One of the difficulties in analyzing the trade-offs between policies to slow the spread of the coronavirus vs. the damage to the economy of lockdown measures is that the benefits are measured in lives saved, while the costs are measured in dollars of economic loss.
It is hard to compare the costs and the benefits when the two are measured in different units.
But we do have a way of measuring lives lost or saved in terms of dollars. It is called the “value of statistical life” and is used by government to make policy trade-offs between spending money and saving lives. While the procedure sounds cold and inhuman, we do need some way of evaluating these trade-offs.
Obviously, we can’t spend billions or trillions of dollars to save a single life. Just as obviously, we can’t morally justify not spending one dollar if it would save thousands of lives. So we do have to figure out how much we are willing to spend, or lose, to prevent deaths if we are going to enact reasonable policies.
In the United States, government guidance is to use $10 million as the value of a statistical life. That is, we should be willing to spend $10 million to prevent one death. Likewise, if a single life is lost, then we should record a $10 million loss of value from our economy.
Given this number, if we can estimate how many lives will be lost under different policies to control the coronavirus, we can compare the economic value of the lives lost to the damage done to our economy.
Even without social distancing, the pandemic would cause a hit to the economy due to a loss of productivity because of illness and overloading of the health care system. So the cost of doing nothing and letting the pandemic run its course is not zero.
A group of scientists at the University of Wyoming used these facts to estimate whether social distancing policies would make economic sense. They used numbers from the government and Goldman-Sachs to estimate the economic effects. You can download their research and see all the details at: tinyurl.com/socialdistancingcost.
To summarize, here is what they found:
• Without any social distancing, we could expect 2.18 million deaths, for an imputed economic impact of $21.8 trillion. We could also expect the economy to take a $6.49 trillion hit compared with what would have occurred if the pandemic had not existed. This is a total economic value loss of $28.29 trillion.
• With effective social distancing, we could expect 0.949 million deaths, for an imputed economic impact of $9.41 trillion. We could also expect the economy to take a $13.7 trillion hit compared with a no-pandemic scenario. This is a total economic value loss of $23.11 trillion.
What this means is that the total economic cost of the pandemic — when the imputed cost of deaths and the hit to the economy are both taken into account — would be about $5 trillion less with effective social distancing than without it.
Putting this in current terms, ending social distancing policies too soon could result in a loss of value to the U.S. of around $5 trillion. Nobody would take $5 trillion out of the bank and burn it. But based on what these scientists calculated, ending social distancing now is basically the equivalent of doing just that.
Those who would argue that this calculation is wrong need to make a convincing case that the arguments presented in the research paper are mistaken. It isn’t a case of political ideology. It is a matter of economic projections based on observation and scientific reasoning. Any valid argument against social distancing needs to be made on that same basis.
Richard Howey lives in St. Paul.