As the COVID-19 pandemic caused unprecedented lockdowns, it was implicitly understood there would be a major impact on the economy. This weeks second-quarter advance estimate of GDP shows unprecedented results. In fact, it is the most severe contraction on record.
The somber report has many asking tough questions. First, what made the United States economy contract so much? Next, was the contraction avoidable? Finally, what can we learn from our past actions?
ISEG Research Fellow Finds Longer Lockdowns Correlate with Worse Economic Outcomes
August 1, 2020. Dr. Abigail Devereaux, Research Fellow at the Institute for the Study of Economic Growth (ISEG), published a policy paper in the American Institute for Economic Research (AIER). The paper, tiled “Longer Lockdowns Associated with Much Worse Economic Outcomes” is focused on exploring the effect of voluntary and involuntary reductions in consumption and production.
A significant voluntary reduction in consumption–people staying home, shifting to remote work, and taking their kids out of school—occurred before the cascade of shelter-in-place orders and restrictions on assembly and certain businesses. Will Luther has written on the voluntary reduction in consumption and production prior to the institution of lockdowns, and in states where there were no lockdowns. Additionally, many businesses and particularly services temporarily closed shop—ceased production—before the lockdown orders. But it’s obvious that if you restrict and ban certain businesses, they will suffer for it.
The full paper is available at AIER.