Since the outbreak of COVID-19, scholars and journalists have turned their attention to the 1918 Spanish Flu, seeking lessons for the current pandemic. Correia, Luck, and Verner were among the first to publish research on the economic impact of public health interventions, finding:
“…cities that intervened earlier and more aggressively do not perform worse and, if anything, grow faster after the pandemic is over. Our findings thus indicate that NPIs [Non‐Pharmaceutical Interventions] not only lower mortality; they may also mitigate the adverse economic consequences of a pandemic.”
These finding apply to relatively limited NPIs – school closures, public gathering bans, and isolation and quarantine – rather than to current, stricter lockdowns. Nevertheless, the finding suggests that government‐mandated social distancing may have little lasting economic impact.
New evidence, however, weakens this claim. Lilley, Lilley, and Rinaldi write:
“Using data from 43 US cities, Correia, Luck, and Verner (2020) find that the 1918 Flu pandemic had strong negative effects on economic growth, but that Non Pharmaceutical Interventions (NPIs) mitigated these adverse economic effects. Their starting point is a striking positive correlation between 1914–1919 economic growth and the extent of NPIs adopted at the city level. We collect additional data which shows that those results are driven by population growth between 1910 to 1917, before the pandemic. We also extend their difference in differences analysis to earlier periods, and find that once we account for pre‐existing differential trends, the estimated effect of NPIs on economic growth are a noisy zero; we can neither rule out substantial positive nor negative effects of NPIs on employment growth.” (emphasis added)
The key lesson of the second paper is not that its conclusions are necessarily “more correct” than those in the initial work. Instead, the lesson is that economics (along with epidemiology and science broadly) proceed, mostly, in fits and starts rather than with one new paper settling an issue. Only when an initial result has survived replication, extension, and critical review from a broad audience does it suggest updating one’s view of the world.
This implies that designing and imposing major policy changes in a hurried or panicked fashion has serious potential to misfire. No matter how appealing new studies may appear, policymakers should exercise prudence before going all in on major policy decisions. Relatedly, trusting the diverse reactions and decisions of individuals, private companies, or at least lower levels of government may protect against overreaction based on incomplete and sometimes incorrect knowledge.