<p>Both Alice and Kate have bills to pay, regardless of whether they are earning money or not.  Restaurants and salons have to pay rent and maintenance on their properties whether they are in business or not.  They both need to feed themselves and possibly their families whether they earn income or not.  They need electricity and water and other utilities in their homes.  They probably have to pay rent or mortgages on those homes.  Their employees to whom they normally pay a regular wage also have bills to pay whether or not their workplaces are open.</p>

<p>If Alice and Kate (and ALL the Alices and Kates, and all of their employees) are no longer able to pay their bills, the people or companies to whom these bills are owed cannot afford to remain in business either.  And these people or companies presumably have their own bills to pay to other people or companies, and salaries to their employees, who <em>also</em> have bills to pay, and so on and so forth.  The effect ripples upwards and outwards.</p>

<p>The particular disaster has even larger implications than usual due to its universality. 
In the case of a typical localized disaster (a flood, hurricane, earthquake, etc.), residents of the effected areas can always move to another location where there are still jobs available and rebuild their lives.  But this pandemic has shut down business across the country and even the whole world, so there's really nowhere that can take in all these displaced workers.</p>

CC BY-SA 4.0
2020-06-03T17:04:04.870Z
2020-06-03T17:04:04.870Z
Darrel Hoffman
<p>Let's consider another example. I'm an automotive manufacturing service engineer; I build and repair machines that are used to build and repair cars. I use the money I earn to buy a variety of things, including, say, gasoline.</p>

<p>Of course, if all of the automotive manufacturing service engineers stop working, that's no big deal. People can just build their own car-making tools and use them to build their own cars. Right?</p>

<p>And likewise, if I'm out of work, that's no big deal. I can just extract my own crude oil and refine it into gasoline myself. Right?</p>

<p>Well, no. </p>

<p>One person can't build a car. It's just too complicated a job for one person to do. The good news is, however, it's pretty easy for one million people to build one million cars. In order for that to happen, though, those million people have to be able to go to work. </p>

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2021-02-23T14:00:26.070Z
What do people need one million cars for if they aren't going to work?
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2020-06-04T05:26:22.393Z
2020-06-04T05:26:22.393Z
Sophie Swett
<p>Most people aren't Alice and Kate.</p>

<p>GDP is a measure of the total goods and services produced within an economy. The point is measuring total production, not measuring how much money is changing hands.</p>

<p>There are a couple of things going on here:</p>

<p>In the example you mention of Alice and Kate, there is presumably some reason why they were paying each other for the food and haircuts rather than each doing both tasks for themselves. This reason is probably <a href="https://en.wikipedia.org/wiki/Comparative_advantage" rel="noreferrer">comparative advantage</a> and likely resulted in each of them having better haircuts and food and/or having more free time to do other stuff, due to relative quality and speed of completing the tasks.</p>

<p>More important, though, is a much larger issue: The vast majority of situations are not like Alice and Kate. Most of the drop in GDP is not because people are doing stuff for themselves instead of buying it, but rather that tons of people are just plain out of work entirely. They're producing far less goods and services than they normally would be. </p>

<p>Regardless of how you distribute remaining production from others, fewer goods and services are being produced overall. This means average standard of living <em>must</em> decline as a result. Redistributing income from the goods and services produced by people still working merely changes the distribution of who is bearing the burden of having a lower standard of living. It does not actually make up for the standard of living being lower or in any way generate any extra goods or services. On the contrary, carrying out the redistribution almost certainly uses up some goods and services and/or requires time that would otherwise be used producing goods and services, so the redistribution actually <em>reduces</em> the average standard of living in practice.</p>

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2020-06-04T17:56:31.010Z
"but rather that tons of people are just plain out of work entirely" - what happens to the work done by those people? They were providing something that people wanted, right? Who does that thing now, or does it not get done?
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2020-06-04T18:16:34.273Z
In many cases, the work does not get done. Either the work is postponed, or the association of people that had planned to do the work ceases to exist because it can no longer afford the fixed costs of existence.
Damian Yerrick
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2020-06-04T18:38:42.573Z
@user253751 Yes, what Damian said. For the most part, the work is either not being done at all or is being delayed. The goods and services are not being produced, as many people currently waiting on overdue shipments or who have had their travel plans cancelled can presently attest.
reirab
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2020-06-07T17:51:53.160Z
But during the pandemic, the average standard of living will decline anyway even if the exact same level of goods and services are produced and consumed, because a lot of people will die in the process. The question is why we can't just let the market decide what level of production and consumption is appropriate instead of the government either (a) forcing people to stay off work then they don't want to or (b) forcing people back to work when they would rather self-isolate
Andy
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2020-06-07T21:38:03.593Z
@Andy At least in the U.S., I'm not aware of any instances of the government forcing anyone to work when they would prefer to self-isolate. When people say stuff like "we need to get the economy moving again," they're talking about removing the government restrictions that require certain types of businesses to close, not forcing any to open that don't want to. Also, "standard of living" is defined in terms of the goods and services available to someone. Certainly, a disease reduces _quality of life_, but it doesn't really reduce "standard of living," per se.
reirab
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2020-06-07T21:43:01.977Z
@Andy Forcing people out of their job, on the other hand, definitely does reduce standard of living. Of course, people dying obviously does decrease economic output, but we're talking about 0.03% of the population vs. about 20% that was forced out of their jobs at the height of the shutdown.
reirab
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2021-02-23T13:59:51.400Z
@reirab Everyone is forced to work *by default* in our current economic system. He who does not work does not eat. The government doesn't need to see to that.
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2020-06-03T18:40:23.280Z
2020-06-04T00:54:29.113Z
2020-06-04T00:54:29.113Z
reirab
<p>Trade is good because it creates efficiency. Alice has invested in her kitchen and knows the supply chain of ingredients, and due to the efficiency of her business, she can sell a meal for $50. If Kate wants to cook the same meal, she'll have to buy all the necessary equipment and ingredients, and spend time learning cooking techniques, and by the end, she'll likely have spent more than \$50 to make the same meal. Similarly, if Alice wants to style her own hair, she will spend more than \$50 in equipment and time to get a similar-quality cut.</p>

<p>By trading, Alice and Kate can each specialize and become efficient in their industry. I'd argue that the premise that "they are both in exactly the same financial position as they were before" isn't exactly true, since Alice or Kate are either spending more doing their meals/haircuts themselves, or getting an inferior outcome due to their lack of experience. Alice would be happy to trade $50 for a Kate-quality haircut, but without the ability to trade, she cannot. The fact that Alice never cuts her own hair suggests that at this price point, Alice is not indifferent to who styles her hair - the \$50 cut has <em>at least</em> \$50 of value to her. But since she has to stay home, Alice will spend some amount of money cutting her own hair, and arrive at a cut that's not worth \$50. If Alice could indeed give herself a \$50-value cut for \$50 or less, she wouldn't be spending money at Kate's salon in the first place. </p>

<p>On the other hand, a cut by Kate must cost her less than \$50, otherwise she'd lose money on every client. So you can see that after trading, both Alice and Kate are better off than before - Alice got a haircut that she feels has at least \$50 of value for only \$50, while Kate sold a haircut that cost her less than $50 for more than it cost her. <em>Both</em> parties come out ahead when trading - Kate gets her monetary profit margin, and Alice gets some "value margin" over the quality/cost of a self-styled hairdo. By trading, both can eat and look better than they would by acting alone.</p>

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2020-06-07T17:46:13.770Z
I'm not arguing against the basic premise of capitalism; what I'm saying is that during the pandemic, Kate and Alice no longer find the terms of trade acceptable because of the risks of catching covid, so they make a mutual decision not to trade. Of course they are both worse off than if there had not been a pandemic but they are better off than if they had traded because they are safer.
Andy
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2020-06-03T16:46:29.523Z
2020-06-03T19:53:21.753Z
2020-06-03T19:53:21.753Z
Nuclear Hoagie
<p>In addition to the +1 answer of @KennyLJ which corrects the misconception beteen money and value, let me address the question in your last paragraph directly. Even if we could assume for a sake of the argument that we can manage to perfectly redistribute all income from people and businesses who are still able to operate and produce value (such as netflix, amazon etc.) we would still have a problem even if only non-esential people are out of work. </p>

<p>First as KennyLJ pointed out, its not about money but creating value through production and GDP is just a way how to track that value. Not producing new goods and services does not just mean that GDP wont increase it actively shrinks the GDP as people still even non-essential workers have to consume some of the output but now there is much less people to actually produce it.</p>

<p>As the data from <a href="https://www.bea.gov/news/2020/gross-domestic-product-1st-quarter-2020-advance-estimate#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%202.1%20percent." rel="nofollow noreferrer">U.S Bureau of Economic Analysis</a> show just in the first quarter the US economy shrunk by <span class="math-container">$5\%$</span>. Now probably not all of this decrease can be attributed to lockdown but comparing it to the Sweeden (not necessary most accurate comparison as countries differ in many ways but best that can be done given the data) which did not locked down and had a GDP decrease of only <a href="https://www.scb.se/en/finding-statistics/statistics-by-subject-area/national-accounts/national-accounts/national-accounts-quarterly-and-annual-estimates/pong/statistical-news/national-accounts-first-quarter-2020/" rel="nofollow noreferrer"><span class="math-container">$0.3\%$</span></a> would suggest that large portion of this can be attributed to the lock-down (although again a more serious econometric analysis would be warranted here but its not unreasonable to interpret data in this way) </p>

<p><a href="https://i.sstatic.net/vrWzr.png" rel="nofollow noreferrer"><img src="https://i.sstatic.net/vrWzr.png" alt="enter image description here"></a></p>

