NEW! – 10/24/20 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the economics of issues raised during the Final 2020 Presidential Debate.

Authors Glenn Hubbard and Tony O’Brien discuss the economic impacts of what was discussed in the final Presidental debate on 10/22/20. They discuss wide-ranging topics that were raised in the debate from reopening the economy & schools, decreasing participation of women in the workforce due to COVID, healthcare, environment, and general tax policy. Listen to gain economic context on these important items. Click HERE for the New York Times article discussed during the Podcast:

Just search Hubbard O’Brien Economics on Apple iTunes and subscribe!

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The Wall and the Bridge – an article from Glenn Hubbard in National Affairs.

Advances in technology and expanding international trade have disrupted some key U.S. industries. These developments have made new products available, lowered the prices of existing products, and fostered the creation of new companies and new jobs. Yet, there has also been a downside. Some U.S. manufacturing firms have disappeared and some workers have been left unemployed for long periods. How can economists help frame a discussion about policies that will help everyone participate as the economy continues to evolve? Glenn Hubbard discusses a new approach in his article “The Wall and the Bridge”, published in National Affairs in September 2020.


NEW! – 9/18/20 Podcast – Authors Glenn Hubbard & Tony O’Brien answer questions asked by Principles students from the University of Notre Dame!

Glenn & Tony address questions asked of Glenn during a recent virtual class visit to Eva Dziadula’s Principles of Economics class at the University of Notre Dame. They deal with Glenn’s tenure with the CEA and his feelings on the current challenges facing the CEA. They also discuss career options for Economists and how an economic way of thinking will help in any career.

Just search Hubbard O’Brien Economics on Apple iTunes and subscribe!

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NEW! – 9/04/20 Podcast – Authors Glenn Hubbard & Tony O’Brien Welcome Jadrian Wooten of Penn State.

Listen as authors Glenn Hubbard and Tony O’Brien have a wide-ranging discussion with Jadrian Wooten, an economics professor at Penn State University. Jadrian discusses some pedagogical approaches in his online classes, his use of a standing desk in zoom teaching his large classes, as well as the unclear impact of missing college football to the local college economies.

Over the next several weeks, we will be gearing up this podcast to become an essential listen during your week. Whether your interest is teaching or policy, you will learn from this discussion.

Just search Hubbard O’Brien Economics on Apple iTunes and subscribe! Episodes are usually available the next day on Apple iTunes or any other podcast app.

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NEW! – 8/21/20 Podcast – Authors Glenn Hubbard & Tony O’Brien reflect on the policy effects of the government response and the impact of no events on places like Orlando and college towns.

Authors Glenn Hubbard and Tony O’Brien revisit some of the policy responses to the Pandemic to discuss unemployment payments and other government fiscal responses. They also consider some of the longer-term impacts on business – like supply-chains – and the role that Economics can play in these issues. Glenn and Tony discuss how tourism is impacted in places like Orlando or college towns without college football as an economic engine.

Over the next several weeks, we will be gearing up this podcast to become an essential listen during your week. Whether your interest is teaching or policy, you will learn from this discussion.

Just search Hubbard O’Brien Economics on Apple iTunes and subscribe!

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COVID-19 Update – Apply the Concept: Can You Catch Covid-19 from Touching a Surface? Taking into Account How People React to Changing Circumstances

Supports:  Econ (Chapter 1, Section 1.3- in All Volumes)

Here’s the key point:   To forecast the effects of a government policy, it’s important for economists to take into account how people will change their behavior in response to the policy.

In forecasting the effects of a government policy, economists take into account how people will respond to the policy.  In general, when people’s circumstances change, including when the government enacts a new policy, people change how they act.  It’s easy to fall into an error if you fail to take into account how people’s actions might change—their behavioral response—as their circumstances change.  Let’s consider two examples.

First consider an example from the Covid-19 pandemic.  In May 2020, the federal Centers for Disease Control and Prevention (CDC) noted that few people were contracting the disease as a result of touching surfaces contaminated by the virus and that most people became ill by breathing in the virus while near an infected person. Some media outlets interpreted the CDC’s announcement as meaning, in the words of one headline: “CDC Now Says Coronavirus Isn’t Easily Spread by Touching Surfaces.” But is this conclusion correct? Consider two scenarios:

Scenario 1: Despite the spread of the coronavirus, people and businesses don’t adjust their behavior. People are unconcerned if they touch a surface, such as a doorknob, that may contain the virus.  After touching a surface, they don’t immediately wash their hands or use hand sanitizer.  No one wears gloves. Businesses don’t make a special effort to clean surfaces.

