The Cost of Staying Open: Voluntary Social Distancing and Lockdowns in the US

Yves here. As various analyses have shown, in many places, governments implemented lockdowns after citizens had started restricting their activities to avoid contracting Covid-19. It’s useful to see economists address the question of what the cost of doing nothing or very little would have been.

By Adam Brzezinski, DPhil (PhD) candidate in Economics, University of Oxford, Valentin Kecht, Graduate Student, Bocconi University, and David Van Dijcke, DPhil student in Economics, University of Oxford. Originally published at VoxEU

Lockdown policies have been found to be effective in promoting social distancing and slowing down the spread of COVID-19. Yet, such measures are often blamed for downturns in the economy. This column argues that the lockdowns in the US are in fact efficient in minimising the costs of the epidemic, once both the economic and medical burden that would arise in the absence of such policies are considered. Estimates from a controlled SIR model, which includes the possibility for changes in behaviour, suggest that lockdowns reduce the costs of the pandemic by at least 1.7% of annual GDP compared to a no-lockdown scenario.

With few exceptions, governments around the world have implemented lockdown policies in order to combat the COVID-19 pandemic. Public debates over the costs of such measures have typically assumed that the extent to which populations socially distance, and the associated economic costs, are mostly within the government’s control. What is largely missing in these debates, however, is the recognition that the economic costs of the pandemic will be substantial even in the absence of lockdowns, since the spread of the virus causes a significant increase in voluntary social distancing (Chudik et al. 2020, Brzezinski et al. 2020a). This suggests that the counterfactual additional costs of a lockdown might be lower than commonly assumed.

Indeed, in a recent paper (Brzezinski et al. 2020b), we find that lockdown policies have been economically more efficient than staying open in the US. To obtain these results, we combine microeconometric methods with an epidemiological model that allows for societal and political response to the virus in order to estimate the costs and benefits of lockdown policies.

Our argument builds on two pillars:

  • First, we find that the additional economic costs due to lockdowns are relatively low, once accounting for the voluntary response that would occur in the absence of such policies. This is in line with forecasts for 2020, which predict similar contractions in most developed countries (European Commission 2020) even if they did not impose lockdown measures, like Sweden. It also aligns with earlier research that showed credit card consumption only marginally less in Sweden, than in neighbouring Denmark, which did lock down (Andersen et al. 2020). Research on unemployment data from the US further suggests that only one fourth of the claims has been caused by lockdowns (Baek et al. 2020).
  • Second, the medical benefits of a lockdown are high because of the high hospitalisation rate of COVID-19. Taken together, our findings indicate that lockdown measures generate efficiency gains in terms of medical expenditures that offset the comparatively small economic losses caused by lockdown policies.

Voluntary and Lockdown Responses

We leverage daily county-level mobile phone data on movement patterns to study the impact of local outbreaks and lockdown policies on mobility. These data are considered crucial in mitigating the spread of COVID-19 (Oliver et al. 2020) and have been used in a wide range of applications (Allcott et al. 2020, Andersen 2020).

Our events of interest are the first county-level case and state-level stay-at-home orders issued over the course of March and April 2020. These allow us to estimate the voluntary and lockdown responses to an outbreak, respectively.[1] Due to the gradual occurrence of these events across the US, we are able to construct viable counterfactual scenarios using difference-in-differences designs. Our outcome variable of interest is the percentage of devices that stay home all day.

Figure 1 shows the estimated uptake in social distancing following the first COVID-19 case by state. The horizontal line indicates the estimated coefficient for the US as a whole, while the points correspond to state-specific estimates. Overall, the share of people that stayed home all day increased by around 1.8 percentage points in the US. This constitutes an increase of 5.1% compared to February 2020. As reduced mobility maps into lower economic activity, this implies that economic costs are inevitable even in the absence of lockdown measures.

Figure 1 Voluntary response, by state

Notes: The figure plots the difference-in-differences estimate for the change in the percentage of devices that stay completely at home following the first case in a county. Blue (red) lines correspond to Democratic (Republican) states as per the 2016 presidential election; dashed lines indicate parameters that are insignificant at p<0.05; confidence level: 95%.

This substantial uptake in social distancing is comparable in magnitude to citizens’ response to lockdown orders. Using a similar approach, our results show that the additional lockdown-induced impact on social distancing is 5.3%. Thus, governments that rely solely on voluntary social distancing need to take into account that the behavioural change will be significantly smaller without a lockdown policy in place, but will nonetheless still lead to sizeable decreases in activity.

Estimating Economic and Medical Costs

How do these patterns in social distancing map into medical and economic costs? We answer this question by studying a controlled SIR model (Gros et al. 2020) (the acronym stands for Susceptible – Infected – Recovered). In addition to the standard epidemiological SIR model, this framework introduces the possibility for changes in behaviour, such as social distancing, which influence the rate at which the virus reproduces. This additional parameter can be interpreted as the joint social and political effort to promote social distancing and therefore to mitigate the spread of the virus. In the context of the COVID-19 pandemic, the model allows us to split the reaction strength into the components related to voluntary and mandated social distancing. Then, based on the previously estimated coefficients, we simulate the outbreak for both a lockdown and a no-lockdown scenario.

Based on these simulations, we separately estimate the economic and medical costs arising from the pandemic. The medical costs are composed of the production loss due to infected workers going on sick leave and the medical expenses associated with infections. These costs are directly proportional to the number of infections over the course of the pandemic.[2] The economic costs depend negatively on the degree of social distancing, which can be measured by the relative decrease in the reproduction number. Overall, the model reflects the trade-off faced by governments between balancing medical and economic costs. Less-restrictive policies increase medical costs through the total number of infected individuals, while lowering the burden from reduced economic activity.

The medical and economic cost estimates are presented in Figure 2 for a selection of US states that imposed lockdowns. It shows the costs in terms of GDP per capita associated with the estimated total containment response (T) and the counterfactual voluntary response (V).[3] For the US as a whole, we estimate that COVID-19 generates costs of around 13.9% of annual GDP per capita under a laissez-faire scenario compared to 12.2% if a lockdown is imposed.[4] In other words, imposing a country-wide lockdown would reduce the loss incurred by as much as 1.7% over the course of the pandemic compared to a no-lockdown scenario.

The finding that lockdowns are efficient in lowering the overall costs holds consistently across all states considered.[5] Decreasing the measured containment response by lifting a lockdown would only marginally increase the economic costs, while at the same time drastically increasing the medical costs. This pattern is more pronounced in states where the overall containment response was insufficiently effective, such as New York, Delaware and Massachusetts. In these states, voluntary social distancing leads to relatively larger decreases in economic costs compared to states with more efficient containment responses such as Vermont and New Mexico. Yet, the small reductions in economic activity are more than outweighed by the much larger relative increases in medical costs.

Figure 2 Voluntary and lockdown costs, by state

Notes: The figure shows estimated costs under voluntary social distancing (V) compared to total social distancing (T) – which includes voluntary (V) and lockdown-induced reductions (L) in movement. Estimated costs for (T) are based on simulations of the discretized C-SIR model. Costs for (V) are re-estimated with α scaled by the estimated ratio V/(V+L) = V/T. Costs are in terms of GDP per capita. Costs for both (V) and (T) are broken down into economic (red) and medical (blue).


We provide evidence for the efficiency of lockdown policies in mitigating both the overall costs to the economy as well as the spread of COVID-19. The reason for this is that individuals engage in voluntary social distancing even in the absence of lockdowns, once the virus takes hold in their area. Hence, substantial economic costs are unavoidable, even when not locking down. Yet, the additional lockdown-induced social distancing plays an important role in preventing further medical costs. Indeed, for our estimates of the voluntary and mandated social distancing responses, all US states that imposed a lockdown would have incurred larger overall costs had they stayed open. Considering the correct counterfactual costs is therefore key in informing policy decisions during potential future waves of COVID-19.

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  1. PlutoniumKun

    I think this is an important message, as it seems to me to be creeping into so much everyday dialogue that ‘the lockdown has devastated business…’ or similar. It needs to be repeated constantly that there is no evidence whatever that once the virus is within a country that there is any reasonably economic policy but trying to suppress it as quickly as possible. Sweden has shown clearly that avoiding a lockdown does not save your economy. Its the virus that is doing the damage, not the response to the virus.

    But this does feed back to the point Nicholas Nassim Taleb was making from the very beginning of this crisis, that highly aggressive responses to any potential pandemic are economically rational, even if they cost billions and turn out not to have been needed. The countries that are doing ok (relatively) economically are those like South Korea, Taiwan, Vietnam and New Zealand, which reacted very fast and very aggressively to stop the virus getting hold. This I think proves Taleb right – the correct response is to apply the precautionary principle and to ‘over react’ to fat tailed risks – and pandemics are pretty much the ultimate example of a fat tailed risk. Once the virus has established itself it is too late, and you are left with no good options.

