Just two weeks ago, the likelihood of a major US recession as a consequence of the public health challenge posed by COVID-19 was still in doubt. In the past few days, the number of claims filed for unemployment insurance hit record levels; the total number of COVID-19 cases in the United States went past 100,000, already substantially higher than the totals in Italy and China; and parts of the country have imposed lockdowns, closing non-essential businesses and requiring people to stay at home as much as possible.

Chicago Booth’s Initiative on Global Markets (IGM) invited its panel of US economists to express their views on the policy response to the COVID-19 crisis, in particular the interactions between containment measures and economic activity, and the need for investment to support the medical response to the health emergency.

Of the panel’s 44 members, 41 participated in this survey. More details on the experts’ views came through in the short comments that they were able to include with their answers. Several provided links to relevant research evidence, including the web page set up by IGM to collect policy proposals for mitigating the economic fallout from COVID-19.

Almost all the respondents agreed that limiting coronavirus infections will involve a significant economic contraction.

Larry Samuelson of Yale noted, “We have already seen one of the quickest and most severe contractions in history, with no immediate end in sight.” Bengt Holmstrom of MIT concurred: “Economic activity [is] already down and will hardly pick up until pandemic [is] under control and fear abates.”

Princeton’s Angus Deaton said, “We don’t quite know how bad it will be, or exactly what ‘very large’ means. But spirit is right,” while Kenneth Judd of Stanford was more optimistic: “Yes, there will be a ‘very large’ contraction, but with a short duration, hopefully just several weeks.”

Aaron Edlin of the University of California at Berkeley alluded to the link between the public health crisis and the economy: “We need a lockdown and random testing until we know either A. that the virus is under control or B. that mortality is low.” Similarly, Chicago Booth’s Anil Kashyap commented, “Slowing the disease spread requires social distancing and less labor supply—we don’t want to fully offset this,” adding a link to his analysis with three colleagues of three pillars of the economic policy response to the COVID-19 crisis.

Several panelists referred to the appropriate policy response when tolerating an economic contraction is necessary for public health reasons. Alberto Alesina of Harvard, for example, stated, “Fiscal policy will be needed to support the weakest during the recession.” Jose Scheinkman of Columbia said, “It is crucial to preserve capacity of firms of all sizes to return rapidly once social distancing is no longer necessary.” Northwestern’s Christopher Udry added, “There are many steps we can take that both will reduce the contraction and reduce lives lost. Most obviously vastly improved testing.”

Others expressed further caveats. Harvard’s James Stock argued that the “spread of infections must drop to point health system can handle; will be contraction, but not clear suppression is desirable goal.” University of Chicago’s Robert Shimer said, “There are other reasons to stop tolerating the contraction, e.g. effective treatments, evidence that mortality rates are not too high, etc.” And Daron Acemoglu of MIT noted, “Containment doesn’t mean complete elimination. May be optimal to stagger return to work for low-risk groups once peak-disease is gone.”

Panelists were also largely in agreement that lifting a lockdown too early creates its own economic hazard.

In their comments, several panelists mentioned the evidence from epidemiology. Darrell Duffie of Stanford linked to the widely discussed Imperial College report on strategies for mitigation and suppression, saying, “The epidemiology studies imply severe economic damage in the form of additional loss of human life (to which I assign high economic damage).”

University of Chicago’s Michael Greenstone also referred to evidence on the benefits and costs of “flattening the curve” for COVID-19: “Taking available epi models at face value suggests there are large welfare/economic benefits to social distancing/slowing spread of COVID-19.” Kashyap added, “Everything I read suggests that premature cessation will backfire—see Andy Atkeson’s analysis.”

Columbia’s Scheinkman commented, “Without vaccine, likelihood [of] recurrence is high till very high percentage infected. Optimal strategy involves multiple waves of contact reduction.” Christopher Udry points out that “the key is to reduce the likelihood of resurgence by better targeting of preventative measures. Until then, strict social distancing needed.”

But Yale’s Pinelopi Goldberg, who expressed uncertainty about each of the poll’s first two questions, argued that “we need to know the true infection and asymptomatic rates before deciding on local lockdowns. If everyone is already infected, lockdowns will not make a difference.” Both she and Harvard’s Stock emphasized the need for data to inform the policy response—and Stock argued strongly for random testing: “We have insufficient data to assess and need random testing of population to ascertain true infection and death rates.”

Peter J. Klenow of Stanford provided links to preliminary evidence on the optimal length of a total economic lockdown and the role of testing and case-dependent quarantine.

The respondents were unanimous about the desirability of greater government investment in treatment capacity.

Among this unanimity, the panelists’ comments touched on a number of different policy issues. MIT’s Acemoglu said, “US federal response has been incoherent and counterproductive. Hard to understand lack of investment ahead of current situation.” Samuelson added, “A timely response could have [been] less vigorous and less expensive, but we must now intervene all the more to compensate for wasted time.”

David Autor of MIT noted, “The fiscal response is awesome, but the federal health response has been abysmal.” But Aaron Edlin warned, “Compare the spending in the stimulus package on these necessities vs. stimulus that spreads virus,” linking to his policy advice: “Don’t just flatten the curve: Raise the line.”

William Nordhaus of Yale was emphatic: “Given the potential length and depth of downturn, it is hard to imagine overinvesting in pandemic-related investment.” Similarly, Kenneth Judd commented, “Absolutely! Hard to imagine overspending on vaccine development, given likely spillovers to future work.”

He adds a link to his policy proposal to get cash to corporations quickly by the government buying newly issued preferred stock. Another innovative policy proposal on the IGM website is a COVID-19 vaccine price guarantee suggested by a team of researchers at Stanford.

Several panelists referred to US policy failures in response to the COVID-19 crisis. Scheinkman noted, “Though hard to measure current investment rates, government greatly underinvested when a serious epidemic became apparent in China.” Chicago Booth’s Richard Thaler mentioned, “Massive incompetence in delayed testing and supplies acquisition. Thankfully some governors are stepping up.”

Robert Hall of Stanford stated, “The failure of executive leadership in government, especially the White House, is tragic.” And Richard Schmalensee of MIT concluded, “Some state governments are flat out, others asleep; the federal government should do more now and should prepare for the NEXT pandemic.”

All comments made by the experts are in the full survey results.

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