As cities and states around the globe have taken unprecedented social distancing measures to slow the spread of the coronavirus pandemic, much of the world’s economy has suddenly halted, causing some to worry about what comes next.
President Donald Trump has pushed for a quick ease of the restrictions, tweeting “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF." New York Times columnist Thomas Friedman outlined a plan to ‘get America back to work’ motivated by the questions: “Wait a minute! What the hell are we doing to ourselves? To our economy?" On Fox News, Texas Lt. Gov Dan Patrick took this argument to the extreme, arguing that people older than 70 should sacrifice themselves to COVID-19 for the sake of the economy that they leave their children and grandchildren.
All of these arguments are based on the same premise — that there is a tradeoff between saving the economy and saving lives. But that may not be the case, according to a new study.
Emil Verner, professor of finance at the MIT Sloan School of Management, and his colleagues looked to see how social distancing measures implemented by cities to mitigate the impact of the 1918 flu pandemic — efforts that are nearly identical to what is being done today such as shutting down businesses and closing school — impacted both mortality and the economy after the pandemic was over. He talked to The Inquirer about what they found. Responses were edited lightly.
What we find comparing cities that intervene more versus less aggressively in their use of these non-pharmaceutical interventions is that cities that were more aggressive at first were able to reduce overall cumulative mortality.
But at the same time, they do not perform worse economically than cities that intervened less aggressively. If anything, cities that intervened more aggressively come out of the pandemic stronger, with a stronger economy in 1919.
Philadelphia put social distancing measures in place slowly — 8 days after deaths started to rise dramatically — and for a limited duration —51 days compared to an average of 88 days. In response, the city experienced a high mortality rate (about 900 deaths per 100,000 residents) and a weak economy after the pandemic was over. In comparison, Cleveland acted quickly — 2 days before deaths started accelerating — and aggressively — putting measures in place for 99 days. Cleveland’s mortality rate was lower (600 deaths per 100,000 residents) and the economy in 1919 was about average.
In a normal economy, if you implement social distancing and other interventions that limit mobility and business activity that’s going to be bad for the economy. But the pandemic itself is very bad for the economy. During a pandemic people don’t want to shop and consume, go to large public gatherings, and they don’t necessarily want to work as much because they are afraid of contracting the virus. The pandemic itself causes massive economic disruption that reduces demand, reduces labor supply, and reduces business investment — because businesses become more cautious in the uncertain times brought about by the pandemic. Because the pandemic itself is so destructive, any policy that you can use, that directly targets the severity of the pandemic, will ultimately end up being good for the economy.
Being timely is important but actually the duration is just as important and probably more important.
We don’t want to just naively extrapolate the direct results from then. The 1918 pandemic was just so much more severe and more deadly than the current coronavirus based on the estimates that we have. The 1918 flu was particularly deadly for prime aged individuals. Healthy adults between 18 and 45 were much more likely to die in 1918 from that flu than the coronavirus today.
The structure of the economy is also different. Back then it was more agricultural and manufacturing based economy; today it’s more service based based economy. Some of these services we’re able to do remotely and that should mitigate the adverse consequences of the shock. But there’s lots of other services that can’t be done remotely, lots of interpersonal services from dentists to restaurants and other service workers. If you think about the service sector, the implications are that today’s pandemic could be more or less severe on the economy.
Global supply chains today are obviously much deeper and a much more important source of ultimate production.The disruptions in supply chains that we’re seeing today are exacerbating the economic impact of the of the pandemic. The analysis that we have isn’t well suited to thinking about those question.