Over the last couple of weeks, we asked our committee members to share their thoughts and opinions on the pandemic, the economy, and the future.
On the Pandemic’s 10 Million Milestone
Initially, many in the West thought Covid-19 would stay in Asia just like SARS nor MERS did. This time the West was in for a nasty surprise. The epidemic became a pandemic in little more than a month. Waking up to the terrifying nature of the pandemic took a little longer. Measures of caution began with elbow and fist greetings in early March that turned into lockdowns, social distancing, and wearing of masks a month or so later. Major parts of our economies were shut down as a consequence. The measures taken to contain the virus may seem extreme, and some have in the spirit of President Roosevelt suggested that the only thing we have to fear here is fear itself. Covid-19 is nothing but an exceptionally severe seasonal flu. By now, it should be clear that this is not the case.
In the long term, we in the United States need to attempt once again to provide everyone with health insurance and employment sick-leave policies that will allow everyone to be treated promptly as needed, and permit people with contagious diseases to stay home from work without losing their jobs. The pandemic makes clear that such policies are public goods. Around the world, we need to think about the fragility of supply chains for health care goods, and about how to make orderly transitions into and out of emergency policies.
The global pandemic has recorded 10 million confirmed cases of the new coronavirus. These cases have spread over the entire world. Because of the characteristics of the virus, we know that many cases go unrecorded. Hence, the number of actual cases exceeds the confirmed case figure by estimated multiples of 5 or 10. Many of these unrecorded cases are either mild or asymptomatic. The confirmed cases tend to be severe enough to warrant testing or hospitalizations. One might conclude that the confirmed cases are the more important thing on which to focus in human terms. In truth, both numbers matter. Mild and asymptomatic cases are infectious, and a key element in the challenge of virus containment.
Lars Peter Hansen:
As the remarkable and catastrophic pandemic crosses an unfortunate threshold, we see that economies around the world continue to confront difficult tradeoffs in considerable uncertainty. While we see definite progress for some of the economies with the adverse consequences of the pandemic being substantially reduced, this progress should be acknowledged with some caution. There is a looming possibility of a reversion or second wave that could emerge as economies continue to open up and resume more normal activity.
When will vaccines be available, and how reliable will they be? How trustworthy are immunity tests? Even data collected on the number of cases is subject to substantial error, both because of the differential availability of tests and their limited accuracy. Not only do these uncertainties make it challenging to forecast the future evolution of the pandemic, but they also make it difficult to design "best" ways for opening economies. Prudent policy necessarily has to navigate through this "ocean of uncertainty."
The Pandemic and the Economy
Both for those who were essential and continued to work (and were thus left exposed to infection) and those who were required to stay home from work, this kind of lockdown exacerbates the consequences of wealth inequality.
Prosperous office workers can often work remotely, and continue to be paid, but many manual workers can't work remotely, and when government stimulus payments to maintain employment run short, they become at least temporarily unemployed.
The Pandemic Economy Tracking Project at the Luohan Academy provides detailed real-time data on the co-evolution of the pandemic economy in 132 countries, using real-time mobility data as a proxy for the magnitude of the economic contraction. The pandemic has come in waves. The first in China and a few Asia countries where the virus was rapidly contained with aggressive measures in China produced a sharp but relatively short economic contraction. The second wave came in the developed countries where the virus also spread invisibly before countermeasures were taken. Here too, there were sharp and, in some cases, lengthy contractions, followed by measured recoveries in which policymakers have to continuously balance the benefits of economic recovery against the risk of accelerations in the spread of the virus.
Lars Pete Hansen:
Economic and social policies are faced with a fundamental tradeoff. Efforts to halt or at least limit the spread of disease through forms of isolation are costly in terms of squashing economic activity and creating additional social and psychological problems. Many considerations come into play and require a variety of expertise to provide meaningful ways to assess this tradeoff and understand how it operates. Epidemiological expertise alone is not enough. While this tradeoff can look daunting, we do see some remarkable adaption and "learning by doing" for continued productivity in the presence of "social distancing."
A successful treatment protocol that would significantly reduce the risk of severe outcomes from Covid-19 infection could dramatically reduce fear and clear the return to a normal economy. Fear can be alleviated in many other ways. Knowing more about the routes of transmission and thereby, how to avoid infections should remain a high priority. Epidemiologists seem less focused on diagnoses of this kind, perhaps for a reason. They tend to focus more on forecasting. It took epidemiologists a surprisingly long time to conclude that aerosols are a major vector of transmission.
Looking Towards the Future
It will be fascinating to see what this pandemic and the prospect of future ones have on how we restructure economic, social and even personal interactions over the next decades. As we hope for continued progress in reducing the pandemic's costs, we also should take a comprehensive inventory on what lessons there are for the future.
Most surprising is the emergence in several American states of patterns that look like the distinctive third wave cases where recovery has not started, and new confirmed cases are growing faster than recoveries. This appears to be the result of premature opening up and abandonment of or non-compliance with containment policies.
Though the world has passed an unexpected and unfortunate milestone at 10 million, this battle is far from over. Most of the developing world is yet to enter the recovery phase. There is the very real possibility of seeing an economic recovery in the context of continued or even accelerated spread of the virus in many countries. Unfortunately, the 10 million milestone may not be the last one we pass.
Governments' response to the Covid-19 pandemic has, on the whole, been disappointing. We have the economic, medical, and public health knowledge that could have spared us much suffering. But poor political leadership has interfered---and continues to interfere---with putting that knowledge to good use.
Years from now we will look back on the Covid-19 pandemic as a source of much new information, not just about epidemic disease and how to manage it, but about structural features of the world's economies that were made clearer by the crisis and how it was handled, both well and badly. In the meantime, we can begin to speculate about what we will have learned when the pandemic is history, and what we must still learn to prepare for dealing with its continuation, and with future pandemics.
The government can reduce fear by being transparent and communicating clearly its policies. This does not exclude being flexible in the face of new evidence. On the contrary, changing course and explaining the change is reassuring if it is properly rationalized. I have suggested that acknowledging the crucial role of fear, understanding what feeds it, and focusing on how it can be alleviated may be a more effective way of coordinating efforts to combat Covid-19. The virus may never be eliminated, but reducing fear to a tolerable level should be achievable. Only when fear has been substantially reduced, will the economy be ready to return to normal.