My starting point was a controversial article by Toby Young, published at the end of March. Young had posed the question “Has the government overreacted to the Coronavirus Crisis?” and concluded that it had. Unfortunately, the article had several flaws which made it easier for critics to dismiss it at the time. Despite this, he made many valid points that are worth revisiting now.
Perhaps most importantly, there is nothing wrong with trying to put a monetary value on a human life, or even arguing that some lives might be worth less, in some contexts, than others. This is not “eugenics”, nor is it about people’s “wealth-producing capacity” or “economic productivity”, as many of Young’s critics suggested. Instead, it is about using limited resources in the fairest way.
If this sounds indefensible, imagine you had the awful responsibility of allocating the last seat in a lifeboat as the Titanic sank, and that there was a straight choice between rescuing a healthy child or a sickly old man. Whom would you save, and why? Most people would surely pick the child, because the child has many more years of good life ahead of them.
Indeed, this is the thinking behind the approach, often used by health economists, of putting a monetary value on people’s lives based on the number of years of life that they have left, and the quality of that life. This is the concept of “Quality Adjusted Life Years” (QALYs), which I discuss further in the paper and which Young, and others, have applied to Covid-19.
Young was also right to emphasise the age profile of those dying with Covid-19. We can now be even more confident that the virus is a far bigger risk for the elderly and those with pre-existing conditions. Applying the QALY approach is therefore more likely to produce a lower number for the value of the lives lost or saved than if those who are most vulnerable had been younger and in better health.
Finally, Young’s article provided some examples of what others have called the “identifiable victim” problem. We do not have a lot of good data yet on the wider health and social costs of the lockdown, and indeed these will always be relatively uncertain. This may lead policymakers to focus too much on those people who might be at risk of dying of Covid-19, and not enough on less visible costs, including any harms done to others as a result of the government’s own actions.
However, there may be a risk too of over-estimating the economic and fiscal costs of the lockdown itself. This illustrates the problem of identifying the “counterfactual”, or what would have happened anyway even if the authorities had not responded in the way that they have.
For example, in assessing the value of the lockdown we need to have an idea of the number of premature deaths that the lockdown has prevented. The fact that the actual number of deaths during the lockdown has been much lower than some had feared proves nothing either way.
In addition, the economy was already weakening before the official lockdown began, and at least some of the fiscal costs would have been unavoidable too.
Many of these costs also take the form of “transfer payments” that redistribute income from one group (e.g. future taxpayers) to another (e.g. currently furloughed workers, or benefit claimants). These payments are not necessarily a net loss to the economy as a whole, even though they may distort incentives and have other costs, including the opportunity cost of not using the money for something else.
Nonetheless, there is also plenty of evidence that the lockdown has exacerbated the economic impact, at least in the short term, and compounded the fiscal costs. Indeed, if the official lockdown were not having any additional effects on behaviour and hence on economic activity, it would prompt the question of why it is needed at all.
Finally, if this were not complicated enough, this recession is unprecedented. GDP will have fallen by a relatively large amount in a relatively short period of time. But the economy could still rebound relatively quickly, as the threat from Covid-19 recedes and the lockdown is lifted.
A temporary pause would be far less costly than a prolonged slump. Indeed, the GDP lost during the “hibernation” could be more comparable to the income foregone while you are on holiday – albeit an enforced one – rather than a conventional slump.
This all makes any cost-benefit analysis of the lockdown extremely challenging, not least given the difficulty of comparing apples (deaths from Covid-19), oranges (other less visible impacts on health and wellbeing) and pears (economic and fiscal costs). However, the longer the lockdown remains in place, the greater the margin by which the costs are likely to outweigh the benefits.
It may still be right to focus on the impact on health and wellbeing rather than any short-term economic costs. But the balance is shifting even on this score, given the growing evidence of harms that the lockdown is doing to others. This includes patients who are not getting treated for other conditions, even cancer and heart problems, and younger people who are missing out on education and job opportunities.
In addition, the longer the economy is kept shuttered, the greater the risk that the damage will be permanent, making it that much harder to pay for better public services and infrastructure in the future. It is therefore reasonable to conclude that the lockdown may have been “worth it” originally, but is no longer so now. That’s my view, anyway.
This blog post was originally published on CapX.