Introduction

Unfortunately, from the perspective of promoting the well-being of society as a whole, we

believe that governments in the United States and around the world are making significant
mistakes in their policy responses to the COVID-19 pandemic. If we are right in that judgment, it
is important to understand why. So, there is a need for a symposium that explores the political
economy of the pandemic. As we will explain later, the political economy perspective challenges
the assumptions of the omniscience and benevolence of all actors, politicians, regulators,
scientists, and members of society in responding to pandemics. We live in an imperfect world,
inhabited by imperfect beings, who interact in an imperfect institutional environment. However,
starting from the basic behavioral postulate that people are the same whether they are in the
marketplace, government, or in the nonprofit voluntary sector, we will explore the systemic
effects of alternative institutional arrangements on individuals' choices and their adaptations and
adjustments in response to the feedback they receive from consequences of that choice. As James
Buchanan points out, the same player with different rules produces different results. And as such,
variations in outcomes must be explained by variations within institutions, not differences in
people. In the UK and Germany, the two countries that are empirical centers of this paper, the
initial shocks are the same, the economic policy responses are very similar in almost all relevant
respects, but the implementation and effects are very different. Reflecting our conclusions, the
UK's furlough schemes, both initial and revised versions of the fall 2020 season, target the
aggregate unemployment rate and delay slightly but far from eliminating mass layoffs. Similarly,
business support schemes fail to reach many of their beneficiaries, in large part because UK
banks lack the basic knowledge and regulatory arrangements to provide emergency funds to
ailing companies. Many businesses ended up closing their doors in late summer 2020 despite the
initial financial assistance.
Discussion

Trade-off making decision

Since the first wave of lockdowns, countries have diverged in their use of this measure.
Lockdowns are controversial because on the one hand, they envisage mitigating the pandemic
but on the other hand they impose a social, commercial, and cultural toll in form of them
reducing or suppressing communal practices. In deepening the analysis of the lockdown, this
paper explores how this trade-off mitigating pandemics versus suppressing communal practices
entails many other trade-offs. In economic theory, every decision comes at a cost, which is called
opportunity cost. The case of mitigation of Covid-19 and the suppression of communal practices
is such a case. The remainder of this section discusses how this trade-off can be conceptualized
in economic theory. In doing so, it will use the strictness of lockdown measures as proxy for
mitigating the pandemic and loss of economic growth the difference between the estimation of
growth of the Gross Domestic Product and its real growth as proxy for the toll the suppression of
communal practices. Of course, other variables could serve, too, as proxies. As in all empirical
economics, there are many more factors at play than can possibly be covered by any economic
model.(Boettke & Powell, 2021)

The political and economic reality goes far beyond these elements. But they are proxies
for the political decision making on the one hand and its economic effect on the other. A more
comprehensive understanding of the economic effects of those measures would incorporate their
total economic cost, as well as their redistributive and intergenerational components. In
economic theory, every decision comes at a cost, which is called opportunity cost. The person
who decided to write a paper on Covid-19 decided against writing one on Confucianism, against
going to a museum, against watching a movie and the like.(Hancké et al., 2021) Trading off in
decision making occurs, when an optimum level of activity is sought. If the person likes writing
paper and watching movies and has only a limited amount of time for doing both, the person
choses a combination of time spent on the paper and time spent watching the movie. This
combination at the same time conforms to the person’s preferences and combines the factors to
the level of activity writing, watching to maximize the person’s preferences given the constraints
of the decision-making. In political economy, where agency is not as clear-cut as on the singular
agent level and therefore preferences and maximizations are less accessible, trade-offs are
usually framed differently, often as the minimization of the total effects of constraints. The case
of mitigation of Covid-19 and the suppression of communal practices is such a case. At least in a
charitable view, government A Trade-off between Political Economy and Ethics pursued a
strategy of mitigating the pandemic while minimizing the impact of those measures on
communal practices. In this trade-off the answer seems to be As long as the strictness of the
lockdowns are commensurate with the loss in GDP (Gross Domestic Product), the measures may
be deemed as proportionate. From a certain degree of stringency on, the economic costs of the
lockdown increase over-proportionate to the strictness of the lockdown, or stringent lockdowns
impact the economy over-proportionately. This suggests that there is a trade-off between
stringency and economic cost where the rate of increasing stringency equals the rate of increase
of economic loss. This point in which the rates equal each other optimizes the compound effects
of both and is referred, in economic theory, as an optimum, or, so political economy suggests,
the commensurate degree of strictness of lockdowns.(Yao & Wang, 2021)

