Episode 7: Learning from South Korea’s Success

TESS VIGELAND: Many countries mandated lockdowns to try to flatten the curve of infection rates, but South Korea never implemented one or imposed really any restrictions.

EDUARDO PORTER: The trick to South Korea’s strategy was it used technology to tell its citizens where infected people were.

TESS VIGELAND: This is Pandemic Economics, a podcast about the global impact of COVID-19 from Stitcher and the Becker Friedman Institute for Economics. I’m Tess Vigeland.

EDUARDO PORTER: And I’m Eduardo Porter.

TESS VIGELAND: We’ve been invited to have this series of conversations with University of Chicago economists.

EDUARDO PORTER: In this episode, I speak with Chang-Tai Hsieh about his recent paper, which assesses the health and economic impacts of the South Korean strategy and compares it to the lockdowns in Europe and the United States.

TESS VIGELAND: For every million citizens, on average, COVID has caused 295 deaths here in the US. In Korea, only 5.2.

EDUARDO PORTER: So South Korea detected its first case of COVID a day before the US did, on January 20. But since then, the US developed millions of confirmed cases, a massive death toll. In South Korea, it’s a totally different story. There hasn’t been the same kind of spread or anything close to the kind of economic freefall we’re suffering in the US. So tell me, what gives? How did they do it?

CHANG-TAI HSIEH: Well, the key thing about South Korea is that they never closed down. I mean, they never implemented a lockdown. There was a period of about a week in which schools were closed, but last week was the first time that they closed down some bars. But before that, they never shut down the economy. There never was any mandatory requirement that people stay at home. So this is the thing that we know, that we know that lockdowns are very costly to economic activity. And then South Korea never did that.

EDUARDO PORTER: Was there a cost, and did Korea lose jobs? Was there a hit to GDP that we know of?

CHANG-TAI HSIEH: There was a hit to GDP. The official numbers say that there is a downturn of about 1% of GDP, which in normal times, this would be really bad news. But relative to what all the other countries in the world are going through, it’s pretty small. So there isn’t like in the US where getting to 20%, 25% unemployment, maybe a downturn of GDP of maybe about 10%. What’s going on in the US, truly first, just in terms of the economy is truly horrific. And as you said at the beginning, in terms of the outcomes, in terms of deaths and the number of cases, also truly horrific as well.

EDUARDO PORTER: So South Korea’s secret sauce was that it didn’t force its economy into lockdown. And how could it avoid that? How did it achieve these results without closing businesses?

CHANG-TAI HSIEH: Well, I think there were two key things that it did. The first part of what it did that has been widely acknowledged is that it quickly put in place a massive testing and tracing program, which is that it ramped up the amount of tests. It ramped up the number of places that were available for people to take these tests.

And the second thing that it did is that for every person that tested positive, it put in place a mass of contact tracing program, which what they did is that they used a combination of the standard contact tracing procedures, which is that they interviewed the people that tested positive, they got from them the places that they had been over the last week, and they combined that with data that they got from the mobile phone companies, along with the credit card receipts. And from these three sources of data, they put together a picture of every person that tested positive, where they had been. And then based on that, they also went and contacted people that they thought are likely to have been in close contact with the people that tested positive.

The second part of what Korea did, which I don’t think is as well known, is what they did with the information that they got. After they did all this massive contact tracing, they publicly disclosed this information. So the kind of information that they disclosed is for every person that tested positive, they disclosed the age and the sex, so the basic demographic information. They disclosed the location or the district where this person lives. And they also disclosed specific information about the itinerary of this person over the last seven days.

So they said, at 3:00 PM yesterday, this person was at this particular Starbucks, then this person took the subway and went to this restaurant. It also says that for every point in time, if they can figure that out, they also say whether this person had a mask on or whether this person did not have a mask on. And all of this information was publicly disclosed via text messages that were sent to everybody that lives in the same neighborhood as this person lives in, and all this information was put up on a website as well.

EDUARDO PORTER: So say I have my smartphone, and I’d be getting texts saying, hey, my neighbor from down the block turned out positive, and right now he’s at the Starbucks? Or would it give me information as it happened?

CHANG-TAI HSIEH: So the way it works is that after a person has tested positive, they would be quarantined. So this person is in social isolation. But what the text would tell you is where this person was yesterday. So the idea is that, well, maybe you were at that Starbucks at exactly the same time yesterday. And if you were at the Starbucks at the same time yesterday, hey Eduardo, maybe it’s a good idea for you to get tested, too.

EDUARDO PORTER: And maybe it’s also a good idea for people to start steering away from that Starbucks, considering that maybe some of the employees there got sick or acquired the infection? Is that also part of the strategy?