<p>Furthermore, the projections for US for 2nd quarter are even grimmer. According to <a href="https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf" rel="nofollow noreferrer">Fed Atlanta</a> the economy will not drop just by single digits. Even if the GDP per capita would on average only shrink by <span class="math-container">$5\%$</span> per a quarter of lock-down it would take only few years to reduce the current US GDP per capita from its current level of about <span class="math-container">$\$65000$</span> per capita to a level of developing country. To be more specific, with assumption of <span class="math-container">$5\%$</span> negative growth per quarter it would only take 10 years to reduce the <span class="math-container">$\$65000$</span> GDP per capita to about <span class="math-container">$\$8350$</span> bringing US to the lower level than Bhutan or Morocco. So even if it would be possible to have a perfect redistribution at no cost which manages to give everyone the average GDP per capita it would have some serious consequences. Even though, economy would not be falling forever and would eventually stabilize at some lower level given by the potential output under the constraints created by lockdown the projections from Fed Atlanta show that US economy has long way to fall and this seems to hold for most other countries as well. Moreover, lockdown could also have some genuine dynamic effects since prolonged lockdown will probably have some negative impact on human psychology, worse school outcomes that will determine life-long earning potential of kids and so on. </p>

<p>This will eventually even cost lives. Its not an accident that most medical research and medical spending occurs in the world's richest economies and not in the poorest. At some point even if we would only care about human lives with absolutely no regard to what happens to society and what will the quality of that human life be then at some point more lives will be lost just due to economic impact because governments and people wont be able to afford healthcare at the same level as before (in some less developed countries lock-downs even lead to <a href="https://www.theguardian.com/global-development/2020/apr/21/millions-hang-by-a-thread-extreme-global-hunger-compounded-by-covid-19-coronavirus" rel="nofollow noreferrer">worse food security</a> via the effect it has on employment). </p>

<p>Furthermore, I am not a biologist but as far as I understand the point of lockdown was to <a href="https://www.livescience.com/coronavirus-flatten-the-curve.html" rel="nofollow noreferrer">flatten the curve</a>. That means that at the beginning of the lockdown the value of saved lives through the flattening of the curve might be extremely high but at a some point lockdowns value diminishes even if pandemic still rages on as the curve will already be flat - at that point you are just maybe saving few lives at extreme economic cost. Of course, economics is a science not moral philosophy so we cannot as economists tell you if thats not enough of a moral justification to continue lockdown indifferently - but consequences would be grim. Furthermore, this post in itself should not be taken as an endorsement of opening at any particular present day. Maybe one more month of lock-down would be optimal maybe its already past its optimal point - thats something we will discover in future when the present lock-downs will be properly analyzed but an indefinite lock-down or even a lock-down lasting more than a year or so would do some serious damage. </p>

