Why the success of a pandemic depends more on political coordination than regime type
The COVID-19 pandemic serves as a massive global lesson in externalities. While we often focus on medical breakthroughs, the true challenge lies in how institutions manage the hidden costs of local actions that ripple across entire nations and the rest of the world.
The pandemic presented a dual economic challenge: negative externalities from the spread of the virus and positive externalities from vaccine development. Negative externalities occur when local actions, such as those seen in Wuhan, impact far beyond their immediate borders, affecting entire provinces and the global community. Conversely, vaccines provide a positive externability because their benefits extend to those who do not receive the shot, which can lead to the development of vaccines being under-incentivized.
Research involving economists like Alex Tabarrok, Michael Kremer, Susan Athey, and Chris Snyder explores how to better incentivize this development. The stakes are immense; every day without a safe, effective vaccine results in the loss of thousands of lives and billions of dollars. Addressing these massive externalities requires institutions to move beyond individual self-interest and internalize the costs and benefits imposed on others.
When examining the performance of up to 113 countries, the data suggests that the type of political regime—whether democratic or autocratic—is not the primary driver of pandemic success. Instead, the ability to coordinate is paramount. Countries with centralized political parties, which facilitate better national-level coordination, performed significantly better than those with decentralized parties. This highlights the importance of policy coordination in managing large-scale social and economic disruptions.
While federal structures appeared to face more consistent difficulties than unitary systems, the impact of fiscal and administrative decentralization remains less certain due to data limitations. However, successful examples of intergovernmental coordination, such as those seen in Germany, Denmark, and Australia, demonstrate that strong national leadership and nationwide policies can effectively control the initial waves of a pandemic.
Source: Externalities and Incentives: The Economics of COVID
