Economic Consequences of Pandemics and How to Prevent Them

The COVID-19 pandemic resulted in colossal economic and social costs. Measured in trillions of dollars, the costs involved economic, learning, and social losses, strains on healthcare systems, negative effects on mental well-being, inequality, investment, food security, and potential permanent scarring effects on income and employment. The pandemic clearly illustrated that minimizing the profound consequences of pandemics requires a preventive risk-based approach. Rather than devising optimal, or largest bang for the buck, economic policies to mop up after the pandemic hits, an optimal economic policy is to prevent pandemics. Akin to the crisis prevention framework for the financial industry implemented after the 2008 financial crisis, fighting pandemics requires a pandemic prevention infrastructure. This infrastructure includes monitoring and surveillance of potential pathogens, platforms to develop tests, vaccines, and cures ex ante, the network to produce, scale up, and distribute the medical solutions globally, and an institution to coordinate across major stakeholders. This risk-based approach is minuscule in cost compared to the pandemic fallout.