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Paul Romer on How to Survive the Chaos of the Coronavirus

One of the biggest questions every country faces is how to reopen businesses without causing a resurgence of coronavirus infections. Paul Romer, a Nobel Prize-winning economist who has served as the chief economist at the World Bank, has been putting forward plans to mitigate the economic fallout from the coronavirus and to allow for a return of normal economic activity in the U.S. His main proposal is to offer bimonthly tests to every person in the country, allowing more of us to go about our daily lives safely. But testing is still short of where it needs to be, and we may be facing an economic crisis akin to the Great Depression.

I recently spoke by phone with Romer, who is a professor at N.Y.U. During our conversation, which has been edited for length and clarity, we also discussed why Americans may be resistant to digital contact tracing, the need for states to administer tests, and what lessons economists have learned from the crisis.

Over a month ago, you co-wrote an Op-Ed for the New York Times that stated, “To protect our way of life, we need to shift within a couple of months to a targeted approach that limits the spread of the virus but still lets most people go back to work and resume their daily activities.” Are we anywhere close to that approach? And, if not, is our way of life at risk?

We’re not much closer, no. We’ve made very little progress, and I think we are running some risks here. There’s a difference between saying “Here’s something which is likely” and “Here’s something that’s possible, but it’s so bad we have to start preventing it and avoiding that risk right away.” And that’s what I’m trying to say about the possibility that a depression worse than the Great Depression could lead to political turmoil that could do long-lasting damage to the nation. So I think we have to proceed with urgency to try and solve both the health crisis and the economic crisis, and I’m not surprised that we haven’t made a lot of progress yet. But I will tell you that I’m actually encouraged by the decision by Congress to spend twenty-five billion dollars for testing in the phase-three bill. [This allocation is part of Phase 3.5.] That was not what most people were expecting a few weeks ago, and it happened.

What is your biggest fear about the economy right now?

There was some analysis that was done at the St. Louis Fed, going through job categories and just thinking about the employment consequences of physical lockdown and social distancing. Their conclusion was that we were going to be at an unemployment rate above thirty per cent, so that was the early-warning sign that we’re headed for an economic catastrophe that’s worse than the Great Depression.

Different people have talked about different ways to get through this. Your plan focusses on testing more than almost anything else, and more than some of the other plans. Everyone acknowledges that testing is important, but why is it so central to every idea that you’ve put forward?

The key to solving the economic crisis is to reduce the fear that someone will get sick if they go to work or go shop. So it’s really about building confidence. The thing about testing is that it’s easy to explain and it doesn’t frighten people the way digital contact tracing does. It’s not subject to technological and social, political uncertainty the way digital contact tracing is. It doesn’t require the organizational capacity that doing human contact tracing does. It’s really just a very simple, easy-to-explain idea—that to control the pandemic, we need to get a reasonable majority of the people who are infectious into a quarantine, and then we’re good. That’s really all it’s about. So I wanted to try and articulate a very simple approach for managing this crisis, because I think that’s central to restoring confidence.

For example, think about me going back to my dentist. It doesn’t really matter what the law says or the governor says I can do. I don’t want to go back to the dentist’s office in New York City until I know that he can show me a recent negative test, and he doesn’t want me to come into his office until I can show him that I’ve got a recent negative test. So I think it’s easy to explain this idea to people, and I think it’s also easy to convince people that this is something we could do for as long as it takes to manage this pandemic. Suppose it takes more than twenty-four months to get to a vaccine. If it takes more than twenty-four months, I could see going and getting tested before I go to the dentist and the dentist could get tested. Neither of us has a problem with that.

I really think that confidence is so central to investment decisions, to planning, to anticipating the future, that we need something so simple that nobody worries if it’s going to work, nobody worries if we’re going to abandon it because it’s too painful. Everybody just says, “O.K., yep, that’s the plan. We’re going to stick to it.” And then we go.

Some of the other plans that have come out have dealt more with things like contract tracing and digital surveillance. Is your critique of this approach that you yourself are worried about privacy issues, or is it more that you think that politics or that those plans will be concerning to citizens, which will then impair our ability to put them into effect and get the economic growth back where we want?

I’m not worried about the privacy issues, because it’s kind of, like, “Compared to what?” I think we’ve got enormous problems with surveillance right now. This doesn’t seem to me to make it much worse. But I was participating in digital discussions about response to the crisis, and the meeting would go like this: “We need more testing.” Financial people said, “Yep, we got it.” “We need masks and protective equipment.” “Yep, fine.” “And then we need to have the digital contact tracing.” And then, all of a sudden, the whole meeting is taken up with hand-wringing and anxiety and all kinds of fears. Every time somebody said “digital contact tracing,” it became a target. So I just don’t see how you get something done with the kind of speed we need right now when it raises so many concerns among so many people.

Testing has sped up but is still not where it needs to be. Shouldn’t the government be willing to do basically anything, including spending any amount of money, to amp up testing, because the money it spends will be a rounding error in the budget compared to the economy coming back?

I think I share your puzzlement about why that doesn’t just end the discussion. And some people ask, “Well, what do you as an economist have, what’s your business poking into an issue that should be the domain of the epidemiologists?” And my answer is, “Listen, you need the perspective of economics to say that, right now, this depression is costing us, in an order of magnitude, back-of-the-envelope, five hundred billion dollars per month. So, if we can come up with a solution that costs us like eight to ten billion a month, we’re way ahead. And so don’t worry about whether we can afford to do the testing compared to the alternative. We can obviously afford it. Let’s just see if we can agree to testing at that level, then provide the kind of safety we need, and that we can communicate to everybody how this works and why it will work.

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