AUSTIN, TX — As the state’s seven-day average positivity rate continues to trend downward amid the coronavirus, state and local officials will soon have to decide on which business to reopen in achieving an equilibrium between economic benefit and health risks.
Enter the McCombs School of Business at the University of Texas at Austin, which has unveiled a study with the Sloan School of Management at the Massachusetts Institute of Technology using myriad data on consumer and business activity in measuring 26 types of businesses in terms of their usefulness and risk. The study comes amid a lowered trend of positivity rates since July 16.
“Vital forms of commerce that are relatively uncrowded fare the best in the study,” the study’s authors wrote. “Less essential types of businesses that generate crowds perform worse.”
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The study may provide clarity moving forward for Gov. Greg Abbott and other state leaders who have endured backlash that forced a scaling back to the Texas economic reopening, noted Avinash Collis, an assistant professor in the Department of Information, Risk, and Operations Management at the McCombs School and co-author on the paper with Seth G. Benzell, a postdoctoral associate at the MIT Initiative on the Digital Economy, and Christos Nicolaides, a digital fellow at the MIT Initiative on the Digital Economy. The paper, “Rationing Social Contact During the COVID-19 Pandemic: Transmission Risk and Social Benefits of U.S. Location,” appears in Proceedings of the National Academy of Sciences.
“Texas started a phased reopening in May, with sit-down restaurants and bars, movie theaters, museums and malls permitted to reopen at reduced capacities, but there was no reasoning provided regarding why certain locations were reopened first and others remained closed,” Collis said in a prepared statement. “Then when the number of COVID-19 cases surged statewide, many of these locations were ordered to close again.”
On July 27, some 800 Texas bar owners opened for “Freedom Fest,” an event protesting Abbott’s June 26 order that re-closed bars after opening them in early May, researchers noted. After launching his multi-phased economic reopening on May 1, Abbott later expressed regret having allowed bars to reopen after his April stay-at-home orders expired, citing crowded bars as one reason for a sharp spike in COVID-19 cases.
“Policymakers have not been making clear explanations about how they are coming to their decisions,” Collis said in a prepared statement. “That’s why we wanted to provide a more data-driven policy guide.”
Banks perform best in the study, being economically significant and relatively uncrowded, along with general merchandise stores such as Walmart and Target. These locations provide great economic and social value and typically have large spaces that limit crowding, researchers said.
By contrast, other business types create much more crowding while having far less economic importance, the study shows. Liquor and tobacco stores, sporting goods stores, cafés, juice bars, dessert parlors and gyms all fall in the bottom half of the study’s rankings of economic importance, while, taken together, they rank third highest out of the 26 business types in risk, according to the study.
University of Texas at Austin graphic.
Gyms are the fifth riskiest, according to the study’s metrics, which include cellphone location data revealing how crowded U.S. businesses get.
In many cases, researchers noted, policymakers have made reasonable decisions about what types of businesses should be open and closed. But there are notable exceptions, including liquor stores, which have been deemed “essential services” despite ranking 20th out of the 26 business types in economic importance but 12th highest in risk.
By contrast, colleges and universities have suffered a 60 percent decrease in visits, analysts said, in part because of policies that assume these locations pose a health risk. But the study found they rank eighth out of the 26 business types in economic importance, and because most campuses offer large, open-air facilities and a consistent population of visitors, the health risk is minimal. If campus living arrangements could be made safer, the researchers think, the other parts of university life could offer relatively reasonable conditions.
To identify the trade-offs involved in opening different places, researchers said they first needed to understand each location’s potential health risks and importance to consumers and the economy. To measure importance, they investigated how much consumers value being able to have access to the location, its levels of employment, the size of its payrolls and the amount of revenue it collects.
Researchers also constructed a measure of “cumulative danger,” or overall risk, of spreading or catching COVID-19 in 26 categories of places. To do so, they harnessed cellphone data to track the number of visits the business receives, the number of unique visitors it gets, the person-hours of attendance at different levels of crowd density and the median distance traveled to the destination, which provides an indication of how much geographic mixing takes place.
Researchers noted a key to their approach is recognizing that during the pandemic, many consumers are trying to limit trips that generate interaction with strangers, while still needing to get essential and useful transactions done.
Should the pandemic worsens again, researchers said their study can apply to shuttering businesses again.
While there is hope Texas is turning a corner with COVID-19, this study can steer policymakers around some of the bumps they encountered earlier this year, Collis said: “State leaders have been making these decisions in the dark, but in the fight against this pandemic, intuition alone isn’t good enough.”
For more information about this research, read the McCombs School of Business Big Ideas feature story or watch the video interview.
This article originally appeared on the Austin Patch