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What can we and the government do to achieve the best outcome in this COVID-19 crisis?


Via Montenapoleone, Milan’s foremost shopping district, now empty (Photo by Nicolò Campo/LightRocket via Getty Images).

Synthesis

We are going through a strange, rocky, and unprecedented period that could have serious ramifications for the US and for the world for years to come. How serious those ramifications are will depend on the government’s response to this crisis and how effective it is. 

The big dilemma that faces the government now is whether to reopen the country soon or not. In terms of health, this would be he worst avenue to take. Experts say that the number of infections will be the same whether we impose and keep preventative measures or not, but the amount of cases at once, the size of the outbreak, will be smaller and more spread out if they are imposed, meaning that hospitals will not be completely overwhelmed, and therefore less people will die from lack of appropriate care. This is called ¨Flattening the Curve” and is illustrated by the well-traveled chart below:

This Version is from the University of Michigan’s department of Medicine (Gavin)

So, in terms of fighting the outbreak, this is the best option. 

However, there are two sides to this story. While stay-at-home measures may prove the solution to the outbreak, they are just the opposite for the economy, plunging it deeper and deeper into recession. For the economy, the best way to deal with the virus would be the quickest, which would involve no preventative measures and many more deaths.However, one must also take into account the effects of this recession. According to CNN, 22 million people have already filed for unemployment, and that number is sure to keep going up as long as these measures stay in place (Tappe and Luhby).

Daily chart - The coronavirus has pushed 3.3m American workers ...

This graph shows the spike in unemployment in the week of March 21st (The Economist).

Businesses that rely on types of contact that the virus pounces upon are being heavily affected, and state and federal governments are losing billions, if not trillions in tax revenue (Lempinen). As businesses close and people fall into poverty, not only are their current lives and fights against the virus hampered, but their future as well. When this ends, jobs will surely be harder to find, and the country will continue in its recession. Such economic situations lead to rises in many other dangers, such as violence, hunger, lack of access to healthcare, and many others, all which kill people themselves. The longer these measures stay in place, the worse the effects are.  However, as Dr. Anthony Fauci warned, lifting the preventative measures could not only cause more deaths, but cause another outbreak, in which case this dilemma would play out again(Holpuch).  

For more on Dr. Fauci’s recommendations, press here for an article about it in The Guardian.

For more on the possible impacts of the COVID-19 Virus on the economy, press here for a UC Berkeley article or here for an in-depth look by McKinsey & Company.

Therefore, it may seem an impossible trade-off between the remedy for the outbreak, and for the economy. But in reality, one affects the other: it is not a trade-off, but a delicate balance, one that is yet to be found.

There is one last part to this project. While the government may make one choice or another, the different players that are affected by those choices will make their own decisions to survive. These players are the businesses affected by the crisis, their employees, and the consumers, or the rest of the population (not counting essential workers). These groups will react in the way that’s best for themselves, and this may contradict what’s best for others.  Therefore, while theoretically one choice by the government might be good or not, the actions of the people and businesses involved will gravely affect the success of any government decision. This project aims to understand how the effectiveness of the government response will be affected, and what actions will lead to the best outcome for everybody. 

Health Worker confronts anti-Social Distancing protests in Denver, Colorado (McClaran).

Response, For Now

According to my model, the outcome of this crisis, if we all do what’s best for ourselves, will be the best outcome available, in societal terms. It entails the government enforcing closures and social distancing measures, Businesses not laying off their employers, employees not going to work, and everyone else staying at home. You might notice that this is very similar, if not identical to what is going on in most places. This shows that, all things considered, what most of us are doing right now is what we should be doing, which I find comforting.

How I arrived at this solution:

I found this solution using Game Theory, the discipline I have been learning for these past few months. I modeled this situation in what’s called an extensive-form game, which looks like a family tree:

 

The circle represents one player, the square the other, and the branches the strategies they can choose. I had 4 players in my game: The government at the top, then Businesses, then employees, then consumers. The strategies were:

Government:
A-Focus budget on providing help for businesses to keep paying employees, in the form of tax cuts, interest-free loans, and other proposed measures, and also to stimulate the economy when the preventive measures are discontinued, as increase spending on unemployment benefits, but leaving the country in quarantine and enforcing closures. This means reducing spending on healthcare.

B-Begin reopening the country, discontinuing social distancing and other protective measures. 

 

Businesses: 

A-Continue paying workers, open or not, and employing them while still open. 

B-Close and Layoff or stop paying employees

 

Employees:

A-Keep going to work unless laid off or businesses close, but stay home otherwise and only go out to buy essentials

B-Stop going to work, even if not laid off, and stay home, but still go outside to buy essentials. In this case, if they are not laid off and stop going to work, they will be fired.



