(Bloomberg Businessweek) -- David Rocke, a mathematician at the University of California at Davis, has been watching President Trump’s pandemic performance with a scholar’s interest. The president’s touting of (and now maybe even using) the rheumatism drug hydroxychloroquine, his musing about injecting disinfectants, and his egging on of armed anti-shutdown protesters all look to Rocke like a species of what game theory calls “gambling for resurrection.” The concept is that if you’re behind in a game—say, a presidential campaign—big, bold moves can make sense, even if there’s only a small chance they will pay off. If someone does stumble on a miracle cure for Covid-19, or the national economy somehow gets going by Election Day, then both Trump and the American people win. If the gambles fail, he’s no worse off because he was probably going to lose the election anyway. As for the American people, they could wind up much worse off from his experiments. But if the president has a bad Election Day, that won’t be his problem anymore.
From the perspective of game theory, Trump’s wager is highly rational, says Rocke, who handled the math parts of a 1995 book on gambling for resurrection called Optimal Imperfection? Domestic Uncertainty and Institutions in International Relations, which he wrote with the late political scientist George Downs. On the other hand, Rocke allows that the president may just be winging it. With Trump, he says, “it’s very difficult to tell how much is craft and how much is idiocy.”
The U.S. has gotten into a bad place from which there are no good exits. It desperately needs to reopen the economy and yet is vulnerable to a resurgence of disease if it does so without careful preparation. The economy lost 20.5 million jobs in April, and the unemployment rate rose to 14.7%. At the same time, as of May 20 there have been more than 1.5 million cases of Covid-19 in the U.S. and almost 92,000 deaths, vs. 58,000 in the Vietnam War.
With the election approaching, it’s reasonable to assume that Trump will double down on his gamble to get the economy to bounce back from what Bloomberg Economics calls the sharpest decline since World War II. But what about everybody else? What’s the right strategy—for companies, Congress, state and local governments, and families—as the U.S. begins to reopen with the virus still on the loose? Consider this a realist’s guide to outlasting the pandemic.
There’s actually a fair chance that Trump’s bet will pay off. Let’s say the number of new cases continues to fall nationally, as it has in most of the world, because most people continue to take precautions. Deaths remain elevated in nursing homes, prisons, and crowded multigenerational housing, but the public regards that as an inevitable consequence of the pandemic and doesn’t blame Trump. Democrats come to be seen as silly hand-wringers or, worse, obstructionists who tried to kill growth for political ends. Trump suddenly has a good shot at winning a second term.
Two points about that scenario. One, allowing more vulnerable people to die is a choice, not an inevitability. Two, there’s a risk that things will turn out much worse, with a second or third national wave of infections that kills tens of thousands or more.
The Trumpian framing device—lives vs. livelihoods—is a false choice. “Will some people be affected? Yes. Will some people be affected badly? Yes,” Trump told reporters during a factory visit on May 5. “But we have to get our country open, and we have to get it open soon.” In reality, reopening too soon is likely to cost both lives and livelihoods. The economy won’t regain full strength if people remain afraid to leave home or if fresh outbreaks force renewed closures. Other countries from Iceland to South Korea to New Zealand have shown that stopping the virus cold first is the most effective way to save the economy. Even then victory is not complete. China has imposed a new lockdown on more than 100 million people in its northeast amid fears that a flare-up there may have been caused by a harder-to-detect version.
While Trump aspires to refill stadiums with fans, the hard reality is that, until there’s a vaccine, life will have to be different, and worse. Surviving the pandemic will be enormously expensive, not only in dollar terms but in the changes people need to make, from mask-wearing to isolation of the elderly to bans on large gatherings. Months after the outbreak began, the U.S. remains short of reagents, swabs, and other materials needed for widespread testing and lacks the infrastructure to trace the contacts of people who test positive—critical components of any reopening plan.
Trump recently promised a vaccine by yearend. But as a reality check, there are still no approved vaccines to prevent Covid-19’s older cousins, 2012’s MERS and 2003’s SARS. “We have to find ways to live with the virus for now, and this is the new normal,” Takeshi Kasai, the World Health Organization’s regional director for the Western Pacific, said in a briefing on May 14. “As long as the virus is circulating in this interconnected world, and until we have a safe and effective vaccine, everybody remains at risk.”
