Some people I talk to still seem a bit at sea on the economics of the pandemic, the role of government aid, etc. So a few notes inspired by Guerrieri et al but less technical 1/
Think of the economy as two sectors: high-contact stuff that spreads the virus and must be locked down, and other stuff. In normal times money flows freely in all directions 2/ 
What we've done — what we have to do — is shut down high contact activities, so that no money is spent on those goods and services 3/
The question — as illustrated by the question marks in the figures — is whether and to what extent this spills over into a reduction in demand for low contact goods and services. This depends on policy, consumer behavior and maybe some supply-side issues 4/
On consumer behavior, the question is to what extent people respond to inability to buy some goods by buying more of others, as opposed to just saving the money. This can go either way — in fact, it's going both ways depending on what we're talking about 5/
People who can't go out to restaurants are in fact buying more groceries and booze, ordering more from Amazon, etc. However, they're buying less gasoline even though gas stations are open, fewer cars. Net effect still unclear 6/
On the supply side, the toilet paper effect turns out to be more widespread than you might have thought. You might think doing your business at home instead of the office requires no more than a simple reallocation, but it turns out that commercial buyers use different paper 7/
Apparently the same is true for things like meat and eggs: restaurants buy big hunks and giant pallets, and producers can't instantly switch over to supermarket-friendly packaging 8/
Last but definitely not least, POLICY. A lot depends on whether workers in businesses in the affected sector get enough relief to continue buying low-contact goods — and also whether state and local governments are forced into harsh austerity 9/
Right now it looks as if we're bungling the policy side pretty badly. Some people are getting their unemployment money, but many have yet to see a dime. Business loans largely going where they're needed least. And, of course, McConnell 10/ nytimes.com/2020/04/23/opi…
