Pandemics Depress the Economy, Public Health Interventions Do Not

[REWahoo]

Interesting paper published today by a couple of guys with the Fed and a guy from MIT.

Bottom line: In the Spanish Flu Pandemic of 1918 mortality was lower and economic activity recovered more quickly in areas that closed schools, limited business hours and imposed quarantines than areas which did not.

What are the economic consequences of an influenza pandemic? And given the pandemic, what are the economic costs and benefits of non-pharmaceutical interventions (NPI)? Using geographic variation in mortality during the 1918 Flu Pandemic in the U.S., we find that more exposed areas experience a sharp and persistent decline in economic activity.

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3561560&mod=article_inline

 

[Sunset]

Except for the funeral businesses

 

[foxfirev5]

Perhaps due to the fact that people were not as mobile as today? Was it not the movement of troops from Europe to the US that lead to the original spread?

No facts. As they say just askin'.

 

[Spock]

I didn't do the research, but I believe the premise and the comparison is completely wrong.
1918 did not have anything close to today's communication (print only, not even radio) and no transmission mobility like cars and airplanes. Locking down a whole country (and basically the planet) vs. areas of outbreak is going to cause more damage from the intervention than the virus deaths.


To go "Logan's Run" (not that I'm in favor of it because I personally would be in one of the at-risk populations), the covid19 skew to elderly deaths would reduce SS withdrawals, long term medical (probably negated by long term health problems in covid19 survivors), and trigger wealth triggers to heirs faster. Etc.
The 1918 virus, at least the first wave of it, had higher mortality rates among the young/productive parts of society.

 

[MichaelB]

I've read this elsewhere, before the current outbreak and again since. It's certainly possible now, the infrastructure is still in place and there will be lots of available labor.

Interesting paper published today by a couple of guys with the Fed and a guy from MIT.

Bottom line: In the Spanish Flu Pandemic of 1918 mortality was lower and economic activity recovered more quickly in areas that closed schools, limited business hours and imposed quarantines than areas which did not.



https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3561560&mod=article_inline

 

[NW-Bound]

China is now reopening Wuhan. Europe and the US are still debating lockdown.

 

[Ian S]

We also have the advantage that unlike the case in 1918, we have a fiat currency that is not dependent on gold reserves. In essence, the federal government today is free to spend as much money as needed to offset the worst of a recession/depression.

 

[capjak]

I thought the majority of the US is in a situation where non essential business is closed. I know here in ILL we are pretty much shelter in place only going out for food/doctor when necessary?

Either way these types of observational studies have major flaws/confounding error (that does not mean that it is not true or will not be true, just that looking back from 1918 and extrapolation is probably as accurate as predicting where the market will go based on where it was in 1918). But some cities today have higher economic growth than other cities over time.

My understanding is that South Korea did not lock down the country since they were able to locate/track/trace most cases of the virus, this would mean that the country will suffer a slow economic decrease. Areas of China that did not lock down will fare worse than Wuhan?

 

[foxfirev5]

I've read this elsewhere, before the current outbreak and again since. It's certainly possible now, the infrastructure is still in place and there will be lots of available labor.

Lots of available labor provided there is an immediate incentive to work. If it wasn't so serious i would consider the premise a joke