Save Grandma, Save the Economy
The meat supply is starting to fail. Meat processing factories seem especially susceptible to COVID-19 probably because of mist, chilled air circulation, the creation of aerosols and close worker contact. What other industries could be affected? What would happen if the energy, transportation, or pharmaceutical sector failed? We aren’t even sure which industries are critical. Who would have thought that nasal swabs would be a critical industry? In researching vaccine production I was stunned to learn that glass vials may be a bottleneck. Glass vials! How then do we best protect the workers in our critical industries? Should everyone else practice social distancing, closing of non-essential firms and work from home or should everyone else return to work as if everything were normal?
Social distancing, closing non-essential firms and working from home protect the vulnerable but these same practices protect workers in critical industries. Thus, the debate between protecting the vulnerable and protecting the economy is moot. “Lockdowns” protect vulnerable people and protect vulnerable industries. Save grandma, save the economy.
The point is simple but made formally in Social Distancing and Supply Disruptions in a Pandemic by Bodenstein, Corsetti and Guerrieri.
Abstract: Drastic public health measures such as social distancing or lockdowns can reduce the loss of human life by keeping the number of infected individuals from exceeding the capacity of the health care system but are often criticized because of the social and economic costs they entail. We question this view by combining an epidemiological model, calibrated to capture the spread of the COVID-19 virus, with a multisector model, designed to capture key characteristics of the U.S. Input Output Tables. Our two-sector model features a core sector that produces intermediate inputs not easily replaced by inputs from the other sector, subject to minimum-scale requirements. We show that, by affecting workers in this core sector, the high peak of an infection not mitigated by social distancing may cause very large upfront economic costs in terms of output, consumption and investment. Social distancing measures can reduce these costs, especially if skewed towards non-core industries and occupations with tasks that can be performed from home, helping to smooth the surge in infections among workers in the core sector.
Addendum: I wrote “lockdowns” because I am in favor of getting back to work with mass testing and safety protocols so I don’t think that a “lockdown” is necessarily the optimal policy. Indeed, I think we could get the meat processors back up and running with testing at the door and safety protocols. But we are not having a rational discussion about the tools and the investments that we need to reopen the economy. Instead, the people protesting to reopen the economy are also protesting against the use of a key tool to reopen the economy, masks! Welcome to crazy town.