Lockdowns Are More Economically Devastating Than Voluntary Social Distancing
Once again, several European countries have extended and tightened lockdowns, despite the continent having been under recurrent strict confinement measures since the beginning of the pandemic. The population watched in disbelief how new restrictions were added to the already heavily curtailed access to restaurants, bars, cultural gatherings, sport events and international travel. The authorities are repeating the same narrative to justify the new measures—a spike in covid-19 cases threatens to overcrowd hospitals, while the media blames the fiasco on the spread of new virus strains or slow vaccination campaigns. In reality, this is yet more proof that lockdowns are not the solution to the covid-19 crisis. Ryan McMaken makes a strong case that restrictive lockdown measures further reduced economic activity beyond the effect of normal voluntary social distancing without producing any additional health benefits during the pandemic. This invites the obvious question why, after more than one year of pandemic, mandatory lockdowns are still perceived as a “silver bullet” when voluntary self-protection against the virus would work better. In principle, individuals using their own judgment are likely to adjust more efficiently their business and social behavior to the perceived health risk, thus reducing the burden of social distancing.
This question becomes almost rhetorical if we think about the inherent drive of governments and politicians to control the conduct of businesses and citizens. They could not miss the opportunity of the covid-19 crisis. And in order to support them, mainstream analysts spare no efforts to come up with unexpected theories and arguments. In chapter 2 of its latest World Economic Outlook the International Monetary Fund argues that “lockdowns and voluntary social distancing played a near comparable role in driving the economic recession” and warns “against lifting lockdowns prematurely in hope of jump-starting economic activity.” In other words, it was not mandatory lockdowns that drove many economies to the ground during the pandemic, but the fear of contracting the virus, which led many people to reduce social contact. Moreover, the IMF concludes that “lifting lockdowns is unlikely to rapidly bring economic activity back to potential if health risks remain” and “medium-term gains may offset the short-term costs of lockdowns, possibly even leading to positive overall effects on the economy.” So, what the IMF claims is that lockdowns bear little or no economic cost because in their absence the epidemic would have wreaked havoc through the economy anyway.
Before showing that the IMF’s analysis flies in the face of reality, one cannot help noting that their overall claim is counterintuitive. If the IMF’s models are correct and lockdowns and voluntary social distancing have played a similar role in reducing mobility and economic activity during the pandemic, why would the former be necessary at all? Even if lockdowns are allegedly not causing additional economic pain, they certainly have a psychological cost, which reduces people’s welfare. Moreover, there is a nonnegligible legal compliance cost both for the police and the taxpayer.
The IMF’s claim is based on a quantitative analysis of the impact of lockdowns and voluntary social distancing on mobility. According to it, applying a full lockdown that includes stay-at-home requirements, business and school closures, and travel restrictions reduces mobility significantly, by about 25 percent within a week. Afterwards, mobility would resume gradually as the “lockdown tightening shock dissipates.” But people are also likely to reduce exposure to one another on a voluntary basis when the number of cases increases. In this case, the IMF estimates that a doubling of daily cases reduces mobility by about 2 percent within two to three weeks, after which the effect starts to dissipate (graphs 1 and 2). The IMF further concludes that during the first three months of the pandemic, both lockdowns and voluntary social distancing had a large and roughly similar impact on mobility, with a smaller contribution from voluntary social distancing in low-income countries and a larger one in advanced economies.
Graphs 1 and 2
Source: International Monetary Fund, World Economic Outlook: A Long and Difficult Ascent (Washington, DC: International Monetary Fund, October 20
Article from Mises Wire