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Procedural Rationality in the Time of COVID-19
Homo economicus, the typical economic man, is a rational agent whose goal is to find the optimal solution to any problem. However, this may not be feasible in complex situations like the current global pandemic. We argue that in such environments where Knightian uncertainty plays a big role, the behaviour of countries, sectors of the economy, and individuals may be characterised by procedural rationality. Instead of focusing on the outcome, it is argued that the decision-maker draws upon similar experiences and follows a consistent procedure.
The ongoing COVID-19 pandemic is without a parallel in the last 100 years of human history. The closest comparison is probably the gargantuan calamity-ridden 1918 flu pandemic of which there are hardly any survivors remaining to tell tales of. The last few months have witnessed countries going from total denial about the impact of the severe acute respiratory syndrome-coronavirus-2 (Sars-Cov-2) to complete lockdown orders. Life has been at a standstill and economic activities have been frozen. We are now entering a transition phase where different countries, perhaps resigned to their fate, are contemplating reopening their economies partially, fully or in stages. India, for example, has introduced nationwide colour-coded activity zones, where red zones are extremely restrictive and green zones are attempting a return to normalcy. The United States (US) instead, keeping with its federalist foundation, has different states taking their own measures to restore economic activities without adhering to a single coordinated nationwide criterion. South Korea, relying on intrusive citizen monitoring policies, has voluntarily resorted to life as normal. However, without an antidote, or the promise of a vaccine in the immediate future, these steps are all analogous to driving through a dense fog to a necessary destination.
As with any global catastrophe, the pandemic has created systemic uncertainty. Idiosyncratic or individual-specific uncertainty that is always present is still there, but its magnitude has increased manifold. The policymakers currently face three levels of uncertainty. First, is the “biological uncertainty” stemming from the fact that we are unsure of treatment drugs and do not have a clear timespan for a vaccine. Moreover, our knowledge of Sars-Cov-2 and Covid-19 remain limited. Although social distancing has provided partial respite by “flattening the curve of new infections,” reopening might trigger a relapse. Ultimately, most countries still do not have a systematic way of monitoring asymptomatic patients and lack adequate reserves of protection equipment for front-line workers, doctors and nurses, as well as medical necessities like hospital beds and ventilators for the sickly.
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