Responding to COVID-19: A Note

We consider several epidemiological simulations of the COVID-19 pandemic using the textbook SIR model and discuss the basic implications of these results for crafting an adequate response to the ensuing economic crisis. Our simulations are meant to be illustrative of the findings reported in the epidemiological literature using more sophisticated models (e.g., Ferguson et al. (2020)). The key observation we stress is that moderating the epidemiological response of social distancing according to the models may come at a steep price of extending the duration of the pandemic and hence the time these measures need to stay in place to be effective. We caution against ignoring this tradeoff as well as the fact that the timeline of the pandemic remains uncertain at this point. Consistent with the prudent advice of hoping for the best but preparing for the worst, we argue that a comprehensive economic response should address the question of how to safely “hibernate” the national economy for a flexible time period. We provide a discussion of basic policy guidelines and highlight the key policy challenges.