The Cato Institute came out Tuesday with its Pandemics and Policy collection of coronavirus-and-pandemics-related articles described as purposed to “provide policymakers with an actionable guide to policies that can harness [old‐fashioned American ingenuity] and foster a resilient society capable of meeting the challenges ahead.” Among the articles is “Balancing Tradeoffs between Liberties and Lives” by Cato Institute Director of Economic Studies Jeffrey Miron and Cato Institute Senior Fellow Peter Van Doren.
In this Tuesday article, Miron and Van Doren declare they are seeking to judge the propriety of government-imposed “social distancing policies such as school closures, bans on public gatherings, mask requirements, and lockdowns of ‘nonessential’ businesses.” Regarding these policies, they note the following at the beginning of their article:
These policies plausibly save lives, but they also impose economic and noneconomic costs. Society therefore faces a tradeoff between greater health versus higher gross domestic product (GDP) and greater freedom in choosing how much, and what kind of, social distancing policies to impose.
To decide if government policies implemented in the name of countering coronavirus were merited, with focus on the sought benefit of preventing deaths, Miron and Van Doren apply a “cost-benefit analysis.” They note the cost-benefit analysis “allows integration of both economic and noneconomic effects in a single analysis, and it often provides suggestive bounds on what kinds of policies might be reasonable.” Involved is applying numeric monetary values to various things, including things for which there is no actual market cost, and putting these values into a formula or formulas (along with numbers that rely on assumed conclusions regarding the effectiveness of various policies in protecting against coronavirus deaths). Then, push some buttons on a calculator and, voila, a judgement on the policy is spit out.
That is the idea at least.
Here is the article conclusion:
The essential insight of economic analysis is that there are tradeoffs. In the context of a pandemic, economic analysis is an attempt to find the sweet spot: the amount of reduction in economic interaction that saves enough lives to justify the cost. The costs of reduced economic activity can be calculated through GDP data. But we argue that other costs should be added to this figure because of lost freedom and liberty.
The benefits of lives saved from reduced economic interaction require us to ascribe a dollar value to lives, extrapolated as best we can from how people appear to value theirs, so that we can compare the tradeoffs. The current [value of a statistical life (VSL)] ($10 million) is probably too high because the coronavirus fatality rate is estimated to be 100 times the highest fatality rate in labor market data used to estimate VSL. Thus, a more appropriate VSL is around $5 million. Evidence for the necessity of modification of VSL for age and income is more varied and inconclusive.
Estimates of fatalities from moderate social distancing policies suggest 1–2 million lives saved in the United States, implying $5–9 trillion in benefits. The problem with such a cost‐benefit calculation is that spending a quarter to over 40 percent of national income on coronavirus avoidance seems implausible even to researchers who have spent decades developing VSL as a tool to facilitate such analyses.
Whew. The calculator results say liberty and the economy should not have been attacked in America so much in the name of countering coronavirus. Hopefully, the calculator will say the same thing when new numbers (based on underlying assumptions, guesses, and biases) are thrown into it again in the next “crisis” situation.
Talking about those underlying assumptions, guesses, and biases, take a look at the suggestion in the article conclusion that coronavirus crackdown policies saved “1-2 million lives in the United States.”
How’s that? As Jacob Sullum writes in a Wednesday Reason article, the government of Sweden refraining from imposing most restraints imposed elsewhere in the name of countering coronavirus did not lead to relatively high death numbers in Sweden. Hmmm. It seems that zero would be a more appropriate estimate of the number of lives saved in America by coronavirus crackdowns.
Further, it may well be that government policies pursued in the name of countering coronavirus on net increased deaths through effects including increased poverty, reduced noncoronavirus medical diagnoses and treatments, and increased mental trauma from isolation. If that is the case, instead of net deaths prevented, there would be net deaths caused. The “deaths” number would count among the costs, not the benefits. With the sole benefit of government coronavirus policies that Miron and Van Doren presented gone, there would be only costs remaining to consider and thus no cost-benefit calculation to undertake.
Reprinted with permission from the Ron Paul Institute for Peace and Prosperity.