The best economic plan against the coronavirus

I have produced a 7 pp. document, mostly micro- rather than macroeconomics, leaving the pure health and health care issues aside, you will find it here (link is now corrected). Intended for policymakers. Here is the opening bit:

“We need a series of policies to achieve some rather complex ends, and in conjunction. Other than the obvious goals (“minimize human suffering”), these ends are:

Scale down economic activity in a rapid way to keep people at home, but without devastating the physical, cultural, or organizational capital that will be needed to restore growth and normality.
Boost the confidence of markets — both retail and financial markets — by showing progress in limiting the spread of the disease. (But note that merely slowing the spread of the disease may not help the economy, as uncertainty would linger for longer periods of time.)
Keep business in a position to rebound.
Create incentives for production to bounce back once that is appropriate.

You will notice a tension between #1 and #2-4, which is what makes this policy issue so difficult. The ideal policy mix should both lower and raise output, and at just the right speed. No one ever taught us how to do that.

Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans).

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”

Again, here is the link, please do leave your suggestions in the comments section of this blog post. I thank Patrick Collison for some writing and editing assistance with this document, though of course he is not liable for its final contents or conclusions.