The Covid-19 pandemic creates a giant externality through contagion, and we aren’t doing nearly enough to contain it.

Absent a vaccine, our main defenses against this “plague” are eerily similar to what people did in the Middle Ages: Wear face masks and keep your distance from people who might be contagious. Americans afraid of contracting the disease are taking these precautions now—or at least some are. And that’s where the externality comes in.

Start with face masks. First, they cost money. Probably more important, they are uncomfortable to wear and make you look—how shall I say it?—a bit odd. Individuals who make decisions in their own best interests will balance these costs against the benefit of reducing their susceptibility to the virus—which, scientists tell us, is small. Based on this personal cost-benefit calculus, each individual will decide whether or not to wear a mask.

But wait. What about neighbors, co-workers, and passersby? Since wearing a mask benefits other people much more than ourselves, the beneficial externality from mask-wearing is huge. Consistent with that, several studies have estimated that the health gains from masking are large while the economic costs are small. A good deal. Yet basic economics tells us that self-interested decision makers will not wear masks enough.