Job losses, business extinction, and the rise of the impoverished are the immediate results of the unprecedented pandemic crisis, giving rise to an inevitable stronger government role that also is needed for effective vaccine program administration, said the latest Nobel economics laureate Paul Milgrom.
“The pandemic is harming more people right now than at any other time. Infections and deaths are higher than ever. Job losses are causing families to be evicted from their homes. Ideology should be set aside in this moment. It is much too soon to start worrying about folks learning to become too reliant on government help for other kinds of situations, when self-reliance should play a larger role,” said Milgrom, professor of economics at Stanford University, in an email and video interview with Maeil Business Newspaper.
The expert on game theory to make exchange and private resource allocation work better however claimed “what is needed today is a strong governmental response. We need to provide relief to the industries and workers that the pandemic has hit hardest. Once we decide about the kind of relief, market design theory can help provide it in the best way.”
“There are so many other changes to define the coming era. We have automation, climate change, and loss of privacy to name just a few. People will need to be open-minded and adaptable to see what is happening and make the necessary changes in their lives.”
The first big change is the huge job losses that have been concentrated in a few industries: airlines, hospitality, restaurants, entertainment. “Many shuttered businesses will never reopen; many workers will remain unemployed; and many households will become impoverished.”
The state role also comes important to procure and distribute vaccines timely to the right places.
“Some vaccines require infrastructure, for example super-cold storage, that makes them unsuitable for use in particular areas. Infrastructure to deliver and administer vaccines is also limited, so vaccines should be sent to areas when and where they can be used. Since only local officials know their capabilities, a trading mechanism for vaccines can help to allocate the right kinds of vaccines at the right times to the right places.”
As people adapt to this long crisis, more companies and people would shift to remote work, which would have widespread consequences, Milgrom projected. In Silicon Valley, for example, he said more high-paid tech workers are choosing to work remotely while living far away, putting a downward pressure on local housing prices.
Milgrom is an expert in game theory, especially auction theory and pricing strategies. He won the 2020 Nobel Memorial Prize in Economic Sciences, together with his friend and colleague Robert B. Wilson, "for improvements to auction theory and inventions of new auction formats".
Milgrom acknowledged that he was more in favor of universal basic income than targeted subsidies. “The great appeal of UBI, particularly if automation destroys jobs as extensively as some expect, is that compared to targeted subsidies, it allows people to make their own choices about whether to work, to risk becoming a single mother, and generally how to live their lives. Targeted subsidies create perverse incentives,” he explained.
By Park Yong-beom
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