I estimate that if no additional restrictions are imposed, even with the vaccination program currently in place, the pandemic will cost an additional $1.3 trillion going forward if the value of statistical life (VSL) is used to value life and $368 billion if life is valued with discounted quality-adjusted life years (dQALY).Įvidence shows that the lockdown measures adopted in parts of the United States and Europe in Spring 2020, which included bans on large social gatherings, closures of public places such as gyms, schools, bars and entertainment venues, and shelter-in-place orders, were highly successful at reducing the virus transmission (e.g., (Courtemanche et al. The expected future monetary cost of the COVID pandemic is calculated from the following three components: (1) the loss of productivity due to missed work of the symptomatically ill (2) the cost of medical interventions that could have been used elsewhere and (3) the value of lives of the projected fatalities. I rely on the COVID literature to obtain the model parameters, such as the basic reproduction number that prevails with the social distancing measures currently in place, as well how it will change during a nation-wide lockdown, similar to lockdowns implemented in Europe in Spring 2020. I model the COVID-19 pandemic curve using the SIR (susceptible, infected, recovered) model widely used in epidemiology. I perform a cost-benefit analysis of a possible lockdown by comparing its benefits that come from reducing the number of future infections until the vaccination target is reached to the incremental costs a lockdown would impose on the economy and finding the optimal stopping time before incremental costs start to exceed incremental benefits. They also miss days of productive work, reducing GDP (or in the case of children and older adults, their caretakers miss productive work days). This happened in spite of the broad awareness that older population faces higher risks.Įven when a COVID infection is not fatal, it is still costly because the sick consume medical services that could have been allocated to other health conditions. 2020) find that increased rates of infection among young people in the June–August 2020 period helped transmit the virus to more vulnerable high-risk groups, such as older adults. The failed Swedish experiment has illustrated that it may be impossible to selectively protect the vulnerable population without a government intervention. The COVID experience from around the world has shown that centralized policies are critical to achieving an optimal pandemic management. Moreover, the fatality data shows that COVID-19 also poses substantial risks to the lives of younger people who may be unaware of their health vulnerabilities ex-ante and therefore fail to take adequate precautions. Footnote 4 The value of life can be quantified by a person’s willingness to pay to stay alive, with metrics such as the value of statistical life (VSL) and discounted quality-adjusted life years (dQALY) being widely used in policy decisions. 2018), Table 12.1).ĭespite society as a whole being potentially less concerned about saving the lives of the more vulnerable older adults, Footnote 3 the older people’s lives are valuable to them. Moreover, the public may view the pandemic risks as acceptable because children are largely unaffected and frontline workers and first responders are getting protection from the virus by being among the first to be vaccinated (e.g., (Tumpey et al. Footnote 2 The costs of a lockdown are felt in real time in the form of inconveniences and lost wages while the benefits from the reduced number of illnesses and deaths come in the future, and as such they may be perceived as hypothetical and underestimated. While some European countries have implemented a new round of national lockdowns, there is resistance to imposing more stringent COVID restrictions in the United States. Footnote 1 In the meantime, the virus continues to claim about as many lives every day as the 9/11 tragedy. However, vaccine production and distribution are slow, with the Biden administration stated goal of administering only 1.5 million vaccines daily. Operation Warp Speed has successfully delivered two highly effective COVID-19 vaccines, with additional vaccine candidates undergoing clinical trials.
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