Novel externalities are social activities for which the emerging cost (or benefit) of the spillover is unknown and must be discovered. Negative novel externalities have regained international salience following the COVID-19 pandemic. Such cases frequently are invoked as evidence of the limits of liberal political economy for dealing with public emergencies. Through a re-reading of classical political economy with the modern state’s confrontation with infectious disease in mind, we defend the comparative efficacy of liberal democracy against authoritarian alternatives for coping with these social problems. Effective responses to novel externalities require producing and updating trustworthy public information and an independent scientific community to validate and interpret it. Those epistemic capacities are prevalent in liberal democratic regimes with multiple sources of political power, an independent civil society, and practices of academic freedom. Our analysis highlights the theoretical value of polycentrism and self-governance beyond their more familiar role, of increasing accountability and competition in the provision of local public goods, towards facilitating effective national policy.