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2020-06-06T15:13:30.567Z
Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/108987/discussion-on-answer-by-1muflon1-why-do-we-need-to-get-the-economy-moving-again).
Kitsune Cavalry
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2021-02-23T14:01:06.333Z
Sweden lost significantly more GDP after this comment was written. I believe they are now doing worse than New Zealand, which had one of the harshest lockdowns. So both countries are now reaping what they sowed.
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2021-02-23T14:09:54.137Z
@user253751 not they actually gained GDP (relative to that time) and overall they were doing better then even expected at time of writing this answer (see [here](https://www.reuters.com/article/sweden-economy/update-1-swedish-govt-sees-milder-downturn-in-2020-slower-growth-next-year-idINL8N2IW3EU), you are right thought that NZ is doing better because though it had much bigger hit to GDP in first half of 2020 it regain that quickly after they relaxed restrictions because they successfully flattened the curve - however, it is not clear that could have been done in the Europe, NZ is isolated
1muflon1
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2021-02-23T14:11:29.067Z
so it is not necessary good control group for Sweeden, also lockdowns are not just boolean values, it is not that the choice is between no lockdown or lockdown but between right mix of restrictions and allowing economy function.
1muflon1
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2020-06-03T09:28:49.270Z
2020-06-04T08:29:22.807Z
2020-06-04T08:29:22.807Z
1muflon1
<p>A lot of the answers you've already received address questions like &quot;what is the benefit to trade&quot; or &quot;why do we have specialization of labor.&quot; I think this is a little more basic than what you asked--I'm assuming you meant not 'why do we have an economy' but &quot;why do we need to 'get the economy moving again' <em>right now</em>&quot;, rather than five (ten, twenty...) years down the road--i.e. what are the arguments for removing barriers to pre-disease economic activity as soon as possible and for providing incentives to &quot;encourage&quot; people back to work, who would rather wait until things are known to be safer. (You probably implicitly assume that the economy will 'get moving again' at some point--if it doesn't, then... well... it doesn't; I assume you aren't asking 'why should we go back to the status quo ante' and that you accept that returning spontaneously to the exact economic status from before the disease would require a very long time, if it happens at all).</p>
<p>First, let me point out: economics as a discipline is not about value judgments. It's about the production and distribution of goods under various policy regimes, and thus predicting the effects of policy decisions on same. Whether the effects are desirable or not is a political decision which requires assigning values outside the economic discipline.</p>
<p>So. Why <em>now</em>?</p>
<p>This answer has two parts: first, what are some predicted effects of <strong>longer</strong> shutdowns that might be avoided by <strong>shorter</strong> ones, and second, from a political (ie, non-economic) standpoint, what are some motivations for different parties that might motivate particular courses of action. The latter section will be more opinionated and controversial than the former, but I am including it because a) it's where the answer to your question actually lies, and b) part of what makes economics such a privileged discipline in our society is that economics-the-science is forever getting conflated with these sorts of political-philosophical issues; it's worthwhile making them explicit.</p>
<h2>Effects of Longer Shutdown</h2>
<p>The biggest consequences of longer vs. shorter shutdowns can be summarized as <strong>&quot;loss of economic momentum.&quot;</strong> You've already noted that shutdown blows a hole in tax revenues, constraining the agency of state and local governments and requiring federal government to take a more active redistribution role. The two remaining players are <strong>workers</strong> and <strong>firms</strong>.</p>
<ul>
<li>For <strong>workers</strong>, <a href="https://money.com/unemployment-is-really-low-so-why-cant-these-people-find-jobs/" rel="nofollow noreferrer">the longer one is unemployed, the harder it is to find a new job</a>. (Yes, a pop source, but it's a decent summary). This comes down to two main factors: discrimination on the part of employers, and skills deterioration. In the present situation of ~15% unemployment, discrimination is less likely to be a factor. However, workers' skills will still be deteriorating, and the unemployed are being denied the opportunity for skills and career development, leading to increased competition with new graduates/young people entering the workforce. A big clog in the pipeline means a dearth of people at higher experience levels across the board in the future.</li>
<li>For <strong>firms</strong>, it is much much easier to continue in an established business than to set up a new one. The longer businesses are shut down, the more reopening starts to resemble starting a brand-new business, with all of the corresponding challenges of getting yourself set up, finding workers to hire, making yourself known to customers, establishing relationships with suppliers, etc. This effect is particularly pronounced for small businesses, which do not have the name recognition, credit/cash reserves, or formalized supplier networks of larger firms. Think of your local family-owned auto repair shop: they have a glass supplier they trust, a parts supplier they know can get them something by tomorrow morning, claims adjusters they can point customers to; not to mention all the money they spent on ads to make people think of going to them. The longer they're shut down, the more their customers forget. The longer they're shut down, the more likely those partners go out of business, and now they can't offer the same quality service at the same prices. They may even lose key employees. This is one of the main points in the discussion of <a href="https://www.forbes.com/sites/sarahhansen/2020/06/03/u-shape-v-shape-recovery-shapes-explained-and-what-they-mean-for-americas-economy/#6e71f02825a5" rel="nofollow noreferrer">u-shaped and v-shaped recoveries</a>--the longer you're shut down, the harder it is to come back.</li>
</ul>
<p>Other considerations:</p>
<ul>
<li><p><strong>Price instability</strong> occurs as a knock-on effect of the above. Modern supply chains are extended and bizarre, and as firms collapse, the distribution of goods starts to break down in unpredictable ways. A lot of this disruption is probably temporary, but our assumptions about the availability of goods can become dangerously wrong. Effects can be felt at a distance in ways we can't predict: the closure of meat-packing plants leads to culling of animals on farms, meaning that farm animal production is down; what if this means that once a vaccine is available, there are shortages of animal-derived amino acids, gelatins, etc. that prevent production?</p>
</li>
<li><p><strong>Financial networks</strong> are also complicated. When people or firms can't pay their rent, landlords can't afford to pay their mortgages; then banks start having cash flow issues, etc. Now, the 2008-2009 crisis demonstrated clearly the federal government's ability and willingness to make the financial sector whole, so this is more a concern of political will than inevitability; but if we assume no government intervention--intervention being a policy choice many economists are unhappy with on principle--the consequences could be a breakdown in the credit system that inhibits new firm formation even after the crisis has passed.</p>
</li>
</ul>
<p>The desirability of the above varies depending on where you're standing. Maybe you think decreased overall economic output is good for environmental reasons. Maybe you're an established player in an industry and think extra headwinds for the smaller firms you compete with are great news. Maybe you're looking forward to high unemployment so you can cut employee wages. That's all outside the scope of the economic question.</p>
<p>Further, while some of the above issues might be avoided by reopening faster, these consequences I've described are all also predictable results of having to shut down again or having large parts of the workforce die from coronavirus. It is no secret that minimization of or indifference to the risks of coronavirus is correlated with politically conservative views; many economists tend to share a more politically conservative outlook, particularly those who are disinclined to care about disciplines or considerations outside of economics. Thus a lot of the predictions from economists assume &quot;reopening sooner than later, and nothing bad happens&quot;--taking it for granted that the health risks have actually passed, and the only variable is the one we actually control (choosing to reopen). Even regardless of possible personal bias, that assumption is sort of baked into the question. The consequences of &quot;reopening, only to shut down again after renewed viral spread&quot; would probably be the same types as staying closed longer, but worse (because it gets dragged out even more). Which one is true? <em>We just don't know,</em> and the answers to that come from epidemiologists, not economists.</p>
<p>Final point: the consequences above can be addressed by government intervention: adjustment of financial contracts to share the burden of lost income, expanded public-sector employment opportunities and jobs training for workers, insurance programs, contracts, and incentive programs for smaller and new firms, direct spending to initiate cycles of economic growth... Due to political or other considerations, economists vary in their support of such measures, but from 1941-1945 the US government seized the lion's share of the country's GDP <em>literally to go blow it up</em> and the result was the largest period of sustained economic growth in the country's history, so there's certainly historical precedent that we can find non-traditional, non-laissez-faire ways to solve practical problems in the production and distribution of real goods over the medium term of a few years.</p>
<h2>Qui Bono, or &quot;Who's 'We'&quot;?</h2>
<p>The other question you've implicitly asked is who the &quot;we&quot; is that needs to 'get the economy moving again.' Whose interests does it serve? I once again stress that balancing the interests of competing groups in society is a <em>political</em> not an <em>economic</em> decision. Indeed, most basic (introductory-undergrad-level) economics explicitly does not consider competing interests or varying wealth distributions among different social groups, instead using <a href="https://en.wikipedia.org/wiki/Representative_agent" rel="nofollow noreferrer">representative agent</a> models that assume uniformity among consumers, firms, etc. So let's look at who those groups might be and what their motivations might be.</p>
<ul>
<li><p><strong>Workers:</strong> Well, <a href="https://www.washingtonpost.com/politics/2020/05/20/most-americans-and-most-republicans-still-want-move-slowly-reopening-country/" rel="nofollow noreferrer">most Americans still want to move more slowly</a>. Polling is complicated; people differ in their levels of desperation, indifference to or awareness of individual &amp; group risks, etc. I'm sure you can imagine that there's diverse opinion. I'll point out a structural feature though: most workers disemployed by the shutdown can tolerate continued closure only while government support (money and rent/loan repayment freezes) are in effect. As more and more workers rejoin the workforce due to reopening (or are forced to take dangerous essential jobs because they need the money, or...) the collective interests of workers become more fractured, which will erode the political support for the measures that let people stay home, which will force more back to work... etc. <a href="https://en.wikipedia.org/wiki/Solidarity" rel="nofollow noreferrer">It is in the interest of those who want to stay home to make that preference as widespread as possible.</a></p>
</li>
<li><p><strong>Consumers:</strong> Obviously many people wish they could consume things that aren't currently available. Maybe Kate wants her haircut, even if that means half her neighborhood (or, let's be honest, <a href="https://en.wikipedia.org/wiki/Racial_segregation_in_the_United_States" rel="nofollow noreferrer">not <em>her</em> neighborhood</a>) catches coronavirus as a result. But overall, the same polls cited above still apply, since workers are consumers.</p>
</li>
<li><p><strong>State and Local Governments:</strong> In addition to the generic tax revenue issue you mentioned, there's also the problem that <a href="https://www.cnn.com/2020/04/15/politics/unemployment-benefits-state-trust-funds/index.html" rel="nofollow noreferrer">states are running out of unemployment money</a> (that article's from mid-April, so the situation has only gotten worse). States, unlike the federal government, actually have to pay their debts. This would be fixable with money from the feds, but given the ongoing lack of federal support, it is obviously in states' interests to promote a return to work; if workers die, all the better, one fewer unemployment check to pay.</p>
</li>
<li><p><strong>Small firms:</strong> As I mentioned, they are most vulnerable to closure due to longer downturns. They are also struggling because <a href="https://www.cbsnews.com/news/paycheck-protection-program-small-businesses-large-companies-coroanvirus/" rel="nofollow noreferrer">relief nominally intended for them was snapped up by other parties</a> and because <a href="https://www.npr.org/2020/04/21/838879361/bitter-taste-for-coffee-shop-owner-as-new-600-jobless-benefit-closed-her-busines" rel="nofollow noreferrer">massively-underpaid service work is extremely difficult to hire for when there are more generous unemployment benefits at no risk of infecting your family with coronavirus</a></p>
</li>
<li><p><strong>Renters:</strong> are doing all right, given the widespread eviction freezes and rent pauses. Same goes for <strong><a href="https://studentaid.gov/announcements-events/coronavirus" rel="nofollow noreferrer">student debtors</a></strong>. Of course, this is going to explode in six months when all that back rent is due. But that's a problem for another day.</p>
</li>
<li><p><strong>Landlords/Rentiers:</strong> are taking a bath right now, because of the eviction freezes and rent pauses. They haven't, on the whole, been getting the same level of government support that renters have. And they are definitely worried about that 'problem for another day' of a bunch of unemployed people not able to pay six months' back rent.</p>
</li>
<li><p><strong>Large firms:</strong> The Dow Jones Industrial Average is already back above where it was 12 months ago--Wall Street either believes that reopening will be successful, or that it doesn't matter anyway, because government supports for large industries will continue as needed. After all, the biggest targeted federal government intervention to promote production during the crisis has been to <a href="https://www.reuters.com/article/us-health-coronavirus-trump-liability/trump-orders-u-s-meat-processing-plants-to-stay-open-despite-coronavirus-fears-idUSKCN22A2OB" rel="nofollow noreferrer">free owners of liability for worker harms in meat-packing plants</a>. Larger firms are taking this opportunity to use bankruptcy to get out of debts and unfavorable contracts, and probably see it as a good opportunity to consolidate market position by replacing the smaller firms that are getting hit harder. That's not to say there aren't some large firms that are really hurting, but we have seen plenty of political will to support e.g. the airline industry in the past and there's little reason to think that won't continue.</p>
</li>
<li><p><strong>Psychological need:</strong> The coronavirus has meant a huge alteration in people's ability to plan for the future and control their lives. This is extremely uncomfortable for many. People naturally want to feel in control, and reopening--returning to the appearance of normalcy and comfortable daily patterns--can help many to feel like the crisis is over and they are in control of their lives again. There's also just the sheer <em>boredom</em> with the current state of affairs: many people are just simply impatient. Unfortunately, epidemiology does not care about your feelings; but it is my personal observation that a desire for control in one's personal life and a lived experience of substantial control over one's life (e.g., being personally well off, or usually employed in a supervisory role) correlate to a tendency both to minimize the risks posed by the virus and to promote reopening despite whatever risks are acknowledged. I am not aware of any formal work done on this and it is (obviously) not an economic consideration, but it's an undercurrent in the public conversation.</p>
</li>
<li><p><strong>&quot;Winners&quot;:</strong> The longer mass unemployment is the norm, the more entrenched things like rent relief and student loan debt relief will become. There are economic arguments about the sanctity of paying debts in order to create trust in the credit markets, but ultimately this concern is about the relative power of debtors and creditors (and renters vs rentiers, those who collect gains by virtue not of productive actions but by owning property). The stock market and financial industry don't seem too concerned right now, but as with the small-business-hiring issue above, you are already seeing a shift in the balance of power between labor and owners, between renters and landlords, between debtors and creditors. The longer that continues, the more it normalizes ideas like universal basic income and dramatic rent and student-debt reforms, which would not be in the interests of <a href="https://en.wikipedia.org/wiki/Economic_rent" rel="nofollow noreferrer">people whose income is chiefly derived from large current wealth and wealth inequality</a>. Given, among many other examples, the <a href="https://www.cbpp.org/research/federal-tax/substantial-income-of-wealthy-households-escapes-annual-taxation-or-enjoys" rel="nofollow noreferrer">privileged position unearned income has in the US tax code</a>, it seems credible to believe that the interests of the wealthy are disproportionately represented by the same government figures that are pushing for a return to work.</p>
</li>
</ul>
<h2>Summary</h2>
<p>Ultimately, you're asking why reopening needs to happen now. There are real economic consequences to a prolonged shutdown which are probably undesirable from most perspectives/value systems. However, it is not at all clear that rapid reopening solves the issue--there is a substantial risk of prolonged and worse economic impacts due to viral resurgence. To truly answer your question, we have to look outside the discipline of economics to consider the interests of different impacted parties, and how those interests are represented in our society, public culture/media discourse, and decision-making mechanisms.</p>

CC BY-SA 4.0
2021-02-23T14:03:58.193Z
Well, we've now seen the consequences of "reopening, only to shut down again after renewed viral spread" in just about every country that's not a Pacific island.
Criticize SE actions means ban
CC BY-SA 4.0
2020-06-17T16:08:11.970Z
2020-06-17T16:08:11.970Z
Tiercelet
<p>Capitalism is predicated on an expanding economy. When Mr. Moneybags goes to market, he exchanges his money (<span class="math-container">$M$</span>) for the commodity of labor (<span class="math-container">$C$</span>). He employs this labor to create further commodities, which he then sells for some amount of money (<span class="math-container">$M'$</span>). This process only makes sense if <span class="math-container">$M' &gt; M$</span>. Since <span class="math-container">$M'$</span> is collected at a later date than <span class="math-container">$M$</span> is launched into circulation, this means that value has to increase with time. Thus, the whole system of capitalism (the selling of labor on the open market for a wage) requires the economy to grow so that capitalists can expect <span class="math-container">$M ' - M$</span> (their profits) to be a positive quantity. </p>

<p>If there is no growth, then <span class="math-container">$M' - M$</span> will on average be a negative quantity and it will no longer make sense to hire labor, which will throw the system into crisis. There will be a surplus of unused capital and raw materaials and a surplus of labor but no way to bring them together productively because the profit incentive has vanished. </p>