Scenario 2: Most people react to the spread of the coronavirus by avoiding touching surfaces whenever they can.  If they do touch a surface, they wash their hands or use hand sanitizer. Some people wear gloves. Businesses disinfect surfaces much more frequently than they did before the virus became widespread.

If Scenario 1 accurately described the situation in the United States in May 2020, we could reasonably draw the conclusion contained in the media headline we quoted: You are unlikely to catch Covid-19 by touching a contaminated surface. In fact, of course, Scenario 2 more accurately describes the situation in the United States at that time. As a result, the fact that few people caught the virus from touching a contaminated surface does not allow us to conclude that you are unlikely to catch Covid-19 that way because people adjusted their behavior to make that outcome less likely.

Now consider an economic example.  Suppose that a city decides to tax colas and other sweetened beverages.  If stores in the city are currently selling 100 million ounces of soda and the city imposes a tax of 2 cents per ounce, will it collect $2 million (= $0.02 per ounce × 100,000,000 ounces) in revenue from the tax per year?  We can expect that because of the tax, stores will increase the prices they charge for soda. Those price increases will cause consumers to change their behavior. Some people will buy less soda and, if the city’s suburbs don’t also enact a tax, some people will drive to stores outside the city to buy their soda. As a result, sales of sweetened beverages in the city will fall below 100 million ounces and the city will collect less than $2 million per year from the tax.

In both these cases, we would draw an incorrect conclusion if we failed to take into account the behavioral response of people to changes in their circumstances, whether the change is from the arrival of a new disease or an increase in a tax.  Economist sometimes call the error of failing to take into account the effect of behavioral responses to policy changes the Lucas critique, named after Nobel laureate Robert Lucas of the University of Chicago.

Question: An article in the Seattle Times published in late May 2020 noted that: “Half of new coronavirus infections in Washington [state] are now occurring in people under the age of 40….” Yet an opinion column in the New York Times published in March 2020 near the beginning of the pandemic noted that the coronavirus was disproportionately infecting older people.  Is one of these accounts of which age group is most likely to be infected necessarily incorrect? Briefly explain.

For instructors that would like the solutions to these questions, please email your name, course number, and affiliation to christopher.dejohn@pearson.com and we’ll send along a solutions manual.

Sources: Sandi Doughton, “Half of Newly Diagnosed Coronavirus Cases in Washington Are in People under 40,” Seattle Times, May 28, 2020; and Louise Aronson, “‘Covid-19 Kills Only Old People.’ Only?” New York Times, March 22, 2020.


5/29/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Guest – Prof. Bill Goffe from Penn State University!

Glenn Hubbard and Tony O’Brien continue their podcast series hosting guest – Professor Bill Goff of Penn State University. In talking with Bill, we discuss the challenges of teaching online during the Pandemic this past spring. We talk some about unemployment as well as hearing how Bill how he developed his passion for photography in his travels around the world. The image on this post was a picture of the Milky Way taken by Bill in North Central Pennsylvania!

Links for podcast of May 29, 2020 with Bill Goffe of Penn State

1. Link to RFE:  Resources for Economists on the Internet that Bill edits: https://www.aeaweb.org/rfe/

2. Link to the website of the Journal of Economic Education where Bill is an associate editor: https://www.tandfonline.com/loi/vece20

3. Link to the CTALE TeachECONference – https://ctale.org/teacheconference/. You can register – for free – by clicking HERE

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COVID-19 Update – If the Economy Is Down, Why Is the Stock Market Up?

Supports:  Econ (Chapter 8 – Firms, the Stock Market, and Corporate Governance; Micro (Chapter 8): Macro (Chapter 6); Essentials: Chapter 6.

Apply the Concept:  If the Economy Is Down, Why Is the Stock Market Up?

Here’s the Key Point:  In determining a firm’s stock price, the firm’s current profitability is less important than its expected future profitability.

The price of a share of stock reflects the profitability of the firm that issued it.  During economic recessions, firms experience declining sales and profits and the prices of their stocks fall.  We saw such a decline at the beginning of the downturn caused by the Covid-19 pandemic in 2020.   As the following figure shows, the S&P 500 stock market price index reached a high the week ending on February 14. By the week ending on March 20, this index had declined by 29 percent.

