04-23-2020, 07:40 AM
I think the criticisms of the study are valid. Thankfully, we have not had a large number of pandemics in the modern era. I also think it's a bit odd that they set a threshold of 100,000 dead, when the population has changed over time.
It was an interesting analysis because as mentioned there is a difference between wars and pandemics. Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock. So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).
I do think the recovery will be sharp but partial at first, and then slow after that. For example, take all the people who were furloughed from Disney. The park will reopen at some point, and when it does most of them will be rehired. When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now. So we will partially bounce back from the current level of unemployment. Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt. After an initial partial bounceback, then there will be a long, slow slog. The question will be what will the unemployment level be a year from now? I don't expect it to be 25% and I don't expect it to be 4%.
BC
It was an interesting analysis because as mentioned there is a difference between wars and pandemics. Wars destroy the capital stock and kill a lot of people, while pandemics kill a lot of people but don't destroy the capital stock. So, it is reasonable to expect that a pandemic will erode the return on capital while potentially improving the bargaining power of the workers who remain (this is over the long term; acutely, as you note, we will have plenty of workers).
I do think the recovery will be sharp but partial at first, and then slow after that. For example, take all the people who were furloughed from Disney. The park will reopen at some point, and when it does most of them will be rehired. When airlines, hotels, and restaurants reopen, not all will go bankrupt and though their labor needs will be much lower than they were pre-pandemic, they will be higher than they are now. So we will partially bounce back from the current level of unemployment. Of course, some of the employment cuts will be permanent and many small businesses will go bankrupt. After an initial partial bounceback, then there will be a long, slow slog. The question will be what will the unemployment level be a year from now? I don't expect it to be 25% and I don't expect it to be 4%.
BC