CC BY-SA 4.0
2020-06-04T04:24:14.383Z
Why was I downvoted?
Charles Hudgins
CC BY-SA 4.0
2020-06-04T10:16:21.847Z
"Added value" (in Marxist terminology) is not growth. Capitalism still works and people still produce (and consume) value even in a shrinking economy. Well, it isn't a pleasant experience, because everyone has less and less goods and services to consume, but something is still produced and consumed. (No, I didn't downvote, but your answer is "not even wrong")
fraxinus
CC BY-SA 4.0
2020-06-04T12:12:22.477Z
@fraxinus If GDP shrinks proportionally with population but GDP per capita remains the same, then such a steady-state economy must not necessarily be unpleasant if it is a wealthy society to begin with.  When will we ever [have enough](https://politics.stackexchange.com/q/135/130)?
gerrit
CC BY-SA 4.0
2020-06-04T12:13:22.793Z
@fraxinus The question is not asking "why do we need economic growth" (or it would be a duplicate of the linked question on Politics.SE).  It is asking "why do we need to get the economy moving again".  Added value is not growth, but it *is* movement.
gerrit
CC BY-SA 4.0
2020-06-04T17:17:55.690Z
@gerrit the question is asking about a situation in which "shrinking economy" implies lowered GDP per capita, so I don't think your comments apply here.
gormadoc
CC BY-SA 4.0
2020-06-04T18:43:44.677Z
@fraxinus You're right. Labor does always add value to raw materials. But the market isn't always ready to absorb the commodities that labor produces. This happens, for example, in a shrinking economy where there are fewer, less consumptive consumers (in a shrinking economy it makes more sense to hold money than to spend money). Because capitalists can't sell their surplus goods, they lose money on their investment in labor. It doesn't take long for them to realize that labor is a bad investment, resulting in declining production.
Charles Hudgins
CC BY-SA 4.0
2020-06-04T18:44:33.273Z
So, as I said, you have surplus capital (left over from the period of overproduction) and surplus labor, but no way to bring them together in socially useful production. This is a pretty standard account of capitalism's tendency to overproduce and the crises that result. I don't know where you got the idea that I'm "not even wrong."
Charles Hudgins
CC BY-SA 4.0
2020-06-06T15:13:51.170Z
Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/108988/discussion-on-answer-by-charles-hudgins-why-do-we-need-to-get-the-economy-movin).
Kitsune Cavalry
CC BY-SA 4.0
2020-06-04T00:41:45.803Z
2020-06-04T04:21:52.827Z
2020-06-04T04:21:52.827Z
Charles Hudgins
<p>What your example doesn't include is the relative ability of each person to provide a needed product or service. If we expand your example this becomes clearer:</p>

<p>Kate spends 50 USD on a meal which takes Alice 30 minutes to produce. Kate can produce that same meal in 1 hour. Alice spends 50 USD on a haircut from Kate which takes 30 minutes. Alice can cut hair in 1 hour.</p>

<p>If Kate and Alice trade, then Kate can produce 2 haircuts per hour (produced herself) or 2 meals per hour (by trading 2 haircuts for 2 meals). Similarly, Alice can produce 2 meals per hour (produced herself) or 2 haircuts per hour (by trading 2 meals for 2 haircuts).</p>

<p>If they do not trade, then each party can still afford <em>their own products</em> at the same rate. Kate can afford 2 haircuts per hour (produced herself) and Alice can afford 2 meals per hour (produced herself). However, their efficiency drops substantially for the traded-for product. Now, Kate can only produce 1 meal per hour and Alice can only produce 1 haircut per hour. Overall, after producing both meals and haircuts, both parties are worse off than if they had traded.</p>

<p>When these contrived examples are expanded to include the full basket of goods and services that each person needs/wants, then the effect becomes obvious. For example, would you be able to produce as much if you had to provide <em>every</em> product and service yourself (manufacture your own car, produce your own petrol, grow your own vegetables, farm your own animals, produce your own household goods, provide your own medical care, fix your own teeth, etc. etc.)? Clearly you are far more efficient specialising in a narrow range of fields, and then trading your product for those who have specialised in other areas.</p>

CC BY-SA 4.0
2020-06-05T13:03:52.740Z
2020-06-06T12:19:21.793Z
2020-06-06T12:19:21.793Z
JBentley
<p><strong>Short Answer:</strong> We need to 'get the economy moving again' because at this point in human history it is the only means we have of not sinking more societies into a state of civil war.</p>

<p><strong>Long answer:</strong> We don't need to 'get the economy moving again' necessarily, because 'the economy' that will be made to move again will not be exactly the same as the pre-covid economy because people's value systems will have changed during the years it takes to stabilize ourselves into what we consider to be 'normal'. Restaurant meals and haircut salons will not have the same meaning in a few years as they once did when society-ending pandemics were not on the radar except in science-fiction. In fact, there is currently a huge push into the food sector because Big Money has realized that food is the only thing left when everything falls down, including housing.</p>

<p>Many people assume that ‘the economy’ is a functional entity with clear mechanisms that make it possible for individuals to live decently, and that the flow of ressources, values and expenditures can be measured with indicators such as the Gross Domestic Product (GDP). This is false, and anyone who claims to understand ‘the economy’ is only momentarily ignoring part of the picture in order to arrange a small other part of it into a sensible argument.</p>

<p>The fact that a restaurant can serve a 50$ meal is made possible by banks and government propping up the sectors of energy, transport, agriculture and real estate. People during covid are thinking that being healthy of body and mind has more value than eating out at the restaurant, and that shift is much too big and fast for ‘the economy’ to react in an organized manner.</p>

<p>Enough research and criticism exists about things like the <strong>GDP</strong>, <strong>True Cost Accounting</strong>, <strong>Time Banking</strong> and <strong>speculation</strong>, to consider that there are many different ways ‘the economy’ could function.</p>

<p><strong>Why GDP fails as a measure of well-being</strong>
<em>-CBS News, 2016</em>
<a href="https://www.cbsnews.com/news/why-gdp-fails-as-a-measure-of-well-being/#:~:text=The%20textbooks%20generally%20point%20out,and%20requires%20rebuilding%2C%20GDP%20increases.&amp;text=GDP%20only%20counts%20goods%20that,production%20and%20black%20market%20activity." rel="nofollow noreferrer">https://www.cbsnews.com/news/why-gdp-fails-as-a-measure-of-well-being/#:~:text=The%20textbooks%20generally%20point%20out,and%20requires%20rebuilding%2C%20GDP%20increases.&amp;text=GDP%20only%20counts%20goods%20that,production%20and%20black%20market%20activity.</a></p>

CC BY-SA 4.0
2020-06-04T01:48:42.740Z
2020-06-04T01:48:42.740Z
Samuel Martin
<p>Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into too much economic jargon.</p>

<p>Consider the following scenario:</p>

<p>Kate is a hairdresser and Alice owns a restaurant. Every month Kate goes to Alice's restaurant and spends \$50 on a meal, and Alice spends \$50 getting her hair cut at Kate's. This generates $100 of GDP. Now say there is a global pandemic which makes it dangerous to meet each other, Kate decides it's safer to cook her own dinner and Alice cuts her own hair. They are both in exactly the same financial position as they were before but no GDP has been generated. After a while the government announces that we all need to do our bit to "get the economy moving again" (which I interpret to mean "generate GDP") even if it means putting ourselves in danger.</p>

<p>I understand that the government wants economic activity because that's how they collect tax revenues, and I also understand that some people do jobs that are essential for the functioning of society. I also understand that going to work conveys other psychological benefits than simply earning money, but let's assume for the moment that there are at least some people people who would rather just stay at home and where there is reduced natural demand for their services.</p>

<p>It seems to me that all the money that hasn't been spent in restaurants and hairdressers during the COVID-19 pandemic hasn't gone anywhere, it's still sitting in the bank accounts of the people who would otherwise have spent it. </p>

<p>If we could find another way of redistributing that wealth from the people who's jobs are essential (and are therefore still getting paid but aren't going to restaurants) to people who's jobs are not essential (and therefore don't need to work during the pandemic), is there any harm with putting the economy on hold for an indefinite period until people decide they want to go back to work again?</p>

<hr>

<p><strong>Edit 8 June</strong></p>

<p>Thanks for all the great responses, this has really helped my understanding but I don't think anyone has hit the nail on the head so I've added this note to try and clarify what I was after. I’ve tried not to move the goalposts to the extent that previous replies look stupid (I haven’t edited anything above this line).</p>

<p>Firstly just to clarify my original question, I wasn’t questioning the benefit of economic growth over stagnation under non-covid circumstances; I was questioning whether covid + economic stagnation might be better than covid + enforced economic activity.</p>

<p>Also one thing I maybe didn’t make clear enough is that I wasn’t talking about an enforced lockdown in cases where people would rather go to work; I was arguing that people who wanted to consume or produce less shouldn’t be obligated to consume and produce more, just to fuel the engines of capitalism.</p>

<p>The effect of covid has been to push the cost of goods upwards (because of the risk of contracting covid while producing them) and the benefit of consumption downwards (because of the risk of contracting covid whilst consuming). This will put some markets into a state of oversupply, even without an enforced lockdown.</p>

<p>So let’s say my widget supplier says “I’m no longer willing to supply that widget for \$50; I’d rather lose my job and get paid \$30 on welfare” and I say “I’m not willing to pay \$50 anymore; I’d rather live without it, even if it means I have to pay \$35 more in taxes”.</p>

<p>In this scenario we’re both happier than we would have been had we traded, and the government gets $5 to administer the welfare. The only people who aren't happy are those that have a vested interest in ever-increasing GDP, who in turn are often those in powerful positions and might try to use their influence to "get the economy moving again" to the detriment of the average citizen.</p>

CC BY-SA 4.0
2020-06-04T12:08:19.003Z
Related: [*Why is economic growth considered essential, even in rich countries?*](https://politics.stackexchange.com/q/135/130)
gerrit
CC BY-SA 4.0
2020-06-04T12:40:54.370Z
In this particular case, in fact only Alice needs to reopen because [you can get anything you want at Alice's restaurant](https://en.wikipedia.org/wiki/Alice%27s_Restaurant).
Gareth McCaughan
CC BY-SA 4.0
2020-06-04T17:49:03.783Z
Sure, everyone could do everything themselves (except for rent because that isn't a real product or service). People usually don't want to and you lose economies of scale. Apparently everyone baked their own bread in the Great Depression - would you like that?
Criticize SE actions means ban
CC BY-SA 4.0
2020-06-05T05:45:02.360Z
This is not a good comparison. Your life will not end if you do not visit the hairdresser. Compare a baker who has a huge full-equipped bakery and no fields, and a farmer who has wheat fields full of thousands of tons of grain and no bakery. Add the doctor and dentist who have no fields and no bakeries. Add the other services which keep the world running... They all need food.
RedSonja
CC BY-SA 4.0
2020-06-05T14:04:38.283Z
I have an extensive answer that addresses parts of your question that haven't been answered before, but as the question is now protected, I guess it'll have to... wait, or something.
Tiercelet
CC BY-SA 4.0
2020-06-05T15:17:49.143Z
First of all you are mistaken that only "essential" workers are working.  A lot of extremely "non-essential" workers are still working, but from home.

