Government Failure vs. the Market Process during the COVID-19 Pandemic

Abstract

This paper argues that government policies such as lockdowns and command and control regulation of businesses have not efficiently addressed the nature of the COVID-19 externality because these interventions fail to take account of insights from standard price theory about the reciprocal nature of externalities and the allocation of rights such that least cost avoiders adjust behavior. Furthermore these interventions stifled the market’s entrepreneurial adjustment process that partially ameliorates the externalities over time.