Chapter 4: Macroeconomic Perspectives on the Corona Crisis

On January 30, 2020 WHO announced a Public Health Emergency of International Concern (PHEIC). On March 12, the virus had spread enough for WHO to declare it a Pandemic. At the time this is written, September 2020, some signs of recovery can be seen but the crisis is clearly not over.

This chapter is built on a speech I held at the 5^th EMIC 2020. I will focus on how the economy has responded to the pandemic and the policies introduced to contain the virus. I will also discuss what I believe is the right economic policy to deal with the current crisis. Being an economist, not an epidemiologist, I will largely take the measures taken to reduce contagion as given when discussing the economic policy options. I will, however, present some simple back-of-the-envelope calculations addressing the question of whether closing down our economies to save lives is worth its economic cost. In the end, I will also discuss recent developments where models are constructed that integrate economic and epidemiological knowledge in what can be called Epi-Econ Integrated Assessment Models. These models can provide a better understanding of the interaction between the economy and virus spreading. When such models are fully developed, they should also be able to inform policymakers and the public about the tradeoffs that we face between minimizing human health-related suffering and allowing the economy to produce the goods and services we value.