<p>As of time of writing, many countries have been in lockdown for weeks or months, and the economic data coming out of that is usually quite grim. I'm wondering how being in lockdown relates to poor economic data. As I understand it the standard chain of reasoning goes like this:</p>

<ol>
<li>Country in lockdown means people stay at home, which means they spend less.</li>
<li>In turn this means the services they would otherwise have bought get less revenue, which means less profit, which means they suffer and might have to lay off employees.</li>
<li>Therefore unemployment increases and more people have no money.</li>
<li>Therefore we get an economic crisis and recession.</li>
</ol>

<p>However, #1 also means that people have more money. Some of them might earn less, but as a whole unless money is actually being taken out of the economy (and how would that happen?), the amount saved across the entire economy ought to balance the amount not earned. Therefore what actually happens is more "income inequality" (quotation marks here because it's the amount of money that each person has that becomes more unequal, not income itself). And if <em>that</em> is what happens and income inequality is the root cause of economic crises, why am I not seeing that in the media?</p>

<p>I don't get it, so hoping someone can explain.</p>

<p>Related: <a href="https://economics.stackexchange.com/questions/36491/who-has-the-unspent-money">Who has the unspent money?</a> which is about similar things, but doesn't go as far as this question does.</p>

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2020-05-08T06:40:36.720Z
@KennyLJ Post this as an answer? (Also under the other question.)
Giskard
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2020-05-08T10:57:29.493Z
This is yet another question that offers an incorrect answer for some reason. If everything after the first two sentences was deleted, it would be a good starting point.
Brian Romanchuk
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2020-05-08T11:00:14.430Z
@BrianRomanchuk if I don't write the incorrect answer, then my experience is people write answers that don't answer the substantive question (in this case what is wrong with the incorrect answer).
Allure
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2020-05-08T11:29:55.077Z
@Allure By putting in wild guesses, it makes it much harder to answer the question, as the answer needs to address weaknesses in the question as well. Your actual question is just the first two sentences. However, that is an extremely broad question, and the odds of getting a good answer is low.
Brian Romanchuk
CC BY-SA 4.0
2020-05-08T11:45:16.813Z
@BrianRomanchuk that's kind of the point though - the question is only answered if the headline question is answered *and* the counterarguments are refuted. As long as the wild guess sounds sensible, I cannot say I understand any answer.
Allure
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2020-05-08T15:55:46.473Z
@Allure - there is a vote to close the question. If you want an answer, it will need to be fixed. Nobody is going to write a 40 page document attempting to answer every conceivable counter-argument. This site attempts to answer technical questions about economics, not write long primers on current events. You should be able to find many such articles online.
Brian Romanchuk
CC BY-SA 4.0
2020-05-09T00:09:55.803Z
@BrianRomanchuk all the same, a brief answer with a link to a relevant article is more useful to me than an answer that doesn't address the counterargument.
Allure
<macroeconomics>
How does locking down a country cause its economy to suffer?
Allure
# How does locking down a country cause its economy to suffer?

(Asked by: username_0 on 2020-05-08)

As of time of writing, many countries have been in lockdown for weeks or months, and the economic data coming out of that is usually quite grim. I'm wondering how being in lockdown relates to poor economic data. As I understand it the standard chain of reasoning goes like this:

1. Country in lockdown means people stay at home, which means they spend less.
2. In turn this means the services they would otherwise have bought get less revenue, which means less profit, which means they suffer and might have to lay off employees.
3. Therefore unemployment increases and more people have no money.
4. Therefore we get an economic crisis and recession.

However, #1 also means that people have more money. Some of them might earn less, but as a whole unless money is actually being taken out of the economy (and how would that happen?), the amount saved across the entire economy ought to balance the amount not earned. Therefore what actually happens is more "income inequality" (quotation marks here because it's the amount of money that each person has that becomes more unequal, not income itself). And if *that* is what happens and income inequality is the root cause of economic crises, why am I not seeing that in the media?

I don't get it, so hoping someone can explain.

Related: [Who has the unspent money?](https://economics.stackexchange.com/questions/36491/who-has-the-unspent-money) which is about similar things, but doesn't go as far as this question does.

**Tags:** macroeconomics

> **Comments:**
> **username_1**: @KennyLJ Post this as an answer? (Also under the other question.)  
> **username_2**: This is yet another question that offers an incorrect answer for some reason. If everything after the first two sentences was deleted, it would be a good starting point.  
> **username_0**: @username_2 if I don't write the incorrect answer, then my experience is people write answers that don't answer the substantive question (in this case what is wrong with the incorrect answer).  
> **username_2**: @username_0 By putting in wild guesses, it makes it much harder to answer the question, as the answer needs to address weaknesses in the question as well. Your actual question is just the first two sentences. However, that is an extremely broad question, and the odds of getting a good answer is low.  
> **username_0**: @username_2 that's kind of the point though - the question is only answered if the headline question is answered *and* the counterarguments are refuted. As long as the wild guess sounds sensible, I cannot say I understand any answer.  
> **username_2**: @username_0 - there is a vote to close the question. If you want an answer, it will need to be fixed. Nobody is going to write a 40 page document attempting to answer every conceivable counter-argument. This site attempts to answer technical questions about economics, not write long primers on current events. You should be able to find many such articles online.  
> **username_0**: @username_2 all the same, a brief answer with a link to a relevant article is more useful to me than an answer that doesn't address the counterargument.  

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