On the figure, the shaded area shows the weeks during this period when the economy was in a recession. We are dating the beginning of the recession using the Weekly Economic Index published by the New York Federal Reserve and compiled by James Stock of Harvard, Daniel Lewis of the New York Federal Reserve, and Karel Mertens of the Dallas Federal Reserve. The index is comprised of 10 economic variables including sales in retail stores, claims by laid off workers for government unemployment insurance payments, steel production, and railroad freight traffic.

            Notice two things about the figure:

  1. Stock prices began to fall in mid-February 2020, about a month before the recession began in mid-March.  This result is not surprising because the stock market is often a leading indicator, that is, stock prices tend to decline before production and employment fall.  The incomes of professional stock traders and managers of mutual funds and exchange-traded funds (ETFs) depend in part on their ability to sell stocks before their prices decline and buy them before their prices increase. So these finance professionals have a strong incentive to attempt to anticipate changes in the economy before they occur.
  2. Stock prices began to rise in mid-March while the economy was still in recession. In fact, the S&P 500 stock index increased more than 20 percent between mid-March and early May even though, as measured by the WEI, the economic recession was becoming worse as production and employment were rapidly declining. This result surprised many people who had trouble understanding how, as the headline of an article in the New York Times put it: “The Bad News Won’t Stop, but Markets Keep Rising.”

Both these points reflect the same key fact about the stock market:  Although a firm’s stock price depends on the firm’s profitability, the firm’s current profitability is less important than its expected future profitability.  You wouldn’t pay much for the stock of a firm that was making a profit today but that you expect will be driven out of business in the future by another firm about to introduce a superior competing product.  Even though the profitability of most firms in the United States had yet to decline in mid-February, many investors were beginning to fear that Covid-19 would have a major effect on the U.S. economy, so stock prices began to decline.

      Why then did stock prices turnaround and begin to rise only a month later, and why did they rise and fall significantly on many days?  Those swings in stock prices reflected a key result of investors interacting in financial markets: Buying and selling of financial assets like stocks results in the prices of those assets fully reflecting all the available information relevant to the value of the assets.  In the case of the stock market, buying and selling stock results in stock prices reflecting all available information on the future profitability of the firms issuing the stock.  New information that is favorable to the future profitability of a firm—for instance, Apple announces that iPhone sales have been higher than investors expected—will lead investors to increase demand for the firm’s stock, raising its price. The opposite happens when new information becomes available that is unfavorable to the future profitability of a firm.

Because new information becomes available continually, we would expect stock prices to change day-to-day, hour-to-hour, and minute-to-minute.  Stock prices for the market as a whole, as reflected in stock price indexes like the S&P 500, will rise and fall as new information becomes available on the future strength of the economy. During the Covid-19 pandemic, investors were particularly concerned with the following four issues:

  1. The development of new medical treatments for the disease, particularly vaccines.
  2. The effectiveness of government programs, such as loans to businesses, that were intended to help the economy recover from the effects of the lockdowns used to reduce the spread of the virus.
  3. The ability of the economy to adjust to the possibility that the virus might persist in some form for years.
  4. The willingness of consumers to resume buying goods and services, such as restaurant meals and movie tickets, that seemed particularly affected by the virus.

Optimistic news about these factors, such as successful early trials of a vaccine for use against Covid-19, caused sharp increases in stock prices and pessimistic news caused prices to fall.  For example, here are the percentage changes in the S&P 500 stock price index for consecutive trading days in mid-March (the stock market is closed on Saturdays and Sundays):

Stock prices are rarely this volatile. Wall Street investment professionals spend a great deal of effort gathering all possible information about the future profitability of firms, but in this period they had difficulty interpreting the importance of new information. No investor had experienced a pandemic as severe as Covid-19, so it was particularly challenging for them to determine the implications of new information for the likely future strength of the economy and, therefore, to the profitability of firms.

The large fluctuations in stock prices were another indication of how unusual an event the Covid-19 pandemic was and the difficulty that investors had in understanding its likely long-run effects on the U.S. economy.

Sources: Matt Phillips, “The Bad News Won’t Stop, but Markets Keep Rising,” New York Times, April 29, 2020; and Federal Reserve Bank of St. Louis.              


