After days of market freefall, President Donald Trump hinted two weeks ago that he was thinking about relaxing public-health restrictions for the sake of the economy—“WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” he tweeted, before promptly getting roasted by the public health world. Did he really want to sacrifice American lives to goose the Dow back up? It seemed inhumane.
Since then, the president has backed away from opening businesses up right away, but he also had a point: This cure is pretty bad. This week’s report that 6.6. million Americans had filed for unemployment insurance was double the previous record, which was set only last week. Analysts are predicting that GDP could shrink by double-digit percentages this quarter. That’s a lot of future unhappiness.
At the same time, the disease might be even worse. Trump’s coronavirus task force has said that 100,000 to 240,000 Americans could die from the virus, and that’s the best-case scenario.
So, what’s the right amount of economic pain to endure in order to save lives? The debate will only intensify over the next month, as we approach the April 30 endpoint Trump set for national social-distancing guidelines, and pressure builds to re-open businesses, despite the high likelihood the virus will still be spreading.
Politico Magazine turned to a handful of thinkers—people who have studied the impact of pandemics, recessions and more—to helps us understand how to even begin to think about the dilemma ahead. Do we really need to weigh lives against money? If so, how do you do it right?
Spoiler alert: No one offered us a hard date for when life will go back to normal. But there were some surprises. You’ll find a clear guide to making the lives-money tradeoff (and a good rationale for doing it), a surprising fact about the economics of the response to a past global pandemic, a suggestion for a surgical middle-ground approach to a reopening, and a strong argument that recessions actually save lives.
Why Economists Measure Human Lives in Dollars
It’s a highly imperfect exercise—but could actually save more people.
It might feel heartless when President Donald Trump muses about whether the “cure is worse than the problem,” as though a plunging stock market and a patchwork of business and travel shutdowns could possibly outweigh the lives saved by America’s response to the Covid-19 pandemic. And it might feel uncomfortable to think about the response as a tradeoff between saving the economy and saving lives.
But we really are facing that tradeoff, and, in fact, economists make a routine practice of comparing dollars with lives. There are costs and benefits to every policy decision, and by valuing human lives in dollar terms we can arrive at a way to measure those costs and benefits against each other.
As human beings, we tend to see life as having almost infinite value, but it’s also worth remembering that money spent to save one life has an opportunity cost: It could have been spent in another fashion and—if spent more efficiently—saved even more lives. Resources are never unlimited, and without assessing the dollars-to-lives tradeoff, it’s likely that policymakers will fail to save as many lives as they otherwise could.
When it comes to policy, and especially an urgent and life-altering policy issue like the current epidemic, the problem with this kind of cost-benefit calculation isn’t in the idea, it’s in the execution. Even for run-of-the-mill policies, it’s tricky to assess whether a policy does more good than harm. With respect to Covid-19, an exhaustive cost-benefit analysis is even harder because of limitations in our ability to track the disease’s spread, predict the human response to it and analyze the effects that policy will have in slowing its transmission.
Acknowledging these challenges, here’s what the numbers look like, as best we can determine.
On the cost side of the ledger, it is difficult to disentangle the costs of the shutdown policy from the costs of the coronavirus itself. Many of Trump’s supporters talk as though the economy would fully re-open if the restrictions were lifted. But even if governors around the country lifted their emergency orders overnight, would life return to normal, and the stock market revive fully? Likely not. There would still be a new and dangerous virus in the country. Aside from the thousands, maybe millions, who became sick, many more people would still stay home while the risk of infection remains high.
To get a handle on the costs of current policies, one must identify the elusive “counterfactual” scenario—what would happen if the government did nothing. If we assume that most people would choose to stay home regardless of any government action, then the costs of government orders to stay inside and close businesses could be close to zero. At the other extreme, Federal Reserve analysts have estimated that GDP could decline by as much as 50 percent in the second quarter of this year. If we assume that it’s really government orders driving this behavior, and otherwise people would be going about their business, then the cumulative cost of the government’s response is vast, as much as $ 2.5 trillion just in this quarter. The cost over the long-term would be even higher.
The true cost likely falls somewhere in between these extremes. The debate in Congress about the proper amount of stimulus might be instructive. One way to look at the $ 2 trillion stimulus package passed last week is as an attempt by the government to make Americans whole for the costs of being forced to stay home by government orders. Provisions of the stimulus bill directly address these costs—increasing unemployment benefits and broadening eligibility for millions of recently unemployed Americans, as well as loan and grant programs that may allow small businesses to make payroll during the shutdown.