      1. Marshall Auerback

        “individuals engage in voluntary social distancing even in the absence of lockdowns, once the virus takes hold in their area”. And the same thing happened in Sweden where the press has persisted in suggesting that the gov’t took a “let’er rip” approach. Sweden’s emergency measures consisted mainly of Public Health Agency recommendations for social distancing, working at home, school closings, border controls, internal travel restrictions and self-quarantining–some of which proved surprisingly effective due to high citizen compliance with eventually 50% working from home, a 90% reduction in holiday travel and a 70% reduction in pedestrian traffic. Bans on public gatherings of over 500–soon reduced to 50–were mandated, not just recommended. Testing was limited to priority cases. Even though Sweden had, by Europe’s high standards, somewhat low hospital bed and ICU capacity, no hospitals were overwhelmed. Temporary hospital expansions were largely unused and ICUs only reached 80% capacity. On the other hand, little was done about old age homes and they proved to be a major component of the death count.

        This is not a problem unique to Sweden, and in fact was a big problem in many countries, including the UK, Canada and the US. Read here to get a full picture. Sweden’s nursing homes are death traps:

        And yes, their economy also contracted. Surprise, surprise, when the entire global economy shuts down, and you’re a small globalized economy highly dependent on what the rest of the world does, then yes, it’s pretty hard to avoid taking a major hit.

        BTW, Germany kept 80% of its factories operating during the pandemic and is now reopening. So it’s hard to say that a complete lockdown was the most “economically efficient” way to deal with the pandemic

        1. juno mas

          Anders Tegnell (Sweden’s chief immunologist) assumed that the policies they put in place would protect everyone. They didn’t. The elderly were decimated (or worse). The policy was not backed with real ACTIONS to protect them. (It has been clear from the beginning in Wuhan that the elderly were at high risk. Yet Tegnell’s over-confident style allowed him to ignore the risk; it was Trumpian at its core—“the virus will disappear”.

          Comparing Germany to Sweden is not helpful. Germany was testing and tracking effectively while Sweden still does not know the extent of the penetration of the virus in its’ population.

          The reason the lockdown were important is that most nations were unprepared and the virus was novel; mortality seemed high and knowledge of transmission in flux. It’s clear that the Swedish method would have been a disaster in the U.S. with it’s cultural chutzpah against wearing (effective) masks when in public.

          1. Ian Ollmann

            I hear — not an expert — that Sweden has a constitutional freedom of movement guarantee that would have made lockdowns illegal.

    1. jcmcdonal

      I think Taleb is pointing to when we don’t know anything – specifically the actual mortality rate. COVID isn’t an extinction level risk at this point.

      More importantly, though, this article doesn’t know what happens when lockdowns are removed. If we all end up getting it anyway because it’s still circulating, wasn’t this all an enormous waste? It’s not like the government appears to have been getting ready for anything…

      In talking to friends and family, everyone seems to be breaking lockdown rules in some capacity at this point. Combined with the protests, either we get lockdown v2.0 or… Ugh. And I’m not sure we can enforce a harsher lockdown that could actually eliminate the virus.

      1. cuibono

        Japan didnt lockdown. Nor did HK, Taiwan or Korea mostly
        flattening the curve does three things: keeps ICUs from being overwhelmed, allows time for therapeutics and allows time for vaccine development

        1. Yves Smith Post author

          HK and SK (not sure re Japan) did aggressive contact tracing (which requires TESTING, SK had drive by testing and testing in separate tents for the carless so as not to expose patients and personnel in medical facilities) and SK had required and heavily monitored quarantining for 14 days (fines if you cheated; the health officials would bring food and supplies upon request).

          The US isn’t capable of providing the support (for free) for quarantining and lacks the will to punish scofflaws. Sure this is the case for the UK. Australia winds up in the same place by virtue of having Scotty from Marketing in charge.