In May 2020, an article in New York Magazine noted that, “The stock market zoomed on Monday in response to very preliminary positive news about a vaccine” being tested by the pharmaceutical firm Moderna.  Positive news about one of its products might be expected to increase Moderna’s future profits and the price of its stock, but why would prices of many other stocks increase on this news?

For Economics Instructors that would like the approved answers to the above questions, please email Christopher DeJohn from Pearson at christopher.dejohn@pearson.com and list your Institution and Course Number.


5/22/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Guest – Prof. Mike Ryan from Western Michigan University!

Glenn Hubbard and Tony O’Brien continue their podcast series hosting guest – Professor Mike Ryan of Western Michigan University. During the conversation, we learn about Mike’s experiences working with faculty from Western Michigan School of Business taking their courses online. He also offers his thoughts on the current trade situation as well as personal insights from a January visit to Japan.

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5/15/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Guest – Texas A&M Economics Professor, Jonathan Meer

Glenn Hubbard and Tony O’Brien continue their podcast series hosting guest – Jonathan Meer, Professor of Economics from Texas A&M University as well as the Director of the Private Enterprise Research Center at Texas A&M. During the conversation, we learn about Jonathan’s teaching over 3,500 students annually in a large online Principles of Microeconomics lecture course. He discusses how his usual online teaching absolutely helped his transition when Texas A&M closed for the semester. He also talks about the state of Higher Education, non-profit giving, as well as some challenges nonprofits face in these uncertain times.

Some notes from this Podcast if you’d like more information:

1. Link to Jonathan Meer’s Youtube video on setting up an online course:

Jonathan Meer of Texas A&M University shares his best practices for teaching economics online.

2. Link to Jonathan’s website page providing links to his research papers on altruism and charitable giving: http://people.tamu.edu/~jmeer/research.html

3. Nontechnical summary of Jonathan’s research with Harvey Rosen on charitable giving: https://www.nber.org/reporter/2018number1/rosen.html

4. Please refer to the Apply the Concept feature from Chapter 2 of Hubbard and O’Brien Economics, 7/E, on the use of market mechanisms to allocate food at the Feeding America charity (for your convenience, we hope to post this shortly so check back).

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4/10/20 Podcast – Glenn Hubbard & Tony O’Brien discuss the economic impacts of the pandemic.

On April 10th Glenn Hubbard and Tony O’Brien sat down together to discuss some of the larger impacts of the pandemic.

In these 18 minutes, Glenn and Tony discuss the fiscal & monetary response, the future relationship of the US Treasury and the Federal Reserve System, as well as several other topics.


COVID-19 Update: Lessons from the Influenza Pandemic of 1918-1919 for the Coronavirus Pandemic of 2020


Economics – Chapter 7, The Economics of Health Care; Chapter 18, GDP:  Measuring Total Production and Income; Micro – Chapter 7, The Economics of Health Care; Macro Chapter 5, The Economics of Health Care; Chapter 8, GDP:  Measuring Total Production and Income; Essentials – Chapter 5, The Economics of Health Care; Chapter 12, GDP:  Measuring Total Production and Income

Lessons from the Influenza Pandemic of 1918-1919 for the Coronavirus Pandemic of 2020

The coronavirus pandemic of 2020 was by far the most serious epidemic to affect the United States since the influenza pandemic of 1918-1919, sometimes called the Spanish Flu.  Does the 1918-1919 influenza pandemic provide clues that help us predict how the coronavirus pandemic might affect the U.S. economy?   In this discussion, we:

  • Summarize scholarly and popular articles that address this question.
  • Provide links to the full articles.
  • Draw some tentative conclusions.


What Effect Did the 1918-1919 Influenza Pandemic Have on Death Rates and Real GDP?

            A National Bureau of Economic Research (NBER) Working Paper by Robert Barro of Harvard University, José Ursúa of Dodge & Cox, a mutual fund firm, and Joanna Weng of EverLife, an online food firm, estimate that the 1918-1919 pandemic killed about 39 million or about 2.0 percent of the world’s population.  An equivalent percentage of the world’s population today would be 150 million people.  The pandemic killed about 550,000 people in the United States or about 0.5 percent of the population.  If the death rate in the United States from the coronavirus were also 0.5 percent, the result would be 1.65 million deaths. 