Then there is the benefits side of the ledger, which is also difficult to gauge. A study from Imperial College London estimated that as many as 2.2 million Americans might die as a result of Covid-19, but this was an early estimate that basically assumes no behavioral responses from the public as the disease devastates the country. Even if we assume that number is a reasonable upper limit on how many people might die, there’s still the question of how effective government policy will be in changing the trajectory of the pandemic’s progression and saving lives. Some epidemiologists believe that as soon as the social distancing efforts end, the virus will return with a vengeance.
Here’s where assigning a dollar value to life-extending benefits enters the equation. One common way to do this is by using the “value of a statistical life,” or VSL, which reflects what current citizens are willing to pay to reduce their own risk of death. (It’s usually estimated by looking at how much extra compensation workers in dangerous professions get paid.) Estimates of the VSL vary, but tend to average about $ 10 million for Americans. If we assume, for example, that the government’s response to Covid-19 prevents an enormous death toll of 2 million citizens, the value of all those prevented deaths could be as much as $ 20 trillion.
However, the value of a statistical life is not universally accepted by economists. For one thing, what an individual is willing to pay to reduce risk might be very different from what society should pay. A person nearing the end of life might find it rational to expend all of his or her wealth on potential life-extending treatments. But society, which will endure past any of our individual lives, ought to be more frugal with its finite resources.
An alternative approach to the VSL is to consider the productive contributions associated with extending life—that is, the economic value people are expected to contribute. Such an approach is commonly employed when valuing the benefits of regulations that enhance our health. For example, an environmental policy that prevents asthma attacks or non-life-threatening illnesses might end up saving society money by reducing hospital stays or emergency room visits. Compared with the VSL, this approach provides more of an apples-to-apples comparison between benefits and financial costs. It accepts that the true value of a life is likely undefined, but we are at least able to estimate the economic value each person creates.
One 2009 study estimated the total value of worker production at different stages of life, including the value of “nonmarket” roles such as staying at home to raise kids. The authors estimated that the present value of future worker contributions ranged from about $ 91,000 to $ 1.2 million in 2007, depending on the age of the worker.
Age is an important factor in the coronavirus pandemic, too. The CDC has reported that, as of March 16, 80 percent of U.S. deaths from Covid-19 have been people ages 65 or older. Combining the CDC’s numbers with the aforementioned estimates of the value of worker production at various ages (and updating them for rising productivity and inflation since 2007), we end up with an expected value of forgone earnings for victims of Covid-19 of about $ 414,000 per person. Even this estimate of benefits—already drastically lower than the VSL at $ 10 million—likely overestimates the economic value of workers in cases when the cost of replacing them is relatively low.
In other words, the economic benefit of preventing all those potential deaths depends on which controversial measure you use: In this case, upper-bound estimates of mortality benefits associated with government interventions range between $ 20 trillion with the VSL approach and $ 828 billion if the worker production approach is extended to 2 million lives saved. Twenty trillion dollars is roughly the value of an entire year of the nation’s GDP; $ 828 billion is considerably less than the value of Congress’ latest economic stimulus bill.
There are other costs and benefits to account for as well. On the one hand, a prolonged shutdown of the economy could increase some health risks for those who lose their jobs, a knock-on cost of impoverishing so much of the citizenry. On the other hand, Covid-19 has been shown to cause significant lung damage among some of those who recover; reducing those cases is another potential benefit of government action. An economic shutdown could even have unexpected benefits—for example, a decrease in air pollution or the number of car crashes.
To go strictly by the numbers, Trump may well be right that the government “cure”—in the form of restrictions on commerce and movement—might be worse than the Covid-19 disease. But it’s also possible, given what we know, that everything the government is currently doing is worth it, and relatively inexpensive to boot.
Cost-benefit analysis can offer us a way to think about decisions, and put some boundaries around the likely outcomes. But even in simpler circumstances, it cannot always provide bright-line recommendations. And it can’t answer our deepest and most profound questions. In some cases, the calculus has to be driven not by a set of numbers, but by our values.
Social Distancing Saves Lives. So Do Recessions.
If you’re weighing a recession versus a pandemic in terms of lives lost, there’s no contest. Contrary to popular belief, deaths go down during economic downturns.
When Donald Trump tweeted in late March, “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF,” a lot of people had questions about what “worse than the problem” meant, exactly. “You’re going to lose more people by putting a country into a massive recession or depression,” he clarified a few days later in a Fox News town hall. “You’re going to lose people. You’re going to have suicides by the thousands.”
