Economics and COVID-19
Prof. Natalia Czap, a behavioral economist, notes that the Journal of Behavioral Economics for Policy recently published a special issue on COVID-19. Two articles in this issue may be of particular interest. The first, titled "The ethics of social choices and the role of economists in a pandemic" by Lionel Page, discusses the tradeoff between lives saved versus economic and social considerations. He argues for the importance of accounting for moral principles and preferences of citizens when determining public policy during the pandemic. The second article is "The social perils and promise of remote work" by Phil Lord, who argues that the move to remote work has a potential to reduce historic inequalities, such as those concentrating women in lower-paying positions. However, it might also increase the job insecurity and reallocate the cost of workspace from employers to employees.
Prof. Warren Anderson, our resident economic historian, suggests two history-oriented analysis of the COVID-19 pandemic. First, Douglas Almond reports in the August 2016 issue of the Journal of Political Economy that the 1918 Influenza Pandemic had significant long term consequences. The birth cohort in utero during this pandemic (1918-19) exhibited higher rates of physical disabilities, lower educational attainment, and lower income relative in adulthood relative to other cohorts. This suggests our current pandemic could adversely affect the health and economic prospects of the current cohort unless we provide effective public health prevention programs and good health care to pregnant women and infants.
Second, in March 2020 Robert Barro, Josè Ursúa, and Joanna Weng posted a working paper at the National Bureau of Economic Analysis titled “The Coronavirus and the Great Influenza Pandemic: Lessons from the ‘Spanish Flu’ for the Coronavirus’s Potential Effects on Mortality and Economic Activity.” They report that, on average, nations suffered a 6% decline in GDP and an 8% decline in consumption due to the 1918-19 pandemic.
Prof. Hans Czap, our Environmental Economist, recommends reading a recently published article by D. Helm titled “The Environmental Impact of the Coronavirus.” We all have seen posts that tout the benefits to the environment of the significant economic disruption caused by Covid-19, mostly in the form of clean air. And while it is true that air pollution has rapidly and significantly decreased all over the world, the paper outlines the uncertainty regarding the overall short- and long-term effects on the environment. Some reasons why the environment may not benefit in the long- or even medium-term are that economic activity may well rebound quickly and even increase to make up for lost output, environmental policy may become less restrictive, and global efforts to curb emissions may be reduced due to competing requirements on federal budgets.
Prof. Antonios Koumpias, a health economist, reports that in the May 14, 2020 issue of Health Affairs a group of health economists estimate that “Holding the amount of voluntary social distancing constant, […] results imply 10 times greater spread by April 27 without shelter-in-place orders (10 million cases) and more than 35 times greater spread without any of the four measures (35 million): large event bans, school closures, closures of entertainment venues, gyms, bars, and restaurant dining areas, and shelter-in-place orders.”
He also recommends an article by researchers at UM’s Institute for Healthcare Policy and Innovation titled “Racial Disparities in the Time of COVID-19.” The authors report that “In Michigan, over 40% of COVID-19 deaths are African Americans, while only 14% of the population is made up African Americans. Haggins and Geronimus argue that “the reasons behind these unsettling findings are a complex disparity ecosystem”.
Prof. Pat Smith, who teaches statistics, notes that NPR’s Planet Money program nicely summarizes a recent study on employment and spending during the pandemic by a group of “Big Data” economists led by Raj Chetty. Their analysis shows that like previous recessions, the current recession is fueled by a decline in demand. However, in a typical recession demand drops for durables (vehicles and other large manufactured goods) while in this recession the drop in demand is most severe in restaurants, hotels, bars and other in-person service businesses. They also find evidence of a greater drop in spending and higher lay-offs in richer zip codes. This research team argues that the usual fiscal policies of tax cuts and increased government spending likely won’t be enough to re-ignite demand. Instead they recommend a focus on public health efforts to restore safety so consumers can go out to service-oriented businesses without fear of disease.