            Barro, Ursúa, and Weng also estimate that the influenza pandemic reduced real GDP per capita in the typical country by 6 percent and real private consumption per capita by 8 percent. The comparable estimates for the United States are a decline in real GDP per capita of 1.5 percent and of real private consumption per capita by 2.0 percent.  They conclude that, “At this point, the probability that COVID-19 reaches anything close to the Great Influenza Pandemic seems remote, given advances in public-health care and measures that are being taken to mitigate propagation.”  The following table summarizes the Barro, Ursúa, and Weng estimates.

The What Effect Did Air Pollution Have on theWhat Effect Did Social Distancing Have on the 1918-1919 Influenza Pandemic?

A working paper by Sergio Correia, of the Federal Reserve Board, Stephan Luck of the Federal Reserve Bank of New York, and Emil Verner of the MIT School of Management examines the benefits and costs of non-pharmaceutical interventions (NPIs)—such as social distancing policies—during the 1918 pandemic.  They find that cities that implemented NPIs early and maintained them for longer experienced both lower mortality and higher economic growth, as measured by increases in manufacturing employment between 1914 and 1919. The cities of Seattle, Portland, Oakland, Los Angeles, and Omaha particularly stand out in this respect. Cities such as Pittsburgh, Philadelphia, and Boston that were slow to implement NPIs, or kept them in place for shorter periods, experienced both higher mortality rates and slower economic growth. The authors note: “This suggests that NPIs play a role in attenuating mortality, but without reducing economic activity. If anything, cities with longer NPIs grow faster in the medium term.”

            Correia, Luck, and Verner find substantial positive economic effect from early and prolonged implementation of NPIs: “Reacting 10 days earlier to the arrival of the pandemic in a given city increases manufacturing employment by around 5% in the post period. Likewise, implementing NPIs for an additional 50 days increases manufacturing employment by 6.5% after the pandemic.” They suggest that early implementation of NPIs may “flatten the curve,” keeping hospitals from being overwhelmed, and reducing mortality. They note that aggressive early use of NPIs appear to have successfully reduced both mortality rates and economic losses in Taiwan and Singapore.

What Effect Did Air Pollution Have on the 1918-1919 Influenza Pandemic?

Karen Clay and Edson Severnini of Carnegie Mellon University and Joshua Lewis of the Université de Montréal find that U.S. cities with worse air pollution—largely as the result of local utilities using more coal to generate electric power—suffered significantly higher death rates: “Cities that used more coal experienced tens of thousands of excess deaths in 1918 relative to cities that used less coal with similar pre-pandemic socioeconomic conditions and baseline health.”

Sources:  Robert J. Barro, José F. Ursúa, and Joanna Weng, “The Coronavirus and the Great Influenza Pandemic: Lessons from the “Spanish Flu” for the Coronavirus’s Potential Effects on Mortality and Economic Activity,” National Bureau of Economic Research, March 2020—The paper can be found here (the NBER is providing free access to working papers related to the coronavirus epidemic): https://www.nber.org/papers/w26866.pdf; Sergio Correia, Stephan Luck, and Emil Verner, “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu,” March 26, 2020—the paper can be found here: ; and Karen Clay, Joshua Lewis, and Edson Severnini, “Pollution, Infectious Disease, and Mortality: Evidence from the 1918 Spanish Influenza Pandemic,” Journal of Economic History, Vol. 78, No. 4, December 2018, pp. 1179-1209—The NBER working paper version can be found here.


Did People Who Were in Utero during the 1918-1919 Influenza Pandemic Suffer Negative Health Effects?

In an influential academic article published in 2008, Douglas Almond of Columbia University argued that people who were in utero during the influenza pandemic “displayed reduced educational attainment, increased rates of physical disability, lower income, lower socioeconomic status, and higher transfer payments compared with other birth cohorts.”  However, research by Ryan Brown of the University of Colorado, Denver and Duncan Thomas of Duke University provides evidence that the women who became pregnant during the pandemic were likely to be from lower socio-economic status than were women who became pregnant during earlier or later years. This result is attributable to the pandemic occurring during 1918 when many men of higher-than-average socio-economic status had been drafted to fight in World War I.   After correcting for the socio-economic status of the parents of people who were in utero during the pandemic, Brown and Thomas find that “there is little evidence that individuals born in 1919 have worse socio-economic outcomes in adulthood relative to surrounding birth cohorts.”