Consumers: 

A-Stay home as much as possible, keeping with the current social distancing measures. 

B-Act as if nothing was going on: Go out to buy food, meet with others, etc.





Every combination of strategies gives the players a payoff, at the end of each branch. These payoffs come in the form of a number, in this case from -100 to 100, and in my game were formatted in the following manner: (Consumer, Employee, Business, Government). These payoffs reflect how good or bad the outcome was for each player. They were determined using the following tables:

Government: 

 

Factor

Payoff

Businesses maintain revenue close to usual

+20

Nobody left without full income 

+40

No preventable deaths 

+40

Preventable deaths

-20 if Government plays strategy A, -10 if Government plays strategy B

Businesses lose some of revenue but survive

+10

Businesses are affected by the crisis

-15

People left without income, but with unemployment benefits

-10

Extreme amount of preventable deaths

-40 if government pays strategy A, -30 if government plays strategy B

People left without any income

-30

Many Businesses go bankrupt or are heavily affected by crisis.

-30 if government plays strategy A, -40 if government plays strategy B

Total

 

 

Businesses:

 

Factor

Payoff

Maintain revenue close to usual and survive crisis

+90

Lose revenue but survive without having to take up debt or engage in cost-cutting tactics

+40if government plays strategy A, +30 if government plays strategy B

Don’t lay off workers

10

People left with reduced income

-15

Many preventable deaths/people left in poverty 

-30 if government plays strategy A, -20 if government plays strategy B

Lose most of revenue but survive

-20if government plays strategy A, -30 if government plays strategy B

Have to lay off workers

-10

Extreme amount of deaths/ people left in poverty

-60

Many businesses go bankrupt

-100 (all other negative payoffs nullified if this happens)

Total

 



Employee:

Factor

Payoff

Keep full income

+50

Not exposed to virus

+40

Businesses somewhat affected by crisis, losing some of usual revenue meaning jobs will be somewhat harder to get

-5

Exposed to virus

-40if government plays strategy A, -30 if government plays strategy B

Businesses affected by crisis, losing a sizeable amount of revenue, meaning jobs will be hard to get

-15if government plays strategy A, -20 if government plays strategy B

Keep unemployment benefits

+20

Businesses survive as unscathed as possible

+10

Some Businesses go bankrupt, or are heavily affected, meaning jobs will be extremely hard to find

-25

No Income

-35

Total

 

 

Consumers:

 

Factor

Payoff

Not exposed to virus

+45

Have most things you need (food, essentials, etc.)

+45

Good quality of life (able to go out, walk, do things that are beneficial)

+10

Be exposed to Virus

-65if government plays strategy A, -50 if government plays strategy B

Not have some things you want

-10

Be missing essentials

-15

Not be able to have a good quality of life

-10


Based on what the different strategies cause, you add or subtract these numbers, until you are left with a total sum of all of the positive and negative effects of the combination of strategies, and this number is called a Utility. 

After combining all of this, my tree looked like this:

Payoffs formatted in the following manner: (Consumer, Employee, Business,Government)

 

 

Game Tree if Government picks A
Game Tree if Government picks B

This game can be solved using a method called Backwards Induction. This involves starting at the last player and working your way back to the top. In Game Theory, you can usually assume the players will be playing rationally, which means that they will pick the strategy that gives them the best outcome. The last player to pick the strategy in this game is the consumer. The payoff is formatted like this: (Consumer, Employee, Business,Government), so the consumer will be looking for the highest left-most number in each case. Looking at the whole game, we can see that the consumer will always have a better outcome if he plays strategy A, stay at home. Therefore, we can eliminate strategy B for him/her:

Now, the employee knows that whatever he/she picks, the consumer will always pick A. Therefore, effectively, the employee knows what payoff he/she will get for every strategy. Knowing that, the employee is looking at that second number, seeking to maximize it. It will pick the strategy that does that, then the business will follow the same process and then the government will have to make the first, and final choice. This is what the tree looks like at the end of that process:

 

As you can see, there is a tie between strategies A and B for the employee on the first side, and between business strategies A and B on the second picture, but since what we are seeking to find is what government decision works best, we can simplify the game to this:

 

The government, looking at the last number, will choose strategy A. So we have our solution: Government keeps the country closed, businesses do not lay off their employees, and everyone stays at home. If this happens, then consumers stay safe while having everything they need, employees stay safe while not losing their income and businesses survive.

This outcome is what is called a Pareto Optimal Outcome. This means that there are no outcomes in the game in which you can, relative to this outcome, raise the payoff of some of the players without hurting the payoffs of others. Both the consumers and the businesses have the opportunity of getting a higher payoff somewhere in the game, but, in a situation like this, a compromise is needed, and one that includes the employee’s and the Government´s best possible outcomes is a good one.

