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Leonora Risse – Think shutdowns hurt the economy? You should see what pandemics do

Summary:
This question of "what would be the damage if we didn’t get the virus under control?" is what economists call opportunity cost. University of Michigan economist Justin Wolfers sums up this parallel universe thinking neatly: “If you think shutdowns hurt the economy, you should see what pandemics do." His observation is based on an analysis of the effects of restrictions imposed in the US during the 1918 Spanish Flu. The study found that letting a pandemic sweep through the community is what causes most damage to the economy – not the effects of the restrictions themselves. The Age Leonora Risse - Think shutdowns hurt the economy? You should see what pandemics do

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This question of "what would be the damage if we didn’t get the virus under control?" is what economists call opportunity cost.

University of Michigan economist Justin Wolfers sums up this parallel universe thinking neatly: “If you think shutdowns hurt the economy, you should see what pandemics do."

His observation is based on an analysis of the effects of restrictions imposed in the US during the 1918 Spanish Flu. The study found that letting a pandemic sweep through the community is what causes most damage to the economy – not the effects of the restrictions themselves.

The Age

Leonora Risse - Think shutdowns hurt the economy? You should see what pandemics do

Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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