The assumption that people die more in recessions feels right, and so it seems like a good reason to suggest risking a more severe coronavirus outbreak with lighter restrictions on businesses and people, instead of inviting the worst economic crisis since the 1930s. There are, after all, a lot of reasons to imagine such a surge in deaths could happen: lost healthcare due to lost jobs, which would make people more vulnerable to otherwise preventable deaths and, of course, suicides.
But the assumption that people die more during recessions is wrong, at least in wealthy countries. Past economic downturns show that, in fact, mortality rates go down in recessions, for a number of reasons. If you’re weighing the human cost of a recession or depression against the human cost of illness and death from the virus itself, as Trump and policymakers across the country are doing right now, it’s important to keep in mind that the toll of a recession in terms of lives lost is not a factor.
It’s true that poor people die younger. That was true in France and Britain in the 19th century, and it is true in the United States today. People in their mid-40s in the top 1 percent of tax returns have about 15 more years to live than people in the bottom 1 percent. Yet is it not true that when people get poorer, they are more likely to die; annual death rates are lower in recession years than in boom years.
In our recent book, Deaths of Despair and the Future of Capitalism, we argue that the long-term, 70-year, slow-motion collapse of work, wages and community for working-class Americans is the root cause of the epidemic of drug overdose, suicide and alcoholism that has ravaged less-educated men and women. That epidemic, and those deaths, came after a slow and prolonged decline in the wages and jobs that supported working-class life—very different from the normal upswings and downswings of the business cycle. Despair came over years and decades, not from a short-term downturn in the economy.
One of the first studies of health and recession was published almost a century ago by sociologists William Ogburn and Dorothy Thomas (the first woman to be tenured at the Wharton School). They made the important distinction between “lasting changes in the economic order”—such as the Industrial Revolution or, to extend to our own work, the erosion of working-class life that underlies deaths of despair—and “brief swings in economic prosperity and depression, around the line of general economic trends,” such as the Great Depression.
They examined booms and busts from 1870 to 1920 and found, to their own astonishment, that death rates rose in good times and fell in bad times. They were careful not to overstate their findings—“we do not draw a definite conclusion”—so strong was the seemingly obvious presumption that bad times bring death. That presumption is widely held to this day.
One might think the pattern of recessions and death from a century ago is different from today. A century ago, pneumonia, influenza and tuberculosis were the leading causes of death, not cancer and heart disease. Deaths were “younger,” with death rates among infants higher than death rates among the elderly, the inverse of today’s pattern. Sixteen out of every 100 children did not live to see their first birthdays.
But the same pattern of recessions and deaths held throughout the 20th century. Mortality rates fell from 1930-33, the four worst years of the Great Depression; in the 1920s and 1930s, mortality rates were highest in the years of fastest economic growth. The same was true for the longer period from 1900 to 1996. Business cycles differ to some extent in different U.S. states, and mortality was lower in bad times state by state in the 1970s and 1980s. The same was true in England and Wales for economic fluctuations from 1840 to 2000. The relationship was stronger at some times than at others, but the pattern was consistent: Mortality declined more rapidly in bad times, and declined more slowly or even rose in good times. Europe and Japan show the same pattern.
What about the Great Recession after the financial crash in 2008? The economic effects were most severe in a few European countries, like Spain and Greece. Remember Greece? Its economy was so devastated that it threatened to crash out of the Eurozone. In the United States, it was used as the bogeyman, the perennial warning of what might happen to us if we did not get our fiscal house in order. Unemployment in Greece and Spain more than tripled, to the point where more than a quarter of the population was unemployed. Yet Greece and Spain saw increases in life expectancy that were among the best in Europe.
For the Great Recession in the United States, the story is more complicated, because the years after 2008 saw a large and growing epidemic of deaths of despair. But deaths of despair began to rise in the early 1990s and grew inexorably into the 2010s. They rose before the Great Recession, and grew during and after the Great Recession; the line of rising deaths shows no perceptible effect of the collapse of the economy.
The big question is: Why? And why is our intuition so wrong?
Many of us have the haunting vision of ruined financiers hurling themselves out of skyscrapers and off of bridges during the great crash of 1929. These accounts were doubtless exaggerated, but suicides did indeed increase during the subsequent Great Depression. Suicides, however, are the exception, not the rule, and they are a small share of total deaths. In 2018, there were 2.8 million deaths in the United States, of which 48,000 were suicides—less than 2 percent of the total. Each is a tragedy, but it takes very large changes in suicides before the suicide tail wags the mortality dog.
