The Economics of Lockdowns

 

Lockdowns fail. The last two years have proven that point, if it was ever in doubt. They fail to prevent the spread of a highly contagious virus and they fail to save lives. In fact, they actually result in many lives lost through mental illness, increased illicit drug use, and suicide. These facts have been well documented in other posts. (Lockdowns Historically Failed, The Control Pandemic)

But what about the economic harm lockdowns cause? For two years economists have had a chance to evaluate the economic harm of lockdowns and now they’re speaking out. The University of Chicago economists Tomas J. Philipson and Casey B. Mulligan have been vocally opposed to lockdowns from the beginning, and now they are reporting the calculated harm of lockdowns.

In a recent article published in The Wall Street Journal, Philipson says attempts to limit the number of Covid deaths are not enough. We must also reduce the total harm caused by both infection and heavy-handed attempts to prevent them. He says, “Reducing the incidence of disease isn’t necessarily desirable if excessive prevention, in the form of lockdowns or school closures, is more costly to society than the damage done by an illness. We don’t close highways to minimize accidental deaths, despite the existence of dangerous drivers. Yet this is exactly what we’re doing when the government intervenes to limit the spread of communicable diseases by, for instance, mandating vaccines that don’t prevent transmission.” 

Philipson says the public health community has proven incapable of quantitatively assessing trade-offs between the harms of prevention and the harms of disease. This has hindered the development of policies that could have minimized the total harm to society from Covid-19. Economic epidemiologists, by contrast, have for decades used quantitative methods to evaluate these harms by looking at them the same way they look at taxes.

He explains: “The burden of a tax doesn’t fall solely on those who pay it directly. A $1 million tax on airplane tickets would generate no revenue because no one would ever fly again. The mass migration to other forms of travel would impose huge costs on the rest of the transportation industry. Similarly, case counts don’t capture the total burden of a disease. The costs of efforts at avoiding the disease must be quantified and tallied as well.”

Since early 2020, University of Chicago economists have estimated that about 80% of the total damage from Covid came from prevention efforts that hindered economic activity – and only 20% from the direct effects of the disease itself. In other words, in economic terms, the attempts to prevent the disease were four times more costly than the disease itself!

This analysis prompted these economists to recommend that initial efforts to stop the spread should focus on older people, who are at higher risk of severe illness and not as active in the economy as younger people. This is consistent with the recommendations of most doctors who have advocated we spend more time and money preventing the disease in the elderly and those at the highest risk, rather than wasting it on the young who are at the lowest risk.

Mr. Mulligan found that total monthly Covid-related harms fell from 2020 to 2021, even as the number of deaths rose. In tax terms, this is an effect not unlike that of the Laffer curve – a lower rate may increase revenue because of growth in the tax base. Similarly, vaccines and treatments reduced the costs associated with getting sick – call it the “disease tax”- but also increased social and economic activity, allowing the infection to spread. Even if the disease tax is paid by more people, the costs are outpaced by the overall benefit derived from the subsequent tsunami of economic activity.

Mr. Philipson notes Joe Biden accused President Trump during the campaign of getting Americans killed by refusing to clamp down completely on all economic activity. But the evidence shows that the U.S. experienced lower total harm in 2020 than did the nations of the European Union. Under Biden’s presidency, we have not only experienced even more deaths than under Trump, we have also experienced more economic harm. Philipson concludes, “Mr. Biden surely understands how difficult it is to contain the spread of a highly contagious respiratory disease. He should make the reduction in total harm his administration’s objective now – and that includes the harm done by lockdowns, school closings, and unproductive restrictions on economic activity.”

 

One comment

  1. Thanks for always telling the truth even if not popular in some circles!!

    Comment by David Godfrey on February 3, 2022 at 10:14 am