Is Preventing COVID-19 Deaths Worth a Severe Recession? The Answer Depends on Controversial Assumptions About the Epidemic’s Lethality.
In a paper published on Monday, three economists address the tradeoff between COVID-19 containment and economic activity in the United States. They estimate that “the optimal containment policy increases the severity of the recession but saves roughly half a million lives in the U.S.” According to their model, aggressive control measures more than double the decline in aggregate consumption. The lead author, Northwestern University economist Martin Eichenbaum, says the difference would amount to an additional reduction of $1 trillion over the course of a year. That comes out to roughly $2 million for each life saved, which looks like a bargain compared to the $9.3 million per-life value used in the model.
Eichenbaum and his co-authors—Sergio Rebelo, also at Northwestern, and Mathias Trabandt of Free University in Berlin—are grappling with an issue that politicians have mostly ignored in responding to COVID-19: At what point do the costs of their interventions outweigh the expected benefits? But the answer to that question hinges on assumptions that are controversial, impossible to verify based on existing data, or both.
The value that Eichenbaum et al. assign to each life saved is similar to the number calculated by Vanderbilt University economist W. Kip Viscusi based on labor market data. But it is arguably too high, since it does not take into account the age distribution of COVID-19 deaths, which are concentrated among the elderly. “We found that our conclusions are robust to reasonable perturbations of this value,” the economists say.
More consequentially, Eichenbaum et al. assume a 1 percent case fatality rate (CFR) for COVID-19, which is the high end of the range that federal public health officials consider reasonable. Currently the crude CFR in the United States is about 1.3 percent. But that rate is bound to be an overestimate, because the denominator includes only confirmed cases.
The current testing capacity in the U.S. is very limited, and COVID-19 symptoms are typically mild to nonexistent, meaning many people who are infected will not seek medical attention or testing. The actual number of infections t
Article from Latest – Reason.com