CHANG-TAI HSIEH: Exactly. The idea is that contact tracing is great, but it’s only as good as your ability to find all the infected people. But it’s very likely that no matter how good your contact tracing regime is that there are going to be a bunch of people that you’re going to miss, or you’re going to catch them too late. So you may get them in five days, but between now and five days, they’re out there spreading the virus.

So what you see in the data is what you would expect, that after specific stores are identified, then the next day nobody goes.

EDUARDO PORTER: Wow. So instead of, say, demanding that businesses close, as has happened in New York and other cities in the United States, they just told people, hey, there’s a higher risk at that business. And so people would just stop going there anyway, right? So you didn’t have to tell the business to close.

CHANG-TAI HSIEH: That’s exactly right. We are trying to limit the spread of the virus. And the idea is that, well, the probability of getting the virus is not uniform everywhere. There are some places where the probability is high, and there are other places where the probability is low. The strategy that we’ve been following in the US is that we’re not distinguishing between places where the probability is high and places where the probability is low.

We are basically lowering social interactions across the board, both in places where the probability is high, which is what we should be doing, and also in places where the probability is low. So in places where the probability is low, what you’re getting then is very little benefit in terms of how much you reduce the spread of the virus but the same amount of economic damage.

EDUARDO PORTER: Yeah, yeah. This could actually be a lot of information for people to handle, right? I mean, I can imagine lots of text messages coming in if you live in a particular neighborhood.

CHANG-TAI HSIEH: What quickly happened was that people put together apps that basically aggregated that information. And what you could do then with these apps is that you could put in place a particular route, like you are planning to go to this place. And then the app would tell you what the risks are along that route, so that you don’t need to absorb all that information.

EDUARDO PORTER: Yeah, I’m sort of imagining kind of like a Google Map with different color codes.

CHANG-TAI HSIEH: Exactly.

EDUARDO PORTER: Chang-Tai and his colleagues modeled how this app could help contain the pandemic. They looked at Seoul, the capital of South Korea, which has a population of about 10 million people, a little bigger than New York City. What I think is remarkable is the kind of power that sharing this information turns out to have. This sharing of this information reduced the death by more than 10,000 people, at half the economic cost of a lockdown, like we’ve had in cities in the United States.

TESS VIGELAND: Just by giving people information on where the outbreaks were happening?

EDUARDO PORTER: Exactly. So people could steer their way through life without going to places where they would put themselves at risk.

TESS VIGELAND: One of the questions that has to be raised here, especially in this country, where people value their privacy and don’t want the government knowing where they are and what they’re doing, how do you balance the need for privacy versus public health issues?

EDUARDO PORTER: Exactly.

TESS VIGELAND: And we’ll be back in just a moment to explore that privacy versus public health trade-off in South Korea.

So Eduardo, we were talking before the break about the success in South Korea. But the fact is that some of these privacy issues have been raised, and there have been new outbreaks at nightclubs that have caused some concern there.

EDUARDO PORTER: Yeah. According to what I read, these nightclubs mostly served the LGBT community. And one of the problems with the Korean strategy is that folks in the LGBT community didn’t want to come forward and get tested precisely because they feared that they would be outed because the key to the strategy was informing everybody of who had been infected.

CHANG-TAI HSIEH: Clearly, I understand that it raises lots of tricky questions about privacy. Some of the people that tested positive, they were pretty upset for understandable reasons. And I guess all I have to say to that is we have to weigh that off against the benefits of the disclosure of information. That is, yes, there is a cost in terms of privacy, but there’s also what I think are huge benefits in terms of the disclosure of information. That is, you don’t lose 35 million jobs. You don’t have 90,000 deaths.

The other important part of what I think the South Korean strategy allows for is what I’m going to call people to make their individual benefit-cost calculations. And the idea is the following: If you think that the cost of people socially interacting is that there’s a probability that you’re going to spread the virus, that’s why we don’t want people to interact socially. But we benefit from social interaction. That is, some jobs do require social interaction.

So the other benefit of what the South Koreans did, relative to this broad-based lockdown strategy, is that in addition to allowing for people to target their social distancing in terms of the particular establishments, it allowed people to choose based on their own individual benefit-cost trade-off. So the idea is the following: If you think about the narrative in the US, one important reason for why we are doing this is to minimize deaths, right? What we do know is that the deaths are particularly concentrated among people that are elderly and people with pre-existing conditions.

