The private sector has been indispensable during the pandemic — developing vaccines, enabling us to continue working remotely, and adapting supply chains to home delivery. Clifford Winston (Brookings Institution) says governments must recognise and stop impeding their contribution

Winston, Clifford

English

LSE Research Online

Markets	helped	us	get	through	the	pandemic	—	letthem	do	their	jobThe	private	sector	has	been	indispensable	during	the	pandemic	—	developing	vaccines,	enabling	us	to	continueworking	remotely,	and	adapting	supply	chains	to	home	delivery.	Clifford	Winston	(Brookings	Institution)	saysgovernments	must	recognise	and	stop	impeding	their	contribution.The	public’s	faith	in	both	capitalism	and	the	economics	profession	is	at	a	low	point.	One	reason	is	that	neitherappears	to	have	done	much	to	reduce	the	increase	in	income	inequality	that	began	in	the	1970s.	Another	is	thatmacroeconomists	did	not	prepare	the	public	for	the	Great	Recession	and	could	only	partially	soften	its	blow.But	this	view	is	misguided.	It	fails	to	consider	how	markets	contribute	to	addressing	many	economic	and	socialproblems	that	government	policies	have	failed	to	address,	as	well	as	how	markets	have	the	potential	to	solveadditional	problems,	especially	if	policymakers	give	them	the	freedom	to	do	so.	Indeed,	markets	have	played	anespecially	pivotal	role	in	helping	the	public	by	mitigating	the	hardships	caused	by	COVID-19,	and	they	could	play	aneven	greater	role	in	a	future	pandemic.Both	markets	and	governments	make	mistakes.	The	big	difference	is	that	inefficient	government	policies	persistindefinitely,	while	markets	have	incentives	to	correct	their	inefficiencies	given	sufficient	time,	often	by	developingtechnological	and	product	innovations.	Consider	the	lack	of	intense	competition	and	innovation	in	urbantransportation.	In	most	cities,	taxis	are	regulated,	and	public	transport	is	provided	by	the	public	sector,	becausepolicymakers	believe	that	a	free	market	in	taxi	and	transport	services	would	lead	to	financial	distress,	higher	fares,and	poor	service.	However,	ride-sharing	services	such	as	Uber	and	Lyft	and	bike-hire	apps	have	entered	urbantransportation	markets	and	developed	ways	to	“cooperate”	with	consumers	and,	often,	public	transport	too,	enablingconsumers	to	receive	a	better	combination	of	fares	and	service	than	taxis	and	public	transport	alone	can	offer.Photo:	SDOT	Photos	via	a	CC-BY-NC	2.0	licenceThe	revolution	in	information	technology	has	significantly	reduced	the	cost	of	searching,	collecting,	and	distributinginformation	about	products,	services,	and	workplaces.	Cars	are	a	well-known	example	where	a	consumer	may	bemisinformed	about	the	quality	of	a	product.	In	the	US,	states	have	passed	so-called	“lemon	laws”,	whereconsumers	who	have	purchased	a	hopelessly	defective	vehicle	are	given	an	opportunity,	typically	for	one	year,	torequest	either	a	full	refund	or	a	replacement	vehicle	from	the	manufacturer.	However,	CarFax,	a	website	thatprovides	vehicle	history	reports	on	used	cars	and	light	trucks,	including	mileage	and	repairs,	is	more	responsible	forpreventing	consumers	from	buying	a	“lemon”	than	states’	“lemon	laws.”LSE Covid 19 Blog: Markets helped us get through the pandemic — let them do their job Page 1 of 3		Date originally posted: 2021-11-04Permalink: https://blogs.lse.ac.uk/covid19/2021/11/04/markets-helped-us-get-through-the-pandemic-let-them-do-their-job/Blog homepage: https://blogs.lse.ac.uk/covid19/Both	markets	and	governments	make	mistakes.	The	big	difference	is	that	inefficient	government	policiespersist	indefinitely,	while	markets	have	incentives	to	correct	their	inefficiencies	given	sufficient	timeMarket	forces	also	are	effective	in	promoting	social	goals.	For	example,	in	response	to	legislators’	proposals	to	limitthe	rights	of	lesbian,	gay,	bisexual,	and	transgender	people,	executives	of	leading	corporations	have	signed	lettersurging	repeal	of	such	laws;	have	moved	operations	and	events	out	of	states	that	have	passed	anti-LGBTlegislation;	and	have	threatened	to	cancel	projects	planned	for	a	state	if	it	passed	anti-LGBT	legislation.	Suchcorporate	pressure	has	caused	Georgia,	South	Dakota,	Indiana,	and	Arkansas	to	withdraw	or	significantly	amendbills	that	discriminate	against	LGBT	people.	In	participation	with	the	World	Economic	Forum,	prominent	businessleaders	are	engaging	in	discussions	on	how	to	address	LGBT	discrimination	around	the	world.Facial	recognition	software,	linked	surveillance	cameras,	wireless	devices,	and	drones	are	the	latest	technologiesdeveloped	by	the	private	sector	and	used	by	private	firms	and	law	enforcement	to	enhance	public	health	and	safetyby	detecting	criminal	behaviour	and	by	apprehending	criminals	and	terrorists.		Households	also	are	usingsurveillance	technology	to	help	reduce	burglaries.	Amazon’s	Ring	and	Google’s	Nest	are	internet-connectedcameras	that	enable	households	to	use	their	phone	as	a	personal	security	tool.	Of	course,	use	of	thosetechnologies	must	be	sensitive	to	the	public’s	privacy	concerns.	