Social distancing is not only saving lives. It’s saving the economy.
Will lifting stay-at-home orders be a choice between protecting lives and financial health?
A power struggle between governors and President Donald Trump about when to open the economy mounted this week, peaking when the president proclaimed, “When somebody is president of the United States, your authority is total” — a point that is not supported by the Constitution, according to legal experts.
The disagreement is rooted in the looming recession onset by the coronavirus pandemic. The number of unemployment claims has reached 22 million, equal to the net number of jobs created in the nine-and-a-half-year stretch since the last recession, in the last four weeks alone. Goldman forecasted a 6.2% decline in gross domestic product — the monetary value of all goods and services in a country — for the year.
That’s worse than anything the nation has seen going back to the Great Depression.
This has fueled politicians’ fears and disagreements over when to suspend stay-at-home orders and reopen businesses, given the desire to balance physical and fiscal safety.
“It is always the American government’s position to say, in the choice between the loss of our way of life as Americans and the loss of life, of American lives, we have to always choose the latter,” said Representative Trey Hollingsworth (R-Ind.). He quickly retracted this comment in a statement provided by his office: “It’s hyperbolic to say that the only choices before us are the two corner solutions: no economy or widespread casualties.”
But this raises the question: Will lifting social distancing protocols be a choice between preserving lives and economic stability?
There are a couple of ways to answer this question.
Measuring statistical lives
The “value of a statistical life” is calculated by balancing the estimated number of lives lost and the money spent to prevent this predicted death toll; it’s a pulse check on a decision-maker’s willingness to pay for safety measures.
How do you put a value on a statistical life? One common technique is to figure out how much the average U.S. citizen would pay to reduce their probability of death by a certain factor. So if people would pay $100,000 to reduce their likelihood of death by 1%, then multiply $100,000 by 100% to figure out how much they value the entire security of their well-being: The value of their life would be $10,000,000.
So now let’s ascribe that to lives lost due to COVID-19.
Social distancing would save approximately 1.7 million lives by October 1, according to a recent University of Chicago study. The study uses the Environmental Protection Agency’s V.S.L.: $11.5 million.
These 1.7 million lives saved, using the E.P.A.’s value of a statistical life (adjusted for age and risk), results in a mortality benefit of nearly $8 trillion — that’s nearly 40% of the total G.D.P. of the U.S.
Even if the coronavirus outbreak has a lower than expected death rate — 60% lower than the model used in this paper — social distancing would still have a benefit of $3.6 trillion, almost 18% of the States’ total G.D.P.
Basically, this appears to put the economy in a better position to break out once it is safe to reopen.
Looking at the past pandemic
If the numbers aren’t enough, let’s look at the previous mass pandemic in the U.S.: the 1918 influenza outbreak. Early and extensive government interventions such as social distancing had no adverse effect on local economic outcomes, a recent MIT Sloan School of Management study found. In fact, it was seen that cities which intervened earlier and more aggressively experienced a relative increase in real economic activity after the pandemic.
The paper contrasts the responses and fates of two cities: Cleveland and Philadelphia. Cleveland acted aggressively, closing schools and banning gatherings early in the outbreak — and officials kept restrictions for a longer time. Philadelphia was slower to react and maintained restrictions for half the length of time.
Not only was the death rate far lower in Cleveland (600 deaths per 100,000 people, compared to 900 per 100,000 in Philadelphia), but its economy fared better and was much stronger in the year after the outbreak. By 1919, job growth in Cleveland was 5%; in Philadelphia, it was around 2%.
We need more testing before we stop social distancing
A common thread brought up by experts about opening the economy? We need more testing first.
93% of economists who responded to a recent Chicago Booth survey agreed that “a massive increase in testing” is required for “an economic restart.” Without knowing who has already been infected or who might have antibodies that would make them immune to COVID-19, it would be extremely difficult to limit a second wave of infections.
But there is a disagreement between Trump and governors about the capability of testing right now. “We’re in excellent shape on testing,” Trump said in a press conference Thursday. Meanwhile, Dr. Anthony Fauci countered, “We have to have something in place that is efficient and that we can rely on — and we’re not there yet.”
The good news is that Trump and the governors do appear to have reconciled about the way to open the country. “You’re going to call your own shots,” Trump told the governors, according to an audio recording provided to the New York Times. “You’re going to be calling the shots. We’ll be standing right alongside of you, and we’re going to get our country open and get it working. People want to get working.”
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