In addition, the Government’s payoff is a result of a combination of the fortunes of the other players, so it provides a holistic view of how the outcome will affect the country. The fact that it is the highest here shows that this is the best outcome. 

 

What does this mean?

This solution suggests that the government prioritizing public health and the COVID-19 response over the health of the economy is the best option, even considering the independent, selfish actions of each player.. Although, for the reasons discussed above this could be harmful, the risks of a prolonged outbreak are great not only for the health of people, but for the economy as well, as the longer this whole crisis takes, not just the preventative measures, the more the economy will suffer. Below are two charts, one of the stock market’s performance and the other of the COVID-19 cases in the US.

Cases in the United States (Porter).
S&P 500 from February 14th-March 24th (^GSPC).

These charts are from the exact same time period, and they show how the economy and the outbreak are closely related. As discussed above, experts like Dr. Fauci have warned that reopening the country too soon could lead to another spike in cases, which could cause what the chart above shows, and also cause an identical dilemma once again, the only difference being the greater amount of lives lost the second time around.

This response, as shown by real life experience, is far from perfect, and has and will lead to a lot of suffering. However, what the research, the experts, and the model tells us is that this is the best possible outcome for now, the best way to handle things, and that we should not open the country without the utmost confidence in our ability to control the virus (Gottlieb et al.). This is a severe crisis, and there’s no way to deal with it and survive unharmed, its too late for that now. Importantly, this is only a temporary response, a response for now. This situation is ever changing, and too complicated to prescribe one response for. As Ms. Márcia Prates Tavares, a UN economist who I interviewed stated, there will come a certain point when the effects of the virus, which will be diminishing after prolonged preventative measures, will be overtaken by the worsening effects of these measures on the economy, and in turn the effects of that. At that point,, the payoffs in this game would be different, and it would probably make sense to reopen the country. Hopefully, we do not have to reach this “lesser of two evils”situation, and we can reopen the country having successfully defeated the virus.

How does this matter for me?

We are these players. We are all at the very least consumers, and some of us or our parents may work for businesses that are affected by this crisis, and some of our parents may own such businesses. So this game shows what part you can play, what your role is to ensure this best outcome happens, but also can give you some insight into how to evaluate a situation and react if, as it very often is, people act irrationally, so you can keep yourself and those around you safe.

This game was applied very generally, I made and solved it thinking of the country as a whole. However, I think it requires a lot more specification to have any real importance. Every state in the US, even every city, is being affected differently so this game would be different for each one. This game also labored under many assumptions, and in real life there are many more variables that go into this, and this is an infinitely complicated model.

The truth is, there is no right answer. This is an extremely complicated situation, like no other, and we will come out very different from it, and there will always be regret from one person or another about how this transpired. This was a sort of “one size fits all” game, and I don’t expect it to be accepted as the sole and correct response to this crisis, but instead, I hope it gave you some insight into how our actions and those of others will affect us. The sharpest minds in the world are dedicating themselves to finding a viable response, and they are struggling, so you might think, “What am I supposed to do.” It’s easy to feel overwhelmed and powerless, but if all the people who are feeling this way unite, you will find that you are actually quite powerful: everybody’s feeling this way.

How can I get Involved?

Get involved. There are so many ways to do this, from donating to starting gofundmes to organizing online events to bring people together, or to raise awareness of the importance of complying to government regulations. This changes from person to person, so I turn it over to you: What are some ways that you have gotten involved in your community? Would you be willing to if you have not? What are you doing to keep yourself and those around you safe?

Try to get involved, but most importantly, stay safe and take care of yourself and others. If you have any opportunities for engagement that you would like to share, or be part of, please feel free to share.

Here are a few links related to COVID-19 Crisis initiatives:

Check gofundme.com for any projects that need help.

Click here for an article on how people have gotten involved in their communities.

Click here for the Global Shapers organization’s website, an organization that connects young people striving to make an impact throughout the world.

Although, by virtue of the mathematical nature of Game theory, our players only pick what’s best for them. Luckily, it worked in this model, but it won’t always. But you all have reason, compassion, and courage to do your part, thinking of yourselves and others. So be careful, be selfless, stay at home, pressure your leaders, be it your Student Council representative or the president of the United States to support this too!

 

 

 

If anyone has any questions, feel free to contact me at 22ftavares@unis.org

Did you take away anything relevant, anything that you’re going to apply to your life in any way, from this project? Please let me know!

 

 

Works Cited

Campo, Nicolò. Photograph of Via Monte Napoleone. Bloomberg Quint, www.bloombergquint.com/business/coronavirus-italy-s-recovery-will-be-driven-by-milan. Accessed 20 Apr. 2020.