For	example,	legal	action	has	been	taken	in	the	UKagainst	homeowners	in	dense	residential	areas	because	Amazon’s	Ring	has	picked	up	private	conversations.Accordingly,	owners	of	security	cameras	and	doorbells	should	adjust	them	appropriately	to	respect	neighbours’privacy.If	government	removed	its	shackles,	markets	could	help	in	more	ways.	For	example,	both	counterproductiveregulations	of	international	airline	markets	and	ocean	shipping	and	occupational	licensing	of	dozens	of	serviceslimit	competition	that	could	flourish	in	free	markets	and	reduce	consumer	prices.	In	the	US,	the	dominance	ofFannie	Mae	and	Freddie	Mac	curtail	competition	provided	by	the	private	mortgage	market	that	could	increasehomeownership	and	diversify	risk.	And	the	Education	Department’s	near	monopoly	on	student	loans	crowds	out	apotentially	vibrant	private	student	loan	market,	which	could	help	reduce	student	loan	defaults,	interest	rates	onloans,	and	college	tuition.Markets’	most	important	response	to	the	virus’s	threat	to	human	health	has	been	to	synthesise	priorresearch,	conceive,	and	—	with	government	financial	support	—	bring	to	the	market	new	COVID-19vaccines	in	less	than	a	yearAs	I	discuss	in	my	Brookings	book,	Gaining	Ground:	Markets	Helping	Government,	the	same	type	of	market	forcesthat	have	improved	transportation,	information,	and	health	and	safety	also	have	played	a	critical	role	to	help	thepublic	by	mitigating	the	costs	of	COVID-19.	Markets	have	enabled	supply	chains	to	function	more	normally	astrucks	and	rail	freight	continued	delivery	of	e-commerce	and	brick-and-mortar	stores’	goods,	essential	industrialinputs,	and	critical	products,	including	disinfectants,	chemicals	for	medicines,	and	toilet	paper.	Home	deliveryservices	for	food	and	healthcare	items	also	have	been	significantly	expanded.During	the	pandemic,	the	internet	has	been	an	invaluable	source	of	direct	information	and	personal	advice	byfacilitating	virtual	meetings	with	healthcare	providers,	business	associates,	and	other	professionals.	Informationtechnology	has	enabled	some	employees	to	work	remotely	and	continue	to	be	productive,	so	they	can	earn	a	livingwhile	maintaining	social	distancing.	The	technology	sector	also	has	played	a	vital	role	in	enabling	people	tocontinue	their	formal	education	during	the	pandemic,	by	facilitating	online	teaching	through	platforms	like	Zoom	andTeams.Markets’	most	important	response	to	the	virus’s	threat	to	human	health	has	been	to	synthesise	prior	research,conceive,	and	—	with	government	financial	support	—	bring	to	the	market	new	COVID-19	vaccines	in	less	than	ayear.	Unfortunately,	although	some	firms	and	government	agencies	have	required	their	employees	to	becomevaccinated,	market	forces	have	not	been	sufficient	to	induce	the	UK,	and	especially	in	the	US,	to	achieve	near-universal	vaccination	because	of	political	sentiments	and	mistrust	of	government.In	the	US,	markets	have	also	improved	healthcare	by	sourcing	and	distributing	protective	equipment	for	front-linehealthcare	workers	and	the	public,	implementing	testing	and	contact	tracing	for	individuals	potentially	infected	withthe	virus,	and	producing	ventilators	and	therapies	for	seriously	ill	patients.	In	the	UK,	there	has	been	morescepticism	about	the	ability	of	markets	to	respond	effectively	to	a	health	emergency	without	government	support;however,	the	response	in	the	US	provides	some	cause	for	optimism.LSE Covid 19 Blog: Markets helped us get through the pandemic — let them do their job Page 2 of 3		Date originally posted: 2021-11-04Permalink: https://blogs.lse.ac.uk/covid19/2021/11/04/markets-helped-us-get-through-the-pandemic-let-them-do-their-job/Blog homepage: https://blogs.lse.ac.uk/covid19/In	the	future,	innovations	by	the	private	sector	that	result	in	the	deployment	of	autonomous	cars,	trucks,	and	dronescan	facilitate	fast	and	reliable	distribution	of	medical	supplies	and	equipment,	social	distancing,	and	reducedisruptions	to	economic	activity	caused	by	a	highly	contagious	virus,	with	less	exposure	for	transport	and	deliveryworkers.The	public’s	faith	in	markets	can	be	restored	if	markets	are	allowed	to	work	effectively.	To	that	end,	governmentofficials	must	recognise	the	contribution	of	markets,	adopt	policies	that	enable	them	to	develop	their	limitlesspotential,	and	stop	impeding	markets’	constructive	contributions.This	post	represents	the	views	of	the	author	and	not	those	of	the	COVID-19	blog,	nor	LSE.LSE Covid 19 Blog: Markets helped us get through the pandemic — let them do their job Page 3 of 3		Date originally posted: 2021-11-04Permalink: https://blogs.lse.ac.uk/covid19/2021/11/04/markets-helped-us-get-through-the-pandemic-let-them-do-their-job/Blog homepage: https://blogs.lse.ac.uk/covid19/

Markets helped us get through the pandemic — let them do their job

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Markets helped us get through the pandemic — let them do their job

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