Saturday, 4 April 2020

Economics of Covid-19 – humanitarian vs. utilitarian

Economists pay a lot of attention to policy choices and trade-offs. Genuine free lunches are a rarity. The coronavirus pandemic has spurred a lot of comment on trade-offs, from economists and non-economists alike. Are governments, by effectively putting large parts of their economies into deep freeze to combat Covid-19, paying too high a price in terms of lost business, work and incomes to save what might prove to be a relatively small number of lives?

This seems like a horrible question to pose at this time of crisis but it is not completely unreasonable. As I say, trade-offs are part of the very stuff of economics. Indeed, implicit trade-offs are always being made within health systems. Available resources are finite and concepts like ‘quality of life years’ play a role in determining how to allocate care to different groups of people. It’s also likely that during the current crisis some medical practitioners will be faced with the distressing choice of which Covid-19 patients to help if hospitals run short of life saving equipment.

However, acceptance of this kind of micro choice doesn’t mean we should apply a similar calculus at the macro-level. The utilitarian principle of ‘the greatest good of the greatest number’ is of limited practical value when, as at present, we simply don’t have sufficient information to assess the trade-offs involved at the point when policy decisions have to be made. 

Even when the crisis is over, any post hoc assessment of the trade-off will be questionable because we’ll never know the counterfactual. UK epidemiologists think that without the lockdown and other measures the government has taken the death toll from coronavirus could potentially hit 500,000 in the UK alone. If, as we pray, the outcome is far better than this it will be highly misleading to simply weigh the economic cost against the actual number of deaths.

I fully understand why, with so many people suffering financial hardship as we battle Covid-19, some ask ‘is it worth it?’ I can’t answer that question but when pondering it my conclusion is that policy makers should favour the humanitarian response over the utilitarian.      

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