An economic assessment of Covid-related lockdowns

An empty Pfizer-BioNTech Covid-19 vaccine bottle is placed in a waste container at a vaccination site in San Francisco, January 10.


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David Paul Morris/Bloomberg News

As President Biden’s first year of handling the pandemic draws to a close, many of his staunchest critics point to the ugly numbers: More Americans have died of Covid-19 under the current president than under the current president. precedent, despite the prevalence of vaccines and the development of other medical innovations. But as the progression of the pandemic has made clear, public health officials should aim to do more than simply minimize the spread of the disease. They should seek to reduce the total damage caused by both infection and blunt attempts at prevention.

Reducing the incidence of disease is not necessarily desirable if excessive prevention, in the form of lockdowns or school closures, is more costly to society than the damage caused by a disease. We don’t close highways to minimize accidental deaths, despite the existence of dangerous drivers. Yet that is exactly what we do when the government intervenes to limit the spread of communicable diseases, for example by mandating vaccines that do not prevent transmission.

The public health community has proven unable to quantitatively assess the trade-offs between the harms of prevention and the harms of disease. This has hampered the development of policies that could have minimized the total harm caused to society by Covid-19. Economic epidemiologists, on the other hand, have for decades used quantitative methods to assess these damages by looking at them in the same way they look at taxes.

The burden of a tax does not rest solely on those who pay it directly. A $1 million tax on airline tickets would generate no revenue because no one would fly anymore. Mass migration to other modes of travel would impose enormous costs on the rest of the transport industry. Similarly, the number of cases does not reflect the total burden of a disease. The costs of efforts to avoid disease must also be quantified and accounted for.

At the start of 2020, economists at the University of Chicago estimated that around 80% of total Covid damage came from prevention efforts that hampered economic activity, and only 20% from the direct effects of the disease itself. This analysis has motivated me and others to recommend that initial efforts to stop the spread focus on the elderly, who are at higher risk of serious illness and are not as active in the economy as young people. This would allow young people to keep the economy going while limiting the spread of the disease among those most at risk. Some members of the public health community, like the signatories of the Great Barrington Declaration, eventually emerged.

My colleague from Chicago, Casey B. Mulligan, found that the total number of monthly Covid-related damages fell from 2020 to 2021, even as the number of deaths increased. In tax terms, this is an effect not unlike that of the Laffer curve: a lower rate can increase revenue due to the growth of the tax base. Similarly, vaccines and treatments have reduced the costs associated with disease – call it the “sickness tax” – but have also increased social and economic activity, allowing infection to spread. Even if the disease tax is paid by more people, the costs are outweighed by the overall benefit from the ensuing tsunami of economic activity.

Joe Biden has accused President Trump during the campaign of killing Americans by refusing to completely suppress all economic activity. But evidence shows that the United States suffered less total damage in 2020 than countries in the European Union. Now that he’s been president for a year and has presided over so many Covid deaths himself, Mr Biden surely understands how difficult it is to contain the spread of a highly contagious respiratory disease. He should make total damage reduction the goal of his administration now — and that includes damage from shutdowns, school closures and unproductive restrictions on economic activity.

Mr. Philipson is an economist at the University of Chicago. He was a member of the President’s Council of Economic Advisers, 2017-20, and its interim chairman, 2019-20.

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Appeared in the print edition of January 20, 2022 as ‘An economic assessment of Covid lockdowns’.

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