“The Coronavirus Spike.” The Economist, 26 Mar. 2020, www.economist.com/graphic-detail/2020/03/26/the-coronavirus-has-pushed-33m-american-workers-onto-the-dole-in-a-week. Accessed 20 Apr. 2020. Chart.

Gavin, Kara. “Flattening the Curve for COVID-19: What Does It Mean and How Can You Help?” University of Michigan Health, U of Michigan, 11 Mar. 2020, healthblog.uofmhealth.org/wellness-prevention/flattening-curve-for-covid-19-what-does-it-mean-and-how-can-you-help. Accessed 11 Apr. 2020.

Gottlieb, Scott, et al. National Coronavirus Response A ROAD MAP TO REOPENING. American Enterprise Institute, www.aei.org/wp-content/uploads/2020/03/National-Coronavirus-Response-a-Road-Map-to-Recovering-2.pdf. Accessed 20 Apr. 2020.

“^GSPC.” Yahoo Finance, 24 Mar. 2020, https://finance.yahoo.com/quote/%5EGSPC?p=^GSPC. Accessed 20 Apr. 2020. Chart.

Holpuch, Amanda. “Fauci warns Covid-19 cases could surge if stay-home orders lifted too quickly.” The Guardian, 20 Apr. 2020, www.theguardian.com/us-news/2020/apr/20/fauci-coronavirus-covid-19-stay-home. Accessed 20 Apr. 2020.

Lempinen, Edward. “COVID-19: Economic impact, human solutions.” UC Berkeley News, 10 Apr. 2020, news.berkeley.edu/2020/04/10/covid-19-economic-impact-human-solutions/. Accessed 11 Apr. 2020.

McClaran, Alyson. Healthcare workers stand in the street as a counter-protest to those demanding the stay-at-home order be lifted in Denver. 20 Apr. 2020. The Guardian, www.theguardian.com/artanddesign/2020/apr/20/photograph-healthcare-workers-confronted-anti-lockdown-protesters-denver. Accessed 21 Apr. 2020.

Porter, Tom. “The US is well on the way to having a coronavirus outbreak worse than China’s or even Italy’s.” Business Insider, 26 march 2020, www.businessinsider.com/figures-show-us-soon-coronavirus-worse-china-2020-3. Accessed 20 Apr. 2020.

Prates Tavares, Márcia. Interview. 12 Apr. 2020.

Tappe, Anneken, and Tami Luhby. “22 million Americans have filed for unemployment benefits in the last four weeks.” CNN, 16 Apr. 2020, www.cnn.com/2020/04/16/economy/unemployment-benefits-coronavirus/index.html. Accessed 20 Apr. 2020.

 

Sources Consulted

Domm, Patti. “Economists say US in short deep recession, but consumers expected to keep spending despite job losses.” CNBC, 10 apri 2020, www.cnbc.com/2020/04/10/economists-say-us-in-short-deep-recession-but-consumers-expected-to-keep-spending-despite-job-losses.html. Accessed 11 Apr. 2020.

Forgey, Quint. “Health officials bearish on Trump’s drive to re-open economy by May.” Politico, 10 Apr. 2020, www.politico.com/news/2020/04/10/surgeon-general-country-not-open-may-1-178790. Accessed 11 Apr. 2020.

Rushe, Dominic, and Michael Sainato. “US unemployment rises 6.6m in a week as coronavirus takes its toll.” The Guardian, 9 apri 2020, www.theguardian.com/business/2020/apr/09/us-unemployment-filings-coronavirus. Accessed 11 Apr. 2020.

“United States Coronavirus Cases.” Worldometer, 11 april 2020, www.worldometers.info/coronavirus/country/us/. Accessed 11 Apr. 2020.

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COMMENTS: 2
  1. April 25, 2020 by Camille

    Hi Felipe! Wow! This project has really come along! I can tell you have put a lot of time into thinking out each of your players and their strategies and outcomes. You also included a lot of relevance into the game you created for our class, examining what the issue is and how it affects ALL of us, showing how we adhere by your advice and take note of what you have discovered in this project. I think the go fund me pages are a really good recommendation, as I know a lot of small businesses near me have started creating pages for themselves, a couple of which I have donated to or might donate to now, after reading your page! This is really impressive work and it really shows you have a good understanding of game theory and its relevance in the world, especially in a time like right now. Great job!

  2. April 26, 2020 by Cadie

    This was a really interesting project! I like the idea that we need to balance the economy and the outbreak’s needs which are contradicting. I love how you used game strategy to deduct the best way to balance these two things. I agree with the results of the best choice for the government is to prioritize the outbreak despite individuals free will to disobey and disrupt the progress of it, it is still the most productive way to insure the best for the economy and the outbreak.

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