          1. Barry

            Scotty from Marketing failed completely with the bushfire disaster. His handling of Covid19 has been really good so far – cooperation with the states (a ¨national cabinet ¨ setup and even a good relationship with unions)
            The numbers today, Sunday in Australia- No deaths for 21 days – Only 16 still in hospital – only 2 of which in ICU
            5 Eyes death rates per million from Statista
            UK 620
            US 347
            CAN 217
            NZ 4
            AUS 4

          2. Cuibono

            Not capable? Surely we are capable but we have no will to do so. We have 100s of thousands of empty hotel rooms for example

      2. polecat

        The efficacy applied to any further lockdowns will have to be predicated on Mainstreet receiving the necessary relief funding to keep the public at least minimally whole .. at any further expense of kente-draped congressfolk, hedgefunders, private equity, large Corporations – Wall$treet/Finance ticks, vipers, and leeches, generally. The public will no longer commit to the further destruction of their livelyhoods, for the sake of the likes of a Mnuchin, McConnel, Powell, Pelosi .. or a Trump, Obama, Clinton, or Biden. To do so would be to totally shoot the elites wad of ‘crediblity’, such as it is … the result of which being a Fukushima-like sovereign internecine meltdown!

        1. polecat

          To be clear, when I said “to do so”, what I meant by that is the elite continuing with their gluttonous mammon fest, whilst Still condescending to the serious plight of those beneath THEIR ‘station’.

    2. rd

      I live in Upstate NY. Even though the virus had not been confirmed in our area, you could see the number of people in stores, restaurants, and offices dropping markedly in the 2nd and 3rd week of March. By the time, the county execs in upstate NY had shutdown their counties, the locals had effectively done that already, other than schools. We had events and travel booked for early to mid-March. They were effectively cancelled by popular demand before the governments shut things down.

      We have been re-opening for a couple of weeks. There is a lot more traffic on the roads, but people are wearing masks when they are likely to be in close quarters with other people or going into public indoor spaces, like stores. There have only been a handful of “Covidiots” who refuse to wear masks over the past month.

      Outdoors, there is much less mask wearing (I don’t wear one much of the time I am outside) simply because we generally have enough space to keep well away from other people not in our bubble. 6 foot is generally absolute minimum distance people are getting to each other – usually it is 15 foot or more. If I think I am likely to be within 10 feet of people, I put one on.

      At BLM protests last weekend, everybody wore masks. Everybody was generally at least 4 feet from each other and most of the time 6 foot or more. I didn’t see any pushing or shoving or crowding.

      I think our area will continue doing ok simply because people are figuring out how to live their lives and do their jobs while following common-sense guidelines. It is not ideological here in general, instead it is “what makes sense”. Talking to people, I think a lot of people still don’t comprehend that this is likely to continue for 1 to 2 years. But it is becoming a new norm.

      I think indoor dining, bars, movie theaters, etc. are going to struggle as people seem to understand that these are generally bad scenarios for Covid-19. Offices are coming up with plans to function. People like myself will likely continue to work from home for quite a while.

    3. Mikel

      How can there have been a “locked down” economy when they left the stock market open? Guess that was to keep the wealth transfer flowing…
      It’s always been a partial lockdown, foreshadowing who is being selected as “winners” for the “new economy”.
      Name one thing you can’t buy if it is in stock?

      As for education and entertainment, those industries were always too “lefty” for some and other small businesses were taking up too much land that needs to be repurposed.

    4. GM

      There is a lot more to it than even the article itself touches on (it seems to focus only on the short term but it is in the long term that the really serious consequences lie).

      First, the virus will probably leave at least as many (probably more) permanently disabled people as it kills, due to pulmonary fibrosis, kidney failure, and other internal organ damage. Who is going to be paying disability for millions of people? If several million people, most of them old and frail, die due to the virus, that is, as monstrous as it might sound, a net economic benefit because now those people are gone and the rest of society does not have to support them. And I in fact strongly suspect that consideration has featured prominently in the decision making process when it was decided that there are not going to be any real attempts at containment. But if you have the same number of people in their 40s and 50s, and quite a few even in their 30s, put on permanent disability, that not only wipes out all the “gains” from the “culling of the weak”, it creates a huge net negative. Who is going to bear that cost?

      Second, how many medical workers are there going to be left once this is all over? Because medical staff tends to get it much harder than everyone else due to being exposed to very high initial viral loads, and basically of doctors and nurses will get infected eventually (we have already seen it in Italy, Spain, and New York too, how once COVID hits hard, the whole hospital and all hospitals become COVID wards). Even if an effective vaccine is found, produced and distributed in the needed quantities by some point in 2021, given the current trajectory, the virus will have already absolutely decimated medical staff. We’re looking at perhaps as much as a third to a half (by my rough estimates) that will be just gone, some dead, many more disabled. How is society going to function after that without medical workers? It will take decades to train replacements. Look for that to lower life expectancy quite dramatically over the next 10-15 years. What is the economic cost of such a calamity?