Why might the non-suicide deaths decline in recessions? High activity rates bring dangers. There are more traffic accidents. There are more occupational accidents when construction is booming and factories are running at full tilt. There is more pollution, a life-threatening danger for some infants. It is also possible that busier lives bring stress, and that stress brings heart attacks. Or that people have less time for exercise, healthy meals and self-care. In today’s rich economies, most deaths are among the elderly, and many older people are cared for by low-wage workers. When the economy is booming, when there are better paid jobs elsewhere, it is much harder to hire and retain these workers for nursing and elder-care homes. Care matters.
Which brings us back to suicides. Because suicides usually do rise in recessions, we think that there is a plausible case that the forthcoming recession will bring more suicides. But not inevitably.
Mass layoffs from plant closures have often brought suicides in their wake. Today, people are losing their businesses; workers and owners whose livelihoods and lives are structured and given meaning by what they have created—restaurants and coffee shops, bookstores, small businesses and non-profits of all stripes—may reasonably fear that they will never reopen, even if government packages provide some relief. They may feel shame that they did not make provision for such a calamity, shame unlikely to be shared by the managers of corporations who used their profits not to build a rainy day fund, but to buy back shares that enriched themselves and their shareholders, knowing that they would be bailed out in a catastrophe.
This recession, unlike others, involves social distancing or, for many and increasingly more as infection rates rise, isolation. Social isolation is a classic correlate of suicide. The United States has a suicide “belt” that runs north-south along the Rocky Mountains where population density is low. New Jersey, where we live most of the year, has the lowest suicide rate in the country; Montana, where we spend August, has the highest. Zooming in, Madison County, Montana, has a suicide rate that is four times higher than that of Mercer County, New Jersey. Isolation and depression can be deadly. Think, too, of the millions of people in recovery programs, like Alcoholics Anonymous, whose sobriety depends on community support. Social distancing will also bring more suicides this time around if hospitals are slow to respond, so that more attempted suicides may succeed.
Yet there is an important counterargument. Suicides tend to be low in wartime, especially when leaders can build social solidarity, the opposite of social isolation. Winston Churchill inspired the British in World War II. Governor Andrew Cuomo is inspiring New Yorkers (and many other Americans) who listen to his broadcasts. If the rhetoric of fighting the common enemy wins out against the possibility that Americans are jobless, alone, terrified and without meaning in their lives, even suicides could be low in the months ahead.
Here’s What Happened When Social Distancing Was Used During the Spanish Flu
The economy took a hit during the 1918 influenza pandemic, but cities that intervened earlier and more aggressively fared better.
The Covid-19 outbreak has sparked urgent questions about the impact of pandemics on the economy. Will our effort to fight the disease by locking down citizens and businesses do more damage than the disease itself? Because pandemics are rare events, policymakers have little guidance on how to manage the crisis. But looking at past pandemics—both the public health responses and their economic impact—can provide some insights.
The most frequently cited comparison is the 1918 Spanish flu, which similarly swept across the world and triggered widespread shutdowns in response. In a recent research paper, Sergio Correia, Stephan Luck and I examined the impact of 1918 pandemic in the United States to answer two sets of questions. First, what are the real economic effects of a pandemic, and how long do they last? Second, do public health interventions meant to slow the spread of the pandemic, such as social distancing, have economic costs of their own?
Our research compared different areas of the United States that were more and less severely affected by the 1918 flu, as well as areas that were more and less aggressive in their use of public health tactics to slow it down. (The technical term for the tactics we measured is “non-pharmaceutical interventions,” or NPIs.) The public health measures implemented in 1918 resemble many of the policies used to reduce the spread of Covid-19, including closures of schools, theaters and churches, bans on public gatherings and funerals, quarantines of suspected cases, and restrictions on business hours.
We came away with two main insights. First, we found that areas that were more severely affected by the 1918 flu saw a sharp and persistent decline in real economic activity. Pennsylvania, for example, experienced a substantial fall in manufacturing employment and banking sector assets, compared with less affected states like Michigan. The decline in economic activity was large—with an 18 percent decline in manufacturing output for the typical state—and lasted for several years after 1918.
You can see the economic disruption reflected in newspapers of the time. On October 24, 1918, the Wall Street Journal reported: “In some parts of the country [the flu] has caused a decrease in production of approximately 50 percent and almost everywhere it has occasioned more or less falling off. The loss of trade which the retail merchants throughout the country have met with has been very large. The impairment of efficiency has also been noticeable. There never has been in this country, so the experts say, so complete domination by an epidemic as has been the case with this one.”
