russ_watters said:
These statements variously contradict each other and/or your prior statement, alternating between it is and isn't acceptable to not consider the economics, by adding or not adding a delay. Either you are taking into account the long-term impacts *now* - when you make the decision - or you aren't. If you are taking them into account *later*, then you aren't taking them into account *now*, at the time the decision is made. In my opinion, that's foolish, and never a good idea.
Perhaps I wasn't clear about what I was trying to communicate earlier, so let me rephrase it this way.
What I was trying to argue was that in a middle of an emergency, there is a trade-off between rapid action with potentially serious costs in the long-term, versus no action with immediate costs. In such a scenario, I would choose the rapid action to mitigate the immediate costs, while being aware of what could be the potential long-term costs. There is nothing contradictory about this at all, and frankly I find it puzzling why this would be at all a controversial point.
So let's try putting some numbers to it based on the current scenario for the USA vs a hypothetical no-response scenario:
Without shutdown, worst case (USA):
50% infection rate
2wk ave loss of work (that's probably high due to a near 50% asymptomatic rate)
80% of workers have paid sick leave/vacation
1 yr
=0.4% lost production/income/GDP (that's the employment impact on GDP only)
With shutdown and assuming effectively zero infection rate:
13% unemployment for 3 months (so far) vs 3.5% in Feb.
Annualized, that's 2.4% lost production/income/GDP
You may notice I didn't include deaths. 75% of deaths are in people who aren't part of the production economy (they are retired). And 100% of people who die are not included in per capita GDP anymore. So while total GDP could be lower by 0.125% ongoing (at a 1% death vs infection rate), the per capita GDP/income in a country should go up due to COVID deaths.
I also didn't include the cost of hospitalization. While hospitalization is a high personal cost, it isn't necessarily a high societal cost; it is a transfer. Hospitals/doctors/nurses make more money when more people are hospitalized.
I also didn't include the cost of government stimulus, since the "with shutdown" case is actually the true US outcome, which would have been worse without the stimulus, and the cost is in the trillions of USD. In other words, the damage of the shutdown is substantially worse than what I've been able to capture. The cost of the stimulus -- the delayed harm -- is substantially larger than 2.4% of GDP. But beyond saying "trillions" I haven't had much luck finding projections for the cost.
The hypothetical costs you outline above for an unchecked pandemic are flawed in several ways:
1. First, to achieve herd immunity in the absence of a vaccine will require that about 60-70% of the population will need to have been exposed or infected with SARS-COV2 (the virus that causes COVID-19). So the 50% infection rate you specify is an underestimate.
2. I'm assuming that the 2 week average loss of work is taken from the rough period of recovery from COVID-19. But you are not taking into account the wide variability in recovery time, given that some (if not many) patients who have "recovered" from COVID-19 (i.e. those who are no longer infectious) continue to exhibit symptoms for weeks or months after they cease to be infectious. In fact, there have been reports of COVID-19 patients who have experienced respiratory, cardiovascular, and (in some cases) neurological damage. These patients will require far more than 2 weeks to be able to fully recover from these serious symptoms, which will prolong their recovery period and will impact work productivity, costs of rehabilitation, etc.
3. You quote a 50% asymptomatic rate. I'm not sure where you pulled this number from, since as far as I know, there is still no good estimate of the actual asymptomatic rate for COVID-19 (I've heard quotes from 25%, but not sure what the latest data).
4. You also fail to take into account that the loss of GDP isn't based solely on loss of productivity from people getting sick. An unchecked pandemic will also spark fear and anxiety in the wider population (afraid of contracting the illness), which can manifest itself in many ways, including loss of spending in areas like, say, restaurants, bars, etc. So the loss in GDP will extend far beyond what you had estimated earlier.
5. You state above that hospitalization is not a societal cost but a transfer. At an individual level, perhaps that is true, but what you fail to take into account is what happens when hospitals are overburdened with a flood of COVID-19 cases (as what happened in Italy). In such a scenario, we have seen where doctors and nurses are forced to triage patients to determine who lives or dies due to lack of beds, resources, etc., leading to many people dying that could have been saved. In addition, people suffering serious medical conditions are no longer able to have medical provided due to all resources being tied up with COVID-19 cases. This has a clear societal cost, in terms of greater death, but also in loss of productivity due to a substantial number of these people being unable to work, etc.
6. You mention the cost of the stimulus due to the shutdowns. I acknowledge that this is costly, but again, if the economy is severely impacted due to an unchecked pandemic, I would argue the government will eventually have to carry out some form of stimulus anyways. So shutdown or not, any such scenario would have been equally costly. At least if the US had an effective quarantine and lockdown, followed by appropriate and effective testing and contact tracing and widespread mask-wearing (as has finally emerged in Canada), then the US would have been able to re-open their economies to mitigate the effects of the shutdown.
Then I have no idea what point you are trying to make as pertains to what I said. Of course every recession has a recovery. So what? Nor does it seem in alignment with your prior statement, which seemed pretty clear-cut that it was the harm in the recession that could be undone retroactively: "essentially wipe out the past damage and reduce or eliminate the debt accumulated during the pandemic."
So I'll say it again, perhaps in a different way: Debt is future economic harm endured for the purpose of mitigating present economic harm.
The point I was making is that as the economy recovers, then governments will be able to pay down or off the debt they have accumulated to mitigate the present economic harm. I don't see why this is at all hard to understand -- if I borrow money now with the promise I will pay back that money later, and I've saved enough money from my new job to pay off that debt, then the harm of my being indebted disappears.
I'm speaking of course of the South Korean compulsory digital/automated mitigation model. Denmark was highly lauded in the article vs Sweden, but Denmark has so far endured twenty times as many deaths per capita with a shutdown than South Korea has had without a shutdown.
South Korea was able to have a compulsory digital/automated mitigation model largely because that country (along with many other Asian countries e.g. Taiwan) was severely impacted by the 2003 SARS outbreak, and learned from that important lesson to invest heavily in public health measures.
Western countries like the US did no such thing, and have thus suffered the consequences of this. Hence the need for lockdowns, etc. Perhaps a lesson for future pandemics (which will no doubt occur).