      Third, there is no guarantee at all there will be a vaccine or permanent immunity. In fact, there are all the reasons in the world to think that either there will be no lasting immunity after having the virus or, if there is, it will only be conferred by having a bad case (i.e. the type where you have 20% chance of dying and a small chance of surviving without permanent damage, not the likely 1-2% IFR that we are experiencing now), and that means a vaccine will be difficult to develop too (do not get confused by the news about all the vaccine candidates under development that are now going into Phase II trials and that will be going into Phase III trials — all the drugs and vaccines that ever failed a Phase III trial, which is the great majority of the ones that got to Phase III, looked very good in Phase I and Phase II). There will be no such thing as an “economy” in that kind of environment, restaurants, hotels, airlines, tourism, sports, etc. industries will be decimated for many years into the future.

      The only sane strategy that could possibly have been rationally contemplated if the good of society was the guiding consideration was first containment and then eradication of the virus, whatever it takes to do so. And some countries did exactly that. But others did not.

      Which means that decision making in the latter was not guided by overall good of society.

      It’s a long exposition on its own why containment wasn’t even attempted, but I will save that for some other time, I will just note that if there was any justice in this world, a lot of people in the high ranks of government and business around the world should be on trial for crimes against humanity and should be punished accordingly (and yes, that means what you think it means) for making that decision.

      But I am not holding my breath in expectation to see that happening.

  2. jackiebass

    For me economic losses don’t matter. The most important thing is the health and safety of the population. Without a lock down you would have millions more sick people. Tens of thousands more deaths.Many of those that got sick and survived will hav permanent complications . Many of these complications will prevent people from leading a normal life. They will also be a strain on our health care system. Because people are becoming careless, opening back up will create a new wave of infections. We can’t trust the government because this has become political instead of a health issue. The only hope is if a viable vaccine is developed. When you have a large number of people that can now longer work, this becomes an economic drain on our economy. People seem to forget because of an aging population, we are going to have a worker crises in the near future. All of these things will hinder an economic recovery for a very long time.

    1. The Rev Kev

      ‘Many of these complications will prevent people from leading a normal life.’

      You can say that again. I was reading about a women in Chicago whose lungs had been so badly damaged by the Coronavirus, that they gave her a double lung transplant as her heart, kidneys and liver were beginning to fail too. And she was only in her 20s-

      1. Marshall Auerback

        And there will be people who die as a result of vital treatments (eg. cancer, heart disease) that were deferred during the pandemic. Along with higher incidences of suicides, relapses in drug abuse, alcoholism, domestic abuse, etc. But somehow these don’t matter?

        1. PlutoniumKun

          And many lives have been saved through the drop in air pollution and traffic accidents due to lockdown, especially in China.

          If the hospitals were overwhelmed with Covid cases, as happened in Italy and Spain, then many, many more people would die from unrelated medical issues. This is simply not a matter of dispute among medical professionals – in fact, it was one of the key drivers in the decision to lockdown in most countries in Europe that I am aware of. Lockdown allowed breathing space to re-organise hospitals to allow both treatment of covid cases and unrelated illnesses. Here in Ireland, cancer treatments went on as normal right through the past few months precisely because they were able to maintain spare capacity in the system thanks to a rapid flattening of the curve.

        2. John Wright

          One can imagine economics and environmental graduate students readying a slew of papers about the economic and environmental effects of the lockdown.

          Maybe they will be able to attach some valid numbers to the costs/benefits?

          Delaying the effects of climate change a short time must have been a benefit.

          Perhaps delaying some elective surgery lowered the death toll?

        3. False Solace

          Iatrogenic causes are the 3rd leading cause of death the US. I wonder if some of those delayed for-profit procedures will have the effect of saving lives. Predictably, the sick care industry has pushed back on the figures, but even they admit the number of deaths is at least 35,000 a year. We now appear to be in an ideal situation to determine which side is correct. I look forward to reading the studies when they come out.

        4. witters

          Of course they do. So let the pandemic rip? Maybe all violent crime would stop if we were all paralyzed.

