* Tribune editorial board…
It’s clear that policy adjustments are not enough to breathe vigor back into the economy. “The virus is the boss,”says Austan Goolsbee, an economist at the University of Chicago’s Booth School of Business. A study he conducted with colleague Chad Syverson found that state and local shutdown orders were not the main reason for the plunge in consumer traffic to stores and other businesses.
“The vast majority of the decline was due to consumers choosing of their own volition to avoid commercial activity,” they write. And the more COVID-19 deaths occurred in a given county, the bigger the decline.
Governors and mayors obviously need to strive to tailor rules to local conditions and make them no tighter than necessary. But if they ease up too much, fueling the pandemic, they are likely to scare consumers into staying home and curbing their expenditures, at a high cost in sales and jobs.
The pandemic will be a serious obstacle to economic recovery until we get a vaccine, cheap mass testing or extensive contact tracing, if not all three. A lot of businesses that thrived before won’t survive, and businesses geared to the changed commercial landscape won’t sprout up immediately.
* From the study’s abstract…
The collapse of economic activity in 2020 from COVID-19 has been immense. An important question is how much of that collapse resulted from government-imposed restrictions on activity versus people voluntarily choosing to stay home to avoid infection. This paper examines the drivers of the economic slowdown using cellular phone records data on customer visits to more than 2.25 million individual businesses across 110 different industries. Comparing consumer behavior over the crisis within the same commuting zones but across state and county boundaries with different policy regimes suggests that legal shutdown orders account for only a modest share of the massive changes to consumer behavior (and that tracking county-level policy conditions is significantly more accurate than using state-level policies alone). While overall consumer traffic fell by 60 percentage points, legal restrictions explain only 7 percentage points of this. Individual choices were far more important and seem tied to fears of infection. Traffic started dropping before the legal orders were in place; was highly influenced by the number of COVID deaths reported in the county; and showed a clear shift by consumers away from busier, more crowded stores toward smaller, less busy stores in the same industry. States that repealed their shutdown orders saw symmetric, modest recoveries in activity, further supporting the small estimated effect of policy. Although the shutdown orders had little aggregate impact, they did have a significant effect in reallocating consumer activity away from “nonessential” to “essential” businesses and from restaurants and bars toward groceries and other food sellers.
The full paper is here.