Coronavirus - What would happen if we did nothing?
Right now we are saving lives at the cost of our economic health. Obviously that makes sense on a human level. But what is the cost of shutting down the economy? Is it possible more lives are lost as a result of a Great Depression?
The Wall Street Journal Editorial Board explores this idea saying, "No society can safeguard public health for long at the cost of its economic health."
If this government-ordered shutdown continues for much more than another week or two, the human cost of job losses and bankruptcies will exceed what most Americans imagine. This won’t be popular to read in some quarters, but federal and state officials need to start adjusting their anti-virus strategy now to avoid an economic recession that will dwarf the harm from 2008-2009.
... the costs of this national shutdown are growing by the hour, and we don’t mean federal spending. We mean a tsunami of economic destruction that will cause tens of millions to lose their jobs as commerce and production simply cease. Many large companies can withstand a few weeks without revenue but that isn’t true of millions of small and mid-sized firms.
In essence we are following the Chinese play-book when we don't even play on the same field:
Some in the media who don’t understand American business say that China managed a comparable shock to its economy and is now beginning to emerge on the other side. Why can’t the U.S. do it too? This ignores that the Chinese state owns an enormous stake in that economy and chose to absorb the losses. In the U.S. those losses will be borne by private owners and workers who rely on a functioning private economy. They have no state balance sheet to fall back on.
The politicians in Washington are telling Americans, as they always do, that they are riding to the rescue by writing checks to individuals and offering loans to business. But there is no amount of money that can make up for losses of the magnitude we are facing if this extends for several more weeks. After the first $1 trillion this month, will we have to spend another $1 trillion in April, and another in June?
As of today at least four states have already mandated complete shutdowns except for essential businesses (grocery stores, gas stations, construction firms, hospitals, doctors, etc.):
New Jersey is projected to make the same decision. Politicians in Germany, England, France, Italy and throughout Europe are making similar proclamations.
The economic costs are already enormous and are projected to get far worse:
> The speed of the [10%] decline over the past week even beats the Black Monday plunge in October 1987, where the peak was in August 1987, Torsten Slok, Deutsche Bank’s chief economist said.
> The worst month for job losses during the financial crisis was 800,00 in March 2009. > > Some forecasts see April quintupling that or worse. Forecasts for that month range from 500,000 to 5 million.
Is this even ethical? If you own a restaurant, gym, coffee shop, or practically any retail store you are hereby screwed, wholly and unilaterally.
Does the virus even warrant this? To date there are only 19,285 infections in the United States. New York has 8,398 infections. California 1,185. Illinois 585. Pennsylvania 303. Pennsylvania has over 12 million citizens.
At Los Alamos, Del Valle and her colleagues are using alternatives to the century-old susceptible/infectious/recovered models in hopes of getting a more realistic picture of an outbreak’s likely course. A bedrock assumption of the traditional models is “homogeneous mixing,” Del Valle said, meaning everyone has an equal chance of encountering anyone. That isn’t what happens in the real world, where people are more likely to encounter others of similar income, education, age, and even religion (church pews can get crowded).
The Los Alamos researchers are still wrestling with their Covid-19 model, which is showing — incorrectly — the outbreak “exploding quite quickly in China,” Del Valle said. It is overestimating how many susceptible people become infected, probably because it’s not accurately accounting for social isolation and other countermeasures.
The government has unilaterally determined that its citizens cannot be trusted to self-enforce their own social distancing and anti-viral hygeine. Is there empirical evidence for this? We've heard the stories about kids packing bars on St. Patrick's Day to much consternation. Presumably that is the justification to save the people from themselves.
We're using science to model the infection rate of the disease. Are our elected leaders validating that science in real time? Are we analyzing each of the infected individuals in each state? Were they the kids partying at the bars and not practicing social distancing?
The motivations of all the various stakeholders couldn't be more stark. Politicians and reporters aren't going to lose their jobs as a result of the shutdown. In fact both parties's job prospects could potentially improve as a result of the shutdown. The reporter earns clicks and eyeballs as a result of this near constant, life-changing news. The politician gets time in the spotlight to promote himself/herself and her decisive policies. Furthermore, none of these shutdowns can be back-tested. Politicians worldwide are all making the same decisions, maximizing the political risk of going against the prevailing group-think.
Maybe it's time for the citizens to prove that we can effectively self-enforce our own social distancing. It's already been proven to work throughout Asia. We can do it here, too. But our politicians need to give it a chance to work.