Author: Einat Wilf and Saar Wilf

The Case for Economic Hibernation during the COVID-19 Lockdowns

The extreme social distancing measures required to arrest the spread of COVID-19, especially the lockdown and isolation, are presenting economic policymakers with an unfamiliar challenge. The economic slowdown, caused by the need to employ extreme social distancing and isolation measures, has nothing to do with underlying issues in the local or global economy. Businesses are closing and people are losing their jobs, not because of a natural decline in demand for their services, nor due to a new technology that has made their job obsolete, nor a bubble whose time has come to burst. People still want to travel abroad, purchase clothes, go to the hairdresser, and sit with friends for coffee. The underlying demand in the global economy remains unchanged. This means that the extreme social distancing and isolation measures are sending distorted signals into the economy of a supposedly precipitous fall in demand for numerous products and services. In reality, demand for these products and services remains the same, but simply cannot be realised as a result of the enforced isolation. These distorted …