The International Monetary Fund estimates that shutdowns will destroy $9 trillion in world economic output in 2020 and 2021. If that’s true, then the world saves $375 billion for every month by which it manages to shorten them. That huge sum can be interpreted two ways—as a reason to reopen right away, with safety as a secondary concern, or, better, as a justification for spending crazy sums to make the reopening safe. Opening only to shut down again just extends the pain and cost. But government spending that accelerates development of a vaccine or effective antiviral treatment, allowing the economy to open safely even a month or two earlier, will pay for itself many times over. Subsidize the construction of multiple factories for vaccines that are still undergoing testing just in case they pan out, even though most probably won’t? Sure!
Covid-19 has changed everything. Things that made sense before the pandemic don’t anymore, and things that were absurd before the pandemic are reasonable and realistic now. Spending gargantuan sums of taxpayer money is not wasteful at all. To scrimp is penny-wise, pound-foolish.
The same logic argues for going big on aid to families and businesses that have been harmed by the virus. Some of the money will inevitably be cadged by unworthy parties, providing fodder for investigative journalists and congressional committees. But in a crisis the perfect can be the enemy of the good. There’s even a public-health angle: People who are managing OK in a lockdown because of help from the government won’t be so desperate to reopen economies. That will save lives.
It’s hard to imagine that running up huge government deficits could ever be a sound strategy. But then, the greatest policy failure of the pandemic has been a failure of imagination: an inability to grasp the magnitude of this disaster and the measures required to combat it. Trump was far from the only myopic leader in the early going. British Prime Minister Boris Johnson briefly gambled on letting the virus spread to achieve herd immunity before coming down with Covid-19 himself. Even now the U.K., Italy, and France have more fatalities per capita than the U.S. does. New York City’s terrible outbreak is partly the fault of Mayor Bill de Blasio and Governor Andrew Cuomo, who have feuded for years and reacted tardily to the virus. Cuomo pushed de Blasio to close city schools. But when de Blasio spoke of a shelter-in-place order for the entire city, Cuomo initially opposed the idea, saying on March 17 that “no city in the state can quarantine itself without state approval.”
The imagination that was absent at the start of the crisis is more important now that the U.S. is attempting to emerge from it. To defeat the virus, think like the virus. Not literally, of course, since viruses don’t have brains or intent. We just need to be aware that the best-laid plans for reopening are worth nothing if they don’t factor in how the virus will respond to them, probing for weaknesses in society’s defenses and flaring up in inconvenient places. A single infected person entering an unexposed population “is like dropping a blob of ink into clean water,” Kim Gang-lip, South Korea’s vice minister of health, warned on May 8 after an outbreak at nightclubs.
By now we know what works. The pandemic-fighting strategy that was pioneered by China and applied successfully elsewhere is to get the rate of new infections low enough that you can stamp out fresh flare-ups through testing and tracing. If there are too many active infections, though, testers and tracers won’t be able to keep up. They’d be fighting a brushfire with a water pistol.
That’s why in Wisconsin, where cases have been increasing, Governor Tony Evers wanted to extend a stay-at-home order. But the state Supreme Court overruled him on May 13, and residents flocked to bars and restaurants. In Texas, armed militia members have guarded some establishments that opened illegally to keep police from shutting them down.
With Trump presiding as divider-in-chief, Americans are fighting each other instead of the virus. The risk, of course, is more waves of infections. In the Spanish flu pandemic of 1918-19, the second wave was bigger than the first.
One pragmatic way out of this political logjam could be truly massive testing—enough to tamp down even a high infection rate. It could be coupled with contact tracing, which can be done using cellphone data as well as trained human tracers, some of whom could be people who lost jobs because of the pandemic. (Mike Bloomberg, the majority owner of Bloomberg LP, is financing such an effort by New York state’s Department of Health.)
But tracing is costly, and the U.S. isn’t prepared to do it on a massive scale. Fortunately, using nasal swabs to find and isolate asymptomatic carriers sharply reduces the spread of the virus even if it’s not accompanied by tracing of the carriers’ contacts, according to simulations by New York University economist Paul Romer. “To control this pandemic, and any future pandemic, the U.S. should make the investment necessary to test people every two weeks, which would mean 25 million tests per day on an ongoing basis,” he writes in a reopening “roadmap.” (The U.S. has done just over 12 million tests in total so far, according to the Covid Tracking Project, a volunteer project launched by the Atlantic magazine.)
