Policymakers and politicians have an unenviable decision to make. The longer their economies are totally shut down because of social distancing, implemented to combat the coronavirus, the more they stagnate, the higher the rates of unemployment and the greater likelihood that businesses, once closed down, will never open up again. In other words, the economic damage rises exponentially as time goes by.
How long can we go on with our economies totally closed down?
They face a classic trade-off, similar to the trade-off found in a Production Possibility Frontier:-
If they want to stop the virus from spreading, they introduce social distancing and reduce economic growth considerably, say to 4% on the Y-axis (in fact it is probably much lower than this at the moment). This saves 9000 lives, point b. on the PPF. If they relax the social distancing, however, this results in people going back to work and increases economic growth, to say 10%, but the cost of this is only 3000 lives saved – point a. on the axis.
What is the price of human life? How many people are we prepared to sacrifice, in order to get the economy going again?
Andrew Cuomo, the Governor of New York said recently, after Donald Trump the US President suggested that getting the US economy going again was as important as saving lives:-
“You can do both* but not in a clumsy, ham-handed way. ‘Well, we’ll just sacrifice old people, they’re old people anyway and the old get left behind.’ What is this? Some modern Darwinian theory of natural selection? You can’t keep up so the band is going to leave you behind? God forbid.”
* in other words, get the economy going again AND save human lives