            Brian Beach of the College of William and Mary, Joseph P. Ferrie of Northwestern University, and Martin H. Saavedra of Oberlin College study this issue using individual data from the population censuses of 1920 and 1930 linked to World War II enlistment records. Their sample is large enough to contain many brothers, which allows them to completely control for the effects of socio-economic factors. They conclude that in utero exposure reduced high school graduation rates by about 2 percentage points but had no effect on adult height, weight, or body mass index (BMI).

Sources: Douglas Almond, “Is the 1918 Influenza Pandemic Over? Long- Term Effects of In Utero Influenza Exposure in the Post-1940 U.S. Population,” Journal of Political Economy, Vol. 114, No. 4, August 2006, pp. 672-712; Ryan Brown and Duncan Thomas, “On the Long Term Effects of the 1918 U.S. Influenza Pandemic,” June 2018 (https://clas.ucdenver.edu/ryan-brown/sites/default/files/attached-files/brownthomas_0.pdf); and Brian Beach, Joseph P. Ferrie, and Martin H. Saavedra, “Fetal Shock or Selection? The 1918 Influenza Pandemic and Human Capital Development,” National Bureau of Economic Research, Working Paper 24725, June 2018 (https://www.nber.org/papers/w24725).


An article on msnbc.com notes that compared with the 1918-1919 influenza pandemic, the coronavirus pandemic may turn out to be more contagious but with a lower death rate (although the death rate from the coronavirus appeared higher when the article was first published).

            In an opinion column in the New York Times, John Barry, a professor of public health at Tulane University and the author of the best-known history of the 1918-1919 pandemic, notes that an analysis of differences in the policies enacted among U.S. cities during the influenza pandemic indicates that when social distancing happened “before a virus spreads throughout the community, [it] did flatten the curve”—that is, it avoided a spike in deaths that would overwhelm hospitals.  

            An article on nationalgeographic.com has some interesting graphs showing death rates from the influenza pandemic across many U.S. cities. Some cities experienced two peaks during 1918, while others did not. The article, which summarizes earlier epidemiological research, concludes that “death rates were around 50 percent lower in cities that implemented preventative measures early on, versus those that did so late or not at all.” The cities that kept these measures in place longest were the ones that did not experience a second spike in death rates.

            Although the nationalgeographic.com article attributes the relatively low death rate in New York City during the influenza pandemic to the early implementation of quarantine and other public health measures, this op-ed in the New York Times by historian Mike Wallace indicates that the city did not close its public schools or most of its theaters, although it did levy fines to enforce a prohibition on public spitting—a common habit among men at the time.

            This essay in the Wall Street Journal by a medical doctor and adjunct professor at the Duke Global Health Institute reviews the course of the influenza pandemic in the United States and attempts to draw some lessons for the current coronavirus pandemic. The essay discusses the often-mentioned mistake by the Philadelphia city government of allowing a crowd of 200,000 to attend a parade to sell Liberty Loans: “within 72 hours, every bed in the city’s 31 hospitals was filled.” The doctor  notes that “cities which implemented isolation policies (such as quarantining houses where influenza was present) and ‘social distancing’ measures (such as closing down schools, theaters and churches) saw death rates 50% lower than those that did not.”

Tentative Conclusions

There are limits to drawing parallels between the 1918-1919 influenza pandemic and the 2020 coronavirus pandemic for at least three key reasons:

  1. Epidemiological profiles  The viruses are different and have different epidemiological profiles.  The coronavirus appears to be more contagious than the 1918 influenza virus but has a lower death rate.  The influenza virus killed more people in the prime age groups, particularly people aged 25 to 34. The influenza virus also had a higher death rate among children. In both pandemics, men were more likely to die from the coronavirus than women.
  2. Medical knowledge, drugs, and equipment   The state of medical knowledge is greater today than it was in 1918-1919, which may be helping to reduce the death rate. There are many more intensive care units in hospitals—such units were rare in hospitals in 1918.  Antibiotics had not yet been discovered in 1918, so people died of secondary infections, particularly pneumonia, who have been saved in the current pandemic. There are also antiviral drugs available today that were unknown in 1918, although at this writing (early April 2020) it was unclear whether any current antiviral drug will be effective against the coronavirus. No medical equipment similar to current-day respirators were available in 1918, which made it difficult for people suffering from severely reduced lung capacity to survive.
  3. Knowledge of policies during 1918  Knowledge of the course of pandemics is greater now than in 1918, partly because the breadth and scope of the influenza pandemic made it the subject of close study during the decades since.  Three lessons in particular have affected the response to the coronavirus pandemic. First, errors committed by local government officials in 1918, notably the mayor of Philadelphia allowing the Liberty Loan parade to take place despite warnings from local health officials, have been widely publicized. As a result these errors have largely been avoided in 2020. For instance, most cities canceled their St. Patrick’s Day parades and U.S. sports leagues shut down promptly in mid-March.  Second, we know that those cities that enacted policies of quarantines and social distancing in 1918-1919 had the lowest death rates.   This knowledge contributed to government officials and the general public supporting similar policies in 2020. Finally, we know that the 1918-1919 pandemic occurred in three waves—with the second wave during the fall of 1918 being the worst in the United States.  In 2020, the public and government officials are aware that the initial coronavirus wave in the late winter-early spring of 2020 would likely be followed by additional waves in the absence of an effective vaccine or the development (or repurposing) of therapeutic drugs.

