In this thread, we've been discussing what interventions, if any, the government should take to reduce the spread of coronavirus, especially when we observe tradeoffs on the economy.
I noticed that we've linked a projection for the economic damage of current interventions taking place in the USA.
The Goldman Sachs report predicts a
-3.8% hit to GDP.
As a point of comparison, I thought it might be helpful to also project the economic damage if the US took
no action to reduce the spread, as proposed in this thread.
As it so happens,
The Times also wrote about this subject today. They link to
this paper by Eichenbaum et al that is reasonably understandable to a layman like me. It uses a
Value of Statistical Life as a variable. Based on a VSL of $9.3m and a high-end estimate of ~2.2m deaths given no government intervention, the authors would predict a
-5.5% hit to GDP.
I think this is important because in this view, we should be expecting a serious hit no matter what we do, just because the virus is destructive. But the authors do find that government interventions can push GDP down further.
And interestingly, the authors
do recommend interventions that would push the predicted GDP hit further to -12.3%, at the benefit of reducing deaths by 500k. One rationale they pose for this is that in the long run, the reduction hours worked (which I presume is a proxy for economic output) is permanently reduced in the do-nothing case by 0.65%, but only 0.53% in the intervention case.