The Shaky Logic Behind Hopes for a Quick Recovery

President Donald Trump promises that the economy will soar “like a rocket ship” as soon as the COVID-19 pandemic ends. Writing for the Independent Institute, R. David Ranson, like many who fear the government more than they fear the virus, agrees.

[A]fter the production shutdowns end, GDP will shift back above pre-crisis trend as businesses and consumers make up for lost time. Events do not as yet add up to a significantly weaker full-year performance for the US economy. Economic activity will go into hiatus, but it can be made up quickly once the crisis is over.

As I explained in this earlier post, Ranson is right to say that pandemics, which hit the economy from the supply side, disrupt things in a very different way from ordinary recessions, which hit from the the side of demand. He is also right that clumsy, improvised public health interventions like universal stay-at-home orders do more damage than would more nuanced interventions based on the test-trace-isolate principle. Everyone knows that by now. We all hope that we will be better prepared for the next pandemic than we were for this one, so that the tradeoff between saving lives and saving the economy will not be so stark.

Economist, Senior Fellow at Niskanen Center, Yale Ph.D. Interests include environment, health care policy, social safety net, economic freedom.

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