Cutting GDP to Counter the Coronavirus Pandemic

A closed shopping mall and its empty parking lot during the coronavirus outbreak in Costa Mesa, Calif., March 18, 2020. (Mike Blake/Reuters)
Across the West, that's the implicit strategy.

NRPLUS MEMBER ARTICLE O ne of the main policy responses to the coronavirus pandemic has been to curb economic activity as a way of reducing the contagion’s spread. I would characterize this policy as a decision to reduce U.S. and world GDP in the short run by roughly 20 percent. In essence, this is a voluntarily implemented negative supply shock, akin to a sudden loss in productivity. The world’s annual GDP today is around $100 trillion, so a 20 percent cut sustained for a year would be about $20 trillion, roughly the annual GDP of the United States. For the moment, I assume that

Robert Barro is the Paul M. Warburg Professor of Economics at Harvard University and a visiting scholar at the American Enterprise Institute.

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