Why We Can’t Foresee the Pandemic’s Long-Term Effects - The New York Times

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Longer-term analyses of the coronavirus pandemic emphasize that there is a good chance that it will fade within a year or two, especially if a vaccine or effective treatment appears.

I hope that’s true. But even if it is, I’m worried that the economy may not return to normal within that time frame.

Big events like a pandemic have the potential to leave behind a trail of disruption. They can create social discord, reduce people’s willingness to spend and take risks, destroy business momentum and shake confidence in the value of investments.

But episodes as far-reaching as this one are scarce, widely spaced in time, and so different in circumstances that statisticians cannot easily compare them systematically. The best we can do is examine some case studies.

The so-called Spanish flu, the influenza epidemic that started in 1918, which ultimately cost 675,000 American lives and millions around the world, is a reasonable place to start. While we know a great deal about that era, we don’t know enough to shed much light on current circumstances.

There was a recession in the United States from August 1918 to March 1919, according to the National Bureau of Economic Research, but not a deep one. Searching the newspapers of the time, one finds surprisingly little concern about the possible ill effects of the influenza on the economy, perhaps because the more-dominant narrative concerned the impact of World War I, which ended on November 11, 1918.

Yet a recent study by Robert Barro of Harvard University and his associates suggests that the epidemic along with the decline in production associated with the war led to a protracted decline in G.D.P. growth in affected countries from 1918 through 1920. In short, that period provides little comfort.

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Perhaps more relevant to the current crisis is the Great Depression of 1929 to 1940, the biggest economic slowdown of modern history. From 1931 to 1940, the annual unemployment rate in the United States never fell below 12 percent. (In April this year, unemployment shot up to 14.7 percent.)

The conventional story is that the 1929 crash was the result of a stock market bubble in the 1920s. The Cyclically Adjusted Price Earnings Ratio, a stock valuation measure that I helped develop, reached 32.6 in 1929 (compared with 31.0 in January 2020). The Depression started in 1929 after a 23 percent crash in the Dow Jones industrial average over two days, Oct. 28 and 29. It created global social unrest around the world and the downturn only ended with World War II.

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In 1929 many people expected the stock market to bounce right back and that decline was short-lived, in one sense: The market rose almost half the way back to its 1929 peak by April 1930. But it fell sharply again, and the crash set in motion a train of powerful narratives that resemble some of the popular notions that are circulating today.

Much as President Trump dismissed the seriousness of the Covid-19 pandemic in its early days, President Herbert Hoover made optimistic forecasts that proved to be wrong.

Much as people fret these days about extreme polarization between Democrats and Republicans, so too were people of that era concerned about extreme political divisiveness. After losing the 1932 election to Franklin Delano Roosevelt, for example, President Hoover, by then a lame duck, called F.D.R.’s plans a “march to Moscow.”

Much as people today have experienced long lines and empty shelves at supermarkets, in the Great Depression people fretted about long lines and empty cash registers at banks.

The Coronavirus Outbreak

• Frequently Asked Questions and Advice

  Updated May 28, 2020

  • What’s the risk of catching coronavirus from a surface?

    Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.

  • What are the symptoms of coronavirus?

    Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.

  • How can I protect myself while flying?

    If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)

  • How many people have lost their jobs due to coronavirus in the U.S.?

    More than 40 million people — the equivalent of 1 in 4 U.S. workers — have filed for unemployment benefits since the pandemic took hold. One in five who were working in February reported losing a job or being furloughed in March or the beginning of April, data from a Federal Reserve survey released on May 14 showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.

  • Is ‘Covid toe’ a symptom of the disease?

    There is an uptick in people reporting symptoms of chilblains, which are painful red or purple lesions that typically appear in the winter on fingers or toes. The lesions are emerging as yet another symptom of infection with the new coronavirus. Chilblains are caused by inflammation in small blood vessels in reaction to cold or damp conditions, but they are usually common in the coldest winter months. Federal health officials do not include toe lesions in the list of coronavirus symptoms, but some dermatologists are pushing for a change, saying so-called Covid toe should be sufficient grounds for testing.

  • Can I go to the park?

    Yes, but make sure you keep six feet of distance between you and people who don’t live in your home. Even if you just hang out in a park, rather than go for a jog or a walk, getting some fresh air, and hopefully sunshine, is a good idea.

  • How do I take my temperature?

    Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.

  • Should I wear a mask?

    The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.

  • What should I do if I feel sick?

    If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.

  • How do I get tested?

    If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.

  • How can I help?

    Charity Navigator, which evaluates charities using a numbers-based system, has a running list of nonprofits working in communities affected by the outbreak. You can give blood through the American Red Cross, and World Central Kitchen has stepped in to distribute meals in major cities.

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There are other troubling parallels: Fear of long-term unemployment and a never-ending depression was rampant back then, leading people to restrain spending, thus prolonging the downturn. This may not happen now, but it is a danger.

Much as now, in the Great Depression people were very focused on maintaining a “fair wage” in the face of economic distress. But this led to nationwide resistance to nominal wage cuts for anyone, even when retail prices were falling rapidly.

This appears to have had the unintended result of inducing employers, who could not afford to keep everyone working at their former wages, to lay off many people. The economists Harold L. Cole of the University of Pennsylvania and Lee E. Ohanian, of U.C.L.A., have shown that this may explain some of the extreme duration of Great Depression unemployment.

Another development back then may have resonance today. Faced with widespread poverty, even people with money voluntarily embraced austerity, saying they no longer needed to “keep up with the Joneses.” Their reduction in consumption helps to explain the severity and duration of the Depression. If contemporary culture shifts in a similar way, it could limit the economy’s ability to bounce back.

A series of concerns like these — some with echoes of the Great Depression, some newly forming and associated directly with worries about disease and infection — will be on millions of people’s minds long after the economy reopens. Such social narratives will affect their thinking on how to spend and invest, whether to go out to eat or attend sporting events, on whom to vote for, and whether to travel: multitudes of decisions, big and small, that determine the course of the economy.

It is too early to tell which narratives will prevail and what path the economy will take after this pandemic subsides. Limited case studies will take us only so far. But we shouldn’t be surprised if we see post-pandemic economic weakness over the next decade.

Robert J. Shiller is Sterling Professor of Economics at Yale.

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