Second, we found that cities that implemented early and extensive public-health measures suffered no adverse economic effects from these interventions by 1919; in other words, the interventions did not make the economic impact of the flu worse. On the contrary, cities that intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic subsided, compared with cities that intervened less aggressively.
Minneapolis and St. Paul, Minnesota, just across the river from each other, illustrate the difference clearly. In 1918, officials in Minneapolis quickly put restrictions into place and kept them for a relatively long 116 days. Officials in St. Paul acted much more slowly and only kept public health measures in place for 28 days. The death rate from influenza in 1918 was 24 percent higher in St. Paul (481 deaths compared with 388 deaths per 100,000 residents, respectively). And Minneapolis’ economy didn’t suffer from the restrictions. On the contrary, employment growth was twice as high in Minneapolis in 1919 as it was in 1914, when the previous manufacturing census was taken. These findings suggest that, at least in the medium term, there was no tradeoff between implementing public health measures and economic activity.
This result might be hard to grasp at a time when millions of Americans are currently filing for unemployment amid the coronavirus pandemic. How can it be that shutdown tactics like school closures and restrictions on business hours could actually benefit the economy?
The reason is that pandemic economics are different from ordinary economics. In ordinary times, business shutdowns and other restrictions are bad for the economy, as they limit economic activity. But it’s important to remember that in a pandemic, the disease itself is extremely disruptive to the economy. Households do not want to spend money or go to work if it involves a major health risk, and businesses do not want to invest because economic conditions are so uncertain. The alternative to these public-health restrictions is not a normal functioning economy, but rather a widespread, debilitating outbreak of disease that causes major economic disruption in the short and medium term. As a result, measures to fight the pandemic can actually benefit the economy in the medium term, as they target the root of what is ailing the economy—the pandemic itself.
Of course, there are a number of important differences between the 1918 flu and the current Covid-19 pandemic—most importantly, that the 1918 flu was significantly more deadly for healthy, working-age adults. But our research suggests that public health interventions such as social distancing should not be viewed as economically costly. Doing nothing could be far worse.
There’s No Tradeoff Between the Economy and Our Public Health
Both are measures of human wellbeing. That’s what we should maximize right now.
In light of political pressure and expert estimates that the Covid-19 pandemic could now rack up a six-digit American death toll, President Donald Trump has (for now) backed down from his threat to ease off social distancing measures, reopen the economy and “fill the pews” on Easter. But he has suggested nonetheless that efforts to protect the health of the American people undermine the vitality of the economy.
The physical separation that is now necessary to contain the Covid-19 pandemic does come with a shocking price tag. Because we’re paying so dearly to limit the risk of mass sickness and death, it can be tempting to take the next step and imagine that if we were to toughen up and bear a bit more risk, we could maintain a much healthier economy with only a bit more suffering and loss.
Considering the tradeoffs of one kind of suffering against another, weighing their relative costs and benefits, seems reasonable. But it can also lead us into error. The tradeoff Trump has alleged between “the economy” and “public health” conceives of them as something like knobs you can’t turn up without turning the other down. But they are, in fact, mere abstractions, intellectual tools for inspecting different aspects of the same thing: the well-being of the population. Economic indicators measure well-being (very roughly) in one way; public health indicators measure it in another. But their common subject is how well people are doing.
Wealth and health go hand-in-hand at both the individual and the collective level. Because healthier populations are more productive, and wealthier societies can afford better measures to protect the health, safety and environment of their people, there’s generally little tradeoff between the public health and economic performance. Tradeoffs are rife in public policy, but the tradeoffs involved in public health initiatives around, say, seatbelts, smoking, guns and food generally have more to do with individual autonomy and wariness of nanny-state paternalism.
Formal economic models abstract away from other aspects of human wellbeing when they conceive of money as a proxy for “utility,” or the value of consumption. More money lets you consume more (or forego less) of what you want. A higher level of consumption, enabled by a less constrained budget, generates a higher level of “utility” or “welfare” in economic models simply because that’s how “utility” and “welfare” are defined in the models. But this doesn’t necessarily tell us what we want to know—especially when we’re struggling to contain deadly mass contagion. “Utility,” in the economist’s formal sense, doesn’t refer to a subjective experience of pleasure, happiness or satisfaction with life, and “welfare” doesn’t refer to objective human health and flourishing.
