Health Policy$ense

How Can the U.S. Reopen While Limiting Harm to Americans? An Economics Professor Explains

Mark Pauly for the Inquirer

(reposted from the Philadelphia Inquirer)

Some states, mostly in the south and Midwest, have been gingerly moving toward reopening restaurants with sit-down dining. You would be separated from other tables (no more din) and your server will look creepy with a mask, but at least you will be able to get out of your home and have someone else cook and wait on you. There has of course been considerable controversy over whether relaxing government rules to permit this activity is safe, and many states, such as Pennsylvania, are not there yet statewide and will change by county if they do.


Mark V. Pauly, PhD is Bendheim Professor of  of Health Care Management at the Wharton School, and an LDI Senior Fellow.

However, what happens when businesses are allowed to reopen depends not just on government rules but also on how restaurant owners and potential patrons respond — the owner has to be willing to reopen and the diners have to be willing to come. On the latter score, in particular, we see large but not unexpected partisan differences. In a Washington Post-University of Maryland poll, 36% of Republicans say they would be comfortable eating out versus 10% of Democrats. An NBC-WSJ poll similarly finds 77% of Democrats opposed to reopening the economy but only 39% of Republicans. If people do what they tell pollsters they will do, a restaurant that chooses to reopen had better be in Republican territory and expect to attract GOP fans. Avocado toast will not be a big seller.

There are some serious messages here but, like everything else in the pandemic, they are hard to align. On the one hand, it is interesting to an economist that the market can exert strong discipline here — if consumers are afraid, neither business owners looking for a return to positive income nor politicians desperate for something feel-good will prevail. One note of dissonance is that worker views and fears are probably going to be ignored here, at least those of lower-income workers. (In a previous post I proposed that their employers pay workers for testing and more for a positive test result.) On the other hand, the most strident off-key message is that even the boldest, gun-carrying protester should rationally want others who might be contagious to stay home. It would compound the foolishness if you wanted everyone including nursing home staff on an outing to join you on Opening Day at the ballpark.

What is the solution to the problem when some people want to emerge from lockdown even though they might infect others? Obviously, a strictly enforced lockdown as in Wuhan would work but seems practically and politically infeasible in the U.S. Is there a way to permit some reopening for consumers really dissatisfied with confinement that still limits harm in an efficient way?

Here is an idea based on sound economic theory. Persons exiting home confinement potentially can harm others in the community if they carry the disease; in economics this is called a “negative externality.” So, one obvious step would be to permit people to emerge from sheltering at home only after a negative test for current coronavirus infection (and future testing at some reasonable interval). Now we know that available tests are not perfect, but waiting for a perfect test will not fly. A person leaving lockdown with a positive test is surely much more likely to infect others than those with negative tests — so it will be valuable to the rest of us to require potential carriers to continue to be quarantined if they are tested and found to be positive — as long as the proportion of true positives is reasonably high. Middle class non-essential consumers who want to enter the community should pay (or have their insurance pay) for their tests, to avoid further burdens on state and federal budgets.

Finally, and more speculatively, because there can be false negative tests so someone who mingles can still do harm, perhaps there should be a charge paid into a public compensation fund for those who test negative and then want to gather, at a risk and cost to others. The fewer the false negatives, the smaller the payment to re-enter for non-essential reasons.

At this point many people have begun talking about the need for the federal government to step in on testing (though they appear to be thinking of a federal government that would follow their desires, not the one we actually have). “Science” can tell us what the tradeoffs are (if only the models would settle down and stop moving the target) but it cannot make the decision on tradeoffs between (as they say) lives and livelihoods. Some more sensitive instrument than polls and the November election needs to be found to elicit what individual preferences are and how to make a decision for all when they disagree. Having middle class people pay for testing and the privilege of full social interaction could be one such method.