Defying Gravity: The Economic Effects of Social Distancing

Abstract

The COVID-19 pandemic has forced changes in production and especially in human interaction, with "social distancing" a standard prescription for slowing transmission of the disease. This paper examines the economic effects of social distancing at the aggregate level, weighing both the benefits and costs to prolonged distancing. Specifically we fashion a model of economic recovery when the productive capacity of factors of production is restricted by social distancing, building a system of equations where output growth and social distance changes are interdependent. The model attempts to show the complex interactions between output levels and social distancing, developing cycle paths for both variables. Ultimately, however, defying gravity via prolonged social distancing shows that a lower growth path is inevitable as a result.