Urgent Reassessment of Core Economic Models in Light of Accelerating Systemic Risk: The Case of the "Public Health Economy"

To the Esteemed Members of the Economics Profession,

We write to you not with a theoretical puzzle, but with a warning. Our nation is navigating an era of unprecedented systemic stress, marked by profound political fragmentation, intractable fiscal constraints, and a precipitous decline in institutional trust. In this environment, our prevailing economic models are proving not merely incomplete, but dangerously inadequate for predicting and managing the cascading risks we now face.

The source of this predictive failure, we argue, lies in our discipline’s refusal to analytically confront a system we have long ignored: the “Public Health Economy” (PHE).

As defined in the "Public Health Liberation" framework, the PHE is the totality of interacting markets and institutions—from finance and housing to regulatory bodies and the justice system—that collectively generate health and social outcomes. For years, we treated its dysfunctions as a collection of isolated externalities. In 2025, we can no longer afford this analytical luxury. The PHE is no longer just producing inequity; it is actively generating unpredictable, cascading failures and non-trivial sovereign risk at sub-national levels.

Consider the present realities that our models struggle to explain:

• Fiscal Doom Loops: We see states and municipalities trapped in fiscal doom loops, where poor population health (a PHE output) decimates labor productivity and tax revenues, forcing cuts to the very public services and infrastructure that support health, thus accelerating the decline.

• Regulatory Decay as Market Failure: We have witnessed ideological attacks hollow out the capacity of cornerstone institutions like the CDC, EPA, and FDA. This is not just political theater; it is the systematic dismantling of our economy's risk-mitigation infrastructure, leaving our markets brutally exposed to long-tail risks from pandemics to environmental catastrophes.

• Epistemic Fracture: Our models assume a baseline of shared reality required for managing public goods. When large segments of the population operate on fundamentally different factual premises regarding science and public health, the very concept of coordinated action against negative externalities collapses.

The PHE framework forces us to recognize that these are not separate crises. They are the predictable outputs of a single, coherent system. Its language introduces a new, more accurate vocabulary for the risks we now face:

1. Epistemic Risk (Formerly Model Risk): Our models failed to anticipate the degree to which "illiberation"—a state of rational fear and paralysis in the face of institutional untrustworthiness—would become a primary driver of political behavior. It is now a key variable explaining political stagnation and the public's rejection of evidence-based policy, yet it remains absent from our equations.

2. The Risk of Ungovernability (Formerly Systemic Risk): The Theory of Second-Best is no longer a theoretical caution. We are witnessing it in real-time. Partial, siloed interventions in the PHE are not just inefficient; they are actively exacerbating systemic fragility. The system is becoming ungovernable, as the erosion of trust renders both market-based incentives and regulatory mandates impotent.

3. The Weaponization of Risk (Formerly Endogenous Risk): In the hyper-partisan landscape of 2025, risk is not merely a retaliatory consequence of reform; it has become a primary instrument of market and political competition. "Hegemonic factions" within the PHE no longer simply defend their rent-seeking behavior; they actively weaponize misinformation, legal challenges, and regulatory capture to destabilize opponents and profit from the ensuing chaos.

Our discipline’s credibility is now on the line. We continue to publish models of equilibrium and rational choice while the foundational pillars of the society our models purport to describe are fracturing. The "Public Health Economy" is no longer an academic concept for the sociology department. It is the battleground where the fiscal stability, market predictability, and social cohesion of the nation are being contested.

We must ask ourselves: are we content to be forensic accountants of a systemic collapse we failed to model? Or will we rise to the challenge of developing a new generation of economic theory—a political economy of systemic survival—that can grapple with the stark realities of power, trust, and fragmentation?

The cost of our continued theoretical silence is becoming fiscally and socially untenable.

Respectfully,