Also, whether I am "essential" or not, if you "redistribute" my earnings to other people, I ain't working any more.  Why would I?

You can reply that this would make me a terrible person, but a lot of people don't care so much if other people thing they're terrible.  That's not going to make them work for free (or for very little).
JoelFan
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2020-06-06T14:31:19.040Z
@Tiercelet. The question is no longer protected. You can go ahead and post your answer.
TRiG
CC BY-SA 4.0
2020-06-08T16:55:18.193Z
In response to your new edit: But which country is forcing people to go back to work? As far as I know working in most countries is not mandatory and most countries have some welfare/unemployment support. In most western countries including US nobody can force you to go to work unless you are in prison (as for example US allows forced labor for prisoners). Also, it’s well established in literature that economic growth (commonly measured by growth of GDP) benefits poor greatly. See this paper and sources cited therein https://pdf.usaid.gov/pdf_docs/PNACA656.pdf
1muflon1
CC BY-SA 4.0
2020-06-11T09:26:28.067Z
Nobody is being physically marched off to work but a lot of people need to go back to work because they have bills to pay. Seeing as the people who are working have more disposable income (because they aren't spending it in restaurants and hairdressers), I'm suggesting we have a higher level of redistribution of wealth.
Andy
CC BY-SA 4.0
2021-02-23T13:58:10.903Z
@1muflon1 Working in most countries is mandatory. He who does not work does not eat.
Criticize SE actions means ban
<macroeconomics><gdp><economic-growth><nonexpert><covid-19-crisis>
Why do we need to "get the economy moving again"?
Andy
# Why do we need to "get the economy moving again"?

(Asked by: username_0 on 2020-06-03)

Sorry I have no background in economics but as a computer programmer, I specialise in building models out of simple math and logic, so I hope we can speak the same language without having to get into too much economic jargon.

Consider the following scenario:

Kate is a hairdresser and Alice owns a restaurant. Every month Kate goes to Alice's restaurant and spends \$50 on a meal, and Alice spends \$50 getting her hair cut at Kate's. This generates $100 of GDP. Now say there is a global pandemic which makes it dangerous to meet each other, Kate decides it's safer to cook her own dinner and Alice cuts her own hair. They are both in exactly the same financial position as they were before but no GDP has been generated. After a while the government announces that we all need to do our bit to "get the economy moving again" (which I interpret to mean "generate GDP") even if it means putting ourselves in danger.

I understand that the government wants economic activity because that's how they collect tax revenues, and I also understand that some people do jobs that are essential for the functioning of society. I also understand that going to work conveys other psychological benefits than simply earning money, but let's assume for the moment that there are at least some people people who would rather just stay at home and where there is reduced natural demand for their services.

It seems to me that all the money that hasn't been spent in restaurants and hairdressers during the COVID-19 pandemic hasn't gone anywhere, it's still sitting in the bank accounts of the people who would otherwise have spent it.

If we could find another way of redistributing that wealth from the people who's jobs are essential (and are therefore still getting paid but aren't going to restaurants) to people who's jobs are not essential (and therefore don't need to work during the pandemic), is there any harm with putting the economy on hold for an indefinite period until people decide they want to go back to work again?

---

**Edit 8 June**

Thanks for all the great responses, this has really helped my understanding but I don't think anyone has hit the nail on the head so I've added this note to try and clarify what I was after. I’ve tried not to move the goalposts to the extent that previous replies look stupid (I haven’t edited anything above this line).

Firstly just to clarify my original question, I wasn’t questioning the benefit of economic growth over stagnation under non-covid circumstances; I was questioning whether covid + economic stagnation might be better than covid + enforced economic activity.

Also one thing I maybe didn’t make clear enough is that I wasn’t talking about an enforced lockdown in cases where people would rather go to work; I was arguing that people who wanted to consume or produce less shouldn’t be obligated to consume and produce more, just to fuel the engines of capitalism.

The effect of covid has been to push the cost of goods upwards (because of the risk of contracting covid while producing them) and the benefit of consumption downwards (because of the risk of contracting covid whilst consuming). This will put some markets into a state of oversupply, even without an enforced lockdown.

So let’s say my widget supplier says “I’m no longer willing to supply that widget for \$50; I’d rather lose my job and get paid \$30 on welfare” and I say “I’m not willing to pay \$50 anymore; I’d rather live without it, even if it means I have to pay \$35 more in taxes”.

In this scenario we’re both happier than we would have been had we traded, and the government gets $5 to administer the welfare. The only people who aren't happy are those that have a vested interest in ever-increasing GDP, who in turn are often those in powerful positions and might try to use their influence to "get the economy moving again" to the detriment of the average citizen.

**Tags:** macroeconomics, gdp, economic-growth, nonexpert, covid-19-crisis
> **Comments:**
> **username_1**: Related: [*Why is economic growth considered essential, even in rich countries?*](https://politics.stackexchange.com/q/135/130)  
> **username_2**: In this particular case, in fact only Alice needs to reopen because [you can get anything you want at Alice's restaurant](https://en.wikipedia.org/wiki/Alice%27s_Restaurant).  
> **username_3**: Sure, everyone could do everything themselves (except for rent because that isn't a real product or service). People usually don't want to and you lose economies of scale. Apparently everyone baked their own bread in the Great Depression - would you like that?  
> **username_4**: This is not a good comparison. Your life will not end if you do not visit the hairdresser. Compare a baker who has a huge full-equipped bakery and no fields, and a farmer who has wheat fields full of thousands of tons of grain and no bakery. Add the doctor and dentist who have no fields and no bakeries. Add the other services which keep the world running... They all need food.  
> **username_5**: I have an extensive answer that addresses parts of your question that haven't been answered before, but as the question is now protected, I guess it'll have to... wait, or something.  
> **username_6**: First of all you are mistaken that only "essential" workers are working.  A lot of extremely "non-essential" workers are still working, but from home.  Also, whether I am "essential" or not, if you "redistribute" my earnings to other people, I ain't working any more.  Why would I?  You can reply that this would make me a terrible person, but a lot of people don't care so much if other people thing they're terrible.  That's not going to make them work for free (or for very little).  
> **username_7**: @Tiercelet. The question is no longer protected. You can go ahead and post your answer.  
> **username_8**: In response to your new edit: But which country is forcing people to go back to work? As far as I know working in most countries is not mandatory and most countries have some welfare/unemployment support. In most western countries including US nobody can force you to go to work unless you are in prison (as for example US allows forced labor for prisoners). Also, it’s well established in literature that economic growth (commonly measured by growth of GDP) benefits poor greatly. See this paper and sources cited therein https://pdf.usaid.gov/pdf_docs/PNACA656.pdf  
> **username_0**: Nobody is being physically marched off to work but a lot of people need to go back to work because they have bills to pay. Seeing as the people who are working have more disposable income (because they aren't spending it in restaurants and hairdressers), I'm suggesting we have a higher level of redistribution of wealth.  
> **username_3**: @1muflon1 Working in most countries is mandatory. He who does not work does not eat.  

---

## 9 answers

### Answer by username_9 on 2020-06-03. Score: 20

Both Alice and Kate have bills to pay, regardless of whether they are earning money or not. Restaurants and salons have to pay rent and maintenance on their properties whether they are in business or not. They both need to feed themselves and possibly their families whether they earn income or not. They need electricity and water and other utilities in their homes. They probably have to pay rent or mortgages on those homes. Their employees to whom they normally pay a regular wage also have bills to pay whether or not their workplaces are open.

If Alice and Kate (and ALL the Alices and Kates, and all of their employees) are no longer able to pay their bills, the people or companies to whom these bills are owed cannot afford to remain in business either. And these people or companies presumably have their own bills to pay to other people or companies, and salaries to their employees, who *also* have bills to pay, and so on and so forth. The effect ripples upwards and outwards.

The particular disaster has even larger implications than usual due to its universality.
In the case of a typical localized disaster (a flood, hurricane, earthquake, etc.), residents of the effected areas can always move to another location where there are still jobs available and rebuild their lives. But this pandemic has shut down business across the country and even the whole world, so there's really nowhere that can take in all these displaced workers.


---

### Answer by username_13 on 2020-06-03. Score: 13

Trade is good because it creates efficiency. Alice has invested in her kitchen and knows the supply chain of ingredients, and due to the efficiency of her business, she can sell a meal for $50. If Kate wants to cook the same meal, she'll have to buy all the necessary equipment and ingredients, and spend time learning cooking techniques, and by the end, she'll likely have spent more than \$50 to make the same meal. Similarly, if Alice wants to style her own hair, she will spend more than \$50 in equipment and time to get a similar-quality cut.

