Question

Why are some commentators, economists and politicians talking about “freezing the economy” (meaning trying to keep all businesses in the same condition they were before the pandemic in order to restart from there as soon as it is possible)? What are some aspects that the macroeconomic models we saw fail to consider?

Answer 1

In social media a vast discussion related to the pandemic Covid-19 ,social distancing & get to back work,The Fox News commentators comment on the topic; as what are the economic rules of this upside-down world,where opening the economy too soon produces mass death, but shutting it down for too long produces mass suffering. Economists were observed that ; Emil Verner a Finance Professor at MIT said, we were expecting the areas with more social distancing would have a worse economy but less mortality, he also said an early & aggressive interventions both saved lives & triggered a faster rebound in several measures, such as job growth & banking assests. Northwestern Economist Martin Eichenbaum said; ''In a normal recession, you want to boost demand but, now we don't' really want to boost demand in the very short run at all''.

In the Pandemic, Govt have to freeze the economy and order people to stay at home, because they cant ask people to internalize health risks on an individual basis any more than we can expect polluting factories to self regulate. Denmark & other northern Europian countries are talking a different approach, their govt are directly paying businesses to maintain their payrolls to avoid the sort mass layoffs & furloughs that are already happening across the US, When the economy bounce back,those workers don't have to waste time applying for jobs, or either, they're putting their entire economy in the freezer for three months, one sectors problem quickly become other sectors problem, if US's Small businesses fail to start than, the damage will spread throughout the economy.

A three or four month freeze is one thing, but a full year of isolation & economic inactivity is untenable. The virus delays our ability to treat individuals & release from isolation, the virus is anywhere means that we have to shut down economic activity everywhere, There is no such thing as a normal economy until we contain the virus. But if we can't contain the virus quickly, we might not have anything normal to return to.