Despite the differences between the 1918-1919 and 2020 pandemics, we can offer several tentative observations:

1. The decline in real GDP from the coronavirus pandemic is likely to be greater than the decline in real GDP from the influenza pandemic.  As noted earlier, Barro, Ursúa, and Weng found a surprisingly small decline in real GDP as a result of the 1918-1919 pandemic. Determining the macroeconomic effects of the pandemic is difficult because it began during the last year of World War I and because it preceded the short, but sharp, recession that lasted from January 1920 to July 1921. Most economic historians don’t believe that the pandemic was a significant cause of the 1920-1921 recession.

 This period was also before the U.S. Bureau of Economic Analysis began collecting GDP data. Several economists have estimated changes in GDP during these years, but their estimates differ significantly.  Nathan Balke of Southern Methodist University and Robert Gordon of Northwestern University estimate that real GDP declined by 2.9 percent from 1918 to 1919. Christina Romer of the University of California, Berkeley estimates that real GDP increased by 1.1 percent from 1918 to 1919.  Robert Barro and José Ursúa estimate that real GDP per capita declined by 3.4 percent from 1918 to 1919 (note that the 1.5 percent decline quoted earlier is their estimate of how much of the total 3.4 percent decline was due to the pandemic).

The decline in U.S. real GDP during the second quarter of 2020 is likely to be substantial—perhaps as high as 20 percent on an annualized basis. Still unknown is whether the U.S. economy will experience a V-shaped recession—a sharp decline in real GDP followed by a sharp rebound—or what has been called a “Nike swoosh-shaped recession”—a sharp decline followed by a slower recovery.  If the United States experiences a swoosh-shaped recession, the decline in real GDP is likely to significantly exceed the decline during 1918-1919.

As we discussed earlier, during 2020 the social distancing policies recommended by the federal government and implemented by many states and cities far exceeded anything implemented in 1918.  In 1918, even New York City, which historians generally praise for its vigorous public health response, allowed its schools, restaurants, and most theaters to remain open.  In comparing 2020 with 1918, we can say that in fighting the coronavirus, the United States was willing in 2020 to accept large declines in production and employment in order to reduce projected death rates.  In 1918, perhaps inadvertently, the United States   experienced a higher death rate in part because economic life was not disrupted to the extent that it was in 2020.

2. The long-range health effects of the coronavirus pandemic are not known.  As we noted earlier, Douglas Almond’s research has been frequently cited for its finding that people who were in utero in 1918 suffered substantial negative health and socioeconomic effects as adults. As discussed, recent unpublished research has called Almond’s results into question. It remains unclear whether the influenza pandemic had lasting effects either in the way Almond’s study suggests or perhaps because some people who recovered from the flu suffered reduced lung capacity or were more prone to developing pneumonia or other respiratory diseases later in life. Here’s the key point:  The coronavirus is not a type of influenza, so the long-run health effects from the influenza epidemic—if there were any—may not be relevant in evaluating coronavirus.

In 2020, there was some discussion in the news media that patients with coronavirus who needed to use ventilators might subsequently suffer from reduced lung capacity. Modern ventilators were not available in 1918, so that episode doesn’t provide evidence for the consequences of their widespread use.

