The Response to the Pandemic: A Hayekian View
26 Pages Posted: 3 Jun 2021
Date Written: August 26, 2020
Socioeconomic systems should be understood as "complex" phenomena that cannot effectively be controlled or managed through central planning. In general, markets and other decentralised governance mechanisms that rely on competition and signalling better facilitate learning and adaptation in conditions of complexity. Pandemics are also complex systems that often interact in unpredictable ways with socioeconomic processes. Decentralised governance may not be able to coordinate an effective pandemic response due to high transaction costs, but the complexity of the interactions between socioeconomic processes and the COVID-19 means that policymakers may lack the knowledge to discern which interventions will address its health and economic dimensions at a tolerable cost. Expectations for public responses to the pandemic should therefore be modest and recognise that to a large extent, the complexity of the policy challenge means that successful responses may owe as much to accident as to design. That government action, however clumsy, may be necessary in "emergency situations" does not mean that such action should continue to substitute for markets when the emergency has passed. Conversely, the difficulties that governments face in responding to the coronavirus could be multiplied if attempts to plan economic activity became the norm in the post-pandemic age.
Keywords: Hayek, Austrian School, central planning, COVID-19, pandemic response
JEL Classification: I18, I11, B53, H12, H51
Suggested Citation: Suggested Citation