“Social distancing” – reducing the number of daily close contacts individuals have – is being encouraged by policymakers and epidemiologists. Why it works, and why now rather than for other diseases, is often left unstated. Economists have two important contributions here. First, game theoretic models of behavior are great for thinking through where government mandates are needed and where they aren’t. Second, economists are used to thinking through tradeoffs, such as the relative cost and benefit of shutting down schools versus the economic consequences of doing so. The most straightforward epidemiological model of infection – the SIR model dating back to the 1920s – is actually quite commonly used in economic models of innovation or information diffusion, so it is one we are often quite familiar with. Let’s walk through the simple economics of epidemic policy.
We’ll start with three assumptions. First, an infected person will infect B other people…
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Utopia, you are standing in it! 
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