You are here

The Pandemic and the Economy

A couple weeks ago, Texas Lieutenant Governor Dan Patrick suggested it would be better for older Americans to sacrifice their lives than to risk economic disruption.

You know, Tucker, no one reached out to me and said, ‘As a senior citizen, are you willing to take a chance on your survival in exchange for keeping the America that all America loves for your children and grandchildren?’ And if that’s the exchange, I’m all in.

More recently, Representative Trey Hollingsworth (R-IN) took it a step further, arguing Americans should sacrifice our fellow citizens to protect "our way of life".

Both of these decisions will lead to harm for individuals, whether that's dramatic economic harm or whether that's the loss of life. But it is always the American government's position to say, in the choice between the loss of our way of life as Americans and the loss of life of American lives, we have to always choose the latter.

Patrick returned this week to double down on his advocacy.

“What I said when I was with you that night is there are more important things than living. And that’s saving this country for my children and my grandchildren and saving this country for all of us,” Patrick said.

“I don’t want to die, nobody wants to die, but man we’ve got to take some risks and get back in the game and get this country back up and running.”

These politicians lead a growing chorus of Americans advocating human sacrifice to ensure prosperity, a practice that has not been seen on this continent for five centuries.

But you don't have to look back five centuries to see that this is not the best way to respond to a global pandemic.

We hear a lot about "flattening the curve," slowing the spread of the virus by social distancing so the hospitals have a better chance to save more people. This is not a theoretical solution; in the biggest pandemic of the 20th century, the Spanish Flu of 1918-1920, many cities did just that. Others didn't, and suffered greater losses. An article at history.com in March of this year compared the outbreaks in two cities. In Philadelphia, a Liberty Loans parade was held in the middle of the pandemic. Within 24 hours after the parade more than 100 residents came down with the flu; within three days all the city's hospital beds were full; within a week more than 2600 Philadelphians were dead. In St. Louis, businesses and schools were ordered to close and public gatherings were forbidden. St. Louis kept its peak to one eighth that of Philadelphia, and ended up with only half the overall mortality rate.

But is that the whole story? Some critics think not. John Fund and Joel Hay of the National Review suggest the difference may actually have been GIs returning from Europe who "couldn’t fly nonstop from Paris to St. Louis. They had to land at East Coast ports such as Philadelphia. It’s therefore not surprising that the sick GIs rested and convalesced while spreading the virus on the East Coast, and they got better before continuing to St. Louis and other interior cities."

And that might be a valid hypothesis if St. Louis and Philadelphia were the only two U.S. cities in 1918. Unfortunately for Fund and Hay, we have data from dozens of American cities, and their hypothesis simply cannot account for the evidence.

New York, for example, ordered social distancing from the beginning, and kept it in place until the first wave had passed, and had numbers closer to the St. Louis end of the spectrum. Nashville did not begin social distancing until the death rate had begun to rise, and saw a sharp peak like Philadelphia. The GIs didn't fly in to Nashville before going home to New York.

You can find a chart comparing 36 American cities' response to the pandemic here.

This is not to suggest the economic upheaval caused by a pandemic should not be taken seriously. But even here, social distancing turns out to be beneficial in the long run.

Cities with faster introductions of these policies (one standard deviation faster, to be technical) had 4 percent higher employment after the pandemic had passed; ones with longer durations had 6 percent higher employment after the disaster.

The takeaway is clear: These policies not only led to better health outcomes, they in turn led to better economic outcomes. Pandemics are very bad for the economy, and stopping them is good for the economy.

The experience of Minnesota's Twin Cities makes this clear. Minneapolis moved aggressively to reduce social gathering, closing schools, churches, theaters and pool halls on October 12, 1918. St. Paul waited nearly a month before taking the same action. Not only did Minneapolis keep its mortality rate lower than St. Paul's, it also had a stronger economic recovery after the pandemic. MIT economist Emil Verner, who authored a paper on the topic, explains.

“The pandemic itself is just so destructive to the economy, so any policy that you can use that directly mitigates the severity of the pandemic can actually be beneficial for the economy,” Mr. Verner said. Stricter interventions “actually make it safer for economic activity to resume, and they mitigate the negative impact of the pandemic itself on mortality.”

So maybe we don't have to choose between our health and the economy. Staying home a little longer, it seems, is the way to promote both.

up
24 readers like this.

Theme by Danetsoft and Danang Probo Sayekti inspired by Maksimer