By trading, Alice and Kate can each specialize and become efficient in their industry. I'd argue that the premise that "they are both in exactly the same financial position as they were before" isn't exactly true, since Alice or Kate are either spending more doing their meals/haircuts themselves, or getting an inferior outcome due to their lack of experience. Alice would be happy to trade $50 for a Kate-quality haircut, but without the ability to trade, she cannot. The fact that Alice never cuts her own hair suggests that at this price point, Alice is not indifferent to who styles her hair - the \$50 cut has *at least* \$50 of value to her. But since she has to stay home, Alice will spend some amount of money cutting her own hair, and arrive at a cut that's not worth \$50. If Alice could indeed give herself a \$50-value cut for \$50 or less, she wouldn't be spending money at Kate's salon in the first place.

On the other hand, a cut by Kate must cost her less than \$50, otherwise she'd lose money on every client. So you can see that after trading, both Alice and Kate are better off than before - Alice got a haircut that she feels has at least \$50 of value for only \$50, while Kate sold a haircut that cost her less than $50 for more than it cost her. *Both* parties come out ahead when trading - Kate gets her monetary profit margin, and Alice gets some "value margin" over the quality/cost of a self-styled hairdo. By trading, both can eat and look better than they would by acting alone.

> **Comments:**
> **username_0**: I'm not arguing against the basic premise of capitalism; what I'm saying is that during the pandemic, Kate and Alice no longer find the terms of trade acceptable because of the risks of catching covid, so they make a mutual decision not to trade. Of course they are both worse off than if there had not been a pandemic but they are better off than if they had traded because they are safer.  

---

### Answer by username_10 on 2020-06-04. Score: 8

Let's consider another example. I'm an automotive manufacturing service engineer; I build and repair machines that are used to build and repair cars. I use the money I earn to buy a variety of things, including, say, gasoline.

Of course, if all of the automotive manufacturing service engineers stop working, that's no big deal. People can just build their own car-making tools and use them to build their own cars. Right?

And likewise, if I'm out of work, that's no big deal. I can just extract my own crude oil and refine it into gasoline myself. Right?

Well, no.

One person can't build a car. It's just too complicated a job for one person to do. The good news is, however, it's pretty easy for one million people to build one million cars. In order for that to happen, though, those million people have to be able to go to work.

> **Comments:**
> **username_3**: What do people need one million cars for if they aren't going to work?  

---

### Answer by username_11 on 2020-06-03. Score: 7

Most people aren't Alice and Kate.

GDP is a measure of the total goods and services produced within an economy. The point is measuring total production, not measuring how much money is changing hands.

There are a couple of things going on here:

In the example you mention of Alice and Kate, there is presumably some reason why they were paying each other for the food and haircuts rather than each doing both tasks for themselves. This reason is probably [comparative advantage](https://en.wikipedia.org/wiki/Comparative_advantage) and likely resulted in each of them having better haircuts and food and/or having more free time to do other stuff, due to relative quality and speed of completing the tasks.

More important, though, is a much larger issue: The vast majority of situations are not like Alice and Kate. Most of the drop in GDP is not because people are doing stuff for themselves instead of buying it, but rather that tons of people are just plain out of work entirely. They're producing far less goods and services than they normally would be.

Regardless of how you distribute remaining production from others, fewer goods and services are being produced overall. This means average standard of living *must* decline as a result. Redistributing income from the goods and services produced by people still working merely changes the distribution of who is bearing the burden of having a lower standard of living. It does not actually make up for the standard of living being lower or in any way generate any extra goods or services. On the contrary, carrying out the redistribution almost certainly uses up some goods and services and/or requires time that would otherwise be used producing goods and services, so the redistribution actually *reduces* the average standard of living in practice.

> **Comments:**
> **username_3**: "but rather that tons of people are just plain out of work entirely" - what happens to the work done by those people? They were providing something that people wanted, right? Who does that thing now, or does it not get done?  
> **username_12**: In many cases, the work does not get done. Either the work is postponed, or the association of people that had planned to do the work ceases to exist because it can no longer afford the fixed costs of existence.  
> **username_11**: @user253751 Yes, what Damian said. For the most part, the work is either not being done at all or is being delayed. The goods and services are not being produced, as many people currently waiting on overdue shipments or who have had their travel plans cancelled can presently attest.  
> **username_0**: But during the pandemic, the average standard of living will decline anyway even if the exact same level of goods and services are produced and consumed, because a lot of people will die in the process. The question is why we can't just let the market decide what level of production and consumption is appropriate instead of the government either (a) forcing people to stay off work then they don't want to or (b) forcing people back to work when they would rather self-isolate  
> **username_11**: @Andy At least in the U.S., I'm not aware of any instances of the government forcing anyone to work when they would prefer to self-isolate. When people say stuff like "we need to get the economy moving again," they're talking about removing the government restrictions that require certain types of businesses to close, not forcing any to open that don't want to. Also, "standard of living" is defined in terms of the goods and services available to someone. Certainly, a disease reduces _quality of life_, but it doesn't really reduce "standard of living," per se.  
> **username_11**: @Andy Forcing people out of their job, on the other hand, definitely does reduce standard of living. Of course, people dying obviously does decrease economic output, but we're talking about 0.03% of the population vs. about 20% that was forced out of their jobs at the height of the shutdown.  
> **username_3**: @reirab Everyone is forced to work *by default* in our current economic system. He who does not work does not eat. The government doesn't need to see to that.  

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### Answer by username_8 on 2020-06-03. Score: 5

In addition to the +1 answer of @KennyLJ which corrects the misconception beteen money and value, let me address the question in your last paragraph directly. Even if we could assume for a sake of the argument that we can manage to perfectly redistribute all income from people and businesses who are still able to operate and produce value (such as netflix, amazon etc.) we would still have a problem even if only non-esential people are out of work.

First as KennyLJ pointed out, its not about money but creating value through production and GDP is just a way how to track that value. Not producing new goods and services does not just mean that GDP wont increase it actively shrinks the GDP as people still even non-essential workers have to consume some of the output but now there is much less people to actually produce it.

As the data from [U.S Bureau of Economic Analysis](https://www.bea.gov/news/2020/gross-domestic-product-1st-quarter-2020-advance-estimate#:~:text=Real%20gross%20domestic%20product%20(GDP,real%20GDP%20increased%202.1%20percent.) show just in the first quarter the US economy shrunk by $5\%$. Now probably not all of this decrease can be attributed to lockdown but comparing it to the Sweeden (not necessary most accurate comparison as countries differ in many ways but best that can be done given the data) which did not locked down and had a GDP decrease of only [$0.3\%$](https://www.scb.se/en/finding-statistics/statistics-by-subject-area/national-accounts/national-accounts/national-accounts-quarterly-and-annual-estimates/pong/statistical-news/national-accounts-first-quarter-2020/) would suggest that large portion of this can be attributed to the lock-down (although again a more serious econometric analysis would be warranted here but its not unreasonable to interpret data in this way)

[![enter image description here](https://i.sstatic.net/vrWzr.png)](https://i.sstatic.net/vrWzr.png)

Furthermore, the projections for US for 2nd quarter are even grimmer. According to [Fed Atlanta](https://www.frbatlanta.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf) the economy will not drop just by single digits. Even if the GDP per capita would on average only shrink by $5\%$ per a quarter of lock-down it would take only few years to reduce the current US GDP per capita from its current level of about $\$65000$ per capita to a level of developing country. To be more specific, with assumption of $5\%$ negative growth per quarter it would only take 10 years to reduce the $\$65000$ GDP per capita to about $\$8350$ bringing US to the lower level than Bhutan or Morocco. So even if it would be possible to have a perfect redistribution at no cost which manages to give everyone the average GDP per capita it would have some serious consequences. Even though, economy would not be falling forever and would eventually stabilize at some lower level given by the potential output under the constraints created by lockdown the projections from Fed Atlanta show that US economy has long way to fall and this seems to hold for most other countries as well. Moreover, lockdown could also have some genuine dynamic effects since prolonged lockdown will probably have some negative impact on human psychology, worse school outcomes that will determine life-long earning potential of kids and so on.

This will eventually even cost lives. Its not an accident that most medical research and medical spending occurs in the world's richest economies and not in the poorest. At some point even if we would only care about human lives with absolutely no regard to what happens to society and what will the quality of that human life be then at some point more lives will be lost just due to economic impact because governments and people wont be able to afford healthcare at the same level as before (in some less developed countries lock-downs even lead to [worse food security](https://www.theguardian.com/global-development/2020/apr/21/millions-hang-by-a-thread-extreme-global-hunger-compounded-by-covid-19-coronavirus) via the effect it has on employment).

Furthermore, I am not a biologist but as far as I understand the point of lockdown was to [flatten the curve](https://www.livescience.com/coronavirus-flatten-the-curve.html). That means that at the beginning of the lockdown the value of saved lives through the flattening of the curve might be extremely high but at a some point lockdowns value diminishes even if pandemic still rages on as the curve will already be flat - at that point you are just maybe saving few lives at extreme economic cost. Of course, economics is a science not moral philosophy so we cannot as economists tell you if thats not enough of a moral justification to continue lockdown indifferently - but consequences would be grim. Furthermore, this post in itself should not be taken as an endorsement of opening at any particular present day. Maybe one more month of lock-down would be optimal maybe its already past its optimal point - thats something we will discover in future when the present lock-downs will be properly analyzed but an indefinite lock-down or even a lock-down lasting more than a year or so would do some serious damage.