      1. Susan the other

        Case in point. What we have is a brittle, profit-dependent, fragile economic model. That it can’t maintain itself in a pandemic shouldn’t surprise anyone – actually it can’t maintain itself at all as it has gradually slipped into obscene inequality and environmental devastation just in order to skim a meagre survival-profit. And of course denial. Because this is nothing short of subsistence living. So here’s my question, my perennial question: Why aren’t we discussing making our economy a resilient, decentralized, fail-safe and sustainable structure? Why can’t we get past our frantic grab for profit – frantic because without it we fail within months, we “go out of business”, we “go bankrupt” and etc. We need more socially protected cottage industries focused on 21st century needs. And good self-sufficiency. We need somebody to organize the neighborhood to make various things the local area needs; grow organic gardens; practice practical medicine; we need an herbal pharmacopeia that is standardized by the government and readily available; we need universal health care – M4A. We need The Peoples’ Pharma. We need; we need; we need. Why don’t we get?

        1. Anarcissie

          I work with some people who try to bring about those things. Part of the answer is, most people are not interested enough to do anything about it. That may change, but it hasn’t changed much yet.

          Also, many of those who are interested don’t agree as to how to go about doing it, but that is at this point a secondary problem.

        2. False Solace

          > Why aren’t we discussing making our economy a resilient, decentralized, fail-safe and sustainable structure?

          There are people discussing it. But the people with money and power don’t want it, so it’s not going to happen. Welcome to decline.

          1. polecat

            The finely taylored C-suite Ferengi Crowd have teeth to nash, after all. WE, the ‘former’ Pluribus E. Unums – now considered mere ‘eloi’ .. are in their ways, of total acquistion!

    2. GM

      Without a lock down you would have millions more sick people. Tens of thousands more deaths.

      That is not correct, without a lockdown, i.e. what will actually happen now that it is very clear that all attempts (serious or not) to deal with the virus have been abandoned, is much worse than “tens of thousands more deaths”. It will be several million in the US alone.

  3. Polar Donkey

    I work at a very large restaurant in Memphis. Our business is predominantly tourists when there isn’t large events happening downtown (baseball game, concert, etc). Very few people are working in offices anymore. The hotels are at 20% occupance. No large events. We are allowed to seat at 50% capacity and on Monday will be able to go to 75%, but it will not matter because only doing 25% of our normal business. Restaurants in other parts of town that have local customer base have been able to switch over to take out/delivery pretty well. One restaurant I know was able to maintain its sales volume with half its staff.For decades now, Memphis has been focused on building it’s downtown. NBA arena, AAA baseball stadium, offices, resataurants, condos, and bunches of hotels. Baseball team hasn’t played a game this season and will most likely move to Peoria. NBA team trying to go to Seattle or Law Vegas. 5 new hotels will likely fold. Several restaurants will go under. Office space is empty and new construction halted. Covid19 is neutron bomb for downtown Memphis.

    1. Mr Broken Record

      I wonder what that will do for the crime rate. In the mid 90’s, Memphis did not have a very good reputation in that regard (was working in TN at the time).

    2. NotTimothyGeithner

      but it will not matter because only doing 25% of our normal business.

      We are only at the start of the crisis, and we get to go through more waves of Covid while we are at it. Don’t worry Biden is no, malarkey Jack, and more money for police!

      Sure people are saving, but 40 million people lost their jobs. They aren’t saving. There isn’t going to be pent up demand. There might be a few winners in a few spots.

      1. polecat

        Well, one never knows ..There may be future pent-up demand for tracked-n-fielded pitchfork trials, and uppercrust ‘ripped limbs’ tosses …

  4. Michael Hudson

    OK, you know what I’m going to say.
    In current output and GDP terms, of course the article is right — as far as it goes.
    What it doesn’t discuss is the debt legacy — unpaid rents, debt service and other arrears. THAT is where the real damage will come — not on GDP account, but in evictions and property redistribution.

    1. Shiloh1

      Of course that’s where the Wall Street hoodlum sharks come into the picture, buying up assets for pennies on the dollar – or maybe just handed to them this time around. BlackRock anybody? Perhaps Mnuchin and Kamala have insights on that from 10 years ago.

