As Dan Klein notes, Sweden seems to be doing quite well with few categorical legal rules, perhaps because it is a more homogenous, high-social-trust society than ours.

The market may also be a source of enforcement. For instance, stores that do not put up partitions between customers and cashiers or provide face masks for employees will draw adverse comment and indeed scathing blog, Twitter, and newspaper accounts. They may also lose worried customers.

To be sure, some people will flout social norms. In Chicago, a widely-circulated video showed hundreds of reckless people crowded into a house and yard for a Saturday evening party. This kind of conduct invites adverse social comment (which it certainly received) and yet happened anyway.

Nevertheless, it should be noted that this party also flagrantly violated the categorical legal rules of Illinois, not merely social norms. The question is thus not whether legal rules, when perfectly enforced, will be better than social norms, but whether rules, as actually enforced, are better. Moreover, the United States is not an authoritarian country, making rules that affect personal freedom necessarily weak. We do not resemble Singapore where an individual was prosecuted for leaving quarantine ten minutes early to get breakfast. Our best solutions must work with the society we have, not the one that we might imagine.

To be clear, draconian legal rules may have been useful at first, although some, in my view, were unnecessarily broad from the outset. They got people’s attention and may have helped begin a cascade of good social norms. But over time the government must consider replacing some, if not most, of these rules with performance standards and information campaigns that bring the facts about the transmission of the virus and its prevention to the public in the form of recommendations. Better information will generate social norms more sensitive to the complex and situational tradeoffs we face.

Reader Discussion

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on May 07, 2020 at 09:15:29 am

Nice summary of approaches to regulation which could apply to other areas besides public health. Variation in regulatory approach has been tried insufficiently with regulation of the environment, especially performance standards (think Corporate Average Fuel Economy Standards/ "CAFE") and regional variations in allowable air emissions based on variations in meeting air quality standards.

Interestingly, the automobile industry once clamored for nationally-relaxed CAFE standards. But in the interest of avoiding economic uncertainty that would occur with future tightening (especially from California,) the automobile industry has recently opposed President Trump's proposed CAFE relaxation and instead wants nationally-uniform CAFE standards that are tighter than proposed. Indeed, the standards the industry wants are the standards California wants. From a cost/benefit perspective, the auto industry is now clamoring for CAFE standards that are needlessly tight and excessively costly and will lead to more injury and death on the highway. The auto industry is prepared to externalize to the hapless consumer and the gullible public the economic and human costs in order to achieve corporate planning certainty.

Finally, the Wuhan Virus episode has ARGUABLY shown that this comment by Professor McGinnis is no longer true of our country: "Moreover, the United States is not an authoritarian country, making rules that affect personal freedom necessarily weak."

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on May 07, 2020 at 10:35:48 am

"This is not Singapore"
NO, it is not. In Singapore, the government did not unleash Armored Personnel Carrier equipped police forces to arrest peaceful protesters supporting a local bar owner's attempt to reopen his business.

Also, per today's news, 66% of new hospitalizations in New York are from people who were CONFINED TO THEIR HOMES>
At what point, do we allow the observed reality to dictate our policies and actions as opposed to the "expected" reality promulgated by our self serving experts in both politics and medicine?

The Ventura County commissioner has now unveiled as plan to enlist as many as 20,000 "contact tracers", i.e. people who will track down those that are ChiComm Flu infected and, if need be, forcibly remove them from their homes and place them in "alternate" housing.
At the same time, Los Angeles, is considering "commandeering" private businesses such as hotels and motels who are refgusing to accept ChiComm flu victims and compelling them to house these unfortunate souls.

McGinnis fails to recognize the tendency (inherent, I say) among those who would be Leaders; the tendency to incrementally arrogate to themselves ever more power. It is so and has ever been so.

I would go further than McGinnis on the knowledge problem. Not only do the experts not know all that is required to be known, it would appear that they know less than the average citizen who, at least, is willing to believe "his own eyes" as opposed to the fanciful (and hoped for?) projections of experts.