> **Comments:**
> **username_14**: Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/108987/discussion-on-answer-by-1muflon1-why-do-we-need-to-get-the-economy-moving-again).  
> **username_3**: Sweden lost significantly more GDP after this comment was written. I believe they are now doing worse than New Zealand, which had one of the harshest lockdowns. So both countries are now reaping what they sowed.  
> **username_8**: @user253751 not they actually gained GDP (relative to that time) and overall they were doing better then even expected at time of writing this answer (see [here](https://www.reuters.com/article/sweden-economy/update-1-swedish-govt-sees-milder-downturn-in-2020-slower-growth-next-year-idINL8N2IW3EU), you are right thought that NZ is doing better because though it had much bigger hit to GDP in first half of 2020 it regain that quickly after they relaxed restrictions because they successfully flattened the curve - however, it is not clear that could have been done in the Europe, NZ is isolated  
> **username_8**: so it is not necessary good control group for Sweeden, also lockdowns are not just boolean values, it is not that the choice is between no lockdown or lockdown but between right mix of restrictions and allowing economy function.  

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### Answer by username_5 on 2020-06-17. Score: 2

A lot of the answers you've already received address questions like "what is the benefit to trade" or "why do we have specialization of labor." I think this is a little more basic than what you asked--I'm assuming you meant not 'why do we have an economy' but "why do we need to 'get the economy moving again' *right now*", rather than five (ten, twenty...) years down the road--i.e. what are the arguments for removing barriers to pre-disease economic activity as soon as possible and for providing incentives to "encourage" people back to work, who would rather wait until things are known to be safer. (You probably implicitly assume that the economy will 'get moving again' at some point--if it doesn't, then... well... it doesn't; I assume you aren't asking 'why should we go back to the status quo ante' and that you accept that returning spontaneously to the exact economic status from before the disease would require a very long time, if it happens at all).

First, let me point out: economics as a discipline is not about value judgments. It's about the production and distribution of goods under various policy regimes, and thus predicting the effects of policy decisions on same. Whether the effects are desirable or not is a political decision which requires assigning values outside the economic discipline.

So. Why *now*?

This answer has two parts: first, what are some predicted effects of **longer** shutdowns that might be avoided by **shorter** ones, and second, from a political (ie, non-economic) standpoint, what are some motivations for different parties that might motivate particular courses of action. The latter section will be more opinionated and controversial than the former, but I am including it because a) it's where the answer to your question actually lies, and b) part of what makes economics such a privileged discipline in our society is that economics-the-science is forever getting conflated with these sorts of political-philosophical issues; it's worthwhile making them explicit.

## Effects of Longer Shutdown

The biggest consequences of longer vs. shorter shutdowns can be summarized as **"loss of economic momentum."** You've already noted that shutdown blows a hole in tax revenues, constraining the agency of state and local governments and requiring federal government to take a more active redistribution role. The two remaining players are **workers** and **firms**.

* For **workers**, [the longer one is unemployed, the harder it is to find a new job](https://money.com/unemployment-is-really-low-so-why-cant-these-people-find-jobs/). (Yes, a pop source, but it's a decent summary). This comes down to two main factors: discrimination on the part of employers, and skills deterioration. In the present situation of ~15% unemployment, discrimination is less likely to be a factor. However, workers' skills will still be deteriorating, and the unemployed are being denied the opportunity for skills and career development, leading to increased competition with new graduates/young people entering the workforce. A big clog in the pipeline means a dearth of people at higher experience levels across the board in the future.
* For **firms**, it is much much easier to continue in an established business than to set up a new one. The longer businesses are shut down, the more reopening starts to resemble starting a brand-new business, with all of the corresponding challenges of getting yourself set up, finding workers to hire, making yourself known to customers, establishing relationships with suppliers, etc. This effect is particularly pronounced for small businesses, which do not have the name recognition, credit/cash reserves, or formalized supplier networks of larger firms. Think of your local family-owned auto repair shop: they have a glass supplier they trust, a parts supplier they know can get them something by tomorrow morning, claims adjusters they can point customers to; not to mention all the money they spent on ads to make people think of going to them. The longer they're shut down, the more their customers forget. The longer they're shut down, the more likely those partners go out of business, and now they can't offer the same quality service at the same prices. They may even lose key employees. This is one of the main points in the discussion of [u-shaped and v-shaped recoveries](https://www.forbes.com/sites/sarahhansen/2020/06/03/u-shape-v-shape-recovery-shapes-explained-and-what-they-mean-for-americas-economy/#6e71f02825a5)--the longer you're shut down, the harder it is to come back.

Other considerations:

* **Price instability** occurs as a knock-on effect of the above. Modern supply chains are extended and bizarre, and as firms collapse, the distribution of goods starts to break down in unpredictable ways. A lot of this disruption is probably temporary, but our assumptions about the availability of goods can become dangerously wrong. Effects can be felt at a distance in ways we can't predict: the closure of meat-packing plants leads to culling of animals on farms, meaning that farm animal production is down; what if this means that once a vaccine is available, there are shortages of animal-derived amino acids, gelatins, etc. that prevent production?
* **Financial networks** are also complicated. When people or firms can't pay their rent, landlords can't afford to pay their mortgages; then banks start having cash flow issues, etc. Now, the 2008-2009 crisis demonstrated clearly the federal government's ability and willingness to make the financial sector whole, so this is more a concern of political will than inevitability; but if we assume no government intervention--intervention being a policy choice many economists are unhappy with on principle--the consequences could be a breakdown in the credit system that inhibits new firm formation even after the crisis has passed.

The desirability of the above varies depending on where you're standing. Maybe you think decreased overall economic output is good for environmental reasons. Maybe you're an established player in an industry and think extra headwinds for the smaller firms you compete with are great news. Maybe you're looking forward to high unemployment so you can cut employee wages. That's all outside the scope of the economic question.

Further, while some of the above issues might be avoided by reopening faster, these consequences I've described are all also predictable results of having to shut down again or having large parts of the workforce die from coronavirus. It is no secret that minimization of or indifference to the risks of coronavirus is correlated with politically conservative views; many economists tend to share a more politically conservative outlook, particularly those who are disinclined to care about disciplines or considerations outside of economics. Thus a lot of the predictions from economists assume "reopening sooner than later, and nothing bad happens"--taking it for granted that the health risks have actually passed, and the only variable is the one we actually control (choosing to reopen). Even regardless of possible personal bias, that assumption is sort of baked into the question. The consequences of "reopening, only to shut down again after renewed viral spread" would probably be the same types as staying closed longer, but worse (because it gets dragged out even more). Which one is true? *We just don't know,* and the answers to that come from epidemiologists, not economists.

Final point: the consequences above can be addressed by government intervention: adjustment of financial contracts to share the burden of lost income, expanded public-sector employment opportunities and jobs training for workers, insurance programs, contracts, and incentive programs for smaller and new firms, direct spending to initiate cycles of economic growth... Due to political or other considerations, economists vary in their support of such measures, but from 1941-1945 the US government seized the lion's share of the country's GDP *literally to go blow it up* and the result was the largest period of sustained economic growth in the country's history, so there's certainly historical precedent that we can find non-traditional, non-laissez-faire ways to solve practical problems in the production and distribution of real goods over the medium term of a few years.

## Qui Bono, or "Who's 'We'"?

The other question you've implicitly asked is who the "we" is that needs to 'get the economy moving again.' Whose interests does it serve? I once again stress that balancing the interests of competing groups in society is a *political* not an *economic* decision. Indeed, most basic (introductory-undergrad-level) economics explicitly does not consider competing interests or varying wealth distributions among different social groups, instead using [representative agent](https://en.wikipedia.org/wiki/Representative_agent) models that assume uniformity among consumers, firms, etc. So let's look at who those groups might be and what their motivations might be.