None of this is to say the means to buy the necessities and pleasures of life is not an absolutely essential element of wellbeing. Poverty does cause misery, sickness and death, and measures of wealth are still incredibly valuable. But they’re valuable because we value our lives and how well they go. Viruses don’t discriminate between rich and poor, and the “utility” and “welfare” of economic production and consumption are worth rather less to people struggling to breathe, and worth nothing at all to people who are dead.
Once we acknowledge that the epidemic and the economic slowdown aren’t really two problems, but simply two aspects of a threat to our population’s wellbeing, the policy response becomes clearer. Letting the epidemic rip without mitigating measures would eventually take a catastrophic toll on the economy anyway, in addition to the atrocity and trauma of an overwhelming level of sickness and death. The economic cost of idling the economy to contain the spread of the virus is more immediate than that long-term cost, so it’s the one we are thinking about—but incurring it now better protects the overall wellbeing of the population by minimizing the total loss to health, life and economic capacity.
The danger of fixating on narrow economic indicators of wellbeing, and the need to take a more holistic perspective, has led a number of economists and social scientists to advocate replacing measures like GDP with something like “Gross National Happiness.” Bobby Kennedy captured the spirit of this thinking when he famously complained that it’s confused to treat a metric like GDP, which fails to capture “the health of our children, the quality of their education or the joy of their play,” as the master indicator of our society’s wellbeing. GDP does tell us roughly how much wealth our economy produces, and how much the population has to spend, which is something we need to know. However, as Kennedy rightly observed, “it measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”
Another reason that we can’t turn to economic measures alone to understand how to respond to this crisis is that standard economic models are upended by epidemics. These models assume that physically proximate economic production and exchange generally leave us, and the economy as a whole, better off. But epidemics transform “brick and mortar” workers and customers into vectors of viral transmission, rendering economies based on integrated networks of physical nearness vulnerable to exponential growth in rates of deadly infection. Dead people don’t buy anything, and rampant illness hammers the productivity of workers and the profits of firms. Which is just to say, in the language of economics, that contagious virulence creates a “negative externality,” or harmful spillover effect, from physically proximate labor and market exchange. Simply showing up for your shift at Starbucks, or strolling in to grab a latte, means that you might be, or might become, the living, breathing equivalent of a factory belching toxic sludge into the drinking water.
If the risk of dangerous infection is high, the total harm to health, life, productivity and consumption imposed by the bustle of normal low-distance economic activity can easily exceed its usual economic benefits. When that’s the case, the level of spatial distancing needed to ensure that each infection leads to less than one new infection is economically efficient; it’s the best we can do given the constraints. Economic growth may be impossible in the context of a galloping pandemic. The best we can hope for is to suppress it in a way that minimizes the severity of the economic Ice Age.
It’s crucial to grasp the main constraint within which we are currently forced to optimize is that, thanks to the Trump administration’s slow and hapless response, we don’t know the real rates of infection. If we could better estimate the risk of showing up at Starbucks, we could determine the epidemiologically necessary and economically optimal level of social distancing. If we knew which workers and patrons are most likely to be infected, we could usefully surmise who can safely go on as usual and who should stay home.
For now, all we can do is focus on how to keep as many people well as possible. In the end, measures of economic performance alone—whether GDP or the Dow Jones—don’t always track the things we cherish most. My wife’s mother, and my children’s one living grandmother, is a respiratory therapist in Connecticut. We’re worried sick about her, because we all love her, and she desperately loves my children. Money is great, but it isn’t everything. It would be a cosmic tragedy if we were forced to trade love against prosperity. But we aren’t. Failing to protect the people we love won’t leave more money in our pockets. It will leave them even emptier, and with holes in our lives that we can never fill.
With a Little Ingenuity, We Can Reopen Much of the Economy Right Now
A large swathe of jobs somewhere between “essential” and “optional” could be reengineered so people can go back to work soon and safely.
The Covid-19 debate about when and how to reopen the economy has become dangerously binary. Yes, “life-sustaining” sectors like hospitals and electric utilities must operate unimpeded, and optional, public-facing ones like concerts, dine-in restaurants and theme parks likely aren’t worth the risks for now.
But keeping Americans safe doesn’t require shuttering the rest of our jobs. It does, however, require re-thinking how people do them. There’s a large swathe of jobs, somewhere between essential and optional, that could be reengineered to allow many to get back to work soon and safely.
The logic for all-but shutting down the economy is that doing so will stop the virus’ spread and allow mass testing to catch up. But even with all-out shelter-in-place efforts, we will likely still be living in the age of Covid for the rest of this year at least. Keeping businesses’ doors completely closed will have huge costs. Given this possibility, we need to figure out how to work sustainably in this new reality.
