COVID-19 and the Political Economy of Mass Hysteria

Abstract

In this article, we aim to develop a political economy of mass hysteria. Using the background of COVID-19, we study past mass hysteria. Negative information which is spread through mass media repetitively can affect public health negatively in the form of nocebo effects and mass hysteria. We argue that mass and digital media in connection with the state may have had adverse consequences during the COVID-19 crisis. The resulting collective hysteria may have contributed to policy errors by governments not in line with health recommendations. While mass hysteria can occur in societies with a minimal state, we show that there exist certain self-corrective mechanisms and limits to the harm inflicted, such as sacrosanct private property rights. However, mass hysteria can be exacerbated and self-reinforcing when the negative information comes from an authoritative source, when the media are politicized, and social networks make the negative information omnipresent. We conclude that the negative long-term effects of mass hysteria are exacerbated by the size of the state.

Principles of Monetary and Financial Sustainability and Wellbeing in a post-COVID-19 World: the crisis and its management review

“…Therefore, the most appropriate economic-policy approach or road map for dealing with a pandemic and, especially, recovering from one is quite clear. Some of its essential principles are widely known, and others are an "open secret," especially to all of those who fall into the trap of fueling populist demagogy by creating false and unattainable expectations among a population as frightened and disoriented as one would expect during a pandemic [1].…”

“…However, since at least as far back as 1752, when Hume[13] 1 pointed it out, we have known that the mere equal distribution of monetary units among the citizenry has no real effect 2 . For this reason, monetary authorities ultimately do not wish to even hear about Friedman's famous "helicopter money" as a tool of their monetary 1 Hume expressly states that if, by some miracle, every man in Great Britain woke up one morning to find five more pounds in his pocket, the only real effect would be a decrease in the purchasing power of money (that is, an increase in nominal prices), since the productive capacity of the United Kingdom would remain the same [13: p. 299]. With his famous "helicopter drop," Friedman simply copied and modernized this Hume´s example.…”

“…It is very enlightening, in the extremely difficult situation we now obviously find ourselves in, to pay attention to the reactions and recommendations which are ever more anxiously and restlessly (even it would say "hysterically" [1]) coming from investors, "experts", pundits, and even the most renowned economic and monetary authorities.…”

“…The economies affected by an external shock, like a pandemic crisis, they require a preliminary review of conditions and functions according to the Political Economy Principles [1,2]. These economic principles suggest to let the economy in an adaptation process to the new circumstances with less cost (real and opportunity cost) [3].…”

Principles of Monetary & Financial Sustainability and Wellbeing in a Post-COVID-19 World: The Crisis and Its Management

“…The World economy suffered a severe shock in 2020, which continues in 2021. In order to analyze these shocks and mitigate its consequences we must review how economies affected by an external shock, like a pandemic crisis, can recover and which conditions have to be met for this end according to the principles of political economy [1,2]. These economic principles suggest allowing for an adaptation process to the new circumstances with the lowest costs possible [3].…”