As of the morning of March 31, 2020, the U.S. has 164,610 confirmed cases of Covid-19 and 3,170 deaths. These numbers are not evenly distributed across the country. The State of New York alone has 67,384 confirmed cases and 1,342 deaths,1
becoming the newest hotspot in the Covid-19 pandemic, following earlier hotspots such as the entire province of Hubei and particularly the city of Wuhan in China, Japan, South Korea, Iran, Italy and Spain.
As the newcomer to experiencing the ravages of this global outbreak, the U.S. should have the so-called “last-mover advantage.” We had more time to get ready for an outbreak, which many experts warned was inevitable, and we had precious lessons available from observing the experiences of other countries, lessons on what does or does not work in dealing with this virus. Unfortunately, it seems we did not make good use of the extra preparation time, judging by shortage of personal protective equipment for frontline medical workers (facemasks, gowns and face shields), the mishap related to the initial rollout of test kits, and our slow movement in ramping up the production of ventilators. The healthcare sector, government agencies in charge of public health, as well as individual citizens and businesses all appeared to be caught by surprise while they should not have been. Government regulations and red tape have interfered with and slowed the growing private sector response to these shortages, and our leaders have been slow to get these various regulations put aside in the face of this emergency.
Fortunately, we still have time to learn from other countries and to make better decisions moving forward. Among the countries that have been fighting Covid-19 before us, we focus on Japan and South Korea, two geographic neighbors of China. These two countries were the first to establish non-stop passenger flights to Wuhan, and they have maintained close business relations there. Although Japan and South Korea became the first Covid-19 hotspots after Hubei, both countries managed to bring their situations under control. As of the morning of March 31, 2020, Japan has 1,953 confirmed cases with 56 deaths, and South Korea has 9,786 confirmed cases with 162 deaths.2
In recent days, the number of new confirmed cases have declined and then stabilized at a low level, with fewer than 100 for Japan and about 100 for South Korea. The first graph below depicts the daily new cases for South Korea, until March 30, 2020, which can be compared to the next graph showing the U.S. experience.3
Daily New Cases in South Korea
Daily New Cases in the U.S.
Shutting Down Versus Opening Up
A Covid-19 response team at Imperial College London estimates that, under business as usual, about 2 million people would die from Covid-19 in the coming months in the U.S. The same study projected considerable life-saving benefits from interventions based on social distancing. Social distancing is primarily implemented through partially shutting down the economy by requiring much of the populace to stay at home, to work from home if possible, and generally to minimize physical interactions with individuals outside of their own household. Restaurants and entertainment venues are often closed or restricted to ‘take-out’ service, and certain other retail businesses have closed either by government edict or due to a lack of demand.
President Trump has repeatedly suggested that the U.S. may have gone too far in the containment effort and had hoped to end or modify some of the restrictions by Easter (April 12), although recently he extended the federal social distancing recommendations to April 30. Despite this, there is a policy debate regarding the trade-off between health outcomes and economic outcomes. Official data show that the economic costs, in terms of reduced output, from the extreme shutdown adopted in China were very large. There are also concerns about the human cost that accompany a widespread ban on market activities, and the cost from the suspension of civil liberties.
The experiences of Japan and South Korea seem to suggest that economic activity can continue during a Covid-19 outbreak. Neither Japan nor South Korea engaged in significant interventions in the economy except for closing schools. The “invisible hand” comes into play here. Informed about the benefits of social distancing, individuals and businesses will, in regard for their own self-interest, adjust the way they conduct economic activity during an outbreak by avoiding crowded marketplaces or letting employees work from home.
Even so, Japan’s factory activity experienced its sharpest contraction in nearly four years in February. Japan's economy was already faltering before coronavirus hit. Based on data from the International Monetary Fund (IMF), Japan had a real GDP growth rate of 0.9% in 2019 and the IMF had already projected a lower growth rate of only 0.5% for 2020. However, because Japan has not shut down economic activity to the degree that other countries have it may avoid the magnitude of GDP declines anticipated in other countries.
The OECD has estimated the potential initial declines in GDP. Their estimates are based on assumed reductions in output by industry and the composition of output by industry. The OECD estimates about a 24% decrease in South Korea GDP due to the initial wave of business shutdowns. This places South Korea at about the midpoint of their estimates. The OECD estimates an initial reduction in output for China of less than 20%, but for Spain and Germany they estimate reductions approaching 30%.
It is important to note that Japan and South Korea also adopted containment measures that seem to be missing in the U.S. For example, the use of facemasks has been universal in Japan since January, and South Korea’s aggressive testing and tracking has set a gold standard for the world.
Moreover, imposing a country-wide deadline for opening or shutting down in a country as large as the U.S. seems unwise, especially as the situation in New York grows ominously worse. For an outbreak hotspot like NYC, the shutdown may need to go on for weeks, if not months. For vast rural areas in the Midwest and other western states, on the other hand, it would seem that a government-mandated shutdown may be unnecessary if there are no significant local transmissions. The power of issuing mandated shutdowns is better left local authorities.
