Link: https://ideas.darden.virginia.edu/2021-american-rescue-plan
Excerpt:
If you ask Korinek, this is really Economics 101. “It’s about providing insurance to spread out unequal impact,” he says. “Economists generally think that the government should provide such ‘crisis insurance’ whenever the private market can’t. One example is unemployment insurance.”
When we face risks that are individual-specific, notes Korinek, such as the risk that our house may burn down, it’s relatively easy to buy insurance in the marketplace. However, when we’re confronted with unforeseen, economy-wide risks, like pandemics, it is essentially impossible to be insured. “The way I view the hand of the government during a crisis,” says Korinek, “is not that it distorts markets. Rather, it makes up for missing markets. The market is incomplete, and the government is making it work better.”
Author(s): Gosia Glinska, Anton Korinek
Publication Date: 2 March 2021
Publication Site: UVa Darden Ideas to Action