The economic impacts nationally of having people avoid contact with each other during the coronavirus epidemic will ultimately be far smaller than taking no action to halt the spread of the illness, according to a study prepared by University of Wyoming economists.
The study concluded that while the immediate direct monetary impact of “social distancing” on the country’s economy will be higher than taking no action, the cost in lives will be much higher if no action is taken.
“Assuming that social distancing measures can substantially reduce contacts among individuals, we find net benefits of roughly $5 trillion in in our benchmark scenario,” the study said.
The study, titled “The benefits and costs of flattening the curve for COVID-19,” was authored by Linda Thunstrom, Stephen Newbold, David Finnoff, Madison Ashworth and Jason Shogren, all with the UW’s Department of Economics.
The authors said they wanted to answer the question of whether orders in place across the country for people to remain in their homes are worth the economic disruption that will result.
“These social distancing measures save lives, but they also impose significant costs on society,” the study said. “The resulting contraction of economic activity puts vulnerable low-income workers in jeopardy, and recent forecasts suggest that overall economic output in 2020 may decline substantially, despite large fiscal and monetary stimulus.”
The study quoted Goldman Sachs, an investment banking, securities and investment management firm, as predicting the value of the country’s Gross Domestic Product will fall by 3.8% this year due in part to social distancing measures. Over the next five years, the study projected total loss in value at $26.2 trillion.
Without social distancing measures, the five-year loss in the value of the GDP was estimated at $19.4 trillion.
However, deaths without social distancing could total more than 2.1 million, the study predicted, a number that shrinks to 941,000 with social distancing.
The value of the lives lost with no social distancing was estimated at $21.6 trillion, while with social distancing measures in place, the value will be $9.4 trillion, the study said.
The net effect is that over five years, social distancing will reduce the economic impact of the illness by $5 trillion, the study said.
“Our benefit-cost analysis shows that the extensive social distancing measures currently being adopted in the U.S. likely do not constitute an overreaction,” it said. “Based on a variety of plausible scenarios, the economic benefits of lives saved substantially outweigh the value of the projected losses of GDP.”
The impacts of social distancing will be severe, the study said, and people will have to be convinced to continue the practices as their economic situations change.
