Lead author: “Our benefit-cost analysis shows that the extensive social distancing measures being adopted in the U.S. likely do not constitute an overreaction.”
LARAMIE, Wyo. — The aggressive social distancing policies implemented around the United States have caused millions to lose their jobs and brought many sectors of the national economy to a screeching halt. But a study by economists at the University of Wyoming found that these measures are economically justified in the long run.
The researchers weighed the benefits of social distancing policies against the predicted damage to the economy. They found that, because the strict guidelines have been shown to save lives during the COVID-19 pandemic, they far outweigh the economic carnage the policies cause.
“Our benefit-cost analysis shows that the extensive social distancing measures being adopted in the U.S. likely do not constitute an overreaction,” explains lead author and Assistant Professor of Economics Linda Thunstrom, in a media release. “Social distancing saves lives but comes at large costs to society due to reduced economic activity. Still, based on our benchmark assumptions, the economic benefits of lives saved substantially outweigh the value of the projected losses to the U.S. economy.”
Thunstrom and her team found that, assuming social distancing policies are adopted and followed widely enough to significantly reduce contact among individuals, the monetary value of those policies would exceed the economic costs — by $5.2 trillion.
The team used up-to-date information on how the disease spreads and its effects on economic activity to make their comparisons.
“It should be possible to conduct a more detailed analysis after more data are available,” adds Assistant Professor Stephen Newbold. “But a rapid assessment, based on the best currently available information, adds much-needed rigor to the public discussion about the policy response to this outbreak.”
Governments around the world have issued unprecedented public social distancing policies to slow the spread of the virus. These measures have included school and business closures, travel restrictions, and canceling public events of more than 10 people.
Goldman Sachs recently issued a prediction that these social distancing policies will shrink the US’s Gross Domestic Product (GDP) by over six percent in 2020, despite government stimulus efforts. The U.S. is already reeling from economic decline and massive spikes in unemployment numbers. The impact is especially difficult for vulnerable low-wage workers.
The Wyoming economists accounted for the potential impact of COVID-19 on the U.S. health care system in their analysis. Previous studies have shown that the current social distancing policies throughout the county will reduce the average contact rate between individuals by 38%, reducing the peak of the now-famous infection curve by over half. This would help avoid overwhelming the health care system and suppress the mortality rate below worst-case projections.
The researchers noted that their analysis didn’t segment their results into the impact of social distancing on specific US demographics. They also didn’t account for the possibility of a second wave of COVID infections.
They wrote that the economy could address the fallout of the pandemic with “appropriate redistributions of resources.”
The study was published in the Journal of Benefit-Cost Analysis.