Light v hard lockdown: crunching the life or death numbers

Crikey has recently published thought-provoking pieces by Adam Schwab on the cost of a lockdown. It is important to assess all benefits and costs of policy decisions: lives saved by the restrictions must be weighed against their human and economic costs.

But more discussion is needed than simply comparing deaths due to lockdown v deaths due to COVID-19.

No matter what is mandated, people will adjust their behaviours. Sweden’s economic output shrank by 8.6% in the June quarter, despite its oft-cited light-touch approach. The OECD predicts its economy will contract by 8% in 2020.

The Swedes have self-imposed a lockdown.

Neighbouring Denmark and Norway implemented mandatory lockdowns. Their GDP is forecast to contract by 7% and 8% respectively. Germany also imposed restrictions and its GDP is expected to shrink by a similar amount. The forecast for Australia and New Zealand is 6% and 10% respectively (figure one). 

Some of these contractions are due to other countries’ travel restrictions but Sweden’s economy is larger and less reliant on tourism than its neighbours. (In fact, a falling oil price would have inflicted an additional blow on Norway’s national income.)

It seems economic costs appear decoupled from the extent of mandated restrictions.

Is the higher mortality rate worth it?

Sweden’s COVID-19 mortality rate stands at 556 per million, several orders of magnitude greater than comparator countries (figure two).

Germany and Denmark are the closest at 112 and 107, Norway at 49, Australia at 24 (88 in Victoria) and New Zealand at a minuscule 4.5.

Given the economy will contract anyway, are the additional deaths associated with the light-touch approach worth it? 

The value of a statistical life in Australia is A$4.9 million (US$3.63 million). Multiplying this by the total deaths in Sweden amounts to 3.9% of GDP — almost half the projected 2020 downturn — again dwarfing the comparator countries’ numbers (figure three). 

This suggests the light-touch approach has sacrificed a lot for little economic benefit. Given that 5800 Swedes have died, the strategy would need to prevent an annual economic contraction of 12% — far higher than any of the comparator countries — for the savings to exceed the aggregate value of lives lost. 

Of course, because the virus kills mostly older people one could argue that the value of life should be lower because these people have fewer years left. Basing the calculation on how many life years (or even quality-adjusted life years) victims had would produce a more modest number. However, because the mortality demographics are quite similar across countries, the relative differences would remain.  

Time will tell who got it right

The true cost of the pandemic and the social policy response will be revealed over time. Herd immunity may prove decisive over the coming months and years and may vindicate the light-touch approach. Although a safe, effective vaccine rolled out in sufficient numbers in 2021 would, depending on the price paid and other costs, most likely justify a stricter strategy.

Sequestering vulnerable parts of the population has also been proposed. It could work but, like all approaches, comes with its own costs and problems.

Imposing a conditional lockdown, for example, would not be easy to implement and manage over time. Letting the virus circulate through most of the population heightens the risk of successive waves, more illness and deaths, and further lockdowns. 

Every strategy involves costs and trade-offs. Finding the ideal solution requires a sober analysis of all consequences based on available facts.

At this stage it’s unclear that letting the virus rip is the best, least costly, policy. 

Luke Slawomirski is a health economist, most recently with the Organisation for Economic Co-operation and Development (OECD) in Paris, France. He is a former clinician and a visiting fellow at the University of Technology Sydney