Spend Billions to Save Trillions: An Economist’s View of COVID-19 Response at EconEd

[MarisaBluestone]

This year's EconEd focused on one key idea: the decisions we make in our lives, classrooms, and society have far-reaching impacts. To explore these critical choices, we invited world-renowned economists to share their perspectives on issues vital to our economy. One topic that continues to shape our world is the COVID-19 pandemic, which has had one of the greatest economic impacts in recent history.

While it may feel like we’ve moved past discussing COVID-19, revisiting it now, with hindsight, offers invaluable lessons. Enter Alex Tabarrok, co-author of Marginal Revolution and Macmillan Learning’s Modern Principles of Economics, to guide us through “The Economic Way of Thinking During a Pandemic”. 

The Simple Math of a Global Crisis

At the heart of Tabarrok’s EconEd presentation, which he shared with economics instructors from across the U.S.,  was a clear message: spending significant resources upfront can prevent far greater economic and human costs down the line. This cost-benefit analysis formed the foundation of the economic response to the pandemic. “The entire world economy really became dependent on a single sector: the vaccine sector,” Tabarrok pointed out. Ensuring this sector’s success was key to reviving industries like travel, hospitality, and retail, which were devastated by lockdowns and restrictions.

However, Tabarrok believed that the vaccine sector alone couldn’t carry the burden, and that governments had to step in to take on financial risks that private companies weren’t willing to bear. This approach allowed for a faster recovery, as the public sector shouldered the uncertainty to pave the way for vaccine production and distribution.

Tabarrok highlighted vaccine development as an example of how public investment mitigated the pandemic’s economic fallout. Economists advocated for governments to subsidize vaccine production well before approvals were in place. This meant investing in clinical trials and building manufacturing capacity, even when the success of vaccines was still uncertain. While the financial risk was high, he argued that the potential rewards—saving millions of lives and preventing further economic collapse—justified the strategy. Operation Warp Speed in the U.S. exemplified this approach, where government subsidies accelerated production and distribution.

The costs of supporting the vaccine sector and implementing public health measures were minuscule compared to the potential costs of prolonged economic shutdowns, overwhelmed healthcare systems, and the human toll of unchecked virus transmission, he noted. “Billions are less than trillions,” he said, calling it “the world’s easiest cost-benefit test.” 

Understanding Exponential Growth: The Case for Early Action

Tabarrok also emphasized the importance of understanding exponential growth—an often overlooked factor that shaped economists’ sense of urgency during the pandemic. Early in 2020, the number of COVID-19 cases seemed small compared to other causes of death, leading many to question the need for drastic measures. But economists like Richard Hatchett, CEO of the Coalition for Epidemic Preparedness Innovations (CEPI), saw that waiting to act could result in a catastrophe.

Hatchett raised the alarm about the potential for millions of deaths early on and secured funding for vaccine development, including Moderna’s, in January 2020—long before the virus had reached pandemic status. Tabarrok pointed out that this kind of early, data-driven decision-making exemplified the economic way of thinking. “If you're not too early, you're too late,” he emphasized.

Profits and Public Health: Striking the Right Balance

Throughout his presentation, Tabarrok touched on another key issue: the tension between public health and the potential profits from pharmaceutical companies. There were widespread concerns about profiteering during the pandemic, particularly around vaccine sales. “The American people should never be left doubting if the government will put public health over profits during a pandemic.” 

He also made a case for profitability being a necessary incentive for rapid vaccine development. Without the promise of returns, private companies likely wouldn’t have taken on the significant risks of vaccine production. Tabarrok noted that while some worried about the cost of vaccines, the real value of vaccines to the global economy was far greater. A single course of vaccines, in economic terms, was worth thousands of dollars, yet governments were often hesitant to act quickly over relatively small per-dose costs.

He used Australia as an example, where delays in purchasing vaccines led to slower recovery and economic losses that far exceeded the short-term savings. Tabarrok’s message was clear: focusing on immediate costs missed the larger picture—timely vaccination had the potential to save trillions of dollars in economic losses globally.

Economic Principles in Action

Reflecting on the COVID-19 pandemic, Alex Tabarrok’s presentation at EconEd provides a crucial reminder of how economic principles can guide decision-making during crises. His central message—"spend billions to save trillions"—underscores the importance of early, decisive action and the willingness to take on financial risks for long-term benefits.

From subsidizing vaccine production to leveraging human challenge trials, Tabarrok's analysis demonstrates how the economic way of thinking helped limit the pandemic's damage. While not everyone may agree with every conclusion, the lessons drawn from this real-world test of economic principles could shape how we respond to future global challenges. If you’d like to see the full presentation from Alex Tabarrok, co-author of Macmillan Learning's Modern Principles of Economics, you can see his presentation here. Stay tuned to more insights from EconEd.