Economic Expert
QUARTERLY REPORT THE COVID-19 ECONOMY
–By Stan V. Smith, Ph.D. and Kyle Lauterhahn
Glittering lights are turned off on the Vegas strip, Broadway stages
are silent in New York, Michelin-starred restaurants are serving takeout in Chicago, and across America arenas and stadiums are empty of fans. Due to social distancing to slow the spread of COVID-19 economic activity is falling at a pace never seen. Economists define a recession as two or more consecutive quarters of negative growth in economic activity. We are in a recession and this will be formally acknowledged at the end of June by the National Bureau of Economic Research. Away from the ivory towers of economists, as of today in the real world 22 Million Americans filed for unemployment in only four weeks. The value of the stock market has fallen by one third. Over half a million Americans have fallen ill. Over 30,000 Americans have died of COVID-19, and the Institutes for Health Metrics and Evaluation at the University of Washington, with one of the more trusted statistical models, is projecting over 70,000 deaths by the beginning of August. Behind these sobering statistics there is real hardship. I am certain that many readers are feeling financial stress over reduced income, decreased stock market value, as well as considerable uncertainty for you and your family’s health. Millions of Americans are staying at home meaning that they are not producing or consuming as much as they would in normal times. Many Americans are attempting to work remotely or attend school from home, but millions of Americans in the manufacturing Vegas Legal Magazine Spring 2020 | Pg. 12
and retail industries cannot work from home. The pork, beef, and chicken processers are warning of severe disruption to the supply chain and some major plants have closed nationwide. Additionally, productivity while working from home can be impaired by the need to watch children kept home from school, the relative inefficiency of meeting electronically, or simply the stress of a pandemic endangering the health of yourself and your family. The Value of Saving a Life With this magnitude of economic disruption why is our nation and the world taking drastic steps of “social distancing” to forestall the spread of COVID-19 and will there be any economic benefit? As I have testified, in courts in Nevada and around the country, human lives have significant value beyond the value of earnings capacity. For decades economists have studied what we, as a society, actually pay to preserve the ability to lead a normal life. Studies show we value life beyond our ability to work in the range of $5 million or more. The Nevada Supreme Court unanimously accepted testimony on what I call “hedonic damages” in the case of Banks v. Sunrise 120 Nev. 822, 102 P.3d 52. Economists at the University of Chicago have recently published research on the economic benefits of social distancing and the avoided deaths due to COVID-19. Using data on the value of a statistical life (VSL) which is standard practice in developing
