Reopening the economy vs. keeping it shut longer: What’s more costly?
WASHINGTON — When the governor of Georgia and other leaders press for ending government restrictions aimed at containing the coronavirus, they are proposing a huge gamble, not just for people in their own states but for millions of others nationwide.
And with the coronavirus still spreading, the risks are not just medical. They include the likelihood of expanding and lengthening the already catastrophic economic damage.
That is the widespread view of the nation’s leading experts on epidemics, as well as most mainstream economists.
What makes the risks so great, these experts say, is the way the coronavirus spreads, especially in today’s interconnected economy.
“The health risk is not just to the individual who is out and about. It’s to everyone else in that community,” said Katherine Baicker, a health economics policy expert at the University of Chicago. “And given travel patterns and movement around the globe, the community is very big.”
The head of the Centers for Disease Control and Prevention, Dr. Robert Redfield, has warned that a new wave of COVID-19 infections could coincide with the flu season later this year and make the problem even more challenging to combat.
Much of the pressure to relax social distancing measures can be traced to President Donald Trump and to small groups that support his reelection.
Weeks ago, Trump advanced the argument that the cure is worse than the disease.
In recent days, a number of conservative politicians and economists have weighed in with variations of that argument.
Rep. Trey Hollingsworth, R-Ind., has said that deaths due to the coronavirus were “the lesser of two evils” when comparing the harm to economic and American life.
The supply-side economist Arthur Laffor, an adviser to Trump, contended it was “absolutely immoral” to suppress the economy and deprive future generations of opportunities.
“We are crushing the economy,” said Texas Lt. Gov. Dan Patrick. “There are more important things than living.”
Beyond these arguments, a lively debate has sprung up among economists over whether the pandemic can be treated as a cost-benefit problem. In business, executives and accountants perform such exercises all the time.
In the case of the coronavirus, creating such an equation is complicated by the large number of unknowns, including how many people will be infected, how many will be seriously sickened or killed, and then estimating the long-term financial consequences.
“There is clearly a difficult trade-off here concerning lives versus material goods, with very little discussion about how this trade-off should be assessed and acted upon,” said Harvard economist Robert Barro and co-authors Joanna Weng and Jose Ursua in a recent paper on the coronavirus and the 1918 flu pandemic.
That epidemic, which claimed an estimated 550,000 to 675,000 lives in the United States, is widely considered the closest parallel to the coronavirus outbreak in modern times.
The economic value of a human life, measured statistically on the basis of expected income and other factors, might be in the range of $3 million to $10 million in the U.S., Barro said in an email to the Los Angeles Times.
To determine the cost benefit, that amount would be weighed against the predicted lives saved and the economic cost of continuing to curtail large-scale social interactions and the resulting economic losses.
But setting aside any ethical or moral qualms over such an approach, studies of the impact of the Spanish flu indicate it’s not necessarily an either-or issue: A middleground strategy yields better outcomes on both the health and financial side.
Barro said government interventions like social distancing and quarantines to fight the flu pandemic a century ago lowered peak death rates.
The lowering of death rates did not prove permanent, he said, as the containment policies were generally relaxed after about four weeks. Barro worries that we could be heading down a similar path this time.