The Brief / By Ben FrankelProper Perspective, and a New, Post-Pandemic Economic Paradigm

Published 26 June 2020

Governments around the world have imposed economic and social lockdown in their countries in an effort to contain the spread of the coronavirus. These decisions were driven by dire predictions of several influential epidemiological models. Three months into the lockdowns and shutdowns, these decisions are subject to renewed examination and criticism.
Ross Clark (also see here) questions the usefulness of variables such as “R”-naught (R0), and the underlying figures used in calculating them. Alistair Haimes and Greg Weiner raise more fundamental questions: were government leaders, facing a complex situation requiring costly decisions, too willing – indeed, eager — to accept the recommendations of scientists and modelers, without subjecting these recommendations to searching critiques and thorough examinations? “[I]t is already clear that there has been an unexampled disregard for the foundational pillars of the scientific method even as governments trumpet that they are ‘following the science’,” Haimes writes. Weiner writes that in tough situations, leaders should not outsource decisions to others. Exercising judgment – seasoned by experience, evenness of temperament, and due regard for expertise – “as the means of making political decisions is not only correct; it is unavoidable.”
And judgment leavened by experience, Dr. Waqar Rashid writes, would help us keep this epidemic in perspective. He tells the story of the 1996 mad cow disease (BSE) scare to show that with a better perspective, an initial panicky reaction to a scary new outbreak is often found to have been unjustified.
On 1 December 1862, President Abraham Lincoln sent a message to Congress, proposing the compensated emancipation of slaves. “The dogmas of the quiet past are inadequate to the stormy present,” he wrote. “As our case is new, so we must think anew, and act anew.” This is also Arnold Kling’s argument. The novel virus has created a novel economic predicament. “What is clear, however, is that the COVID-19 pandemic has accelerated the deterioration of the concepts that underpin contemporary macroeconomic-policy thinking in America,” he writes. “The time has come to jettison both the Keynesian and monetarist paradigms that macroeconomic policymakers employ and to pursue an alternative paradigm more suitable to the conditions prevailing in today’s economy.”