“You want to protect the income of furloughed pilots but make productive use of their skills,” he said. He wonders whether there is a viable model in the approach taken in China, where restaurant chains negotiated agreements with big online delivery companies to take on their idled workers temporarily.
At the same time, Mr. Greenstone worries that policymakers aren’t thinking through the current containment policy until the end, especially considering that the coronavirus will remain with us until we achieve so-called herd immunity, which in the absence of a vaccine will require 50 to 70 percent of the population’s becoming infected.
“We need to think about what would a nuanced social distancing policy look like on the way down,” Mr. Greenstone said. Even if we manage to stall the spread of Covid-19 over the summer, he said, we need to assess the benefits of relaxing social distancing, and “measure that against the likelihood of a second wave.”
Addressing the economic policy challenge is, in the end, inextricably linked to dealing with the shock to the world’s public health.
Indeed, economists hold part of the answer to a critical task in defeating the disease itself: developing, and broadly disseminating, a treatment and ultimately a vaccine. Governments and philanthropies need a way to coordinate in allocating funds to the myriad efforts by public and private labs around the world.
Patents, the standard incentive to spur innovation, will encourage private pharmaceutical companies to develop a vaccine or a treatment only if there is the prospect of a big return on investment. But that will require high prices, which will limit access. Entire countries may not be able to afford treatments, along with many of the 27 million uninsured in the United States.
Michael Kremer of Harvard, a recent Nobel laureate, has for years studied alternative incentives, from prizes to patent buyouts by governments. He has also explored arrangements in which governments or philanthropies put up money to guarantee a market for the new drug, at a given price, and can then distribute it broadly.