Fathom’s Recovery Watch Chart 28.10.2020: The shifting relationship between health and the economy

According to standard economic theory, there exists a short-run trade-off between unemployment and inflation (such that scarcity of resources can lead to higher prices) but no such relationship exists in the long run (i.e. persistently higher inflation does not result in permanently lower unemployment). In a recent blog post, Oxford professor Simon Wren-Lewis argued that there is a similar relationship between the epidemiological and economic impacts of COVID-19; in his view, the reproduction/R rate of the virus can only be lowered in the short run through lockdowns (which entail a substantial economic cost). The introduction of effective track and trace processes, social distancing and face coverings are all likely to improve outcomes by ‘shifting it to the left’ — (i.e. facilitating a lower R rate for a given hit to the economy or a better economic outcome for a given R rate). Either outcome would constitute a (Pareto) improvement relative to outcomes in the first half of 2020.

Refresh this chart in your browser | Edit the chart in Datastream

Register for Fathom’s upcoming event: Climate economics and the US election

29 October 2020 – 4:00pm GMT

Trump or Biden – what will this mean for the global climate outlook? Join Fathom and a guest speaker from Refinitiv, for a discussion on the differences between the policies of the two US presidential candidates, with respect to the climate. The event will cover the economic and financial market implications of their climate policies, for the US and the rest of the world.

Register here

________________________________________________________________________________________