COVID-19 #01: This Year’s Coronavirus Epidemic (Required Part Is Highlighted)

Macroeconomists do watch this sort of thing: it is definitely macro, and it might be economic if it gets bad enough. I have done posts like this, or covered topics like this, in this class before.
Here’s how many of the details fit together this time:

• An epidemic started in China in December, and was reported to the World Health Organization on 19-12-31.
• It is not a big epidemic yet (several thousand confirmed ill) so far, but it is widespread. Here’s the current map.
• It is not particularly dangerous: death rates are about 3%. But they don’t really know how many people are ill or how many have died, so that number could be off. Keep in mind that plain old influenza, when it is bad enough to require hospitalization, has a death rate of about 10%. In both cases, most deaths are in the old, the young, or the previously ill. Neither appears to kill through the primary infection, but through opportunistic secondary infections.
• It is contagious, but not terribly so. The measure for this is pronounced R-nought, and it’s the typical number of new people infected by one sick person. Estimates are that this is in the 2 to 5 range, comparable to the common cold, and more contagious than influenza (1.2), but nowhere near as contagious as measles (15).
• Coronaviruses are fairly common, and not usually too horrible. The common cold is a coronavirus. But so are SARS and MERS. We don’t know what the new one is like just yet.
• Why China? In short, pigs, ducks, and people. Viruses tend to be fairly species-specific. A problem is if they can infect a species without making it sick, forming a reservoir of animals than can affect others without it being easy to spot the source (this is the problem with Ebola, although they’ve kind of narrowed that down to bats as the carriers). Pigs are a problem because they can be carriers of both avian and human viruses. Both get into the pigs, mix their genetic material a bit, and pop out as new viruses against which we have no immunity until we catch it and get sick. And the largest, densest, concentration of pigs, ducks, and humans is in central China.
• There is a strong suspicion that the current virus first infected humans at a “wet market”: one in which live animals are sold near meat for human consumption. They’re wet because ice is used, and waste often must be hosed away. Americans tend to take a dim view of this practice, but that’s mostly just prejudice: a restaurant like Red Lobster that carries live lobsters in tanks is a form of wet market too. It’s probably best to just note that these are more common in China.
• China has restricted travel for about 50 million people: essentially, a stay inside your home quarantine. This is largely because they don’t know what they’re dealing with, or how else to contain it. Again, keep in mind how Americans would be likely to behave if the government cut off all travel in, say, Illinois, Indiana, and Ohio. It wouldn’t go over well.
• A fear in China currently is that medical facilities inside that quarantine zone may not have enough supplies, In part, this is because these events are unfolding around the New Year’s holiday period in China: 10% of the population is engaged in long-distance travel to visit family and friends, and many businesses and vendors are closed or not making deliveries.
• There is general agreement that China’s response to this outbreak has been better than their response to SARS, but still not that great. Outside of China it is common to imagine that the central government in Beijing is all powerful, but the reality on the ground is often that it’s a distant overseer without much ability to manage local problems evenly or well.
• A fear is that this will turn out like SARS: not well. Even so, SARS only infected about 8,000 people with a 10% death rate. In the U.S., influenza alone kills roughly 100 times that many people each year. Having said that, initial projections were that SARS might kill 250 million people worldwide.
• Where did SARS go? No one knows. It probably mutated into something that isn’t harmful that we no longer notice. If you like science fiction, Michael Crichton’s first bestseller, The Andromeda Strain, was about an infection that did just that. (If you like movies, I prefer the 1971 version to the 2008 one).
• Beware of people who say this is like the 2011 movie Contagion, or the Steven King book The Stand. Could it be? Of course, anything is possible. Is it? Almost certainly not.
• Having said all that, do recall that the Spanish Flu epidemic of 1918-20 killed 3-5% of the population on the planet. And the latest research is that it too may have started in China. On the other hand, that is by far the deadliest flu outbreak in history, and has yet to be repeated.

Currently we just have travel restrictions. Trade is travel in goods rather than people, so it’s a short step to trade restrictions. These things have macroeconomic effects. And if one of these epidemics gets bad enough, we’re pretty sure there were severe macroeconomic consequences to the Spanish Flu and the Black Death.