IN TERMS OF POLITICAL ECONOMY

Crises such as Covid-19 offer a window into the key mechanisms that make a political economic
system tick: what could be disguised under a thin layer of normality in other periods, forces itself
to the forefront in such moments of high tension. A detailed analysis of the responses of
governments in two very different varieties of capitalism, the CME (Coordinated Market
Economy) Germany, and the LME (Liberal Market Economy) UK, to the economic fall-out of
the health crisis at first glance seems to confirm the theory of institutional convergence. A
similar shock in different systems led to essentially the same economic policy responses, carried
by different government coalitions but with similar support from business and labor. In
combination with other elements in the institutional set-up, furloughs schemes minimized
unemployment but also, importantly, preserved high, specific skills in Germany while mainly
acting as a short-term buffer to unemployment shocks in the UK. Small and medium-sized
enterprises did well out of the loan schemes in Germany but not in the UK, while the very largest
and smallest companies benefited in the UK but considerably less so in Germany.. In addition,
short-term economic indicators suggest a steeper collapse in the UK (minus 20.4% versus minus
10.1% in Germany), higher unemployment and bankruptcies and (almost certainly) a more
difficult recovery. These outcomes, secondly, are related to a powerful but often underestimated
feature of capitalist economies. They are truly systems, in the sense that different elements in it
have to work in tandem to be effective: Policies that government actors introduce therefore have
to be at the very least compatible with the pre-existing systemic elements. Technically this idea
is derived from the theory of institutional complementarities. (Schneider, 2021)

The interaction of two mutually reinforcing elements of a particular capitalist system can
produce performance effects that are superior to the sum of the performance effects of each of
these elements individually, and vice versa sensible policies may fail in the absence of
supporting elements in the institutional make-up. Cherry picking economic policies therefore
does not work in the absence of underlying institutional frameworks that support them. In this
particular case, very similar furlough and business grant schemes have fed into different systemic
structures in the UK and Germany, which produced these diverging results. In sum, despite the
global crisis with similar policy responses everywhere, their effects understood here as their
processual outcomes, not performance diverged because of these complementarities. (Mok et al.,
2021)

Critique
I see areas where strong governments, with virtually unlimited fiscal and political mandates, are
adopting what everyone considers the gold standard response to crises. In the UK and Germany
these policies are significantly at odds with the prevailing macro or microeconomic consensus:
Germany typically resents deficits and activist fiscal policies, whereas since the Thatcher era, the
UK has favored market forces to resolve economic crises. The stage was set for very similar
results, but the opposite happened.

Conclusion
First, when political agents and scientists claim that lockdowns are a necessary measure based on
scientific evidence, they seem to be following the scientist's logic. Scientism does not need a
trade-off because it assumes that the conclusions of science are practical orders. The general
conclusion from this paper, with a grain of salt, is that in political decision-making there are
several elements to be traded off, three of which have been exemplified here. Neither the
elements nor the actual exchange mechanism are clear. Even if they were, different trade-offs
point in different directions. Therefore, policy-making must rely on a vocation of judgment that
lies, ultimately, outside of science and philosophy to make decisions. Finally, some aspects
mentioned in this paper deserve further exploration. The overall economic cost of the lockdown
is as much a point as any other ethical question that has to do with the redistributive and
preventive benefits and drawbacks of actions taken by governments. The question of pandemic
exceptions and what can be learned from UK and German mitigation policies is also an
important research base. Finally, what is meant by an emergency is an urgent question.

References
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