The Costs and Benefits of Lock Down
Back when I was a pinko I studied Policy Making 101. It was an attempt to improve government decision making by applying reason. The aim was to find the best policies for making the world a better place.
(I know. I was hopelessly naive. I was young. I had been through school. I soon came right.)
What follows is that government thinking applied to the most drastic policy decision of my lifetime: locking the country down in Alert Level 4.
Step One: Define the Problem
The government has failed to define the problem. Their decision process appears like this: We have the virus. It could be the Delta. Lockdown!
But the problem can't be the virus.
An invisible virus is not a problem. It must be its effects. The effects are obviously that the virus makes some people sick and some die.
We now have the problem defined: people getting sick and dying.
Step Two: Detail the Options
There has been a lamentable failure to consider options to stop “people getting sick and dying”. Lockdown has been presented as a fait accompli. No options have been presented or discussed.
The options to Alert Level 4 Lockdown might all be terrible but they nonetheless exist. At the very least, there is always the “do nothing” option. That’s the baseline against which all policy must be measured.
There’s also the policy, say, of pop-up hospitals to provide for any surge in illness. These options appear not to have been discussed by the government and certainly options have not been shared with the public. Community transmission has been presented as a dire emergency with lockdown the only remedy.
Fear and panic have replaced facts and reason
Step Three: Costs
The “do nothing” option is Sweden, more or less.
Here is my estimate of the “do nothing” costs completed in ten minutes. I don’t consider my estimate to be rigorous but then it’s not me locking the entire country down.
Sweden’s population is twice ours. They have had just under 15,000 covid deaths. Putting aside demographic differences, that would indicate 7,500 deaths here.
The average age of a covid death is 82 years old. An 82 year old is expected to live another eight years. However, 94 percent of covid deaths have comorbidities. Those who die of covid therefore had life expectancy lower than average.
So let’s half that expectation. That would mean each death equates to an average of four years of life lost.
Total years lost is 7,500 deaths x 4 years which equals 30,000 years.
But not all years of a life are of equal value. A year in a dementia unit is not the same as a year being 20 years old and full of life. And so a year at 85 sick and infirm is worth less than a year in your prime.
How much less I don’t know. But I can easily imagine being prepared to trade a couple of years in my 80s for another year in my forties. That means halving the years lost yet again. The age of covid death does matter.
That’s now 15,000 years lost.
Governments implicitly place a dollar value on a year of life lost with each and every decision. The most obvious examples are decisions to fund a drug, a road safety measure, or to support mandatory safety legislation.
We do the same with our own lives. For example, whenever we drive. Taking a risk with life is part and parcel of living. There’s nothing controversial about trading-off risk and, hence, putting a dollar value on a year of life.
Treasury have crunched the numbers and put a year of life lost (or gained) at $33,000.
So at 15,000 years the total cost in dollar terms of “do nothing” is about $500 million.
That’s the cost of the expected deaths absent any lockdown if Sweden is a guide.
There’s also the costs of those who get sick but survive.
I don’t know what that cost would be. But it may be somewhat offset by a reduction in other respiratory illness. The rise of covid has seen ’flu has drop away worldwide. Certainly, the cost of covid sickness is not in addition to the cost of sickness from a usual ’flu season.
For the purpose of the exercise, I will assume no net additional sickness.
Now for the costs of the lockdown. These costs are huge. Anyone with elderly parents knows how tough it is on them. Our kids are missing out. Our young adults have their lives on hold. Diseases go undetected. Life-saving operations are postponed. Alcohol consumption is up. Domestic abuse is up. On and on it goes. I would imagine lives will be lost.
I have no idea what the cost of all that trauma and lost opportunity must sum too. So let’s call it zero. I am dramatically underestimating the cost of lockdown.
That means narrowing the cost of “lockdown” to lost production. Annual GDP is $310 billion. That’s $850 million a day.
Of course, not all production is lost and lambs still fatten and trees grow but the cost of lockdown also knocks on for the days, weeks and months ahead. There’s not a switch that turns the economy off and then on again. The lockdown causes huge uncertainty which is a huge cost.
I would guess we lose half a day’s GDP for each day the country is at Alert Level 4.
That’s $400 odd million lost for every day locked down. Up above, we estimated the cost of doing nothing at $500 million total.
Step Four: Evaluation
That’s a ten minute calculation. It could readily be refined and improved. But it’s more, I think, than the government has done.
My “back-of-an-envelope” calculation has the total benefits of a lockdown not worth two days of lock down let alone weeks.. That’s crazy. And that’s assuming the lockdown works and the death is avoided.
There may well be deaths in the days ahead which will mean the worst of all worlds. We will have the costs of lockdown without the supposed benefits.
Of course, there has been no responsible analysis from our government or the opposition or the media. It’s been fear and panic. And reason won’t quell panic. Only leadership can do that.
Besides, house prices are booming, we have figured out how to watch netflix all day and get paid, and our stars and starlets keep us amused with their lockdown antics. It’s all good.
It’s left to heartless greedies like me to care about the cost being incurred. And the damage to the national psyche of locking everyone up and cowering them for next to no purpose.