To Panic or Not, that is the Question

How do you react to something like Corona virus? The choice is whether to panic or not.

The rate of the exponential growth of a pandemic depends on two main factors - A. average number of people someone infected is exposed to each day and B. the probability of each exposure becoming an infection. If the population panics, they will (a) reduce contact with others by cutting down on travel, avoiding crowded places, meetings, etc and (b) take precautions like washing hands, not touching the face, etc. Factor A reduces with (a) and factor B with (b). In short, panic leads to a reduction of both A and B, which cuts down the rate of exponential growth and causes a lower inflection point for the curve. On the contrary, if everyone goes about their business, then A and B will be high and the pandemic will be severe.

So, we can say, the only thing to fear is the lack of fear itself.

But then why do we hear world leaders say the opposite and ask us not to panic - using the exact opposite quote about fear?

Short answer: Stock markets.

While panic is the most rational and sensible approach to contain the humanitarian damage, the stock markets will bottom-out if investors respond with panic.

You can take a guess whose side are our leaders on.