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on May 07, 2020 at 10:59:07 am

The problem with this analysis lies in its attempt to apply the concept of "externality." In these circumstances the concept reaches its logical endpoint and thus negates itself. Each human being is a negative externality to each other human being, solely by virtue of existing. Mere existence, mere movement in time and space, of an individual person is held to pose the gravest threat to others. Mere inhaling and exhaling. Mere touching of things. Man is a political animal. Man is a social animal. Human nature is to exist in society of others. These are now uncontested axioms of philosophy and of social and political thought and analysis. But it is that basic, ineluctable truth of human existence that is now held to be so full of "negative externality" that it must be forcibly suppressed. You cannot compress the sphere of human existence any further than the "social distancing" (a term even Orwell wasn't artful enough to invent) regime we have allowed to be imposed, or at least the ideal regime that so many are urging. This virus is bad but in no wise an existential threat to humanity, yet it is become the foundation of a new philosophy of existential externality. Empowering some people (people who themselves do not scruple to violate their own commandments) to regulate the minutiae of human existence for all the rest, down to the number of others I may be in the presence of at any one place and time, down to the conditions under which I will be permitted to breathe and move--the historical significance of this cannot be disguised by cloying appeals to compassion and empathy. When the highest value of human existence, when the only socially acceptable form of human existence, becomes to continuously show how much you "care" for others, that existence has been reduced in significance below the level of the simplest one-celled life form.

We were herded into our closets originally on the basis of "flattening the curve," solely as a technique for conserving scarce medical care resources. Within a few weeks, that foundation proved to be sand and thus the house of human reduction had to be re-built on the indefinite, indeterminate, all-purpose rock of "saving lives." But there is little evidence to suggest that any determinate absolute number of human lives will be saved by this new virus-centered social order. Each of us is going to contract this virus eventually, no matter how long we are kept out of restaurants, theaters and parks. If avoiding contracting the virus now becomes the summa of the new ethical order, the thing to be avoided at any cost, then each and every other human being, your own child, your own parent, imposes the same "externality" onto you merely by being alive and on this earth at this moment in history. No amount of Posnerian law-and-economics sleight-of-hand can alter this unalterable fact. Whatever became of "Live free or die"? Now, it is reduced to its absurdum of "Live or die."

In this impending new war of all against all, the most we will have succeeded in accomplishing is making life nasty, brutish and long. Personally, if we are to march ourselves back into a state of nature, I'd just as soon it be short.

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on May 07, 2020 at 15:46:23 pm

"Each human being is a negative externality to each other human being, solely by virtue of existing. Mere existence, mere movement in time and space, of an individual person is held to pose the gravest threat to others. Mere inhaling and exhaling. Mere touching of things."
This is the clearest cutting of the Gordian Knot I have seen throughout this whole pandemic fan-dangle, in our attempts to balance health and life vs. our economy. I have just now also recalled the famous Pogo expression "we have met the enemy and he is us".

I am surprised by the inability of our vaunted capitalistic free enterprise market system to "turn on a dime" as is often advertised, to provide the abundance of masks, disinfectant, toilet paper, etc. suddenly required in alternative supply chains. The deficit between theory and practice, possibly further hindered by government regulations. The insights from Z9Z99 concerning potential for declines in respect for authority, and that the authorities themselves are not quite as authoritative as claimed during the election cycle, make this one of the better L&L comment threads I have seen. Thanks to all.

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on May 07, 2020 at 14:25:33 pm

Arapahoe and Douglas counties are adjacent political subdivisions in Colorado. Arapahoe County has a population of about 650,000 and Douglas County has about 350,000 residents. Douglas County has a higher average household income. Being adjacent areas in the Denver suburbs, the two counties have very similar appearances; one is usually unaware of passing over the county line from one to the other. The City of Aurora has portions in both counties. The counties share the same board of health. Each county has three hospitals, one from each of the same three large hospital systems. The same physicians take care of patients in both counties. The same coronavirus control interventions were used in both counties.

