People keep asking me if, “as an economist,” I think the lockdown is “worth it.” Of course I am only asked by people who don’t believe it is. That’s why they’re asking an economist instead of a doctor, a social worker, or anyone else employed in a humane profession where s/he isn’t routinely trying to quantify the value of human life and measure it against a meaningless and completely fantastical number like GDP, to see if the math adds up or if they can just ignore the health experts.
It probably goes without saying that lockdown has been brutal in the UK. In what was framed as a trade off between economic growth and saving lives, the UK somehow managed to produce both the largest GDP crash of the last century and one of the highest mortality rates per capita in the world (all while most of us were confined to our tiny flats, broke and terrified of getting sick.) The US has had similarly catastrophic outcomes.
But I have never, not once, wondered whether the economic costs of lockdown outweigh the benefits. It isn’t because I’m clueless about the hardship that lockdown caused for those already living on the margins. It’s because, “as an economist,” I find it troubling that we think of “the economy” as something we need to keep alive by feeding it more humans. (In fact, the economy called and said it wants to try a more diverse diet after eating nothing but humans and coal for the last 400+ years…)
In reality, the “the economy” is not something that demands human sacrifice. Nor is it something that just happens to us. It is a collection of choices made by people in power about the allocation of our collective resources. In time of crisis, those resources can be (and have been, under better leadership) allocated to better suit the needs of our societies. The trade off between health and material wealth is a false dichotomy that need not exist.
But even though I disagree with this whole idea, it turns out that the numbers do add up. Here are a couple of slides from a lecture I attended at the London School of Economics on 16 June 2020, in which Alistair McGuire (Chair of Health Economics in the Department of Health Policy) does the math and concludes that lockdown is absolutely worth it in both the US and the UK.
His estimates are based on a very conservative 1% mortality rate (he uses the locked down cruise ship, Diana Princess, as a proxy, which witnessed a 20% infection rate and a 1.3% mortality.) His statistical value of life is drawn from the values used in public appraisals in the respective countries. He concludes that the lockdown has saved $5.41 trillion in the US, compared to an economic cost of $3.9 trillion.
For UK figures, see the right-hand column:
Although he uses a 1% mortality rate, countries are now recording closer to 4%, so his estimates for the monetary value of life could be significantly higher, making his argument (that lockdown was worth it) all the more compelling.
Another important point he made was that the economic downturn we’re experiencing cannot even be attributed entirely to Covid-19. As many of us know from personal experience, economies have been fragile since the 2008 recession, characterized by informality (the gig economy), almost nonexistent wage growth, and low quality jobs. Global debt has been on the rise for the last 40 years. As such, he and other speakers on the panel argued for far more ambitious economic reforms beyond just weathering this pandemic, e.g. more formal employment, more international cooperation (and far less British exceptionalism), increased investment into healthcare (a.k.a. an end to austerity!), and a recalibration of incentives for vaccine R&D.
Should the UK find itself in a second wave of Covid-19 cases, I hope it does not drag its feet on sensible public health policy as it did the first time around. There is no economic argument to be made for keeping the economy open in the middle of a pandemic. In fact, it is irresponsible to pit health concerns and economic concerns against each other in this way. From a policy perspective, they are necessarily sequential: close the economy to save lives, re-open the economy once the virus is contained (with certain intermediary economic measures to help people weather the crisis…more on that in a future post.)