The stakes are enormous. In February, the leisure and hospitality sectors together employed 16 million Americans, and fewer than 6 million Americans were unemployed across the entire economy. Soon, because of limitations on social gatherings, those figures could be reversed. That is a steep but necessary price to pay; gatherings at bars, theaters and other public venues, are inherently dangerous right now.
We’ve already figured out how to protect many white-collar jobs—just work from home online. But we also can and should reengineer some blue-collar jobs—on-premise, physical work—so it can get done while maintaining social distancing.
Manufacturing is a prime candidate. Major automakers have closed their plants in North America, putting their laborers out of work. But these companies could be allowed to reopen if they can demonstrate that they have developed safe operating practices. True, factories involve people working together, but so do hospitals and grocery stores. And factories aren’t at all like bars or nightclubs: Already, the general public isn’t allowed inside, and many are large facilities with relatively low densities of employees because so much of the work involves heavy machinery. China is pioneering ways of getting factories back online while having workers practice social distancing. Those practices are now a crucial competitive advantage that U.S. workers need to catch up to. To take just one small example, painted lines could be used to define specific pathways where people can walk on factory floors.
Like manufacturing, construction does not directly involve the public, and is capital-intensive. Extended hours on construction sites could let the same work get done with fewer people on premises at any given time. Keeping just these two sectors—manufacturing and construction—alive could spell the difference between severe recession and depression. Together, they employ more people in the United States (20 million) than leisure and hospitality, and their share of economic output (23 percent) is even greater than their share of employment (12.4 percent).
Conceivably, there are even ways that furniture, clothing and other general stores could reopen on a limited basis, with employees but not customers allowed on site. Knowledgeable clerks literally walking through store displays with customers on FaceTime might have a chance to compete, at least in some instances, with Amazon. Shutting down stores altogether denies them that chance. If letting employees into a furniture store seems dangerous, note that anyone can now walk into Target or Walmart to buy a lamp or a chair right now. Those stores remain open because they also sell groceries, even though the furniture stores with which they compete at lamp-selling are forced to sit idle.
In addition to opening up more of these kinds of jobs and businesses, we should also think differently about some of the industries that are deemed “life sustaining.” Right now, those industries can basically operate as they see fit. That makes sense for hospitals—but not gas stations or grocery and convenience stores.
Of course, gas stations should remain open, but self-service involves scores of people touching the same pump handle every day. With so many people needing work, why not require gas to be pumped by gloved attendants with payments made online? That’s feasible; New Jersey bans self-serve stations, and until recently so did Oregon. Gas would be a little more expensive, but these days people are generally willing to pay a little more for safety.
Many grocery stores are taking steps to make their spaces safer, by sanitizing shelves and shopping carts more frequently or capping the number of shoppers at a given time, but they could do more. Making aisles “one-way” would ensure that shoppers never pass each other face to face. Produce could be pre-bagged so customers are not touching three tomatoes before taking one, and “comparison shopping” could be discouraged for the same reason. Before coronavirus, there was “you break it, you buy it”; now maybe it’s “you touch it, you buy it.” At checkout, cashiers could replace paper receipts with e-mails. (Speaking of which, credit card companies are allowed to operate right now, but why not push them to replace swipe cards with contact-less “tap and pay” cards?)
It’s not that companies viewed as essential have made no changes, but they are haphazard and undirected. A concerted and systematic effort to reengineer public-facing essential businesses would almost certainly cut virus transmission by more than would reengineering and reopening shuttered sectors that don’t inherently involve so much person-to-person interaction.
The original idea of two-week shutdown wasn’t long enough to eradicate the virus, and a two-month shutdown will do permanent damage to the economy. Neither protects against Covid returning in the fall or some other pandemic striking next year. Instead of seeing only two possible options—reopening the economy as before or keeping it closed until further notice—we need to be more flexible. We can start by inventing ways to reengineer the vast middle of the U.S. economy so that it can operate sustainably in the Covid age.
We Were Skeptical Social Distancing Was Worth the Economic Cost. Then We Modeled It.
The costs of slowing the economy are high. But they are worth it from an economic perspective.
Should we think about the economic costs to saving lives as Covid-19 sweeps through the United States? It seems cold-hearted to do so in the midst of a pandemic that has already claimed more than 5,000 lives in the United States and puts millions of others at risk. Yet we consider costs to most of the actions we take, small and large, in our daily lives. And as the extent of lost jobs, missed rent payments and lost healthcare from those lost jobs comes into view, we have a responsibility to assess that damage, too.