To speed up a vaccine, Harvard economist Michael Kremer and others advocate government co-funding of research, development, and manufacturing. That’s because vaccine makers won’t invest as much as society needs them to if they bear all the risk. To make sure the companies have skin in the game, some of their compensation from governments would come at the back end in the form of guaranteed fixed-price purchases of vaccines that meet standards of safety and effectiveness.
Another way to accelerate things is a so-called challenge trial of a vaccine, in which experimenters deliberately infect volunteers instead of waiting for subjects to get exposed by chance. A group called 1 Day Sooner has lined up thousands of young, healthy altruists who are willing to risk getting sick. And survivors of Covid-19, with antibodies to prove it, are stepping up to work amid contagion in the belief that they have at least some immunity.
For business, the primary concern is keeping employees and customers safe while restarting the engines of commerce. One concept is the “quaranteam”—a small group of people who mingle with each other but remain socially distant from other quaranteams. A more straightforward idea is to just keep working from home, where that’s possible. Videoconferencing is here to stay. Jimmy Etheredge, chief executive officer of North America for Accenture Plc, says his consulting organization’s productivity metrics were higher in March and April than in January and February. Some jobs that require a physical presence can be restructured to minimize contact: It’s already common in parts of the country for cashiers to be separated from customers by plastic shields.
As punishing as a comprehensive shutdown is, it has the advantage of clarity. Reopening is baffling: Who, how much, and when are all in question and in flux. Trump has left the tough decisions to the states, despite tweeting in April that reopening is “the decision of the President” and later bashing Democratic governors who followed his own administration’s guidelines in delaying reopening. Police departments are being put in a difficult position, having to enforce rules that are constantly changing as the pandemic itself changes. “Police officers are not social workers. They’re not homeless outreach coordinators. They’re not medical professionals,” says Monifa Bandele, senior vice president of MomsRising.org, which has protested heavy-handed enforcement of stay-at-home orders in minority neighborhoods.
As in the case of vaccine development, it’s worth spending a lot of time and money to enable safe reopening because the cost of staying shut is so enormous. Thinned-out seating in offices and public places and on planes and trains is better than no seating at all. Likewise, why not carefully reopen schools, but tell children who live with their grandparents or have other complications that they’ll have to continue learning online? Better some students in the classroom than none. The end of social distancing increases the peril to residents of nursing homes, because it means their staffs will be more exposed to the virus while at home. So why not pay workers extra to live on the premises? The government could help cover the cost.
Speaking of cost, the war against Covid-19 is not going to get any cheaper. Trump and the Republicans in Congress have supported heavy spending to fight the virus and the economic downturn, but they seem to be retreating before the battle is over. Senate Majority Leader Mitch McConnell opposes a $3 trillion stimulus bill the House of Representatives passed on May 15. It includes more than $1 trillion for state and local governments, which are bearing much of the expense of fighting the pandemic, along with a new round of $1,200 checks for families. One reason the GOP opposes the bill is that it’s stuffed with partisan measures, such as reductions in immigration enforcement. Another is that senators want to pause to gauge the effect of previous stimulus. “It’s always interesting to see how much patience some people have with the pain and suffering of other people,” Speaker Nancy Pelosi said on the House floor before the vote.
Deficit spending can be problematic, but in the depths of a recession it’s necessary. Even Federal Reserve Chairman Jerome Powell, who’s paid to worry about inflation, said in a May 13 speech that “additional fiscal support could be costly but worth it, if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
Gambling on a resurrection is one of the pathologies that can emerge from what finance types call the principal/agent problem: the potential for misalignment of interests between the principal (in this case, the American people) and the agent who works for them (in this case, Trump). In business, the fix for a principal/agent problem is for shareholders to have the information and power to control the CEO.
With Covid-19, a further complication is that the American people aren’t speaking with one voice. The pandemic and the struggle over reopening are dividing Americans along familiar lines: red states vs. blue, country vs. city, Sean Hannity vs. Anderson Cooper. That’s unfortunate because fighting the coronavirus requires a united front. It thrives in an unprotected nursing home, on a beach crowded with blithe young people, in a boarding house jammed with low-paid migrant workers. From there it spreads. As with injustice, an outbreak anywhere is an outbreak everywhere.
©2020 Bloomberg L.P.
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