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Reopen the economy — but carefully!

Summary:
I did a WSJ oped today on reopening the economy.  As usual it's gated so I can't post the whole thing for 30 days. Their lead editorial expresses many of the same sentimentsClosing down the economy is a panic response. It is not how we should be fighting the virus. We should be following the ...

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I did a WSJ oped today on reopening the economy.  As usual it's gated so I can't post the whole thing for 30 days. Their lead editorial expresses many of the same sentiments

Closing down the economy is a panic response. It is not how we should be fighting the virus. We should be following the Korea, Taiwan, Singapore models: Test everybody. Trace all their contacts. Isolate those who test positive or with symptoms. Isolate people who are most likely to get really sick and use scarce ventilators. Tamp down hotspots with local lockdowns. Allow business to open, but with stringent protocols adapted to that business and its employees. The options are not lockdown vs. back to nothing. The needed option is reopen with social distance.

The cat is out of the bag on that one, as our governments were caught flat-footed -- as governments almost always are -- and responded late. The snafus and regulatory roadblocks to get testing ramped up and even to produce or allow the importation of masks and gowns are scandalous. But here we are. The situation is out of control. Sometimes you do hit the panic button.

The point of the oped -- closing down the economy is the panic button. It is going to cost something like a trillion dollars a month. So during the next few weeks, our governments -- federal state and local -- need to be getting ahead of the curve, so they can implement the above appropriate public health response. NOW.
Businesses were doing a good job already: announcing sanitation, social distancing and other protocols to keep operations safe and reassure customers. Visit any airline’s website.
State and local governments need to work with businesses to figure out a satisfactory combination of personal distance, self-isolation, frequent testing, stricter rules for those who must interact with customers, cleaning protocols and so on. Each industry will likely be different. Even onerous rules, which can be eased as officials and businesses gain information and experience, are better than a blanket ban.
What are the rules for reopening an auto paint shop? The public parks?

Much of the lockdown is to keep hospitals from getting full. Most of the people hit by this disease are old. And retired people by and large are not counting on a monthly paycheck. That's what "retired" means. The obvious conclusions: Older and retired people may face lockdowns while healthy people can go to work. That and location and contact tracing are horrendous violations of civil liberties, yes.
Is this an awful violation of civil liberties? Doesn’t grandpa have a right to go play golf, or head down to the senior center? Not in an emergency. He does not have the right to expose himself to a virus and then claim a spot in an ICU bed that is costing society $20 million dollars a month. Prepare also to claw back civil liberties promptly when the pandemic is over, as we did after wars. 
There are a lot of empty hotel rooms, with cable TV, and lots of empty restaurants who would like more takeout business, and lots of unemployed uber and grub hub drivers. Want a stimulus? Anyone who tests positive gets a free two week stay at the hotel, meals included, at government expense.

A trillion dollars a month is an immense cost. The shadow value of those missing masks and ventilators is huge. And it's worth spending an immense amount of money to avoid a trillion dollars a month. No, we don't need the defense production act. Just pay 10 x cost -- pay $100 billion for masks ventilators and test kits, and remove the regulatory barriers, and we'll be flooded. Defense production is what a government does that wants battleships but can't afford to pay for them. We've got oodles of money. Profit is a fine motive.

It is even more important for our governments to get the real public health plan going NOW because we are in the calm before the storm. In two to three weeks the crush at the emergency room will be in full swing, and there will be no political breathing space for anything but more panic. This too can be an advantage. People will see the need for the extensive virus safety protocols they will have to follow at work. But that will be a terrible time to start thinking about how to save a tanking economy, and vanishing public trust.  People will not wait for the last case to pass, and the government to sound the all clear in July or August, emerging from their homes like the end of a Zombie movie to find a destroyed economy around them. The choice is sensible plan NOW or widespread disobedience and chaotic re emergence of the virus over the summer and fall.




John H. Cochrane
In real life I'm a Senior Fellow of the Hoover Institution at Stanford. I was formerly a professor at the University of Chicago Booth School of Business. I'm also an adjunct scholar of the Cato Institute. I'm not really grumpy by the way!

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