Public policy advocates are of the opinion that state intervention in society should be bare minimum. A state which intervenes cannot achieve equilibrium and gradually, the trust of its citizens would be eroded, ergo intervention should be done only in case of a market failure. The universe of public policy is all about balancing the three levers of public behavior, taxation and spending money. Pundits say, the state should intervene only if there is a market failure as state intervention would always be coercive in nature since paternalism by the government is an impossibility in the world.
The decision by New Delhi to impose a 21-day nationwide lockdown would go in as one of the boldest interventions ever done by the Indian government. Certainly, it was the need of the hour to prevent the spread of COVID-19 in India as the western world is struggling with thousands of cases and any vaccination is at the very least 18 months away.
There could be four types of market failures as suggested by experts-
1. Asymmetric information- This occurs when one party in a transaction has superior knowledge versus the other party. This could lead to sub-optimal decision making and thus the state intervenes to establish checks and balances.
2. Market power- The state intervenes to prevent a company's relative ability to influence the price of an item in the marketplace by manipulating the level of supply and demand or both.
3. Public Goods- Public goods are essentially non-rival and non-excludable. The state bans certain activities to keep the air quality under check so that people can breathe fresh air.
4. Externalities- When actions of one agent affects the other, it is termed as an externality. These can be both positive and negative and the state intervenes mostly in cases of negative externality.
Now imagine a situation where a person goes to market, comes in contact with someone who is infected from COVID-19, and thus becomes a victim of the infection. The mere presence of the infected person became a negative externality, thus, leading to a market failure. This is where the state ought to use its coercive power and translate that into human welfare.
Ideally, if anyone who has a travel history outside India or feels he/she could be infected, if the person remains in quarantine, the state intervention could have been limited. But that did not happen in most countries of the world and the virus exponentially grew and crippled the day to day life of billions of people. Whether this lockdown is well in time or delayed can be debated by experts but one fact where all agree is the need for this mass shutdown to save India from an Italy-like healthcare crisis.
The world has kept its eyes on India, how we would go with this 21-day lockdown, how the state would take care of the millions of workers engaged in informal sector, how New Delhi would ensure the supply of food grains and how would India’s graph of COVID-19 look post this 21-day lockdown. While New Delhi has left no stone unturned and deserves all the praise for taking bold measure in preventing the spread of this pandemic, policy makers should also take this opportunity to understand the importance of public health and spend more every year on healthcare facilities.
