Toby Young has been given plenty of stick for an article which asked whether the UK government has overreacted to the coronavirus crisis by locking down the economy, and which concluded that it had. In my view, he was right to pose the question, but gave the wrong answer.

The thrust of his argument is that the economic costs of the measures being taken are too high to justify ‘extending the lives of a few hundred thousand mostly elderly people with underlying health problems by one or two years’. This is a clumsy way of expressing the problem and, as I shall explain later, his numbers are way off. Nonetheless, he makes a potentially valid point.

It’s common practice for health economists to put a monetary value on people’s lives according to the number of years they have left, and the quality of that life. This is the concept of a ‘QALY’, or quality-adjusted life year, where one QALY is one year in ‘perfect’ health.

The Treasury’s Green Book, which provides guidance on how to appraise and evaluate policies, projects and programmes, values one QALY at £60,000. This is an answer to the ‘normative’ question of what value society should place on health outcomes, based on ‘willingness to pay’.

The National Institute for Health and Care Excellence NICE uses a lower figure of £30,000 in assessing new treatments for the NHS. This figure is based on a more pragmatic assessment of the funds actually available (and is the one that Young uses). In both cases, a monetary value is being placed on a human life.

Crucially, this is not ‘eugenics’, nor is it about people’s ‘wealth-producing capacity’ or ‘economic productivity’ (as many of Young’s critics assume). If you believe this concept is morally wrong, imagine you were on the Titanic and had a straight choice between rescuing a healthy child or a sickly old man. Whom would you save, and why?

Similarly, we have to draw the line somewhere in allocating limited resources. For example, if we could save just one person’s life at a cost of £10,000, almost everyone would surely say yes. But what if it would cost £1 million (possibly)? Or £1 billion (presumably not)?

Indeed, policymakers are making these sorts of judgements all the time. The same techniques are used to assess the value of lives that might be saved by road safety improvements, and in determining awards of damages in court judgements. The BMA’s own guidance to medical professionals underlines that it is both legal and ethical to prioritise treatment among coronavirus patients.

But I still don’t agree with Young’s conclusion. Let’s begin by dissecting his cost-benefit analysis, assuming this approach is indeed the right one here. (I’ll come back to that assumption too.)

On the benefit side, he has attempted to value the additional lives that might otherwise be lost to COVID-19 if the government took a more relaxed approach.

To be fair, his conclusion does not actually rely on the assertion that the tougher measures would only extend the lives of those saved by ‘one or two years’, which is obviously false. (Young has taken an out-of-date number for the average age of those who have died, and compared this to the average UK life expectancy at birth rather than at the age already reached.)

In practice, he uses a reasonably high number for the potential number of fatalities (370,000) and a more realistic (but still low) figure for the years of life lost (an average of 11). Assuming each year of life is valued at £30,000, this implies a total cost of £330,000 per life, and £122 billion in total. But both these figures are still questionable, especially if the NHS becomes so overwhelmed with patients that it cannot effectively look after younger people with non-coronavirus related problems too. And even relatively young and health medical staff are vulnerable to a high ‘viral load’.

There is also a huge amount of uncertainty here. If it goes horribly wrong, the first figure could be as high as 500,000, and the second as high as 20. We’d then be looking at a total cost of £330 billion. And you could also justify using a much higher number for the cost of a life, such as the ‘Value of a Statistical Life’ saved by a road safety improvement, which is more than £1 million. At the very least, the Green Book’s £60,000 for a QALY seems closer to the concept that Young is trying to capture.

On the cost side, Young starts by focusing on the headline figure of £350 billion for the additional government support announced by Rishi Sunak on 17^th March. He does then acknowledge that most of this (£330 billion) took the form of loan guarantees that may never actually be needed, but only cuts his number to £185 billion.

In reality, the direct costs to the Treasury of the measures announced so far are likely to be in the range of £50-100 billion. What’s more, this can be seen as a transfer from one group of people (mainly current and future taxpayers) to others (such as those whose incomes would otherwise have disappeared), rather than a net loss to the economy.

Young also makes the fair point that recessions themselves can cost lives. There is plenty of evidence that life expectancy is lower in more deprived areas of the UK, and that the pace of improvement generally has slowed since 2011. It’s not a huge leap to conclude that an economic slump could itself have a major impact on the health of the nation.

However, the reality this time may again be more complicated. For a start, there is a big difference between a temporary drop in GDP, even a very big one, and a prolonged recession. Provided the great majority of businesses, jobs and basic incomes are protected – which is the focus of the economic policy responses – normal life should resume relatively quickly once the emergency health measures are lifted.

Some would also argue that it was ‘austerity’ that led to the deterioration in health trends in the 2010s, rather than the recession itself. That’s still debatable (something for another day), but there is no doubt that the fiscal responses to coronavirus are very different from those that followed the global financial crisis.

A lot of the economic costs are also inevitable, whatever policymakers had done. For example, the government’s early analysis of coronavirus suggested that, in a reasonable worst-case scenario, up to a fifth of the labour force might be off work at any one time. That would have hit GDP hard, even if the government had done nothing (and probably by more without the measures that the government has taken).

Put another way, the economic measures being taken now have both costs and benefits, as they prevent bigger losses further ahead, including the accumulated loss of future income (potentially substantial) that would result from the premature deaths of a large number of younger people.

In the meantime, people stuck at home might be bored, and even depressed. But most seem to accept the need for the tougher measures, and community spirit seems high. Studies of previous recessions in the US have also shown a mixed impact on overall health, with an increase in the number of suicides in particular offset by fewer deaths due to other causes, such as traffic accidents.

On this basis, it would be relatively easy to redo Young’s analysis with different and better numbers and conclude that the government’s measures are actually good ‘value for money’.

Finally, though, it is worth asking whether the standard cost-benefit analysis, which you might apply to the approval of a new medicine or an individual railway project, is appropriate to a national emergency, like the coronavirus crisis. To use an extreme example, we wouldn’t have assessed the pros and cons of fighting World War II in this way.

Similarly, we may well be willing to put a much higher price on protecting the lives of people who face a ghastly end in a converted conference centre, especially if we could avoid this simply by chilling at home for a few weeks longer. By all means let’s keep everything under review, but, ‘yes’, I do think the lockdown is worth it.

PS (added on 3rd April).

I’ve since come across a few interesting US papers on the economics of pandemics. These studies (which have also been picked up elsewhere) support the view that the coronavirus lockdown is indeed ‘worth it’…

First, a cost-benefit analysis of social distancing for the US, which suggests that the benefits in terms of lives saved could be worth as much as US$8 trillion (40% of GDP)…

Greenstone, Michael and Nigam, Vishan, Does Social Distancing Matter? (March 30, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2020-26.

Second, a study of how different US cities responded to the flu pandemic of 1918: those that intervened earlier and more aggressively ‘do not perform worse and, if anything, grow faster after the pandemic is over‘.

Correia, Sergio and Luck, Stephan and Verner, Emil, Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu (March 30, 2020)

Finally, a study which finds that a *temporary* deterioration in the economy is actually associated with a small *improvement* in overall health outcomes (because an increase in the number of suicides is more than offset by other changes, e.g. fewer traffic accidents).

Are recessions good for your health?

• Applied economics
• coronavirus