This paper proposes a novel pandemic response paradigm, and shows that it would have been the right middle ground between lockdown and ignore-the-virus for Covid-19: maximize social welfare subject to \(R\,{\le }\,1\) as a constraint. A simple graphical argument shows that this formulation is an approximately optimal way to balance socioeconomic and health objectives, because of a sharp kink in the benefits-of-risk-reduction curve at \(R\,{=}\,1\) (both the curve and its kink are novel to this paper). Two critical insights emerge from this approach to the pandemic. First, the \(R\,{\le }\,1\) constraint imposes a “risk budget” on society. Society should optimally spend this budget on the social and economic activities with the highest ratio of socioeconomic value to disease-transmission risk, with targeted activity bans for activities with too low a ratio of value-to-risk. For example, schools have a much higher ratio of value-to-risk than bars, so society should optimally spend its risk budget on schools over bars. Second, what I call “low-cost risk reducers” (LCRRs) can significantly improve activities’ value-to-risk ratios and hence significantly reduce the cost of satisfying the \(R\,{\le }\,1\) constraint. Examples of LCRRs for Covid-19 include rapid testing, high-quality facemasks, stay-home-if-sick rules and improved air circulation. A simple numerical example, based on estimates from the medical literature for \(R_{0}\) and the efficacy of LCRRs for Covid-19, suggests the potential gains from this paper’s approach to the pandemic would have been enormous—plausibly trillions of dollars and hundreds of thousands of lives in the United States alone.
