For Prof. Harald Uhlig from the University of Chicago, the implementation of a national task force of at least 50 experts from various disciplines is essential in order to face the challenges of the corona crisis. In an IMFS Policy webinar on April 17th, he explained what economics can contribute.
Uhlig warned that the current situation could even deteriorate. In view of the economic slump, a possible threat for the banking system, a threatening overload of the health system and finally the imminent destruction of society, the economic perspective could be useful in order to solve difficult allocation and distribution problems. “The competence of economics lies within data analysis and handling dynamic models,” Uhlig said. In the webinar, he gave on overview about recent research papers on the coronavirus crisis.
The webinar is available as video.
For example, researchers Jesús Fernandez-Villaverde and Chad Jones estimated the mortality figures in Italy at given times during the lockdown on the basis of a model often used by epidemiologists. Uhlig himself analyzed the change in behavior in an opening after a lockdown. Together with Dirk Krueger from the University of Pennsylvania and Taojun Xie from the National University of Singapore he found that there is a change in behavior of people who are afraid of getting infected. “They prefer pizza to go, enjoying it at home, or watching a soccer game on TV rather than going to the stadium”. According to Uhlig, this shift to "low-infection goods" could help to prevent an economic slump and could lead to sectoral shifts on the labor market: “The waiter of the restaurant will deliver your pizza then”.
Other scholars investigated how much politics should interfere in the corona crisis. In their calculations, economists Fernando Alvarez, David Argente, and Francesco Lippi compared the corona death toll with the extent of the economic downturn. Michael Greenstone and Visham Nigam of the University of Chicago calculated that the value of life in the United States by social distancing is worth 8.000 billion dollars. Andy Glover, Jonathan Heathcote, Dirk Krueger, and Victor Rios-Rull concentrated people's preferences . They examined the question how much lockdown people will tolerate depending on their age and job. On the other hand, Veronica Guerrieri, Guido Lorenzoni, Ludwig Straub, and Ivan Werning looked at the Keynesian supply shock.
Uhlig concluded with an urgent appeal to the federal government to make use of this diverse economic expertise pooling it together with insights from hospitals, companies and further research areas in a task force, which should be split up in respective working groups.
The slides of the webinar (PDF)