This is the Cato Daily Podcast for Thursday, November 19th, 2020.

I'm Caleb Brown.

What lessons can economics give us about the pandemic and the proper role of government?

Well, for one, it's that government can likely only properly address the failures of markets and correct externalities.

Tom Fiery's new study for the Cato Institute, government in a pandemic,

digs into where the government should and shouldn't stick its nose.

I started with the basic notion that government should only step in

in cases of market failure. That is cases where people acting privately,

making agreements between each other would have problems coming to an agreement that would benefit both sides or every side involved in this case.

Communicable diseases is a classic example of a type of market failure known as a negative

externality meaning that my interaction with someone else can affect other

people who haven't agreed to be affected.

And obviously as I talk I am emitting vapor out of my mouth I'm emitting

tiny particles of water, those can carry virus that other people can then

inhale in and make them sick. So when I was thinking through this problem, I was thinking

through market failure and negative externalities and we see other examples of these like

Pollution I think last time I was on your podcast you know we jokingly talked about what would happen if I were to take my garbage and

throw it into my neighbor's yard. That's me inflicting a cost on someone else. This is another

example of this of me inflicting a cost on someone else that the other person hasn't agreed to.

That sounds fine, but to the extent that the governments at the state, federal, and local levels have intervened, you argue that they've done a pretty bad job.

Correct. Just simply saying there's a market failure isn't enough to justify government intervention.

You've got to go further and say that the way government intervenes will make the situation

...