Stop covid or save the economy? We can do both

https://www.technologyreview.com/2020/04/08/998785/stop-covid-or-save-the-economy-we-can-do-both/#Echobox=1586385642?utm_source=pocket-newtab

by David Rotman
April 8, 2020

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Yet shutting down businesses is the only real choice, given that an unchecked pandemic would itself be hugely destructive to economic activity. If tens of millions of people become sick and millions die, the economy suffers, and not just because the workforce is being depleted. Widespread fear is bad for business: consumers won’t flock back to restaurants, book air travel, or spend on activities that might put them at risk of getting sick. In a recent survey of leading economists by Chicago’s Booth School, 88% believed that “a comprehensive policy response” will need to involve tolerating “a very large contraction in economic activity” to get the outbreak under control. Some 80% thought that “abandoning severe lockdowns” too early will lead to even greater economic damage.

Meanwhile, any measures to slow deaths from the virus will have huge downstream economic benefits. Michael Greenstone, an economist at the University of Chicago, finds that even moderate social distancing will save 1.7 million lives between March 1 and October 1, according to disease-spread models done at Imperial College London. Avoiding those deaths translates into a benefit of around $8 trillion to the economy, or about one-third of the US GDP, he estimates, on the basis of a widely accepted economic measure, the “value of a statistical life.” And if the outbreak is less severe than predicted by the Imperial College work, Greenstone predicts, social distancing could still save some $3.6 trillion.

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“Our choice is not whether we intervene or whether we go back to the normal economy,” says Emil Verner, an economist at MIT’s Sloan School who has recently looked at the flu pandemic of 1918 for insights into today’s outbreak. “Our choice is whether we intervene—and the economy will be really bad now and will be better in the future—versus doing nothing and the pandemic goes out of control and really destroys the economy.”

Overall, Verner and his coauthors found that the 1918 pandemic reduced national manufacturing output in the US by 18%; but cities that implemented restrictions earlier and for longer had much better economic outcomes in the year after the outbreak.

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