* **Workers:** Well, [most Americans still want to move more slowly](https://www.washingtonpost.com/politics/2020/05/20/most-americans-and-most-republicans-still-want-move-slowly-reopening-country/). Polling is complicated; people differ in their levels of desperation, indifference to or awareness of individual & group risks, etc. I'm sure you can imagine that there's diverse opinion. I'll point out a structural feature though: most workers disemployed by the shutdown can tolerate continued closure only while government support (money and rent/loan repayment freezes) are in effect. As more and more workers rejoin the workforce due to reopening (or are forced to take dangerous essential jobs because they need the money, or...) the collective interests of workers become more fractured, which will erode the political support for the measures that let people stay home, which will force more back to work... etc. [It is in the interest of those who want to stay home to make that preference as widespread as possible.](https://en.wikipedia.org/wiki/Solidarity)
* **Consumers:** Obviously many people wish they could consume things that aren't currently available. Maybe Kate wants her haircut, even if that means half her neighborhood (or, let's be honest, [not *her* neighborhood](https://en.wikipedia.org/wiki/Racial_segregation_in_the_United_States)) catches coronavirus as a result. But overall, the same polls cited above still apply, since workers are consumers.
* **State and Local Governments:** In addition to the generic tax revenue issue you mentioned, there's also the problem that [states are running out of unemployment money](https://www.cnn.com/2020/04/15/politics/unemployment-benefits-state-trust-funds/index.html) (that article's from mid-April, so the situation has only gotten worse). States, unlike the federal government, actually have to pay their debts. This would be fixable with money from the feds, but given the ongoing lack of federal support, it is obviously in states' interests to promote a return to work; if workers die, all the better, one fewer unemployment check to pay.
* **Small firms:** As I mentioned, they are most vulnerable to closure due to longer downturns. They are also struggling because [relief nominally intended for them was snapped up by other parties](https://www.cbsnews.com/news/paycheck-protection-program-small-businesses-large-companies-coroanvirus/) and because [massively-underpaid service work is extremely difficult to hire for when there are more generous unemployment benefits at no risk of infecting your family with coronavirus](https://www.npr.org/2020/04/21/838879361/bitter-taste-for-coffee-shop-owner-as-new-600-jobless-benefit-closed-her-busines)
* **Renters:** are doing all right, given the widespread eviction freezes and rent pauses. Same goes for **[student debtors](https://studentaid.gov/announcements-events/coronavirus)**. Of course, this is going to explode in six months when all that back rent is due. But that's a problem for another day.
* **Landlords/Rentiers:** are taking a bath right now, because of the eviction freezes and rent pauses. They haven't, on the whole, been getting the same level of government support that renters have. And they are definitely worried about that 'problem for another day' of a bunch of unemployed people not able to pay six months' back rent.
* **Large firms:** The Dow Jones Industrial Average is already back above where it was 12 months ago--Wall Street either believes that reopening will be successful, or that it doesn't matter anyway, because government supports for large industries will continue as needed. After all, the biggest targeted federal government intervention to promote production during the crisis has been to [free owners of liability for worker harms in meat-packing plants](https://www.reuters.com/article/us-health-coronavirus-trump-liability/trump-orders-u-s-meat-processing-plants-to-stay-open-despite-coronavirus-fears-idUSKCN22A2OB). Larger firms are taking this opportunity to use bankruptcy to get out of debts and unfavorable contracts, and probably see it as a good opportunity to consolidate market position by replacing the smaller firms that are getting hit harder. That's not to say there aren't some large firms that are really hurting, but we have seen plenty of political will to support e.g. the airline industry in the past and there's little reason to think that won't continue.
* **Psychological need:** The coronavirus has meant a huge alteration in people's ability to plan for the future and control their lives. This is extremely uncomfortable for many. People naturally want to feel in control, and reopening--returning to the appearance of normalcy and comfortable daily patterns--can help many to feel like the crisis is over and they are in control of their lives again. There's also just the sheer *boredom* with the current state of affairs: many people are just simply impatient. Unfortunately, epidemiology does not care about your feelings; but it is my personal observation that a desire for control in one's personal life and a lived experience of substantial control over one's life (e.g., being personally well off, or usually employed in a supervisory role) correlate to a tendency both to minimize the risks posed by the virus and to promote reopening despite whatever risks are acknowledged. I am not aware of any formal work done on this and it is (obviously) not an economic consideration, but it's an undercurrent in the public conversation.
* **"Winners":** The longer mass unemployment is the norm, the more entrenched things like rent relief and student loan debt relief will become. There are economic arguments about the sanctity of paying debts in order to create trust in the credit markets, but ultimately this concern is about the relative power of debtors and creditors (and renters vs rentiers, those who collect gains by virtue not of productive actions but by owning property). The stock market and financial industry don't seem too concerned right now, but as with the small-business-hiring issue above, you are already seeing a shift in the balance of power between labor and owners, between renters and landlords, between debtors and creditors. The longer that continues, the more it normalizes ideas like universal basic income and dramatic rent and student-debt reforms, which would not be in the interests of [people whose income is chiefly derived from large current wealth and wealth inequality](https://en.wikipedia.org/wiki/Economic_rent). Given, among many other examples, the [privileged position unearned income has in the US tax code](https://www.cbpp.org/research/federal-tax/substantial-income-of-wealthy-households-escapes-annual-taxation-or-enjoys), it seems credible to believe that the interests of the wealthy are disproportionately represented by the same government figures that are pushing for a return to work.

## Summary

Ultimately, you're asking why reopening needs to happen now. There are real economic consequences to a prolonged shutdown which are probably undesirable from most perspectives/value systems. However, it is not at all clear that rapid reopening solves the issue--there is a substantial risk of prolonged and worse economic impacts due to viral resurgence. To truly answer your question, we have to look outside the discipline of economics to consider the interests of different impacted parties, and how those interests are represented in our society, public culture/media discourse, and decision-making mechanisms.

> **Comments:**
> **username_3**: Well, we've now seen the consequences of "reopening, only to shut down again after renewed viral spread" in just about every country that's not a Pacific island.  

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### Answer by username_15 on 2020-06-04. Score: 2

Capitalism is predicated on an expanding economy. When Mr. Moneybags goes to market, he exchanges his money ($M$) for the commodity of labor ($C$). He employs this labor to create further commodities, which he then sells for some amount of money ($M'$). This process only makes sense if $M' > M$. Since $M'$ is collected at a later date than $M$ is launched into circulation, this means that value has to increase with time. Thus, the whole system of capitalism (the selling of labor on the open market for a wage) requires the economy to grow so that capitalists can expect $M ' - M$ (their profits) to be a positive quantity.

If there is no growth, then $M' - M$ will on average be a negative quantity and it will no longer make sense to hire labor, which will throw the system into crisis. There will be a surplus of unused capital and raw materaials and a surplus of labor but no way to bring them together productively because the profit incentive has vanished.

> **Comments:**
> **username_15**: Why was I downvoted?  
> **username_16**: "Added value" (in Marxist terminology) is not growth. Capitalism still works and people still produce (and consume) value even in a shrinking economy. Well, it isn't a pleasant experience, because everyone has less and less goods and services to consume, but something is still produced and consumed. (No, I didn't downvote, but your answer is "not even wrong")  
> **username_1**: @fraxinus If GDP shrinks proportionally with population but GDP per capita remains the same, then such a steady-state economy must not necessarily be unpleasant if it is a wealthy society to begin with.  When will we ever [have enough](https://politics.stackexchange.com/q/135/130)?  
> **username_1**: @fraxinus The question is not asking "why do we need economic growth" (or it would be a duplicate of the linked question on Politics.SE).  It is asking "why do we need to get the economy moving again".  Added value is not growth, but it *is* movement.  
> **username_17**: @gerrit the question is asking about a situation in which "shrinking economy" implies lowered GDP per capita, so I don't think your comments apply here.  
> **username_15**: @fraxinus You're right. Labor does always add value to raw materials. But the market isn't always ready to absorb the commodities that labor produces. This happens, for example, in a shrinking economy where there are fewer, less consumptive consumers (in a shrinking economy it makes more sense to hold money than to spend money). Because capitalists can't sell their surplus goods, they lose money on their investment in labor. It doesn't take long for them to realize that labor is a bad investment, resulting in declining production.  
> **username_15**: So, as I said, you have surplus capital (left over from the period of overproduction) and surplus labor, but no way to bring them together in socially useful production. This is a pretty standard account of capitalism's tendency to overproduce and the crises that result. I don't know where you got the idea that I'm "not even wrong."  
> **username_14**: Comments are not for extended discussion; this conversation has been [moved to chat](https://chat.stackexchange.com/rooms/108988/discussion-on-answer-by-charles-hudgins-why-do-we-need-to-get-the-economy-movin).  

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### Answer by username_18 on 2020-06-05. Score: 2

What your example doesn't include is the relative ability of each person to provide a needed product or service. If we expand your example this becomes clearer:

Kate spends 50 USD on a meal which takes Alice 30 minutes to produce. Kate can produce that same meal in 1 hour. Alice spends 50 USD on a haircut from Kate which takes 30 minutes. Alice can cut hair in 1 hour.

If Kate and Alice trade, then Kate can produce 2 haircuts per hour (produced herself) or 2 meals per hour (by trading 2 haircuts for 2 meals). Similarly, Alice can produce 2 meals per hour (produced herself) or 2 haircuts per hour (by trading 2 meals for 2 haircuts).

If they do not trade, then each party can still afford *their own products* at the same rate. Kate can afford 2 haircuts per hour (produced herself) and Alice can afford 2 meals per hour (produced herself). However, their efficiency drops substantially for the traded-for product. Now, Kate can only produce 1 meal per hour and Alice can only produce 1 haircut per hour. Overall, after producing both meals and haircuts, both parties are worse off than if they had traded.

When these contrived examples are expanded to include the full basket of goods and services that each person needs/wants, then the effect becomes obvious. For example, would you be able to produce as much if you had to provide *every* product and service yourself (manufacture your own car, produce your own petrol, grow your own vegetables, farm your own animals, produce your own household goods, provide your own medical care, fix your own teeth, etc. etc.)? Clearly you are far more efficient specialising in a narrow range of fields, and then trading your product for those who have specialised in other areas.


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### Answer by username_19 on 2020-06-04. Score: 1

**Short Answer:** We need to 'get the economy moving again' because at this point in human history it is the only means we have of not sinking more societies into a state of civil war.

**Long answer:** We don't need to 'get the economy moving again' necessarily, because 'the economy' that will be made to move again will not be exactly the same as the pre-covid economy because people's value systems will have changed during the years it takes to stabilize ourselves into what we consider to be 'normal'. Restaurant meals and haircut salons will not have the same meaning in a few years as they once did when society-ending pandemics were not on the radar except in science-fiction. In fact, there is currently a huge push into the food sector because Big Money has realized that food is the only thing left when everything falls down, including housing.

Many people assume that ‘the economy’ is a functional entity with clear mechanisms that make it possible for individuals to live decently, and that the flow of ressources, values and expenditures can be measured with indicators such as the Gross Domestic Product (GDP). This is false, and anyone who claims to understand ‘the economy’ is only momentarily ignoring part of the picture in order to arrange a small other part of it into a sensible argument.

The fact that a restaurant can serve a 50$ meal is made possible by banks and government propping up the sectors of energy, transport, agriculture and real estate. People during covid are thinking that being healthy of body and mind has more value than eating out at the restaurant, and that shift is much too big and fast for ‘the economy’ to react in an organized manner.

Enough research and criticism exists about things like the **GDP**, **True Cost Accounting**, **Time Banking** and **speculation**, to consider that there are many different ways ‘the economy’ could function.

**Why GDP fails as a measure of well-being**
*-CBS News, 2016*
<https://www.cbsnews.com/news/why-gdp-fails-as-a-measure-of-well-being/#:~:text=The%20textbooks%20generally%20point%20out,and%20requires%20rebuilding%2C%20GDP%20increases.&text=GDP%20only%20counts%20goods%20that,production%20and%20black%20market%20activity.>


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