Lockdowns and the Aggregate Dynamics of a Pandemic: Mind the Rebound!

ABSTRACT We study optimal lockdown decisions taken by a policymaker facing a pandemic modeled according to the standard SIRD deterministic model. The policymaker trades off the economic costs and the mortality record of the pandemic which depend on the severity and duration of the lockdown. We contrast the shortsightedness versus the farsightedness of the policymaker. Policy‐related peaks and rebounds are characterized and explain why a strong eradication policy is self‐defeating. A farsighted policy should not be too severe so as to avoid a rebound. The shortest duration consistent with a given health goal is not the less costly. There exists an optimal pair of duration and lockdown severity resulting in herd immunity.