The costs of slowing the spread of coronavirus are enormous. Large sections of the economy have ground to a halt. The stock market has crashed. Unemployment claims surged by more than 3 million last week alone. Congress was forced to pass a $2.2 trillion rescue package — and it will likely need to add to that as the budgets of states on the front lines begin to crater. President Trump has bellyached “we cannot let the cure be worse than the problem itself” — though he has now blessedly backed off plans to reopen the country by Easter.
But what are the benefits from this pain of social distancing?
It turns out you can put a dollar figure on reducing deaths from COVID-19. And it is an enormous figure: $8 trillion, according to modeling by economists at the University of Chicago, whose economics department is best known for its defense of the harsh orthodoxies of free markets. “These benefits are over one-third of U.S. GDP and larger than the entire annual federal budget,” the economists write.
Michael Greenstone is the lead author of the working paper. He serves as the Milton Friedman Distinguished Service Professor in Economics at the University’s Kenneth C. Griffin Department of Economics. He tells Rolling Stone that he wanted to balance the conversation about the costs of coronavirus.
“When you compare something in monetary terms and non-monetary terms,” he says, “the side of the debate that’s in monetary terms has a big advantage. So the reduction of the stock market, the increase in employment, the reduction in GDP — all those are clear and measurable. And we felt like there was a need to be able to put the benefits of social distancing in the same units in order to have a full conversation.”
Greenstone attempted to project the benefits of “moderate social distancing” — defined as “home isolation of suspect cases, home quarantine of those living in the same household as suspect cases, and social distancing of the elderly and others at most risk of severe disease” — carried out over the next three to four months. This is roughly what’s prescribed by the White House guidelines to “slow the spread.” Many states (up to 30 at last count) have gone significantly further, with orders in place for residents to stay at home.
Greenstone built his model atop the bombshell study from Imperial College in London, whose warnings of millions of COVID-19 deaths lit a fire under policymakers in both the United States and the U.K. to implement social-distancing practices. The University of Chicago paper advances the Imperial College model by teasing out the reductions in deaths both from avoided infections as well as from what it terms “overflow” deaths — from sick people who die because there is not enough ICU capacity to treat them with intensive care interventions such as a ventilator for those unable to breathe on their own.
The University of Chicago model finds a reduction in deaths of 1.76 million from social distancing, including 630,000 who don’t die because they would not be able to be treated adequately in the hospital. If the good news is that social distancing can “flatten the curve” of the outbreak, the devastating conclusion from the University of Chicago modeling is that the nation’s hospital systems would still be on pace to be overrun. An illustration included in the paper points to nearly 1 million people who could be denied ICU care even under extended, moderate social distancing. What happens to those without an ICU bed? Under the model, Greenstone says, “we assume 90 percent of them die.” (It’s precisely this kind of modeling that underscores why many states are attempting full lockdowns, rather than the modest distancing promoted by the Trump administration.)
The University of Chicago model focuses on the financial value of the lives that can be saved. To calculate this figure, the economists lean on a federal figure called the “value of a statistical life” that government agencies routinely use in weighing the costs and benefits of policy changes, like raising the speed limit on the highways or imposing new restrictions for environmental pollutants. “It might seem shocking,” Greenstone says of federal bureaucrats weighing the costs of decisions that could kill people or spare their lives. “But it is central to the operation of the U.S. federal government, and to a lesser degree state and local governments. Societies always have to make these trade-offs.”
The value of a statistical life is not limited to future economic earnings or buying behavior. “It’s a full metric of your well-being,” Greenstone says. “It’s how much you value the things you consume, but not just the market things, like food, TV, and stuff like that, but also how you enjoy spending time with friends and family. It’s a comprehensive measure.”
The current value used by the federal government is about $11 million per person. And if the government were doing this modeling, it would use that figure for every life saved, regardless of age. Under those conditions, saving 1.76 million lives amounts to more than $20 trillion — or nearly a full year of the gross domestic product of the United States.
Greenstone’s model is different. “I don’t work for the government,” he says. It adjusts the value of a statistical life (VSL) for age, to account for a disease that poses the greatest risk to the elderly, who have already lived out much of their lives. “There’s a very strong economic case — from economic theory and common sense, honestly — that it [VSL] probably varies over the life cycle. Right? So that if you only have three years left,” it’s probably not the same as if “you had 25 or 30 or 40 years left.” Yet even after grading life on this age-adjusted curve, the sacrifices of social distancing still produce an extraordinary economic return. “It’s very rare for there to be opportunities for any policy to provide such large benefits,” he says. “The $8 trillion turns into $60,000 per household.”
What the University of Chicago research brings into sharp relief is that the extreme rhetoric on the right — most prominently from the lieutenant governor of Texas — about sacrificing the nation’s grandparents so that the economy can continue to thrive is, at its root, a false choice. Losing aging members of our society, even discounting for limited future life expectancy, carries an almost unfathomable, unbearable cost.
“Let me just disassociate myself from the lieutenant governor of Texas,” Greenstone says, “100 percent.”