Thanks for posting. There are a couple of questions/comments I have about the piece:
First -
The sceptics arguing for more rapid relaxation of containment measures point to the economic costs of lockdowns and appeal to the cold calculus of cost-benefit analysis to conclude that the lives saved by lockdowns don’t justify the economic costs incurred to do so.
I don't think that's strictly what people have been saying. I've heard plenty of people commenting that the
human costs - unemployment, mental health, other health consequences etc - of the shutdown should be taken into account.
In short, the authors are attacking a strawman.
However, granting the premise of the article, they come up with the economic value of a human life in Australia as being $1.1 trillion based on the following -
Converting those fatalities to dollars using the Australian value of a statistical life of A$4.9 million per life yields a cost of A$1.1 trillion.
In rough terms, that’s the amount we have gained by shutting down the economy, provided deaths do not skyrocket when lockdown measures are relaxed and borders re-open.
Now, if you're going to apply the statistical value of a life model, that strikes me as being deeply flawed. The coronavirus all over the world has overwhelmingly claimed the lives of the elderly and those with significant co-morbidities. If you're going to run this as a dollars-and-cents exercise, it's hard to justify that every life has an equal economic value, and that those killed by coronavirus have the same economic value as those that are more likely to survive it. It sounds harsh, but strictly as a matter of economic logic that doesn't make a great deal of sense to me.
Third -
It is also important to note that the government’s spending of A$214 billion to support the economy during the shutdown is a transfer of resources from one part of society to another rather than a cost.
It creates neither direct costs nor benefits for society as a whole, other than the economic distortions coming from raising the revenue to service the spending.
With long-term government bond rates near 1% (less than inflation), the total cost of distortions is likely to be tiny.
Now, this is just nonsense. The money we're spending on dealing with this isn't being transferred from one part of society to another. It's being raised through debt. Even with bond rates as low as they are, $214 billion borrowed is $214 billion that has to be repaid - and even if you're not worried about that, it's an undeniable fact that those borrowings represent money that could be spent elsewhere. This is a concept known as "opportunity cost" and I learned about it in high school economics.
Some of the authors' points are perfectly valid, but on the whole they've applied a very shallow methodology to some heroic assumptions and excluded all sorts of variables to arrive to what's clearly a predetermined conclusion. Frankly, I'd expect a lot more from a pair of economics professors.
