Pandonomics: Why Economics was Unprepared for COVID-19-Policies

Despite clear warnings from scientists and a long history of pandemics, the economics profession was largely unprepared for COVID-19 and especially the drastic policy responses it triggered. While the risk of pandemics had been quantified – with estimated global annual costs of up to $500 billion – this knowledge was not integrated into mainstream economic thinking, modelling, or policy planning. Economists underestimated the sweeping public health interventions – particularly non-pharmaceutical interventions (NPIs) like lock-downs, social distancing, and school closures, which were largely overlooked in economic literature. This gap was mirrored by institutions like the IMF, World Bank, and OECD, which had flagged pandemic risks but did not incorporate them into core forecasting frameworks. Academic economics also fell short, with limited pandemic-related research and little cross-disciplinary collaboration with health sciences. Several factors contributed to this underinvestment in preparedness: complacency from decades of global stability, distorted risk perception (e.g., viewing pandemics as issues for developing countries), and the invisibility of successful prevention. Pandemic preparedness, as a global public good, suffers from collective action problems: everyone benefits, but few want to pay. The COVID-19 crisis revealed a major blind spot in economic thinking: the failure to anticipate and model the economic implications of large-scale health policies. Going forward, stronger integration between economics and epidemiology is essential. Policymakers must also remain cautious in assessing the full cost of the pandemic, as data continues to be revised. This experience calls for humility and a rethinking of how economics addresses systemic global risks.