Professor Spence confused epidemic growth and economic growth today in his Princeton Brunnemeyer talk, I thought, and absolutely failed in explaining his unusual “Doubling Days” graph, which was central to his presentation. I really still have no idea what he meant, and when the moderator asked him, he himself couldn’t explain it. <\/p>\n
He had five stages of the effects of the epidemic on growth, which also seemed confused to me. Here’s my redo: <\/p>\n
1. Epidemic grows speedily. It has few direct effects until the public realizes, or the government.<\/p>\n
2. People get scared and start responding. The citizenry stop going to restaurants. The government imposes travel restrictions. The citizenry gets worried about a recession adn stops spending and businesses stop investing. The economy has a sharp downturn. <\/p>\n
3. In some countries, the government imposes very strong measures— lockdowns– that are extremely costly,and the economy collapses. (not South Korea, not Taiwan, not Sweden). <\/p>\n
4. The epidemic spreads. People take voluntary extreme cautionary measures— universities go to online classes and send studetns home, offices go online, small busienss owners decide to shut downa and take a long vacation. This hurts the economy a lot, regardless of government lcokdown. This is what happened in Sweden. <\/p>\n
5. Recession hits because of (3) and (4). We are just starting to get there, I think. Even if the epidemic suddenly ended, the recession would still occur. Many businesses have died of covid19 and it takes a couple of year for those resources to be reallocated in some new business. Bankruptcy proceedings are still going on in the courts. <\/p>\n
6. Longterm effects of government policy hit— inflation or high taxes from the earlier high spending, people permanently leaving the labor force and staying on government welfare payments, etc.<\/p>\n
It is important to note that the direct effect– people getting sick and dying— is small, in direct material terms. When old people die, that actually helps GDP per capita considerably. <\/p>\n","protected":false},"excerpt":{"rendered":"
Professor Spence confused epidemic growth and economic growth today in his Princeton Brunnemeyer talk, I thought, and absolutely failed in explaining his unusual “Doubling Days” graph, which was central to his presentation. I really still have no idea what he meant, and when the moderator asked him, he himself couldn’t explain it. He had five […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-852","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/posts\/852","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/comments?post=852"}],"version-history":[{"count":3,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/posts\/852\/revisions"}],"predecessor-version":[{"id":855,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/posts\/852\/revisions\/855"}],"wp:attachment":[{"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/media?parent=852"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/categories?post=852"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rasmusen.org\/blog1\/wp-json\/wp\/v2\/tags?post=852"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}