As of 5/6/20, Arapahoe County had 2977 COVID cases and 167 deaths, and Douglas County had 556 cases with 25 deaths. What might be the dominant factor accounting for this discrepancy? Why is the per capita case rate in Arapahoe County 2.9 times higher than in the adjacent county, and the per capita death rate 3.6 times higher?

This is significant because there is currently debate over whether, for example, the less authoritarian approach of Sweden is inferior to that of Norway, or whether the approach in Michigan should be imposed on South Dakota. The unspoken assumption is that differences in the experiences between Sweden and Norway, or Michigan and South Dakota is due to differences in government policy. But when we look at two adjacent Colorado counties, that are separated only by an imaginary line, and which used the exact same policies, the underlying assumption is shown to be false. It may be the case that coronavirus data is much less sensitive to government-imposed control measures than "experts" think; that in fact, it may be that people's common sense, on the whole, will have produced pretty much the same case and mortality outcomes as the exercise in declaring which businesses are and are not "essential."

There are two points that are suggested by Professor McGinnis's essay that should be stated explicitly. The first is that panicked policies. poorly thought out and shot through with arbitrary and silly distinctions, enforced without judgment or discretion, result in contempt for authority, and ultimately degrades the legitimacy of necessary institutions. A police officer may have felt justified in thinking his job was accompanied by an inherent respect and a necessary and fulfilling role in a functioning society, but these are diminished when he finds himself brandishing an AR-15 to prevent someone cutting hair, or harassing old people on a beach, just because some mediocre politician told him to. The value of police is diminished when they make themselves look ridiculous.

A second consequence is that people notice just how silly and, for lack of a better word, deficient much of our political class is. It becomes readily obvious that the people who are in positions that require wise decisions are not in those positions because they are good at making decisions. They are in those positions because they have traits, some of which are personality disorders, that are conducive to attaining those positions: ambition, political savvy, inherited or otherwise accidental wealth, an easily dismissed conscience, an iron-brained inability to distinguish ideology from reality. Whatever else one thinks of the coronavirus response in Michigan, Illinois or New York, there appears to be little evidence for the notion that political leaders there are very bright.

There is also the issue of diminishing returns. The governor of Illinois, another person who I would not trust to fill out a 1040 EZ, asserted without evidence that his leadership "saved thousands of lives." There is of course, no evidence for this, and as the experiences in Douglas and Arapahoe Counties referred to above illustrate, there is no way of knowing what the actual, as opposed to assumed or claimed, factors are that affect infection and mortality rate. It is arguable, and extremely likely that the government response in New York caused deaths that would not have occurred otherwise. The hare-brained directive that nursing homes could not require prospective admittees with symptoms of COVID-19 be tested for the disease was ideology over-riding common sense and common decency. It was stupid, and it killed people. It was a policy of ideological vanity, and preening stupidity. Talk about externalities...

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on May 08, 2020 at 12:11:21 pm

After another bout (unsuccessful) with the *moderate* censors regarding a comment wherein I expressed an overly "enthusiastic" acknowledgement of Z9Z99's recognition of a nascent yet growing sense of "contempt for authority" as a possible effect of the ChiComm Flu policies, I shall try again. This time with one more arrow in my quivering quiver.
wherein we find the expert guidance of the CDC includes instructions on how Church are to conduct religious ceremonies, bars are to dispense their beverages, how schools are to dispense with cafeterias, social gatherings (weddings, funerals, in home parties) etc etc and that this may continue on in to the future.
And note well the recommendation for such ChiComm Flu palliatives as "DRIVE-IN VOTING,"eliminate voting in nursing home, senior centers, etc. This reads more like a palliative against voter support for Trump as each and every one of these recommendations may be found in the Democrat party playbook and in the utterances of Pelosi, Schumer and that intellectual giant from NYCity, AOC.

So I will repeat: It is well past time that the citizenry not only recognize the palliative value of contempt for authority but that they embrace that inner contempt.

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on May 08, 2020 at 16:07:57 pm

Gabe just caught up with this(L&L's "new" format fails to notify readers of subsequent comments. See if you can fix that!)
I am pleased to see a healthy "contempt for authority," which is, after all, the mind-set on which our nation was liberated and founded. I will respond more fully later, albeit knowing that no one but you will read my sur-reply (given the "new" L&L software, which is decidedly unfriendly to its very few readers who read and then say what they think.)

