Deck 4: Theories of Economic Shutdown

Question 1

Describe the shutdown interval. For different countries, how does the shutdown interval differ?

Answer 1

To reduce infections, slow the spread of the disease, and decrease the number of deaths, shutdown interventions limit human contact. For most countries, shutdown interventions follow a script: non-essential members of the labor force stop reporting to their places of employment, while essential workers remain. But when non-essential workers leave, they may or may not remain employed with their companies.
For different countries, the shutdown interval differs because
• They may not have the same definition of who are the essential workers.
• They may not shut down the entire economy.
• The level of severity of the shutdown may differ.

Question 2

What are the costs and benefits of flattening the epidemic curve?

Answer 2

Flattening the epidemic curve leads to both a delay in peak infections and a lower number of peak cases. When the epidemic curve flattens, it takes longer for infections to spread through a population. The argument for flattening the epidemic curve is twofold. First, slowing the spread of disease provides time for a network of scientists to create a vaccine and other treatments. Second, slowing the spread of disease addresses the potential of shortages in capacity in hospitals. The costs include lost work hours, a decrease in production, unemployment, and a decrease in income. An additional cost includes isolation.

Question 3

What do economic shutdown interventions accomplish? What are the costs and benefits? What is the optimal mix of shutdown interventions?

Answer 3

The primary objective of economic intervention is to reduce the possibility of close contact among potentially infectious individuals and those susceptible. The primary benefit is the long-run benefit of containing the virus. The short-term cost of economic shutdowns is the initial reduction of economic production as well as lost income for workers. The unintended long-term cost is the potential decline in worker productivity and a movement below the natural rate of output. The optimal level of shutdown depends on whether the measures are substantial in reducing the transmission rate with minimal costs.

Question 4

At the beginning of a pandemic, should countries prioritize health before wealth?

Question 5

Using the graphical depiction of the economy-health tradeoff, what factors impact the concepts of hollowing out and drifting away?

Question 6

Explain the stringency index. What does it measure? How do stringency scores correlate with the change in confirmed cases?

Question 7

Contrast the theories of economic shutdown. Which is the most effective in balancing the need to maximize public health and minimize economic losses?

Question 8

During the coronavirus pandemic, which countries experienced high stringency index scores? Were these countries successful in minimizing the spread of disease?

Question 9

How does a country's view about the free market relate to its program of income assistance?

Question 10

Contrast the European and U.S. models of income assistance. What are the costs and benefits of each model?