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Technical Analysis

Pandemic Trilemma

A new “impossible trinity” has emerged due to the pandemic.

Many are familiar with the “impossible trinity” in economics:

Now with the unfortunate “white swan” of a pandemic, the following trilemma has emerged:

A.  Lockdown and focus on public heath will adversely affect the economy.

B. Free movement and focus on growth will adversely affect public health.

C.  Focus on public health and growth requires some degree of free movement.

Most countries have chosen A. Usually those are countries with weak health system or the ones hit hard by the pandemic. This appears to be the only choice in such cases.

Very few countries are flirting with B.  The rationale for this choice is based on the questionable “herd immunity” theory. This is a very risky choice.

C. Some countries consider limiting impact on economy while minimizing impact on public health by allowing some free movement of already immune people.

In my opinion, C must be implemented when reliable testing with very low Type-I error is available. If there is no reliable testing, choice C is risky and can later force retreat to case A.

The key to transitioning to C is reliable large-scale testing to find those who are immune and put them to work to support those who are in danger and also prevent an economic depression.

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