As the economic costs of social distancing and other measures taken to “flatten the curve” for the COVID-19 outbreak become more apparent, people are asking whether the efforts are worth it. Do the benefits of flattening the curve exceed the resulting economic costs?
President Trump once questioned whether the cure might be worse than the outbreak. Other elected officials, both federal and state, have asked similar questions. Protestors rallied over the weekend to re-open the economy motivated in part by the economic costs of the slowdown. No doubt some people who have lost their jobs or seen their businesses close question the trade-offs being made.
The trade-off in question is basically a cost-benefit analysis, right up the alley of economic research, but in this instance the analysis is tricky because it requires economists to put a value on life, no easy task. Putting a value on life in economic research is not unheard of. Regulatory agencies do so when conducting cost-benefit analyses of regulations. For example, the Environmental Protection Agency places a value of $9.5 million per life when examining its regulations. The USDA also places a value on life when looking at food-borne disease and its regulations. Still, doing so is fraught with difficulty. Another difficulty is assessing the economic costs of allowing the virus to run its course without any restrictions. In other words, researchers must establish a baseline for comparison purposes because there will be economic costs to allowing the virus to spread uninhibited.
Thus far, economists have found the lockdowns and restrictions make economic sense. Researchers from Northwestern University and the Free University of Berlin estimate the cost of economic activity per life saved amounts to $2 million. The researchers assumed that 1 percent of infected Americans would die if the outbreak were left unchecked, or 1.7 million people. Their results further suggest a yearlong shutdown would make economic sense, estimating it would save an additional 500,000 lives, or $6.1 trillion. The Economist reports on other research, “Models suggest that letting COVID-19 burn through the population would do less [economic harm], but lead to perhaps 1m extra deaths . . . This suggests that attempting to mitigate the disease is worth $60,000 to each American household.”
Obviously, there are costs to the economic shutdown due to the COVID-19 pandemic and the steps taken to mitigate it. The question is—are the costs worth it? Research by economists so far show the savings in life outweigh the costs.