There’s No Such Thing as a Free Riot

The last several months have witnessed civil unrest not seen since at least the Rodney King riots in the early 1990s if not the Vietnam era. While many protests have been peaceful, cities including Minneapolis, Portland, Atlanta, Kenosha, and, just last week, Rochester have experienced vandalism, looting, or arson.

Some people are defending destruction on grounds that it is not harmful. For example, after Rayshard Brooks’s death in Atlanta prompted protesters to burn the Wendy’s restaurant where he was killed, one poster on Facebook opined, “Yeah a building burned which is sad but that is why [f]ranchisees carry business interruption insurance [s]o no economic harm.” This claim, which can be found in various forms across social media, is profoundly misguided.

Although it is far from the only cost arising from burning the building, let’s start with the destroyed restaurant. Buildings and their contents are made from scarce resources and the burned one housed an ongoing enterprise. Its owner did not consider it obsolete since there were no (publicly known) plans to bulldoze the building to use the location for an alternative purpose. Just as the broken window fallacy ignores destroyed resources in claiming that broken windows stimulate economic activity, it’s just flat wrong to assert that burning the restaurant produced “no economic harm.” Of course, the same could be said for hundreds of properties damaged across the country over the past three months.

The Facebook quote above is likely correct that the franchisee had business interruption insurance. It’s also likely that the building’s owner, who may not be the same person or business entity as the franchisee, had insurance coverage as well. That the business’s operations and structure were covered by insurance does nothing to change the fact that its destruction was a cost. Instead, it merely shifts the costs of the insurance payouts to the insurance company’s shareholders or to its customers who may face higher price premiums in the future. Insurance spreads risks but doesn’t eliminate them.

Having to file insurance claims can involve significant time costs and haggling with insurers. Even if the franchisee is made financially whole, it may well come after a long and unpleasant process for which the franchisee receives no compensation. Riots’ costs are not merely financial outlays or physical resources, they include aggravation, anxiety, and time diverted from alternative, and more preferred, uses. Such costs are not speculative; news reports indicate many Minneapolis firms are experiencing difficulties having insurers cover their losses.

The franchisee was not the only person affected by the destruction of the restaurant. The night Rayshard Brooks was shot, there was a long line of cars waiting in the Wendy’s drive through lane. Customers who would have patronized that Wendy’s now have to find an alternative food source. There are other Wendy’s in Atlanta and many other restaurants with similar fare, but the people eating at the restaurant presumably considered it their best choice given their circumstances of time and place (for example, just off a major interstate highway). Would‐​be patrons must now find an alternative which offers a less desirable combination of price and fare and experience the inconvenience of searching out an alternative, and inferior, location. Those search costs may not be trivial given Atlanta’s congested traffic and Atlanta Mayor Keisha Lance Bottoms’s description of the area as “a food desert” with the Wendy’s being “one of the few restaurants in the area.” While few may lament the loss of a fast food restaurant, concerns about lost options for consumers are not trivial. No one could watch the news video of Stephanie Wilford, an elderly and disabled Minneapolis woman who was distraught after the only grocery near her home was destroyed, without being moved.

The Wendy’s restaurant in Atlanta also employed several people, perhaps two or three dozen, who can no longer work at the restaurant. At the time of the restaurant’s destruction, Georgia’s unemployment rate was 7.6%, more than twice its pre‐​pandemic level. Finding a job during a recession might not be an easy task and would likely involve significant search costs. Fortunately for the Wendy’s employees, the franchisee indicated its workers would continue to be paid (though how long was unspecified) and would be offered positions at other locations (which are likely less convenient than the burned Wendy’s). Of course, it is unlikely that all of the thousands of employees across the country whose places of employment were destroyed by rioting had employers who were both willing and able to continue to pay them or to offer them alternative employment. The harm to displaced workers might be eased by unemployment benefits, but those too are an economic harm. Like insurance coverage, unemployment benefits don’t just spring from the ground like mushrooms after rain. The cost may be widely dispersed across many workers and employers, or taxpayers during economic downturns, but it is a cost nonetheless.

Although some, like one Twitter poster in late August, contend “it’s just stuff,” riots’ harm extends beyond monetary costs such as lost income and higher insurance rates. Many proprietors pour blood, sweat, and tears into their enterprises and derive much personal satisfaction from their firms. Writing on Facebook, economist Steve Horwitz made this point very elegantly:

Claiming riots cause “no economic harm” also overlooks the lasting damage associated with arson and looting. Research on race riots in the late 1800s and early 1900s as well as more recent events such as the Rodney King riots indicate that violence can have long‐​lasting economic harm. That riots have prolonged negative effects isn’t surprising since they undermine respect for property rights. They also increase operating costs if firms have to increase security or “riot proof” their facilities. Riots can also cause lasting harm by disrupting networks of customers, employees, and suppliers since some people who flee strife‐​torn areas may never return even after the violence subsides.

I’ll leave it for others to debate if it is ever morally justified for peaceful protests to become destructive. But there’s no such thing as a free riot.