Individual corporate behaviour and collective well-being

The coronavirus crisis once again illustrates the difference between the individual rationality of companies and the collective interest. When companies are faced with a higher debt ratio after the crisis, they will freeze their wages and hiring and reduce their investments. For each company, this behaviour is rational because it protects it from the risk of bankruptcy; but the result, if all companies do so, will be catastrophic collectively: rising unemployment and lack of growth. The lack of coordination between companies therefore has serious consequences. This difference between companies’ individual choices and collective well-being is, moreover, general and true even outside crises. Companies do not see the positive externalities associated with the fight against global warming, wage increases, investment, research drive and job creation. As their individual choices do not take into account these positive externalities (the positive collective effect of a reduction in CO 2 emissions and increases in wages, investment, R&D and employment), governments must intervene through incentive policies (tax, regulatory, etc.) so that companies can take these externalities into account (internalise them).