Our economy will likely reboot too slowly
By Scott Sumner
My general view is that social distancing is better than an explosion of coronavirus cases. I believe we were too slow to begin social distancing, at least in hindsight. At the same time, I expect that after the worst phase of the epidemic is over we’ll do too much social distancing.
Suppose you saw a sign in a restaurant window saying, “Our restaurant has a smaller than average number of rats and cockroaches in our kitchen.” Does that make you more inclined to eat there? Obviously it should make you more inclined to eat there, but would it? Many people don’t even give any thought to rats and cockroaches in the kitchen when deciding where to eat. They’d be put off by that sign. Gross!
The Chinese movie theatre industry was about to re-open last weekend, and then the government suddenly reversed course. This picture of a Chinese movie theatre caught my attention:
Those barriers that keep people separated obviously make the theatre safer. But I wonder if they make it seem less safe to the average filmgoer. I can picture my wife saying, “Well, if it’s so dangerous they need to separate people, then perhaps I’ll just stay home and watch Netflix.”
Our society doesn’t react very rapidly to hard to understand risks discussed by experts. But when the risk becomes obvious, we tend to overreact. In a previous post, I argued that overreaction (from an individual risk perspective) was socially optimal in this case. But that Chinese movie theatre picture (and the likely reaction of theatre patrons) makes me think that eventually we’ll go too far. It would be optimal at some point to reboot our economy if we could keep the R0 factor (virus reproduction) below 1.0. Do lots of little things like what we see in the picture above. But I wonder if our extreme risk aversion will demand an even higher standard, closer to zero risk.