Economists differ in their response to how governments should respond to the COVID19 crises. Economist 1 Gigi Foster: "I think that Australia can follow in the footsteps of many other countries in the world, some of which have not had lockdowns as strict as we have had here, such as again, Sweden”. Foster argues the economy should be kept open or even more people will die from not having work or not being able to cope with lockdown. If people die that is simply a cost of keeping the economy healthy. Economist 2 Paul Krugman: “The main driving force behind reopening, as far as I can tell, was the administration’s desire to have big job gains leading into November, so that it could do what it knew how to do — boast about economic success. Actually, dealing with the pandemic just wasn’t Trump’s kind of thing”. Krugman argues that government should, for the sake of health and the economy, deal with the virus. The economy simply will not revive until the virus is under control. Discuss the merits or otherwise of these different views using the four core principles.
Economists differ in their response to how governments should respond to the COVID19 crises.
Economist 1 Gigi Foster:
"I think that Australia can follow in the footsteps of many other countries in the world, some of which have not had lockdowns as strict as we have had here, such as again, Sweden”. Foster argues the economy should be kept open or even more people will die from not having work or not being able to cope with lockdown. If people die that is simply a cost of keeping the economy healthy.
Economist 2 Paul Krugman:
“The main driving force behind reopening, as far as I can tell, was the administration’s desire to have big job gains leading into November, so that it could do what it knew how to do — boast about economic success. Actually, dealing with the pandemic just wasn’t Trump’s kind of thing”. Krugman argues that government should, for the sake of health and the economy, deal with the virus. The economy simply will not revive until the virus is under control.
Discuss the merits or otherwise of these different views using the four core principles.
The four core principles of economics are:
Demand and supply
Costs and benefits
scarcity and tradeoff
Incentives
As per the first economist, opening the economy or not imposing a severe lockdown would help the economy revive because if the lockdown continues, the number of people who die from not having work would also be the cost of the economy. Here the economist is performing a cost-benefit analysis based on the cost the people have to incur due to the lockdown and job loss and the benefit they get from protecting themselves from the disease.
The merit due to this principle is that the costs of not only production but also the livelihood and lives of people affected during lockdown are considered.
Also, there is a clear tradeoff between the two choices: if the country considers tradeoff and scarcity, the lives lost vs the livelihood lost would be compared. So if lives are considered important than the economic loss then the tradeoff would be in favor of lockdown, otherwise not.
The economist should also focus on the fact that if the economy re-opens, and the disease spreads, then there would be a scarcity of beds and tradeoffs between who should be treated and who shouldn't be.
Hence after a thorough cost-benefit analysis, the country should decide whether or not to end the lockdown.
Step by step
Solved in 2 steps
