Determinants of the Economic Vulnerability of Businesses to Pandemics and Similar Events

After providing a general overview of factors that make businesses economically vulnerable to pandemics (such as COVID-19), this article identifies specific elements that increase the vulnerability of businesses to pandemics. These specifics include the extent to which the demand for their production declines, how easy it is for them to reduce the costs of their production (cost escapability), the importance of disruptions or breaks in the supply chains of inputs utilized by businesses, and their ability to sustain their liquidity. Businesses that rely on personal contacts for sales are especially threatened, for example, those in the hospitality and tourism sector. However, others are also vulnerable for the reasons given. Nevertheless, some businesses do gain as a result of pandemics and similar events. Their economic gain adds to GDP. However, it could be more appropriate to regard their gains as a part of the cost of a pandemic rather than a benefit of it. The effect on the vulnerability of businesses if government policies designed to control pandemics is also considered. The main original contribution of this article is to show how the microeconomic theory of the firm can be adapted to conceptualize the vulnerability of individual businesses to pandemics, particularly COVID-19, while also noting the limitations of this approach.

Economic, social and political issues raised by the COVID-19 pandemic.

This article contributes to the assessment of public policies to control the incidence of COVID-19 in several ways. (1) It contains a brief historical and comparative overview of selected pandemics, particularly in relation to the COVID-19 pandemic; (2) It provides a simple original model which could be used to prioritize the admission of COVID-19 sufferers to hospital (taking into account available hospital capacity) and (3) it specifies a second model to evaluate desired social choices involving the trade-off between the severity of social restrictions (taking into account their impact on the incidence of COVID-19) and the level of economic activity. Bergson-type welfare functions are utilized in the second model. It also critically examines the proposition that the isolation (lockdown) of social groups is a desirable method of limiting the incidence of COVID-19. This leads onto the consideration of the extent to which personal freedom of choice (liberty) ought to be restricted in response to the COVID-19 pandemic. A brief outline follows illustrating the factors that are likely to hinder economic recovery from COVID-19. Particular attention is paid to the moral and ethical questions raised by policies to control COVID-19. These appear to have received little attention in the relevant economic literature.