Sources: For 1918-1919 real GDP estimates: Balke and Gordon: Nathan S. Balke and Robert J. Gordon, “The Estimation of Prewar Gross National Product: Methodology and New Evidence,” Journal of Political Economy, Vol. 97, No. 1, February 1989, pp. 38–92; Christina Romer: Christina D. Romer, “The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869–1908,” Journal of Political Economy, Vol. 97, No. 1, February 1989, pp. 1–37; Barro and Ursúa: Excel file posted under “Data Sets” on Barro’s homepage, https://scholar.harvard.edu/barro/publications/macroeconomic-crises-1870-bpe.


Here for You

Professors’ and students’ lives have been turned upside down as a result of what’s going on with the Coronavirus pandemic. Courses which have traditionally been taught in the classroom with maybe some online components are now completely virtual. We empathize with professors who are being thrown into an online environment without much help.

That’s why now was the right time to start this blog and create a series of podcasts. What is written/recorded here isn’t perfect and hasn’t been put through the rounds of review our textbook goes through. But this is timely. And it is an effort to help bring the current situation in the world into your classroom in a way that you can easily share with students and incorporate in your coursework in an online environment.

We hope these posts and podcasts do the job to help in this unprecedented time. And we want to hear from you if there’s more we can be doing, or if there’s something specific you’d like us to cover. Please reach out at our contact page!

NEW! – 9/11/20 Podcast – Authors Glenn Hubbard & Tony O’Brien cover current events, Micro, and Macro! They discuss 9/11, the rising stock market, the challenges facing restaurants, as well as shifts in strategy for the Fed!

Authors Glenn Hubbard and Tony O’Brien continue their weekly discussion about the effects of the Pandemic on the US Economy. They discuss the disconnect between stock market performance and the overall economy. Also, they look at the decision of restaurants to stay open despite struggling to breakeven due to limitations on indoor seating. The Fed’s pivot on the dual-mandate is also discussed as they announce more of their monetary policy focus will be on unemployment rather than inflation.

Over the next several weeks, we will be gearing up this podcast to become an essential listen during your week. Whether your interest is teaching or policy, you will learn from this discussion.

Just search Hubbard O’Brien Economics on Apple iTunes and subscribe!

Please listen & share!

We’re back!! 8/12/20 Podcast – Authors Glenn Hubbard & Tony O’Brien discuss the Covid-19 Pandemic effects and responses as we move towards Fall 2020!

Glenn Hubbard and Tony O’Brien talk about the effects of the Covid-19 pandemic as we head into fall classes. They discuss the impact on teaching and learning as well as a fresh look at the impact of government policies over the past few months. The challenges facing the US economy are discussed as well as how the Nike swoosh or V-downturn is now looking somewhat differently in August 2020. We will begin doing WEEKLY podcasts as we head into Fall of 20202. Please look for new episodes at the end of each week and please subscribe to our Podcast feed via your preferred Podcast app – including iTunes Podcasts!

Just search Hubbard O’Brien Economics and subscribe!

Please listen & share!

6/19/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Guest – Prof. Eva Dziadula from the University of Notre Dame!

Glenn Hubbard and Tony O’Brien talk with Eva Dziadula of the University of Notre Dame. In the podcast, they discuss economics, teaching, and the impact of the pandemic on the classroom. Eva discusses teaching Microeconomics in the middle of a pandemic and teaching Immigration in the midst of our national immigration debate.

Also, these podcasts are now on iTunes or your regular podcast feed! Just search Hubbard O’Brien Economics and subscribe!

Please listen & share!

6/12/20 Podcast – Glenn Hubbard & Tony O’Brien Welcome Guest – Prof. Kim Holder from the University of West Georgia!

Glenn Hubbard and Tony O’Brien talk with Kim Holder of the University of West Georgia. Kim discusses many best practices in preparing for her fall courses that are so flexible they can easily adapt to in-person, hybrid, or online. Listen to her observations about the delicate nature of discussing COVID-19 in classes this fall as well as her passion for personal financial literacy in the wake of the traumatic event. Both instructors and students will learn from what Kim has to say!

Links for podcast of June 12th, 2020 with Kim Holder of the University of West Georgia:

Pyle Pro Portable PA Speaker Voice Amplifier – Pyle PWMA50B – in Black


Economics in One Lesson by Henry Hazlitt

https://www.amazon.com/gp/product/B003XT60KO/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i0 or at no charge from the FEE here: https://fee.org/resources/economics-in-one-lesson/

Tyranny Comes Home by Christopher J. Coyne (George Mason University) & Abigail R. Hill (University of Tampa), Stanford University Press, 2018


Please listen & share!