Sunday , September 20 2020
Home / John Quiggin / Assessing the lockdown policy: a baseline comparison

Assessing the lockdown policy: a baseline comparison

Summary:
Various people, mainly but not exclusively in the Murdoch Press, are still complaining about the cost of the lockdowns and other restrictions imposed to control the Covid-19 pandemic. But most of these people seem to think that, in the absence of the controls, we would have avoided the economic costs, without any additional deaths (or, for the more hard-nosed, with only some expendable old people who would have died soon anyway). So, I thought I’d fill the gap by doing a comparison of the actual outcome with a baseline case: no government-imposed restrictions and no economic policy response. In the baseline case, international and interstate borders would remain open and decisions on social distancing would be left up to individuals and business. Based on international

Topics:
John Quiggin considers the following as important:

This could be interesting, too:

Lars Syll writes Expected utility theory — an ex-parrot

Dean Baker writes Trade wars are class wars: even more than Klein and Pettis say

Dan Crawford writes Open thread Sept. 18, 2020

Lars Syll writes The value of economics — a cost-benefit analysis

Various people, mainly but not exclusively in the Murdoch Press, are still complaining about the cost of the lockdowns and other restrictions imposed to control the Covid-19 pandemic. But most of these people seem to think that, in the absence of the controls, we would have avoided the economic costs, without any additional deaths (or, for the more hard-nosed, with only some expendable old people who would have died soon anyway). So, I thought I’d fill the gap by doing a comparison of the actual outcome with a baseline case: no government-imposed restrictions and no economic policy response.

In the baseline case, international and interstate borders would remain open and decisions on social distancing would be left up to individuals and business. Based on international experience, I’d expect lots of public events to be cancelled, international tourism to drop to very low levels (since most countries would impose quarantine on tourists returning home from a hotspot), and a big decline in activities like eating out. That would reduce deaths compared to a “no change” simulation, but also imply a lot of economic damage.

For an estimated number of cases, I’ll start with the US, where limited and inconsistently applied restrictions have so far seen 6 million recorded infections (with limited testing). That’s 2 per cent of the population. Allowing for the fact that we are about 6 months in, for undetected asymptomatic cases, and for the absence of any formal restrictions in the baseline scenario used here, I’d estimate 8 per cent of the population (about 2 million people) infected in the first year. The fatality rate would be at the upper end of those observed in overseas outbreaks, given overloading of hospital facilities, so I’ll put that at 1.5 per cent or 30 000 deaths, with maybe 100 000 people experiencing long term health effects.

Now lets look at the economic impacts. The immediate reduction in economic activity would be smaller than with the lockdown, but the absence of fiscal stimulus would make largely offset that. In addition, the health burden of the pandemic would disrupt all kinds of economic activity And, in the absence of JobKeeper reductions in economic activity would translate directly into business failures and unemployment with predictable multiplier effects. So, we could expect measured unemployment higher than under current circumstances (7.4 per cent), although less than the sum of measured unemployment and JobKeeper beneficiaries. And the unemployment benefit would be at the pre-JobSeeker rate, which is impossible to live on for long. Almost certainly, the suicides which were predicted as a result of the lockdowns (but did not happen) would have occurred in this scenario. By contrast, the actual outcome has been a reduction in poverty as those already unemployed benefited from JobKeeper and the end of robodebt

To sum up, the baseline case would involve vastly more death and suffering for no economic benefit to the community. The one positive in this case, is that the impact on the budget would have been smaller. That would have permitted the government to push ahead with tax cuts for high-income earners scheduled for 2024-25 (they may still do this, but it will be a lot harder to justify).

So, here’s an invitation to any lockdown opponents. Feel free to challenge these numbers. Or, propose a policy alternative that you are willing to defend.

John Quiggin
He is an Australian economist, a Professor and an Australian Research Council Laureate Fellow at the University of Queensland, and a former member of the Board of the Climate Change Authority of the Australian Government.

Leave a Reply

Your email address will not be published. Required fields are marked *