Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute. Aggregate demand and the public finances dominate most economic policy discourse. What Boris Johnson’s Government could do to “stimulate” activity through taxes or public spending, or how much relief it can sustainably provide, will command most airtime even as economic reopening begins. Insufficient focus, as ever, is given to the supply-side – our ability to produce goods and services at...

Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute. Shelves lay barren, yet the price stickers read “Buy 1 Get 1 50% Off.” Hand sanitiser was like gold dust here in Washington DC in March. Demand surged after the Covid-19 hand hygiene advice. Unsurprisingly, stores rapidly emptied of existing stock. More surprising was the shortages’ duration. Prices usually rise with prolonged elevated demand, encouraging new supply and making consumers...

Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute. Covid-19 is producing an economic bloodbath across developed economies. OECD sectoral analysis suggests lockdowns will see day-to-day activity fall 25-30 per cent across countries for their duration; the Office for Budget Responsibility reckons 35 per cent in the UK. Even if this lasted for just three quarters, with immediate rapid bounce-back, GDP would be 10 per cent lower over the year – a...

Office for Budget Responsibility modelling this week produced staggering forecasts for how the Government’s fiscal response to Covid-19 and the lockdowns will affect GDP, unemployment and the public finances. Its numbers were almost incomprehensible in historical context. Day-to-day economic activity is expected to be down 35pc for the shutdown’s duration. Assuming a three-month lockdown that is then phased out over another quarter, that would see GDP fall in 2020 by 13pc – the biggest annual...

Human life is highly valuable. Basic economic reasoning therefore suggests that, given the risks of COVID-19 to vulnerable populations, we should be willing to withstand large economic costs to prevent the risk of substantial numbers of deaths. This is particularly true if most of those economic costs are temporary. In response to Donald Trump’s tweet last week suggesting “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” many economists have indeed been making these points. They...