Andrew Cuomo, a Democrat, who was New York’s governor at the time, said that “We are not going to place a dollar value on human life.” This declaration came four days after he imposed a statewide COVID-19 lockdown. His goal was “to save lives,” he said.
Ryan Bourne’s Economics is as Simple As a Virus offers a much-needed rejoinder to that morally obtuse position. Bourne, an economist from the Cato Institute highlights important considerations that politicians such as Cuomo ignored when they decided how the country should deal with a serious public health crisis. This was worse than the one the nation has experienced since 1918’s flu pandemic. Bourne does not take a firm position regarding the economics of mass business closings and stay-at home orders. However, he insists. Pace Cuomo, that cost-effectiveness matters, and he deftly shows how economic reasoning illuminates such issues.
The speed limit would be set at 5mph if legislators are determined to protect lives. Or, they could ban cars altogether. That would stop nearly 40K traffic-related deaths each year. If you overlook the cost of countervailing measures, these policies may seem sensible. Thomas Sowell, an economist, famously stated that there is no solution to public policy. There are only tradeoffs.
Bourne says that “logically” there must be negative consequences to government lockdowns. He also suggests that they could become self-destructive. For policymakers to figure when this might be, they need to calculate the public health benefits of lockdowns in order to compare them to the damage that they have caused.
Cuomo does not believe that it is a question of weighing the economic and human costs of locking down drug traffickers. In terms of life and death, lockdowns were a disadvantage because they led to drug-related deaths rising, disincentived medical treatment that could save lives, and caused financial and psychological distress. Neither one is good for your overall health. Bourne stresses that “economic welfare” does not just refer to household finances, but GDP. It encompasses everything valued by people.
Bourne examines the literature regarding the benefits and makes several key analytical points. For example, it is important to differentiate between the effects of restrictions imposed by government and those taken involuntarily. This will help us determine whether lockdowns are “working.” The Trump administration amplified an early and influential prediction by Imperial College London. It based itself on the counterfactual scenario that “we do not” which saw as much as 2.2 million deaths from COVID-19. However, doing nothing wasn’t an option. People were already responding to the outbreak by making changes in their lives.
Apart from all the cancellations of big gatherings like sports events and conventions, data on smartphone mobility shows that the number of individual trips fell dramatically in the early months of March. These numbers were several weeks before many of the lockdowns. Bourne refers to a study by Christopher Cronin, William Evans that estimated that individuals and businesses had contributed between 74-83 percent of the decrease in consumer visits to retail stores, entertainment venues and hotels. Austan Goolsbee (economist) and Chad Siverson (economists) found that legal restrictions were less than 12 per cent of the drop in overall consumer traffic.
Bourne writes that “extensive Social Distancing” was occurring before government orders. “It would be incorrect to assume all lives saved when compared with ‘doing nothing. Bourne suggests voluntary adaptation as a possible explanation for why deaths and cases in countries with very different health programs have remained relatively consistent through most of the spring, summer and fall 2020.
In evaluating lockdown cost effectiveness, private precautions play a significant role. This not only reduces the value of lockdowns, but also lowers their cost. Americans who were scared by COVID-19 reacted by spending more time at home, and less at brick and mortar businesses. These businesses would have been affected (though not as badly) even if the states did not restrict their operations. “It is clear that businesses and much economic activity were shuttering or constrained through changed private behaviors,” Bourne notes, “even prior to state-government-mandated business closures and stay-at-home orders.”
It is important to differentiate between COVID-19 fatalities that could have been prevented and those that occurred later. Although lockdowns are most effective in reducing the spread of the virus early on during the pandemics, the impact they had on mortality could have been greater later, or when vaccines and treatment were more readily available. California was one of the most strict states in America, with a similar winter spike in deaths and cases to other states, but it did not benefit public health from having restrictions imposed in late 2020.
A few natural experiments showed that lifting lockdowns didn’t have the devastating impact critics expected. Dhaval and his collaborators discovered that Wisconsin’s Supreme Court had overthrown the lockdown. They also found no evidence that the move “increased COVID-19” growth one month after the event. The state of Wisconsin, just like all the other states, saw an increase in new cases late in the summer. This was followed by an increase in the fall, and winter. Texas Governor. Greg Abbott (a Republican) was widely condemned by the public for raising business occupancy limits in Texas and creating a mandate to remove statewide masks. Dave et.al. The reopening of cases and deaths was also found not to be an issue, according to the same research.
The lesson here is also not clear. Dave stated that the impact of legal restrictions being removed may be less than those imposed if people continue to adopt the cautious behaviors they learned during lockdowns.
Bourne discusses a number of studies showing that U.S. lockdowns have a significant additional impact on deaths and cases beyond the voluntary ones. A study done by Penn-Wharton economists summarizes this: “Although private responses were the most effective, combined state stays-at-home orders and school closings in the United States resulted in 48,000 fewer deaths during the initial three months of pandemic.” However, the University of Chicago researchers published a second study after Bourne’s book. It found that while lockdowns were not associated with large economic disruptions, they did not provide significant health benefits.
If estimates of significant effects are believed to be credible, the question of how much it was worth paying for those deaths is left unanswered. Cuomo believed that “a human being’ is worthless even though he was following a careless nursing home policy which probably led to many unnecessary deaths. He thought that asking this question would be a moral offense. The question cannot be avoided in an era of limited resources, where officials regularly and accurately weigh the costs of lifesaving regulations.
A policy will be considered justified by regulators if it saves $10 million per death. The “value of an statistical life” (VSL), is calculated from data on the extra wages people are willing to pay for dangerous work. This involves a young, healthy population. Bourne says that the VSL suggests that we should “save just 0.33 per cent of America’s wealth”, which is approximately ten percent of America’s total GDP. Some economists suggest that in this case, the VSL should not be less than $3 million. That would clearly make a huge difference in the estimation of the effect of lockdowns.
Bourne says that lockdowns can have both benefits and costs in the millions of dollars. Even if this sum was greater, it doesn’t necessarily indicate that lockdowns were the most efficient approach. As several international COVID-19 survey results have indicated, less broad, but more targeted policies may have yielded similar results at a lower price. Bourne does not venture a definitive conclusion.
Bourne not only considers whether lockdowns are a good idea, but also uses the Pandemic to demonstrate economic concepts like externalities (the reason for intervention by the government in this instance), marginal analysis (“which politicians often ignore in order to judge the wisdom of restricting low risk activities such as fishing and boating), price mechanism (which policymakers keen to end “price goinguging”), moral hazard (“which suggests that COVID-19 preventive measures might have counterintuitively encouraged risky behaviors), and public choice which helps determines who got bailouts they were). Bourne’s focus throughout is on smart questions rather than glib answers—an approach frequently missing in the pandemic era’s acrimonious debates.
Economics as a Virus: Introduction to Economic Reasoning Through the COVID-19Ryan A. Bourne (Cato Institute), 309 Pages, $19.95