The COVID-19 narrative is strong and pervasive: we must sacrifice either jobs or lives. This debate has seemingly polarized our society on moral and ethical grounds.
For many healthcare professionals, the intrinsic value of life is self-evident. No price can ethically be placed on the value of health and human life.
Fortunately, from an economic point of view, the choice between the economy and health might be a false dilemma.
The intersection of the economy and public health is not a zero-sum game. In fact, the strength of our economy and the state of our health are closely tied. It is well known that adverse economic situations can lead to illness and “deaths of despair.”
Conversely, the illness and death caused by a pandemic can itself lead to economic disaster. In the war against COVID-19, the path to our economic recovery must start with a focus on saving lives.
The first thing to consider is whether we are ruining our economy with social distancing measures designed to save lives. Millions have filed for unemployment, and businesses of all sizes are teetering on bankruptcy. It is tempting to see a direct correlation between social distancing policies and our economic suffering.
However, global pandemics like our current COVID-19 crisis are akin to wildfires ripping through our economy. Social distancing mandates are the controlled fires we set to contain the devastation. Both are damaging to the economy, but the primary destructive force is the pandemic itself.
A study published by the University of Copenhagen compared the economic impact of the COVID-19 crisis in Denmark and Sweden. The two Scandinavian countries both suffered outbreaks at the same time. Denmark imposed severe social distancing restrictions, while Sweden famously did not.
Sweden experienced a drop in total aggregate spending of 25 percent, while Denmark suffered a loss of 29 percent: only a 4 percent additional difference. The data implies that most of the damage to the economy is done by the pandemic itself, not the mandated lockdown.
Why is this the case? While social distancing prohibitions result in supply-side restrictions, the horrors of a dangerous and contagious pandemic simply crush demand. Most people are highly motivated to avoid illness, disability, and death. Even without restrictions on businesses, events, and gatherings, many consumers will stay home until the threat is reduced.
How will social distancing affect economic recovery once the pandemic eases? Economists from the Federal Reserve Board, the New York Fed, and MIT attempted to answer this question by comparing the diverse social distancing policies of American cities in response to the 1918 Spanish flu pandemic. They found that cities that imposed stronger measures actually had more robust economic recoveries after the pandemic.
Cities that implemented the most timely and strict social distancing policies subsequently enjoyed the fastest growth in employment, manufacturing output, and bank assets. Conversely, cities that allowed the pandemic to ravage their communities were stuck in economic doldrums afterward. Clearly, the short-term costs of social distancing are mitigated by long-term economic gain.
One reason for the long-term economic impact of a poorly controlled pandemic is the financial cost of fatalities. Each life lost to COVID-19 represents a permanent loss of future productivity and demand. Scores of retirees, family breadwinners, and business owners might be erased forever from our economy. While jobs are replaceable after a lockdown ends, the lives of consumers, workers, and entrepreneurs are not.
The cost of deaths alone does not capture the full magnitude of the economic burden of COVID-19. This disease has an alarming potential to cause severe long-term illness and disability.
Multiple organ systems can be permanently damaged. A majority of patients are left with lung scarring, which might result in loss of function. Abnormal blood clotting is thought to be responsible for strokes and kidney failure in previously healthy COVID-19 patients. The virus also directly attacks the heart, causing inflammation and injury. The loss of productivity and the medical costs of disability among COVID-19 survivors can potentially dwarf the cost of fatalities.
The health and well being of all members of our society are among our most valuable economic resources. Like any other vital and non-renewable resource, we should not squander the lives and health of our community needlessly. Although the current economic burden is heavy for all of us, we must play the long game: saving lives and preventing illness will save our economy.
The savings are potentially immense. A study published last month in the Journal of Benefit-Cost Analysis calculated that the lives saved by social distancing might result in an economic net-benefit of $5.2 trillion to the US GDP. Another study by the University of Chicago estimated that moderate social distancing would result in mortality benefits of $8 trillion to the US economy, or $60,000 per US household.
To reap these economic benefits, lockdown measures do not need to be draconian nor interminable. Economists at Cambridge and the Federal Reserve recently proposed that a targeted lockdown affecting only one-third of our population for eight months would limit the economic damage of the pandemic by one-half compared to the costs of inaction.
A more recent study estimated that rolling cycles of 50 days of lockdown followed by 30 days of easing might greatly reduce deaths while allowing economies time to “breathe” at intervals. As we move to open our economy, we should be flexible and consider the use of such dynamic and tactical restrictions.
Although future economic benefits might seem intangible to those of us now facing financial ruin, controlling this pandemic aggressively today will bolster our economic health tomorrow.
The stakes are high, and the actions that we take now will reverberate through the years to come. We must be mindful that the best economic policy is the best pandemic policy. Saving lives and preserving health is a long-term investment in our economic recovery.
Yenting Chen is an emergency medicine physician.
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