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00:00I loved your essay before the pandemic. Michael for Project Syndicate What my younger self never expected your younger self never expected a pandemic and particularly one that was so formative in Italy. What is your observance of how we move on from this pandemic . Well Tom I see and Francine it's nice to be with you. I'm I think first of all we have to be prepared for very very slow economic recoveries. I've taken a look at China and their recovery is slower than anybody really expected . And we've got. I just read a detailed report actually . Similar things. Consumption is being held back even for opening economies by risk aversion. And major markets for the big exporters are closed down because of the pandemic. So we'll make it back. But it's just going to be very slow . You are expert at the theory of the unobservable and what's called the type to risk the thing that's out there. El-Erian would say the unknown. Unknown. What does the unobservable drag right now to you that has your maximum attention . To me the most important thing I think to understand is that with a pandemic and in the absence of effective testing regimes basically you have markets that are clogged up by imperfect information. Basically everybody out there that you run into is a risk. And the only way you can get rid of that risk as far as I can see is with an effective vaccine which we just have to wait for for an unknown period of time or for a massive regime of testing. If we if we manage to do what either one of those things then then that will materially speed up the recovery because once it's communicated it will lower the risk and take away the principle break on consumption in America that 70 percent of the economy. So. So that's kind of where we are . I'm focused on missing information at a very micro level in markets because of our inability to source between the people who are infectious and the people who are not . Michael Spence I don't know if there's data to show us what's the optimum time of reopening an economy know at the moment they're reopening slowly but really just tracking new infections in real time. Is there a better way of doing it. Yeah . Well there was a better way to do it which is they invest a lot of places including where I said we didn't invest fast enough in you know getting ready for an opening up. So there's two things I think that need to be said clearly. One you can't lock down an economy for for a very long time without producing an excessive amount of economic destruction and pain and suffering unrelated to the virus. It's just not possible. And the second thing is that you know opening up the story dealing with the health problem effectively is is an accelerator for the seat of vote standing up precisely because it deals with this this risk issue. So we're all behind the curve in one way or another and doing the best we can. On the question of window open up that's that's just a decision that has to be based on values. And our leaders our politicians and policymakers have to make that choice. I don't have any problem with that. I'm not one of these people that think that experts and scientists should make this choice. They should provide inputs. And then the people we elect have to make the choice . And their uncomfortable choices at this point because we're we're taking risks that in an ideal alternative scenario we wouldn't have to take to the same extent . Michael Spencer what do you worry about most in the recovery phase is that the number of unemployed and how long will it take us to get those people back into a job in the U.S.. The it is that I think that's the core of it. I would say it's unemployment and and the destruction of businesses that won't be able to come back at the end because they've been they've been knocked out. And I'm hoping that these massive stimulus efforts you know are complemented by essentially debt forgiveness and other things so that we minimize that dimension of the damage to the economy .

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Nobel Laureate Spence: Be Prepared for Very Slow Economic Recoveries

Michael Spence, Nobel Laureate and senior advisor at General Atlantic, says there are “uncomfortable choices being made” as he discusses the economic fallout of the coronavirus pandemic. He speaks on "Bloomberg Surveillance." (Source: Bloomberg)

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