As has been much discussed elsewhere, the intention of the stay-at-home (or shelter-in-place) measures in effect throughout the United States is to “flatten the [epidemiological] curve,” or to slow the rate at which the virus spreads, thereby reducing the likelihood of a surge in demand for medical services that leads to sorrowful, triage-like decisions about whom to treat. The “COVID-19-related costs” curve illustrates the all-in costs of mitigating the adverse effects of the coronavirus as a function of the length of the government’s quarantine measures. These all-in costs include not only those who unfortunately perish due to the virus, but also the economic and human costs of providing these medical services, including the extraordinary efforts of the medical community in responding to the pandemic. To state the obvious, these costs are exceedingly difficult to quantify.
The “quarantine-related gross costs” curve illustrates the all-in gross costs relating to the slowdown in the country’s economic production, while the adjacent curve illustrates the net costs, after having considered various fiscal and monetary policies designed to mitigate those costs. Both of these curves are also functions of the length of the government’s quarantine measures.
The steep curvature is meant to illustrate that a throttled economy eventually reaches a cascade of compounding adverse effects. As one of innumerable examples, consider that many retailers can now pay neither their employees nor their rent (as well as a score of other charges); in turn, their workers’ anxiety about if and when they will be reemployed leads them to curtail their consumption, and this lowered consumption adversely ripples through the economy. Similarly, the unpaid rent leads to the landlords’ inability to service the mortgage, and these defaults also adversely ripple through the economy, and so on and so on.
While the initial interpretation of the gross- and net-cost curves may be that they simply represent a portion of the country’s forsaken GDP, the more compassionate interpretation is that this productivity also acts as a proxy for the quality of human life. Economic tragedies (lost employment, business bankruptcies, depleted life savings) often bring about human tragedies (alcoholism, drug addiction, family dysfunction), which sometimes culminate in the loss of life. Moreover, the stay-at-home measures disproportionally affect lower-than-average wage earners, and so, hit hardest are those who can least afford it.
Consequently, fair-minded policy makers (and those who advise them) try to strike a balance between these two competing forces, as illustrated here by the “total estimated costs” curve, which represents the sum of the two costs: