Question

Consider the Covid 19 virus and think about it from the perspective of the course. Would you expect decentralized private behaviour in the presence of a virus to lead to a Pareto efficient outcome? If your answer is yes, fully explain. If your answer is no, fully explain and provide one example of a corrective government policy and explain.

Answer 1

The Covid-19 pandemic has not only affected the lives of the people around the globe but also its major impact has been on the world economies too. It has affected the environment lives of the people, financial situation worldwide, etc. It has created a situation for all the economies od the world where the financial system has been badly affected and the recovery cost is very high and the recovery rate is slow.
All types of measures, whether its monetary or fiscal measures, both are unable to recover the individual as well as the world economy in a way that the speed of recovery is much better from the last few months. As per the various analysis made by economists worldwide, recovery of the loss made by the virus will take around 3 to 5 years to completely come out from this situation.
Secondly, a decentralization private behaviour means the way by which the government is going to divide and manage the work and distribute the activities in the private sector so that the public and private sector both can work consolidated for the sake of the economy.
The Pareto efficient outcome explains that the better situation can only be possible for one side at a time, which means the betterment of a situation in one sector or one phase of the economy will result in a standstill or relatively slow recovery speed of the other side, sector or phase of the economy.
The best example of the same is government expenditure deduction. This example best suits the situation of inflation. When there is a severe depression in the economy then the government rises the expenditure to recover the system and the structure of the economy.