Good health equals good economics
Covid-19 was going to cause a recession whatever the Government did. The only choice was whether to save lives, write Sarah Hogan and Todd Krieble of the NZ Institute of Economic Research.
The Government’s move to implement a level 4 pandemic response is not just good public health, it is good economics. Being the last bus stop on the planet has given us time to learn fast from the experience of others.
We are earlier in the global pandemic than other countries, so centuries-old, low-cost public health measures such as contact tracing and social distancing can be put in place and expected to be effective. The result will be a short, sharp economic shock.
The alternative is a long-term grind from a virus that runs unchecked. Based on work released last week from Martin Eichenbaum and colleagues at Northwestern University in the United States, opening up economies too soon will mean more deaths, lost workers, an overrun health system and loss of the social capital that is the fabric of New Zealand society.
A key question for governments in the context of infectious disease is how to deal with individual behaviour that may not be in the collective interest. When people take steps to prevent their own infection, they are not generally considering the effects of their infection on others.
Secondly, a person’s preventive efforts may reduce the chances of others becoming infected, even when those measures are not successful at preventing their own infection.
This means people underestimate the cost of infection and the value of prevention. As a result, individuals will not do enough to prevent the spread of infection without government intervention.
To overcome this, governments intervene with containment measures that have high economic costs. But the trade-off between health outcomes and the economy is inevitable.
Without government intervention, a serious infectious disease will cause massive economic losses from lost productivity and widespread fear-induced consumption reducing behaviour. These costs are in addition to significant loss of life.
Covid-19 will cause a recession. The only choice we have is whether to save lives. Government action last week reflects a societal decision to achieve optimal prevention and maximise welfare.
In New Zealand, the choice is also about equity and fairness. Ma¯ ori and Pacific people are roughly twice as likely to suffer cardiovascular disease and diabetes, and up to five times as likely to suffer from respiratory conditions. They also develop these conditions 10 to 20 years younger.
These conditions increase the probability of death from Covid19 by a factor of 10. As a society, we have a moral and ethical obligation to protect our most vulnerable, particularly when their vulnerability is largely a consequence of past policy failures.
In public health, the population is the patient. This means everyone needs to play their part.
In economics, public health is called a public good because the benefits are shared by everyone and no-one can be denied that benefit.
The number of confirmed cases will rise before the population prescription kicks in. Decisions are always made with incomplete information. If the prescription does not work, we will still be able to learn fast.
We can’t hold off and wait for a vaccine. Lockdown is our best shot until there is a shot. A vaccine will take time and mastery of a virus that may not co-operate.
In the trade-off between gohard now or long-term attrition, go-hard looks like the best option for the nation’s well-being.
‘‘As a society, we have a moral and ethical obligation to protect our most vulnerable ...’’