Partially Right Means Generally Wrong: Why Some COVID-19 Mitigation Strategies Keep on Failing

Abstract

Why do some COVID-19 mitigation strategies fail? As the pandemic continues to spread, policymakers are struggling to find effective policies that lead to fewer infections at a reasonable cost. Although the elusive nature of the virus makes predictions difficult, the field of law and economics provides tools that can help understand how a given policy should affect behavior through its impact on incentives. Yet, existing studies mostly look at individual policies or specific activities in isolation. Policymakers thereby neglect the many possible interaction effects that may arise due to the simultaneous adoption of concurrent strategies and the heterogeneity of social and environmental attributes. When interaction effects are not accounted for, policymakers run the risk of drawing incorrect conclusions, which focus on partial effects that do not necessarily hold as a general equilibrium. In particular, it is crucial to consider substitution effects: even policies that successfully shift behavior away from problematic activities may be ineffective if individuals simply switch to other, equally harmful, activities. Similarly, complementarity effects may occur, where a policy that targets one harmful activity indirectly discourages other related activities. Our analysis, which builds on both traditional and behavioral law and economics, thus provides a new explanation for why some COVID-19 mitigation strategies may fail.

Keywords: COVID-19, Coronavirus, Substitution Effects, General Equilibrium, Law and Economics

JEL Classification: K14, K42, D04, D50, D62, D91, I18