The economy needs to reopen, but individuals need to comply
Lockdowns are ineffective in terms of economics. For policymakers, they spread out harms (but will likely not reduce total transmission) and reduce uncertainty. Personal compliance with simple measures (mask wearing, social distancing, limiting gathering sizes) are the ways to maintain economic activity and limit virus spread.
For the sake of small businesses in Kern County, California, and the United States, what is needed is: (i) robust fiscal stimulus, (ii) increased civic engagement through personal compliance of simple, low-cost measures (hand-washing, mask wearing, social distancing, limiting gather sizes); and (iii) a removal of the shutdown.
Unfortunately, without (ii), (iii) is likely to continue.
Why is fiscal stimulus needed? Even if we chose large-scale economic reopening, economic activity would not have been maintained during the COVID-19 pandemic.
Consider the model for the minimal mandate status quo: Sweden (though, at the time of this writing, Sweden is now implementing large-scale mandates).
Between the fourth quarter of 2019 and the third quarter of 2020, Swedish GDP is 3.4 percent lower, with personal consumption falling by 0.9 percent and restaurant spending falling by 2.4 percent.
Compare this to the United States: GDP has fallen by 3.5 percent, personal consumption has fallen by 3.3 percent, and restaurant expenditures have fallen by 5.5 percent (take out food sales increased by 6.8 percent; instore food sales decreased by 19.7 percent).
Though the third quarter data for California are unavailable (there is a longer time between national and state reporting of numbers, based on Trump Administration actions in the past), the second quarter numbers for California were nearly identical to the values for the U.S. as a whole.
We should expect similar changes in California for the third quarter as we found for the U.S.
What does this show? In countries with haphazard state-level responses due to a lack of federal guidance with strict mandates (the U.S.), economic outcomes are comparable to those that have largely avoided large scale mandates (Sweden).
Unfortunately, the dire position of small businesses is being felt worldwide.
But, not having to implement lockdown mandates would potentially eliminate by half the number of restaurants that are struggling.
Though not a perfect solution, it is a better solution.
But how can we accomplish this? Why was Sweden able to limit closings initially? Individual-level compliance with executive diktat.
We are seeing the consequences of trying to rely on individual level adherence, and its failures (a canonical economic externality), with the result that public policymakers resort to largescale government action: lockdowns. What would be the perfect solution? Face mask adherence, social distancing, and limits on gatherings would eliminate the need in California (and elsewhere around the country) to implement lockdowns.
Unfortunately, far too many take glee at civil disobedience, leading to a tyranny of the minority.
Through the failures of the federal executive and legislative branches, we are left with a witches brew of state-level policies.
The failure of any coherent federal policies, coupled with the failure of the Legislature to take the time to pass any meaningful additional stimulus (yes, it likely means higher future taxes, cuts to spending, and a halt to the continuous deficit spending since 2001) is a travesty.