Finally, it seems clear that Covid-19 is much more dangerous to older persons and to persons with certain preexisting medical conditions. A more cost-effective approach might be to allow/facilitate self-isolation of the old and vulnerable, while not imposing such restrictions on the young and healthy. This would concentrate the costs where the benefits are also concentrated and allow the economy to continue to function.
Testing and Isolation
In the area of testing, the U.S. suffered widely-criticized slow start, an incident marred by a combination of missteps at the CDC and regulations restricting private companies from developing tests. Constraint by the testing capacity, we could not follow the ‘best practices’ on tracing and isolating the close contacts of those infected. It seems that the U.S. has finally caught up in this area. Tests are now performed at a faster rate than even South Korea, which partially explains the steeply climbing number of confirmed cases. The U.S. Food and Drug Administration has recently issued emergency-use authorization for a test made by Abbott that is able to deliver positive results in as few as five minutes and negative results in as little as 13 minutes.
However, the complaint about shortage of test kits continues, suggesting the need for a testing guideline to balance the increasing demand for testing and the limited supply. In finding such a balance, Japan and South Korea’s practices in this area, on the opposite extremes, may provide some useful references.
To economize scarce medical resources, Japan only tested patients with symptoms severe enough for hospitalization or vulnerable people due to old age or underlying diseases. The rationale is that there is no cure for Covid-19, so knowing the test results for patients with mild respiratory symptoms who are otherwise young and healthy would not make any difference. In contrast, South Korea tested as many people as possible, with or without symptoms. Importantly, South Korea did not stop at just knowing the test results, and the public health authorities there followed that up with aggressively isolating confirmed patients and tracing their close contacts, making good use of the test results.
The practices regarding testing for Covid-19 in Japan and South Korea, though on the opposite extreme, both illustrate the economics principle that the value of information lies in its potential to impact actions.
What lessons can we learn from successful practices in Japan and South Korea? On the one hand, we should prioritize testing for patients with symptoms consistent with Covid-19 or vulnerable people due to old age or underlining diseases, as Japan did. On the other hand, we should make good use of the test results by more proactively tracing and self-isolating close contacts of confirmed patients, as South Korea did.
The Use of Facemasks
Experts believe that Covid-19, a viral infection, is primarily spread by respiratory droplets that are transferred from person to person, rather than from infected surfaces or the environment. That is why the U.S. is practicing social distancing and the semi-lockdown, in order to protect the currently healthy from the infected. It seems that facemasks can also be used to protect the currently healthy from the infected. The widespread use of facemasks in China, Japan, South Korea and other Asian countries since the start of the pandemic has been credited by WHO and many experts with slowing the spread of the virus.
However, facemasks are seldom used in the U.S., partially because our government says they have no benefits unless you are a health worker. For instance, the CDC website says “If you are NOT sick: You do not need to wear a facemask unless you are caring for someone who is sick (and they are not able to wear a facemask). Facemasks may be in short supply and they should be saved for caregivers.” The US Surgeon General famously – or perhaps infamously – tweeted, “Seriously people- STOP BUYING MASKS! They are NOT effective in preventing general public from catching #Coronavirus, but if healthcare providers can’t get them to care for sick patients, it puts them and our communities at risk!”
The message from these official statements is twofold. First, only people infected with the virus and medical workers or caretakers helping them should wear a facemask. Second, facemasks are in short supply, and should be saved for medical workers who benefit more from using facemasks.
Some estimates suggest that 80% of those infected with the virus have mild or no symptoms. These people would not normally seek medical care or evaluation. There were incidents where people who showed up at ER facilities for car accidents or other medical emergencies and were found to have CT images consistent with those of patients infected with Covid-19, and evidence indicates that Covid-19 can even spread through asymptomatic individuals. Therefore, facemasks may or may not protect the wearer, but the point is that they protect others from the wearer. They protect the healthy from the unknown infected person who wears a facemask, and in that way work just as other social distancing measures are intended to work to protect the healthy from the infected.
It is understandable that here in the U.S. we may need to save all available masks, for the time being, for our doctors and nursing staff who are treating the sick. But it is not understandable that the U.S. government is basically ridiculing the use of masks as a public safety device, a device that would strengthen the benefits of social distancing and shelter-in-place policies.
Of course, a blanket national requirement that everyone wear a facemask outside their homes, like the one imposed in China, is neither feasible nor cost-effective for the U.S. But we should get the word out about the benefits of wearing facemasks so individuals can make informed decisions on how to best protect themselves. Another option to consider would be to require mass transit users to wear masks during this outbreak.
 Johns Hopkins University’s CSSE has updated information about Coronavirus Covid-19 Global Cases.
 Also from Johns Hopkins University’s CSSE.
 Both graphs are from https://www.worldometers.info/coronavirus/