Image. They were going to call it SARS-COV-2, but they thought that might make us worry too much…

COVID vs the Economy vs the 1970s

5 min readOct 27, 2020


You can save more lives without any economic hit, just by changing the timing of restrictions and lockdowns.

THERE is a surprising connection between COVID and the economy — and it’s not what you think…

In the 1960s, economists thought they had found a trade-off between jobs and inflation. By letting inflation run higher, you could create more jobs; if you pushed inflation down, there would be fewer jobs.

‘Aha!’ they said, ‘inflation is bad, but unemployment is much worse. Let’s turn up inflation and create more jobs.’

What happened? Well…

The 1970s was a pretty dismal period, and not just because of polyester and disco.

It turned out the economists were quite wrong. Keeping more people in jobs didn’t just push inflation up; it made inflation go up faster and faster and faster.


It’s as if you pressed down a little on the gas pedal and, rather than just speeding up to a comfortable 50 miles an hour, your car sped up to 70 and then 90 and then 110 and showed absolutely no sign of stopping. When you panicked and eased back up, it would stay at 110.

It turns out your gas pedal doesn’t control your speed; it controls whether you’re speeding up or slowing down. Driving in this imaginary world would be very different; there would be one magic pedal position which would keep you at a level speed, and you’d be trying to keep the pedal at that position whether you wanted to go at a steady 20 or a steady 70.

That’s actually how the economy is handled nowadays. There’s one magic unemployment rate (gas pedal position) that keeps inflation (car speed) steady, and central banks (drivers) try to keep the unemployment rate at that position all the time. If they tried to keep unemployment low all the time, they’d be back to runaway inflation (your car going faster and faster):

Breaking news: runaway inflation is not fun. Credit.

Now, what does any of this have to do with COVID-19? Well, you often hear that lockdowns trade lives against livelihoods, health against the economy. How does that work? Well, the story goes, a lockdown clearly means an economic hit, but it also lowers the reproduction number R, helping us control this %#&@* virus. Or, if the economic hit is too painful, we keep R a little high, saving the economy.

Here’s the problem with that. R doesn’t tell us how bad the virus is. It tells us whether it’s getting better or worse. An R of 1.2 isn’t like a car that’s speeding; it’s like a car that’s getting faster and faster and faster. We can’t keep the economy open all the time in return for a higher death rate; we can only do it in return for a higher and higher and higher death rate. Like the 1970s economists, we’re chasing a trade-off that’s not actually there.

If you’ve read this far, you might think I’m arguing that we need to damage the economy to save lives. I’m not. I’m really not! I’m about to show you that the maths shows we can get something for nothing here.

I’ll need a toy mathematical model to show you how this works. To keep things easy to understand, let’s assume that we have two kind of weeks:

  • Lockdown weeks, where the economy suffers but the death rate halves.
  • Open weeks, where the economy does great but the death rate doubles.

The UK policy has been to keep a region open until COVID is widespread, and then lock down. Let’s picture this as 7 weeks of open economy followed by 2 weeks of lockdown, that is, 7 weeks of doubling followed by 2 weeks of halving. The number of deaths in each week will look like this:

Now comes the key point. What happens if we put in the same two weeks of lockdown — the same hit to the economy — but we put it in earlier? Let’s say we put the two-week lockdown in after four weeks of doubling. Here’s what we see:

You can see that we have far fewer deaths. At the same time, we haven’t made the economy suffer more; we’ve had the same amount of lockdown, just earlier. In fact, the economy is probably doing better, because people will be less nervous about leaving their homes.

In case you’re worrying about what happens afterwards, here are similar graphs extended out to 20 weeks. They represent:

  • Left Graph. The government starts a two-week lockdown when there are more than 100 deaths in a week.
  • Right Graph. The government starts a two-week lockdown when more than 10 deaths in a week, except right at the end when a vaccine is near; then they let the number of deaths go up to 100.

In both cases we have six weeks of lockdown (six blue columns), so the same economic hit. But in the case shown on the right we have far fewer deaths.

By the way, don’t read too much into the term ‘lockdown’ — I just mean ‘some policies that reduce R’. You can draw little red-and-blue graphs for any policies you like, and you’ll always find that having restrictions and lockdowns earlier saves more lives.


You can save more lives without any economic hit, just by changing the timing of restrictions and lockdowns.




Key science, with sources. Minus bad statistics. Minus shaky methodology. Minus politicisation, left or right.