Read on Twitter
Some thoughts on Covid-19 and health econ. We know that policy choices about the lockdown involve weighing up the economic and social cost against the health benefits. So how do we do that? 1/
Caveat: I’m a health economist by trade but have not been studying this problem – these are a few scattered thoughts! 2/
At the end of March, Imperial analysis ( https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-Europe-estimates-and-NPI-impact-30-03-2020.pdf) suggested Italy had saved 38,000 lives due to lockdown at that point. Let’s assume, ballpark, by the end of the lockdown the UK can save 80,000 lives. What price is worth paying for that? 3/
The UK government values one quality-adjusted life year (QALY = year of perfect health) at £60,000, based on willingness to pay analysis. (NICE uses a £20-£30k threshold for the NHS reflecting NHS budgets, suggesting the NHS is 2-3x underfunded, but that’s another story) 4/
So if we assume (again, very ballpark), 80,000 lives saved who would have lived another 10 quality-adjusted years on average, that means the lockdown is worth 80,000 x 10 x 60,000 i.e. £48 billion in terms of lives saved 5/
Of course, the lockdown will cause a lot of suffering too, in terms of un/underemployment and social isolation. It will also avert lots of cases of Covid that don't result in death. These things are important but let's simplify for now and assume they cancel out 6/
To put the £48 bn in context, UK GDP is about £2.3 trillion (or £2,300 billion). This suggests the lockdown is worth a sacrifice to the economy of about 2% of GDP (including future effects). However, we need to be careful here on the counterfactual (what we compare against) 7/
The alternative is the economic impact of no lockdown, i.e. if things kept going as before but lots more people died from Covid. What the above suggests is that a couple of percent of EXTRA GDP sacrifice, above that impact, is worth it to save 80,000 lives. 8/
The IMF has forecast a 3% drop globally ( https://www.theguardian.com/business/2020/apr/14/great-lockdown-coronavirus-to-rival-great-depression-with-3-hit-to-global-economy-says-imf), but what we don’t know is how much that drop would be without a lockdown. There would undoubtedly been a hit, in part due to great uncertainty, but how much that would have been requires forecasting. 9/
I hope/expect government econs are modelling these kinds of scenarios to weigh up the policy decisions. It’s not straightforward, and it feels a bit crass, but it’s worth running these models and testing the assumptions to make informed decisions 10/
Finally, note I’m not saying government spending should be in the £48bn ballpark – it should be far more because a) govt spending can stimulate the economy and b) it can help the less well-off through this. 11/
A recession doesn’t affect everyone equally, it affects the poor much more. Government modelling should also consider the equity impacts of policy decisions. 12/