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on May 08, 2020 at 16:48:56 pm

Not only that but a link I included in another post to a Hillsdale College symposium on the ChiComm Flu with appearances by Larry Arn, Thomas West and others has somehow not managed to appear. Unfortunately, my reliance upon the good sense of the "moderators" here was misplaced and that reliance led me to delete the information I had on the link.

here it is:


The one I wanted to link to was the 4th one in the opening page and it includes Thomas West, Adam Carrington, Kevin Portteus and hosted by Larry Arn.

I am sorry, Richard Reinsch BUT this is getting to be TOO MUCH.

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on May 08, 2020 at 21:14:14 pm

Saw the Hillsdale symposium
Good stuff
Thank God for Hillsdale College.
I give them money semi-annually and only wish I were Bill Gates so I could endow the place forever.

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on May 11, 2020 at 13:19:29 pm

Sympathize re your battle with the censors.
I just tried to subscribe to the L&L "Newsletter" and got this reply:

Go figure!
Ah, "but for the honor of the thing," as Lincoln's story goes.

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on May 08, 2020 at 12:35:33 pm



here we find a rather interesting AND devastating critique of the Imperial college Model on the effects of the ChiComm Flu (as well as a restatement of standards for all who would purport to be expert modellers).

GIGO = garbage in - garbage out. The outputted garbage is even more likely when a) the code is kept secret and b) that code is not reviewed / analyzed / critiqued by independent reviewers as is done in standard insurance company modelling.

Anyone else ready to rely upon expert opinion.

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on May 09, 2020 at 12:50:17 pm

Wow! A coterie just now of healthy "contempt for authority," each of whom shall "remember with advantages
what feats he did that day."

Statist trolls and other Democrats would defame the event as the mere conjuring of a congeries. But it is, rather, a conspiracy to "Live free of bureaucratic experts or die for want of common-sense," a cabal of high minds opposed to the lowly authoritarians' Hobbesian option, aptly referred to herein as the binary "absurdum of Live or die" and as "a policy of ideological vanity, and preening stupidity" and which I would dub the "shut up and obey" ultimatum.

And to think, Professor McGinnis inadvertently incited it all with a rather elementary comment on the matter of externalities.

It goes to show what can happen when the ship of fools hits an iceberg and sails on to collide with yet another, all the while indifferent to the adjacent glaciers of legal and moral crises: the Administrative State's incompetent failure to perceive the threat (''the danger to be perceived defines the duty to be obeyed,") failure to diagnosis the nature and failure to manage the harm of the Wuhan Virus pandemic and the Democrat Party's unlawful conspiracy to reverse the outcome of the 2016 presidential election and to eject President Trump from office so as to preserve the Obama status quo ante.

I need not restate the overwhelming evidence on both accounts recently amassed by advocates for the victims. To aptly expand the recent admonition of a thoughtful observer:
"Leaders must examine accumulated data to see what has actually happened (how and why the ship of fools hit two adjacent icebergs,) rather than keep emphasizing hypothetical projections (and false, disproven criminal allegations;) combine that empirical evidence with fundamental principles of biology (and law) established for decades (if not centuries); and then thoughtfully restore the country to function." https://thehill.com/opinion/healthcare/494034-the-data-are-in-stop-the-panic-and-end-the-total-isolation

The facts are in. More heads must roll than the heads of Fauci and Comey, but those heads must roll.

Besides reading:https://thehill.com/opinion/healthcare/494034-the-data-are-in-stop-the-panic-and-end-the-total-isolation
also read: https://www.bizpacreview.com/2020/05/09/tucker-carlson-evaluates-faucis-job-performance-a-ruthless-political-operator-918718

And be sure to read Gabe's citation and listen to his recommended Hillsdale College Symposium.

Then "recognize the palliative value of contempt for authority... embrace (your) inner contempt," cry, the beloved country and get angry.

