Individual Choices and Government Intervention: How Much of Each is Needed in Response to COVID-19?
In “Modeling Behavioral Responses to COVID-19,” Cleveland Fed researchers show how a model that allows individuals to alter their behavior in response to the virus both changes the resulting forecast and informs our understanding of the appropriate policy response. The researchers find that when left to their own devices, individuals do curb their social activity in the face of risk, but not as much as a government planner would. Further, simulations suggest that government intervention may be particularly important in the middle and later stages of a pandemic.
“Building upon a standard epidemiological model in which the virus spreads randomly from meetings between susceptible and infected individuals, we allow people to choose the frequency of these meetings based on their own assessment of the risk involved. We show that such a framework diminishes, but does not eliminate the role for government intervention,” say the researchers. “While it is reasonable to suppose individuals wish to protect themselves from the potentially fatal consequences of the virus, they will likely not fully internalize the effect their actions have on others in society.”
Read the Economic Commentary.
Federal Reserve Bank of Cleveland
The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.
The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
Doug Campbell, email@example.com, 513.455.4479