Deadly Tradeoffs

When discussing alternative coronavirus policies, considering what tradeoffs would need to be made between life and economics isn’t just an example of capitalism run amok, or a hard-hearted exultation of profit over people. If we lived in a completely socialized, non-market economy, the central planning board would need to decide what resources it would dedicate to hospital care for coronavirus patients. Whether the Board acknowledged the existence of tradeoffs or not, its decisions would implicitly be making decisions based on a tradeoff between the life of patients and the cost imposed on everyone else. If it were honest, it would explicitly acknowledge the existence of the tradeoffs it was making and defend the values or logic it employed in these decisions.

Relatedly, people in fact do not themselves treat their own lives as though they were of infinite worth. It is not immoral or unreasonable to recognize that. Nor is it unreasonable or immoral for a society to consider the cost of policies that would reduce death, and decline to adopt policies that would cost society more than the value that individuals place on their own lives.

I discuss both these claims below.

Before doing so, however, it is worth underscoring that thinking of the cost-benefit ratio of government policy proposals to respond to the corona virus does not necessarily mean letting the virus run amok. In considering regulations, Federal agencies adopt figures for the value of human life that run the gamut anywhere from $6 million to a bit over $9 million. Let’s take $9 million as our figure.

Estimates of deaths that might result from the coronavirus vary significantly depending on the scenario, and are much contested. Recent estimates suggest anywhere from 200,000 to 1.7 million people could die. For the sake of argument, and calculative ease, let’s choose the figure that 1 million people would die if there were no mandatory government policy interventions.

Doing the multiplication then gives us the figure that the total value the victims themselves would place on their lives lost to the corona virus would be in the neighborhood of $9 trillion. The GDP of the United States in 2019 was about $21 trillion. So, basically, government policies that would reduce deaths resulting from coronavirus to zero would be cost effective up to a little less than half the value of the entire U.S. economy for one year. That’s a lot. There are many ostensibly draconian policies that U.S. governments could adopt that, when totaled, would impose a cost less than $9 trillion.

For example, a “high” estimate of an “economic shut down” to stop the spread of the virus in the U.S. would have the GDP of the country decline by 40 percent, or $8.4 billion. That would be less than the value of the lives lost. So, considering the cost-benefit ratio of policy proposals does not necessarily entail “going cheap” and allowing lots of people to die so the rest of us can once again go out to eat at sit-down restaurants.

At the same time, it is important to note how sensitive the policy recommendations are to changes in the estimates. If, for example, expected deaths are 100,000 to 240,000, as recent estimates suggest, rather than 1 million, then the value of the lives lost would be just over $2 trillion, in which case the cost of an economic “shut down” to respond to the virus far exceeds the value of the lives lost. In that case, more intermediate strategies should be commended, as perhaps in Sweden or partial and region-specific “shutdowns” as Florida had initially employed.

Just thinking this way, however, invites criticism of callousness, cold-capitalist rationality, of putting a price on priceless human life, etc.

First, whether we want to admit it to ourselves or not, cost-benefit analysis is inescapable. If we do not do it explicitly—openly and honestly—we will be doing it implicitly, if not surreptitiously. The many businesses or government bureaus that mouth some version of the oft-repeated platitude that “Safety is Our First Priority” are not being straight with us. If that were the case—if preventing even one death or injury were its number one goal—it wouldn’t be produce anything (in the case of a business) or allow anything to be produced (in the case of a government bureau). We can have a sensible discussion about safety only after we get past platitudes that everything is sacrificed for safety.

Secondly, placing an economic value on our lives is not something that only “they” do to “us.” We place an economic value on our own lives scores of times every day. When economists estimate the value of human life, they seek to elicit from our own behavior the economic value we place on our own lives. As I explained in an L&L post discussing Nobel Prize winning economist Richard Thaler’s doctoral work on estimating the value of a life:

The nub of the estimation approach is easy to understand. (Actual estimations are more difficult.) It goes something like this: Say there’s a sale on an item you want to purchase, but the store with the sale is 20 miles further away than the store closest to you with the same item, but not on sale. If you purchase the item on sale you’d save $30 net of the added cost of getting to the more-distant store. (The gas, marginal wear on your car, your time, etc.). Driving the extra 20 miles, however, also entails additional risk: Traveling the additional 20 miles creates an additional one chance in 100,000 that you will be involved in a fatal auto accident. From your decision whether to make the trip for the sale, and the tradeoff you make between the risk and the reward, we can start to determine the value you place on your own life. If you make the trip, the implicit monetary value that you place on your life must be less than $3,000,000 (the marginal economic gain to you of $30 divided by the marginal increase in risk to your life of one over 100,000).

We all place an economic value on our own lives in the multitude of ordinary decisions we make every day. Society is not asking us to sacrifice our lives for it if it declines to set a higher economic value on our lives than we set them ourselves.

To be sure, there is a large set of important, related questions, such as the difference between being forced to give up one’s life and our choosing to engage in activity that may result in our losing our life. Or losing our lives to someone who accidentally killed us “negligently” relative to losing our lives to someone who accidentally killed us while acting responsibly. These are important considerations, but do not detract from the central point that people themselves do not treat their lives as though they were of infinite value.

We do not do treat our lives as infinitely valuable in other realms as well. For example, the US government sends people to die to defend our freedom and national honor. Even religion does not treat human life as infinitely valuable. For example, while affirming that all humans are made in the image of God, Christianity does not teach that physical life is of infinite value (see, for example Luke 12.4 or Philippians 1.22-24).

Another common criticism of thinking about the economic cost of policy proposals to fight the coronavirus is that such calculations are the result merely of a capitalist mentality. The suggestion being that non-capitalist systems would not engage in anything as low as trading human lives for filthy lucre.

But tradeoffs are unavoidable. The necessity of making tradeoffs between cost and benefits is not unique to market societies. Consider a centrally-planned socialist system in which there are no markets at all and all the means of production are socially owned. Opportunity costs continue to exist. The person ordered to “shelter in place” in a socialist system cannot go to work and produce goods and services to be distributed by the central committee for other people. The same piece of steel cannot be used to make a respirator and also be used in a car in a socialist system.

As I mentioned above, the Central Planning Board in a socialist system with no markets at all would still make tradeoffs when faced with the coronavirus. The Board would use exactly the same criteria asking, “What is the tradeoff between risk and reward that our citizens choose on average for their own lives?”

Of note as well is that if the socialist economy is less productive than the market economy would be for the same society, then the value placed on human life would be greater in the capitalist society than in the socialist society. And policy interventions that respond to the virus would in fact be greater and save more lives in the capitalist society than in the socialist society.

The question is not the existence of tradeoffs. The question is whether the necessity of making tradeoffs will be honestly acknowledged or dishonestly denied. Once the necessity of making tradeoffs is acknowledged, only then can we have an open, honest debate about the expected costs and benefits of competing policy responses to the corona virus.