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HOME Knowledge Insight Publications Capital Markets & IT - lakyara Capital Markets & IT -lakyara List Capital Markets & IT - lakyara May 2020 Putting the economic shock of the coronavirus in context (3) Economic value of “social distancing”

Putting the economic shock of the coronavirus in context
(3) Economic value of “social distancing”

May. 19, 2020

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Executive Summary

  • Minimizing physical contact between people is essential to combatting the spread of COVID-19, as we have yet to develop immunity to the virus. This has led many countries to enact “social distancing” policies that include stay-at-home orders, business shutdowns, and lockdowns of urban areas.
  • Choosing not to implement social distancing policies removes the constraint on economic activity but also increases the risk that infections will surge and overwhelm the healthcare system. While social distancing slows economic activity and thereby entails huge costs, it prevents the virus from spreading and can therefore help to prevent a collapse of the medical system.
  • Social losses due to the coronavirus can be roughly divided into two categories: the decline in GDP due to reduced economic activity and the loss of human life.
  • In this report, I introduce two papers undertaking a cost-benefit analysis of social distancing measures in the United States. These papers suggest that social losses due to social distancing policies are less than the losses that would be incurred if no such policies had been implemented. The papers estimate the economic value of social losses avoided via these policies (i.e., the net benefits) at around USD5-8 trillion.
  • In Japan as well, the government declared a state of emergency for seven prefectures on April 71) and requested that people in the affected areas stay home and that businesses shut down. These social distancing policies can be expected to minimize social losses by reducing the number of infections. However, the government needs to enhance their effectiveness by providing early and adequate economic assistance to businesses and households.

About the Author

  • Ryoji Kashiwagi

    Senior Researcher

    Financial Market & Innovation Research Department

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