What you saw in the South Korean case, in terms of when you look at who were the people that changed their behavior the most in response to the information, it is precisely the people who are elderly and people with pre-existing conditions, whereas younger people, there was much less of a response. And that might seem sensible. You think that if you’re young, you get it, and the consequences for you are not that large.

The South Korean strategy doesn’t get South Korea to nirvana. It’s still very costly to them. There’s no magic pill for this virus. The only magic pill is a vaccine. So the question is, basically, how can you make a horrific situation less bad?

EDUARDO PORTER: You modeled this thing over two years, but Korea contained at least this first burst much more quickly. So I guess you’re assuming that the disease goes and comes back and then goes again? You’re assuming several waves?

CHANG-TAI HSIEH: We are assuming several waves. It contained it, but you are not going to get every case. And as long as you don’t get every case, this thing is going to continue to spread until you get to herd immunity. So that’s what we are modeling. We’re modeling at what point do you get to herd immunity, and what’s a path that you take to get to herd immunity.

EDUARDO PORTER: OK, so let me understand. So herd immunity happens when you have a large enough share of the population who’s become infected and so have become immune.

CHANG-TAI HSIEH: Right.

EDUARDO PORTER: And therefore, the virus can no longer spread easily through the population. So according to your model, this happens in South Korea in two years or so, right?

CHANG-TAI HSIEH: Right.

EDUARDO PORTER: It’s interesting because it seems so detached from the American experience. I wonder, do you think is there some fundamental reason that South Korea, which is a robust democracy, is not an authoritarian state, accepts this kind of intrusion into personal privacy in a way that is sort of anathema in the United States?

CHANG-TAI HSIEH: That’s a good question. I think there’s a huge amount of debate in the US about the trade-off between health and jobs. There’s also some discussion about whether it might be beneficial to target social distancing. And that’s, in a sense, what I am talking about. That is, this is a way to try to target your social distancing so that you maximize the benefits and you minimize the cost.

In terms of Korea, my understanding of Korea is that this mostly came about because of their experience with previous pandemics. And because of their experience with previous pandemics, there was a social consensus that something like this is really important to do. So they built both the public health infrastructure to do the contact tracing and they also put in place the legal structure such that once somebody tested positive, there was the legal basis, such that you could go to the mobile phone company and say, now give me all the data about this person.

And I think it might be the case that after this pandemic, after we’ve gotten through it that we can have a discussion as a society about what would be best for the community as a whole. Where exactly do you want to do the trade-off?

EDUARDO PORTER: Yeah. South Korea applied this plan, this strategy pretty much straight away when it had few cases. Do you think it could work once we’re in a situation like in the US today where there are tens of thousands or hundreds of thousands of confirmed cases out there? Could that kind of a strategy still help us now?

CHANG-TAI HSIEH: I absolutely think so. My hope is that testing data is going to confirm if what I’m going to say next is true or not, that after the lockdown ends in the US, we will have brought down the number of cases. But it should be obvious to anybody that in every community, in every city, in every town, there are going to be people that are infected, that haven’t yet been infected, OK? Think about what that means. That means that the caseload is low enough such that we can remove the lockdown.

But if that’s all that we do, then that brings us back to the US in February. And then within a month, it’s going to spiral out of control again. So then I think it’s completely relevant in thinking about what we should be doing two, three months from now once the lockdown is lifted. And I do think that if the testing data two months from now confirms that the number of cases is low enough such that we can lift the lockdown, then we do need to put in place strategies such that the cases that are out there don’t spiral out of control again. And there I think what the South Koreans did is absolutely relevant.

EDUARDO PORTER: Yeah, it’s kind of like a strategy to contain the second wave, right?

CHANG-TAI HSIEH: Exactly. Because if you do nothing, there is going to be a second wave.

TESS VIGELAND: One thing that has not come in waves in this crisis is rampant unemployment. It’s been a steady tsunami of job losses from even before the lockdowns. Next time, we’ll do a deep dive on what’s happening now with unemployment benefits and the options for what should happen next.

SPEAKER: One in five workers are actually getting twice as much in benefits than their prior earnings were. So our recommendation is that beginning in August when the CARES Act extra benefits expire, that we continue to pay extra benefits but do so in a way that is more tailored to workers’ prior wages.

TESS VIGELAND: Pandemic Economics is produced by the University of Chicago’s Becker Friedman Institute for Economics. Our producers are Devin Robins and Dana Bialek. Our Executive Producer is Ellen Horne. Production and original music by Story Mechanics. Pandemic Economics is part of the University of Chicago Podcast Network. I’m Tess Vigeland.

EDUARDO PORTER: And I’m Eduardo Porter. Thanks for listening.