On March 22, President TrumpDonald TrumpGraham says he hopes that Trump runs again Trump says Stacey Abrams 'might be better than existing governor' Kemp Executive privilege fight poses hurdles for Trump MORE famously tweeted that “we cannot let the cure be worse than the problem itself.” While many rushed to critique Trump’s tweet based on the perception that he was trivializing the severity of the coronavirus pandemic, he was simply saying that we should look at net benefits: Weigh the costs and the benefits associated with policy prescriptions.
Now, over two months into the national quarantine, we are at a fundamental fork in the road. Do we continue with the quarantine, as some experts have suggested, or do we begin to reopen the economy with caution and testing, as other experts have suggested?
Let’s be clear about the costs associated with continued containment: Unemployment is going to continue growing and these workers and their families are going to suffer the consequences. For example, survey evidence from Gallup has shown that those searching for work for half a year or more are three-times as likely to suffer from depression as those with jobs.
Even beyond survey evidence, economists have long pointed towards the adverse effects of job loss on mental and physical well-being. For example, professors Daniel Sullivan and Till von Wachter show that older male workers experience a 50-100 percent increase in the mortality hazard in the years immediately following job loss. Although the risk declines over time, their estimates imply that displaced middle-age workers could experience a 1 to 1.5-year decline in life expectancy.
It’s not just the heightened risk of suicide. There is also widespread evidence that job loss permanently alters workers’ economic trajectory. Professor Christopher Ruhm shows that workers displaced for one week may earn 10-13 percent less than their counterparts even years following job loss.
Moreover, psychologists and behavioral scientists show that financial anxiety more generally has a causal effect on mental well-being and worker productivity. In a study of short-haul truck drivers, professors Jirs Meuris and Carrie Leana show that those with greater financial anxiety are more likely to incur a preventable accident because of the effect of anxiety on cognitive capacity. And in an analysis of 324 published studies, professors Karsten Paul and Klaus Moser find that those who are laid off are 18 percent more likely to experience psychological problems than their working counterparts.
What about workers who still have a job but are isolated in their apartments or houses? Recent evidence from professor Daniel Hamermesh shows that satisfaction decreases as individuals allocate more time alone, particularly among singles. Moreover, professors Andreas Kuhn, Rafael Lalive and Josef Zweimuller show that displaced workers, especially men, are more likely to purchase drugs (e.g., anti-depressants) and experience hospitalization for mental health problems.
Let’s also not forget the most vulnerable, ranging from the homeless to those in nursing homes. While the homeless have long felt abandoned and isolated, they are suffering more than usual during the pandemic. More people have become homeless over the past two months, and shelters have been extended beyond their normal capacity. Those living in institutional arrangements, like nursing homes, are particularly vulnerable to deteriorating mental health, particularly in their older age without the opportunity to interact with friends and families as visitors.
While social distancing may be playing an important role in reducing the spread of the virus and its corresponding impact on mortality, there are also significant costs associated with increased job loss on mental health that extend well beyond measures of gross domestic product, which is also expected to decline by 10-15 percent if we do not begin to open up. In a newly-released paper, professors Dirk Krueger, Harald Uhlig, and Taojun Xie show that people do a fairly good job of scaling back activity and reallocating across consumption goods on their own. In other words, if we reopen, people will probably make reasonable decisions on their own, much like what we see in Sweden’s response, for example.
We shouldn’t get comfortable in crisis. Our country has so much life and creativity inside of it. Public policy is ultimately about evaluating costs and benefits — not just the costs and not just the benefits. That doesn’t mean we should begin reopening all at once, but it does mean that economic revival is around the corner, and we should think about how to accelerate it.
Christos A. Makridis serves as an assistant research professor at Arizona State University, a digital fellow at the MIT Sloan Initiative on the Digital Economy, a non-resident fellow at the Harvard Kennedy School of Government Cyber Security Initiative, a non-resident fellow at the Baylor University Institute for Studies of Religion and a senior adviser to Gallup.