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on May 09, 2020 at 18:16:39 pm

Ah, my Faithful Knight, you do so inspire this lowly squire to redouble his own meager efforts to make plain the utter stupidity and mental deficiencies of those "Who Would Be King"
In another REJECTED post in response to another valiant and insightful commenter, our long time friend Z9Z99, I had alluded, no NOT alluded but rather was downright condemnatory of the utter idiocy, lack of mental acuity AND agility (failure as they do to adjust to observable circumstances) of our Policy Experts, I referenced some anecdotal evidence of the paucity of thought / reason / and communicative capacities of certain elected officials.
It was REJECTED. Perhaps, a tad bit more understandable than rejecting (initially) a link to a symposium by Hillsdale College but...
Well, here is another exemplar of the refined deliberations of the policy elite of, you guessed it, another DEMOCRAT politician, Gov Jay Inslee, previously referred to as Gov Malcolm Milquetoast wherein we observe that a poor old curmudgeon such as yours truly, recovering from a major spinal episode and desirous (hopeful, incorrectly as it turns out) of playing golf on sunday with his beautiful wife of some 40 years, is UNABLE to do so.
Why, because, this commenter is, at present, unable to walk the golf course.
No problem, one would think. Power carts are available.
Ah, Yes they are. However no more than a single rider is permitted in a single cart unless one of the riders is a minor.
Never mind that a husband and wife may have engaged in the most intimate of marital "harmony" the preceding evening - they SHALL not be permitted to share a "Effin"Golf cart. Who knows what may be transmitted over the course of 18 holes of golf?

And we actually ELECT and PAY these morons; these same persons who are in possession of no special intelligence, if any at all and as Z9 offers possess those pyschological traits normally observed only in sociopaths - the ability to lie / dissemble / and obfuscate without apparent hesitation; to posture as "friends" of the downtrodden victims of the nation while simultaneously enhancing their own image / prestige and wealth and to do so with that smile more normally observed in the demeanor of Jeffrey Dahmer, Gary Ridgeway and other sociopaths.
I choose not to participate.
And YET, mark my words, these miscreants WILL be REELECTED.
Doubt it? Look only to Brooklyn, New York, where Comrade Deblasio's snitches are having a field day ratting out their social distance non-conforming neighbors.
And if this one is BLOCKED, then it indicates that LLB has a) either succumbed to the zeitgeist or b) is derelict in policing not its readers BUT its' moderators.

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on May 09, 2020 at 19:54:42 pm

Kafka wrote about your situation.
As a lawyer and former husband I am experienced in the value of applying for a variance, which, in law as in marriage, is permission to engage in conduct departing from the required normative behavior. I advise you to seek such a dispensation with respect to the obligatory one passenger golf cart.

However, do not waste time seeking a variance for you and your wife to travel as one. That smells of the Book of Genesis and risks raising Establishment alarms. Further, it would be conducive of marital harmony and family cohesion, both contrary to the public interest in blue states.

To address the public interest in the venue in which you have (foolishly) chosen to live and golf, I advise that you contribute $10,000 to the Washington Democrat Party and the allowable limit to Governor Milquetoast's re-election campaign; locate a trans-sexual illegal alien recently freed by state authorities from the clutches of ICE and hire him/her as your driver at double minimum wage.

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on May 10, 2020 at 12:38:08 pm

One hesitates to secure such a variance as the mere acceptance / submission to such requirements may very well induce in Gov Milquetoast and his minions the deluded belief that even non-golf cart "two-person harmony" may also require such a variance.
We should not be surprised that, in such a situation as in most others our Leaders would prefer that we be left to "our own devices."

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on May 11, 2020 at 12:59:07 pm

You raise a good point of potential risk.
Now that you bring it up, I do think it advisable that "Social Services" be called in periodically to investigate and re-assess the communal utility and social value of a marriage. Annulment decrees, perhaps, are warranted where inappropriately-married heterosexual couples refuse to obtain a divorce that would serve the community's interest.

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on May 16, 2020 at 10:30:10 am


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