Maximize Utility Subject to R ≤ 1: A Simple Price-Theory Approach to Covid-19 Lockdown and Reopening Policy

NBER Working Paper No. w28093. Latest Draft: November 2020. [PDF]

Abstract

This note suggests that we view R < 1 as an economic constraint, allowing social welfare in the traditional sense (economic activity, societal well-being) to be the policy objective. This formulation highlights two key questions at the intersection of health and economics research in response to the Covid-19 crisis. First, what activities maximize social welfare subject to the constraint that disease-transmission is contained, i.e., R < 1. Second, what are ways to “expand the frontier” of how much social welfare we can achieve while keeping disease-transmission contained. For example, could widespread use of masks and gloves, society-wide campaigns to “wash your hands,” “stay home if sick,” and “don’t touch your face,” and aggressive testing, together allow us to meaningfully increase the level of economic activity and societal well-being that is possible while keeping R < 1? [av_heading heading='Earlier Version' tag='h3' icon_padding='10' ][/av_heading]

April 2020 draft: “R<1 as an Economic Constraint: Can we 'Expand the Frontier' in the Fight Against Covid-19?"

University of Chicago, Becker Friedman Institute for Economics Working Paper..
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Press Coverage

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Financial Post, William Watson, Dec 01, 2020 [PDF]

Video

R<1 as an Economic Constraint (May 2020)

Stigler Center Conference on Covid-19, May 7, 2020.

R<1 as an Economic Constraint (April 2020)

IGM Conference on the Covid-19 Crisis, April 9, 2020.