      1. JeffK

        Lets say the LLCs hoover up all of the default properties as in 2008-9, the parasites got to have hosts, the sharks have to have fresh blood. Who is going to pay the rents once the eviction bans are lifted? I expect there will be LLC bailouts instead of debt forgiveness of the unemployed – and it won’t help. Wall street media keeps hyping the “V-shape recovery” as investor candy. How can the recovery curve be anything different than the inverse of the COVID case/death curve?

    2. GM

      And this is also why nothing was done to contain the virus — to do so would have necessitated cancelling debts (and also giving an UBI), even temporarily, so that people can stay home.

      Absolutely unacceptable (not the UBI part, the debt cancellation), even as an idea to be openly contemplated as part of mainstream public discourse. forget about it being implemented as a policy

      So millions of dead it will be instead.

      What I don’t understand is why no attempt was made to contain the virus when that could have been done with a lot less pain, i.e. in January and February.

      And I can’t shake off the suspicion that the virus was allowed to spread (remember how the CDC outright sabotaged detection and prevention for the most critical period of about a month and a half) precisely so that a situation for property distribution on the grandest scale could be created. Again, at the expense of a few million dead in the US and some 50 million dead worldwide…

      1. Ian Ollmann

        No, the reason nothing was done is cost shifting. We can socialize the cost at net saving to everyone, or can try to avoid paying for it, in the hopes of letting the other guy take he fall. In this case, since much of the cost is from medical care, per article, and that is predominantly a burden for those who get sick, it should be possible to bunker at home and hopefully avoid becoming ill, or so goes the thinking.

        Of course, having the enormous cost of the pandemic come down on a relatively small number of people isn’t going to end well for them. Most of these people are elderly and are probably on socialized medicine. Medical insurance will pick up a bunch of the rest and guess who gets to pay for that. Those planning to stay at home probably can afford to do so because they have assets such as stocks that will pay them to do so, but these are at the mercy of a functioning economy and are socialized in that sense. So, I don’t see much hope in the long run for this plan, especially if costs are, per article, higher by 1.7% GDP. I presume this is going to be like losing 1.7% GDP growth, nearly all of it, this year.

        I expect the proponents of you-are-on-your-own epidemiology, if they are small business owners, are getting hit particularly hard. Alas, customers will not return until they think it is safe to do so, and increasing their risk by this cost shifting plan seems unlikely to help that.

  5. semiconscious

    Indeed, in a recent paper (Brzezinski et al. 2020b), we find that lockdown policies have been economically more efficient than staying open in the US. To obtain these results, we combine microeconometric methods with an epidemiological model that allows for societal and political response to the virus in order to estimate the costs and benefits of lockdown policies.

    i mean, what could go wrong?…

  6. Hoppy

    Interesting approach but there are so many holes in this paper you could drive a truck through.

    “We leverage daily county-level mobile phone data on movement patterns”

    So they are basically tracking movement patterns of the PMC. Those not only with the highest income but also those with the best opportunity to work from home.

    “It also aligns with earlier research that showed credit card consumption only marginally less in Sweden, than in neighbouring Denmark, which did lock down (Andersen et al. 2020).”

    Credit card consumption as a marker, really? Is that additional debt for those with no ability to pay and what about those without credit?

    “These costs are directly proportional to the number of infections over the course of the pandemic.”

    Literally no on thinks there is a near term vaccine so the assumption this is over kind of ruins the logic in the rest of the paper.

    Justifying the lockdown on the basis of the effect on GDP when the lockdown disproportionately negatively effects the working class? Am I on the wrong site?

    These reads like something a bunch of college students would put together. Oh, it is.

    1. False Solace

      Mobile phones are practically required to hold down a job these days, especially among the working class. How do you think management sends out their last minute hourly schedules? If you think only the PMC have mobile phones you’re living in the last century.

      Many people view cash as a potential infection vector. Credit card usage would have increased just for that reason. Instead it’s down.

      Plenty of people in the US think a vaccine is just around the corner. Starting with the top of the executive branch.

      The study is highly dependent on its parameters, but these are some weak objections. Besides, out in the real world we can see the countries that took the strongest initial measures suffered the least. Wonder how the working class is doing in S. Korea or NZ? Think they’d rather switch places with us in the US or UK?

      1. dcrane

        New Zealand mostly got lucky. Their full lockdown began a few days after California’s yet CA has something like 30x the number of deaths, per capita. This is probably (my guess) mostly because the virus was much less widely seeded in NZ when the lockdown began, due to its relative isolation.

