Friday July 01, 2022

Covid-19 and the lost GDP

August 21, 2020

Some folks have complained about the loss of GDP over the last five months and questioned whether the shutdowns have been worth the price. While people often toss around huge numbers in the trillions of dollars as the cost of the shutdown, these big numbers are often both inaccurate and misleading.

While the cost of the shutdowns this spring were substantial, the cost of not shutting down much of the economy would have been enormous. When the country began to shut down in mid-March, the rate of infection was exploding. It was doubling every three or four days, and the reported rate was almost certainly a gross of understatement of the actual rate since testing was very limited. By early April, the pandemic was causing more than 2,000 deaths a day. The number peaked around 2,300 in mid-April and then began to fall gradually until early July when it was just over 500 a day. It since has risen again to more than 1,200 a day.

Had it not been for the initial lockdown in mid-March, it is almost certain that the infection would have continued to spread exponentially and the number of deaths would have grown along with the number of infections. There can be little doubt that the shutdowns saved many hundreds of thousands of lives in the United States, and quite possibly well over a million.

It is also important to recognize that many of the people who get the virus but don’t die, suffer lasting effects. There have been a number of accounts of people who have recovered from the disease but have enduring cognitive and/or physical problems. At this point, we do not have good data on the percentage of the people who get sick who will suffer lasting effects. But it would be wrong to ignore the consequences of the disease for people who get sick but don’t die.

Also, when we consider possible costs for restrictions in the United States going forward, it is important to realize the extent to which we are an outlier. Most other wealthy countries have largely succeeded in bringing the pandemic under control. The European Union (EU), in spite of a recent upsurge, has been averaging less than 7,000 cases a day. That compares to 60,000 in the United States, in spite of the fact that the EU’s population is 20 percent larger. The EU has been averaging around 150 deaths a day, compared to well over 1,000 in the United States.

Other wealthy countries generally had stricter shutdowns and smarter re-openings. As a result, the cost to their economies is likely to end up being considerably lower than in the United States. So, even if we decide that the benefits to public health may have been worth the cost to the economy, that doesn’t mean that we could not have had the same or larger benefits at a lower price, with good planning.

Excerpted from: ‘A Note on Lost GDP During the Shutdown’