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Some micro/macro insights on the economics of coronavirus. Part 3

April 13, 2020

Some micro/macro insights on the economics of coronavirus. Part 3: Extreme risk management
What should we be willing to sacrifice in wellbeing to collectively guard against very infrequent but extraordinarily intense events? This column asks this question in the context of France’s preparation for a pandemic, and argues that the allocation of public investments should be reviewed using scientifically based evaluation tools under uncertainty, using asset pricing theory, decision theory and real option valuation.

Humanity faces many risks that could lead to its extinction. The plague is believed to have killed up to half of the European population in the mid-14th century (O Grada 2020). The pandemics imported from Europe by the conquistadores in

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Some micro/macro insights on the economics of coronavirus: Part 2

April 3, 2020

There is much to be said about the management of the health crisis. Let’s start with the call for good citizenship. At the beginning of March, the French government counted on the civic-mindedness of its citizens to encourage them to behave responsibly. The failure of this policy was widely reported in the media. Why wasn’t education and information enough? Many citizens expressed their rejection of basic preventive measures by explaining that they were prepared to take the risk for themselves. Do they understand that their behaviour affects not only their own survival, but also that of others? 
There are two possible explanations for this lack of civic-mindedness. The first is that these people have not really understood this negative externality, similar to those who refuse

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Some micro/macro insights on the economics of coronavirus: Part 1

April 2, 2020

Some micro/macro insights on the economics of coronavirus. Part 1: Impact assessment and economic measures
We are both economists – one specialised in decision theory under uncertainty, with applications to finance, macroeconomics, climate, insurance, risk prevention and public policy evaluation; the other in development economics, with applications to infrastructure, public procurement, and institutions. Of course, there isn’t any legitimate specialist on the economics of COVID-19, and we make no such claim. Amid a health crisis, there are still many unknowns on the human, medical, economic and financial levels. And yet, decisions must be made very quickly. Scientists have useful but partial and incomplete knowledge. They have a responsibility to share it with

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