Because no vaccine or effective treatments are yet available for Covid-19, the only way to slow the spread and reduce the severity of the outbreak is to implement a strict form of social distancing. In the United States, this has meant temporarily closing schools, universities, daycare centers and tourist attractions, cancellations or suspensions of national sports leagues, shelter-in-place orders and travel restrictions. These are unprecedented measures that come at a large economic cost.
We’re a team of economists at the University of Wyoming, and from the first days of social distancing, some of us were publicly wondering if the preventive measures taken to slow the spread of the virus would incur costs that might make us regret those measures in the long run.
So, we decided to run the numbers for a scientific article that’s currently under peer review. And we found, using a figure known as the “value of a statistical life” (VSL), that the value of lives saved through distancing measures exceeds the value of lost GDP by almost $ 3.4 trillion. In other words, yes, social distancing is “worth it,” also from an economist’s point of view, based on the current information about the economic consequences and disease spread.
To come to this conclusion, we first estimated benefits from social distancing in terms of the value of lives saved. To do so, we used a standard epidemiological model designed to forecast the numbers of susceptible, infected and recovered individuals over the course of an infectious disease outbreak. Then, we compared the predicted disease spread and number of deaths in the United States in two scenarios: one with social distancing measures, in which the spread is slowed and the total number of infections is reduced, and one without social distancing measures, in which the virus spreads unabated. For the social distancing scenario, we assumed a contact rate between humans about 40 percent lower than that in in the scenario without distancing. In the model, we concluded that 1.2 million lives would be saved by social distancing measures.
Next, we used a standard estimate for the value people assign to reducing their personal risk of death, VSL. It’s a controversial figure among social and behavioral scientists, given the provocative idea of assigning values to human lives. Further, the appropriate value is continuously debated among economists. Nevertheless, the VSL is frequently used in official policy analyses, consistent with guidance by the White House Office of Management and Budget. In our analysis, we assigned a VSL of $ 10 million, based on the values used by federal agencies, which gives a total value of lives saved of $ 12.2 trillion for those 1.2 million people.
Next, we estimated the costs from social distancing, in terms of the value of lost GDP. To do so, we compared the GDP development with and without social distancing. We forecasted GDP growth this year and the next six years.
Our forecast with social distancing is based on macroeconomic reports by Goldman Sachs. With social distancing, we assume GDP will drop by 6.2 percent this year (Goldman Sachs’ forecast from March 31), and that it will take approximately three years until the economy has recovered from the recession. Our forecast of the baseline U.S. GDP growth this year without social distancing relies on recent macroeconomic research that predicts the short-run economic impact of a pandemic this year, without accounting for stringent social distancing, would cause a 2 percent decline in GDP.
We assumed the same proportional rate of recovery for the economy with and without social distancing, so GDP growth would return to a new steady rate after three years in both scenarios.
The difference in the GDP reduction of these two scenarios—the 2 percent decline in the scenario without social distancing, and the 6.2 percent with social distancing, with a three-year recovery time in both scenarios—is $ 8.8 trillion. That’s our estimate of the hit that the United State GDP will take over the course of three years from social distancing lasting into the summer months this year.
But remember, the value of lives saved was $ 12.2 trillion. This rapid benefit-cost analysis suggests the net benefits—benefits from lives saved minus costs from GDP loss—amounts to $ 3.4 trillion dollars. Our results suggest that social distancing passes a cost-benefit test.
The final outcome, however, could depend crucially on policy choices yet to be made. Much uncertainty surrounds both the trajectory of the disease in the coming weeks and months and that of the economy in the coming months and years. As an illustration, based on just a 10-day-older, and more optimistic, GDP forecast by Goldman Sachs, we found net social benefits of social distancing amounting to more than $ 5 trillion, as opposed to our current best estimate of $ 3.4 trillion. This illustrates an important point—we gather more data as time goes by, and we likely will not know with confidence the impact of social distancing on the economy or disease spread until after the crucial policy decisions need to be made.
Further, the public health response and the economic stimulus might determine whether the social distancing measures taken in these crucial weeks will be viewed as a difficult but necessary response, or instead as a gross over- or under-reaction. But that does not take away from the importance of doing our best to make rapid assessments that inform policy today. We will have to live with second-guessing our decisions, but first guesses without systematic comparisons of the benefits and costs will likely be regretted more.