Pandemic Threat, Ostrom Threshold and Pre-Emptive Public Goods: why East Asia performed better in the COVID-19 crisis

Abstract

The COVID-19 pandemic is an eminent threat posed by nature to the survival of the whole community. The cost X it imposes upon the community can be mitigated by the community’s pre-emptive public goods: an early warning system, capacity for monitoring, contact tracing and isolating infected persons, the strength of its public health system and the cultivated readiness to cooperate with anti-COVID protocols. The community provides these public goods in a nonstrategic game N (Nature) where the probability of a “bad outcome” (being symptomatically infected) falls with the total spending on pre-emptive public goods. Aside from N, members of the community play an Economic Dilemma Game (EDG), a symmetric Prisoner’s Dilemma Game (PDG) with strategy set (C, D), where the community earns its economic income which in turn provides the financing of the pre-emptive public goods. Games EDG and N are fused into a composite game N+EDG by defining the probability of a good outcome as increasing with the level of public goods financing. N+EDG has the same strategy set (C, D) as EDG but the payoffs of players are composite: the payoff from EDG less the expected share of the pandemic cost to the members. We show that there is a threshold pandemic cost X0 (Ostrom threshold) so that if X ≥ X0, the N+EDG has dominant strategy in C. At the cooperative equilibrium, the community is at its peak strength: economic output from EDG is largest and the contribution to pre-emptive public good is highest. A severe-enough cost of the pandemic threat as perceived by the group (i) causes players to exhibit an altruistic phenotype (choosing C every time) and (ii) leads to the lowest probability of a bad outcome. We argue that previous experience with pandemics in the last two decades on top of a higher tendency to follow authority in East Asia supported both the provision of better pre-emptive public goods and the higher abidance with anti-COVID protocols. These explain better performance.

JEL Classification: C72, D01, D02