The most important thing to remember about the lockdowns is that they are forcefully mandated by the state to further the common good. This is not a situation where people are taking individual voluntary actions to enhance their utility. Rather, they are forced to take steps that are massively detrimental to them financially and mentally, because it is considered necessary for the good of other people.
This means that, by definition, we now inhabit a situation where people are prevented through the coercive power of the state from exercising the basic freedoms necessary to the operation of a free market. They cannot leave their homes. They cannot congregate. They cannot meet and engage with other people. Under such extreme conditions, any attempt to apply free market principles where no such market exists, is going to result in an extreme failure of economic policy.
To be clear: the free exchange of good and services, if it is entered freely by two sides who can exercise voluntary individual action during this period, continues under the free market. This means that people do continue to pay for their food, and if they can travel by car and need to fill it with gas, they will pay for it. There is no suspension of new (new) transactions during the lockdown period. Moreover, business activities that can operate under lockdown, such as software development, can continue with mutual agreement, as well as businesses that governments deem necessary during this period, from manufacturing masks to delivering goods. The free market and its price mechanism do work well for them.
But the free market cannot work for those who are not (not) free. And for them, hibernation of all cash flow is the best solution we could find. That, in addition to government subsidies for basic utilities and food and medicine for the needy. If the unfree are forced to continue paying fixed payments while their income has stopped, the result will be a massive transfer of wealth from the unfree people to banks and real estate owners. The proposal to make loans more freely available to them may offer some help, but still results in a massive unjustified transfer of wealth as well as the free market adjusting according to erroneous short-lived signals of a supposed precipitous demand for numerous services and products.
The transfer of wealth also takes place with respect to those who currently possess the other kind of “rent-generating” asset, which is a secure public job. The holders of these jobs (Excluding of-course those necessary to battle the epidemic, from healthcare workers to sanitation and police) continue to receive secure regular salaries from the public budget, even though their future contribution to the post-corona economy is no greater than those whose income has been forced to zero.
By freezing all pre-corona contracts for the duration of the battle to end the epidemic, economic policy is placed in sync with the impositions made on people’s freedoms during this unique period.