        1. Conal

          Yes “lucky” to have a government prepared to take drastic action before the epidemic had spread widely. “Go hard, go early” was the slogan.

          Now that they’ve eliminated the epidemic and ended their very stringent 7-week lockdown, they are back to having perhaps the most lax social-distancing regime anywhere.

          Lots of people lost jobs and plenty of businesses went bust, but the policy choice was almost universally approved of, and the Labour Party is tipped to win the upcoming election in a massive landslide.

        2. GM

          Don’t forget that New Zealand is where the billionaire class has their post-apocalypse survival estates/bunkers/etc.

          One can’t help but wonder how much that fact has to do with the decision to eliminate the virus there, in contrast to letting it burn through the UK and the US…

  7. kareninca

    I have a friend who is in his 70s who lives alone. He is becoming very, very despondent. I call him every day; other friends call him often. He is on loads of zoom meetings. But still he is in ongoing misery, since he is by nature very sociable. He is terrified of the virus and so other than shopping (which he actually does too much of) and solitary walks he is staying in. But this is agonizing for him, and he sees no end to it. Being sick or dead would be worse, and he is all in favor of the lock downs, but this sort of suffering is real.

    Since I have two other humans and a dog at home, and since I am not sociable, it is hard for me to truly understand how he feels, but I can tell it is awful.

    1. Ian Ollmann

      I am in your camp. I read all these twitter posts, “physical distancing, not social distancing!” and it really doesn’t resonate with me. Cynically, maybe it would be nice if all of these bubbly extroverts would stay home and stop plaguing me (quite literally these days) with their nonsense like they have for all my life. Yes, social distancing is perhaps just what is needed. Pin the social butterflies to the collection board, I say!

      But then, I must remember that I am staying home with my wife and three children. I have all the social interaction I could ever desire with my four favorite people! They have been away the last few days on a camping trip, and I must say life alone is not so grand. I can feel the man’s pain.

  8. marksparky

    I work in downtown Seattle–office-based physician. We closed our offices and went video-based the second week of March. I still go in once a week to pick up mail, etc. Compared to other in-town neighborhoods, which have been gradually coming back to life over the last 4 weeks, downtown remains ‘deadsville.’ I think so many office tower-based workers are able to function from home, that downtown will never recover its former people-density. Retail catering to downtown office workers is in great jeopardy. Our light rail, still being completed to more suburbs, had been a source of civic pride and well-used. Now the train is turned on its head as a potential bottleneck risk site for infection.

  9. The Rev Kev

    I am wondering what the long term effects will be for how the economy is done. I heard about one women that is lucky enough to be able to work from home. But after a few months of doing this, she has realized the insanity of spending up to 4 hours a day just going to and from work. Getting that time back has proved liberating in what she can do so she is now wondering about moving jobs if her present one insists on her going back to her old workplace with all the entailed risks if this virus is still kicking around.

    Read too of one major boss who has now discovered who is doing all the work in his organization and how he could get a more efficient, flatter organization by getting rid of a lot of senior managers who he has found to be doing not much of anything lately without a bunch of underlings to order around the workplace. There has been talk of bs jobs in the past and now perhaps the cost of keeping such jobs going is becoming much clearer. As an example, would it be really be so bad for a university to get rid of half of their admin staff and use the savings to pay their junior teaching staff a livable wage?

    1. Ian Ollmann

      The mere fact that so many jobs are considered non-essential should hint to us that perhaps we have a serious problem with labor misallocation. Capitalism may not be as efficient at meeting our /needs/ as has been claimed. It seems to do better with desire.

      What could we accomplish if we devoted more time an energy to worthy pursuits than we do today?

  10. David Carl Grimes

    During the 1918 pandemic, military spending during WWI kept GDP growing nominally. But the growth was eaten away by inflation. No real lockdowns but consumer spending dropped as people kept away from public places.

    The Financial Impact of Past Pandemics

  11. George Dance

    Amazing. For the last two months, the epidemiological reports have all been saying that the lockdowns saved all the uncounted millions of lives; voluntary social distancing was too little, or too late, to have any effect. Now that economists are putting out reports on the economic costs, the narrative is that the lockdowns were harmless; voluntary social distancing did all the damage.

    1. Yves Smith Post author

      Your comment utterly misrepresents the post, as show by merely reading the overview.

      One more like that and your comment privileges will be revoked.

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