Social Distancing Policies Found to Be Economically Justified

The aggressive social distancing policies that are meant to slow the spread of COVID-19 are hammering the U.S. economy, but an analysis by University of Wyoming researchers suggests that these measures are economically justified. The research was published in Journal of Benefit Cost Analysis.

“Our benefit-cost analysis shows that the extensive social distancing measures being adopted in the U.S. likely do not constitute an overreaction,” says first author Linda Thunstrom. “Social distancing saves lives but comes at large costs to society due to reduced economic activity. Still, based on our benchmark assumptions, the economic benefits of lives saved substantially outweigh the value of the projected losses to the U.S. economy.”

In fact, assuming that social distancing measures are adopted widely enough to substantially reduce contacts among individuals, the benefits of those policies will outweigh the economic costs by $5.2 trillion, the economists found.

A recent forecast by Goldman Sachs predicts that these social distancing policies will cause the nation’s gross domestic product to shrink by more than 6% this year, even with substantial government stimulus efforts. Already, the country is seeing declines in economic activity and dramatic increases in unemployment, with a particular impact on vulnerable low-income workers.

The UW economists’ analysis takes into account the potential impact of COVID-19 on the U.S. health care system. Based on previous studies by other researchers, they estimate that the current social distancing measures across the country will reduce the average contact rate among individuals by 38%, which reduces the peak of the infection curve by more than half. This would help to avoid overwhelming the health care system and to keep the mortality rate down.

The economists note that their analysis doesn’t examine the impacts of social distancing policies on specific segments of the U.S. population.

“It stands to reason that the most vulnerable groups in society will be the hardest hit. For example, the service industry will be disproportionately affected by these policies, which will lead to mass layoffs of low-income workers,” the researchers wrote. “It also is likely that the most economically disadvantaged groups will suffer the most severe adverse health consequences from COVID-19.”