eichengreen140_CHANDAN KHANNAAFP via Getty Images_unemploymentpaperscoronavirusUS Chandan Khanna/AFP via Getty Images

The Human-Capital Costs of the Crisis

Unlike a hurricane or earthquake, the coronavirus pandemic has caused no damage to physical capital stock. But firm-specific skills have no value when the firm that uses them goes out of business, which is one reason why US productivity, wages, and economic growth are likely to be affected for years to come.

BERKELEY – US President Donald Trump tells us that once COVID-19 is contained and it is safe to go back to work, the economy will be “great again.” Is he right?

There is at least one reason to think he is. After all, unlike a hurricane or earthquake, the pandemic has caused no damage to the physical capital stock. It follows, Trump and his advisers argue, that we can pick up where we left off. The economy took a time-out, but now output will rebound swiftly to pre-crisis levels and growth will proceed as before.

We are even told that the economy will be stronger than ever. People who put off buying a car because it was unsafe to visit the dealership will do so now. Firms that have put expansion plans on hold will double down on investment. Baseball teams unable to play in the spring will schedule double-headers in the fall.

To continue reading, register now.

Subscribe now for unlimited access to everything PS has to offer.


As a registered user, you can enjoy more PS content every month – for free.