I woke up this morning to see twitter in absolute meltdown. An evil, rabid, Trumpkinaut, neo-liberal, has appeared on ABC television and dared to suggest there might be trade-offs in economics. There I had been watching re-runs of Survivor instead of Q&A.
Just kidding – I’d never watch Q&A.
Anyway – it turns out that UNSW academic Gigi Foster was to blame for the meltdown. I have disagreed with Gigi Foster’s research work in past so was somewhat surprised that she may have said anything remotely sensible.
I was wrong.
You were awesome.
GIGI FOSTER: I don’t think that anybody is saying we should abandon the old people. I fact, I think that that’s been one of the most consistent messages that we’ve seen from responses around the world, and I even said it on my radio program a few weeks ago – we should be quarantining the older people to the extent we can – voluntarily, of course. You don’t force anybody in our society to do something, ideally, but…
So, if somebody wants to hug their grandchild, fine. But people in nursing homes who can be quarantined, yes, we should protect them. That doesn’t mean that, you know, we shouldn’t be thinking as well about other human welfare costs. And I reject the idea that it’s lives versus the economy. It’s lives versus lives. The economy is about lives. It’s about protection of lives and human welfare and livelihood.
GIGI FOSTER: What frustrates me about this is when people talk about the economic costs of the lockdown, they often don’t think in detail in terms of counting lives, as we do with the epidemiological models, for example. So, has anyone here actually thought about how would you get a measure of the traded lives? When we lock an economy down, what are we sacrificing in terms of lives?
Economists have tried to do that, and we try to do it in currencies like the value of a statistical life, or the quality-adjusted life year, or the wellbeing year. And those quantities enable you to think about lives on one side versus lives on the other. And, I mean, if you do that kind of calculus, you realise very quickly that even with a very, very extreme epidemic in Australia, we are still potentially better off not having an economic lockdown in the first place, because of the incredible effects that you see not just in a short-run way, but in many, many years to come.
SALLY McMANUS: How can you say that? How can you say that? Like, we’re avoiding what’s happened in the UK, what’s happening in the US. The idea of having our ICUs overrun, our healthcare workers dying as well, is just the most horrible thought.
GIGI FOSTER: It’s horrible. It’s horrible either way. The coronavirus has made the world awful. I mean, there’s absolutely no doubt about that. But in order to have a proper discussion about trade-offs, you need to think in terms of lives that you’re giving up. And I know it’s invisible lives and it’s difficult to imagine that when we aggregate, for example, all of the health effects, all of the mental health effects, all of the effects of people right now who have illnesses other than COVID-19…
GIGI FOSTER: Well, I think it’s much too early to be able to tell for sure what the full economic impact is going to be of what we have done to ourselves, because this is not going to be a V-shaped recovery. Recoveries don’t come in V-shapes. We have destroyed network links. We have, you know, severed our overseas trading links in a lot of cases, in many industries.
Now, some of these JobKeeper program-type payments and programs will allow us to retain some of those links so that the employers and employees don’t have to reform, but that process of reforming and getting the economy geared up again, that takes a lot of time. So, we’re not going to see the full economic impacts for at least a year or more.
SALLY McMANUS: But we’ve got time. We don’t have what could have been 10,000 lives. Like, that’s the difference.
GIGI FOSTER: Again, have you done the calculus on the other side of the equation?
SALLY McMANUS: But are you talking about lost opportunity, or are you…?
GIGI FOSTER: I’m talking about lost lives. I’m talking about quality-adjusted life years which is the normal currency that people use when they’re making decisions in developed countries about how much to spend on saving people’s lives, because we always have to allocate resources. We don’t like to think about this, but it happens all the time, every day, in a health ministry in a developed country.
There has to be a choice about how to allocate your scarce resources. How much towards cancer research, how much towards, you know, this, that and the other – different disability and illness that can affect people all throughout their lives. And when those decisions are made, when the Pharmaceutical Benefits Scheme decides what drugs to take on, it’s using QALYs.
Gigi Foster was invited onto the show to provide an economic perspective. As far as I can see that is exactly what she did. Now we can argue whether or not the economic perspective is good or bad, valuable or not. But what she did is economics.
Some might expect economists, of all people, to endorse this calculus.
But as economists we categorically reject these views, and we believe they do not represent the majority of our profession.
We believe a callous indifference to life is morally objectionable, and that it would be a mistake to expect a premature loosening of restrictions to be beneficial to the economy and jobs, given the rapid rate of contagion.
It is wishful thinking to believe we face a choice between a buoyant economy without social distancing and a deep recession with social distancing.
In a world with COVID-19, there are no good choices.
In the very first instance that is a false dichotomy. Nobody is suggesting the only choice is between death for the vulnerable or complete lockdown. But that doesn’t worry me too much; this is problematic:
We believe a callous indifference to life is morally objectionable
Cost-benefit analysis is not a callous indifference to life.
Then in the text of the open letter itself:
Some commentators have expressed the view there is a trade-off between the public health and economic aspects of the crisis. We, as economists, believe this is a false distinction.
The notion that there are not and cannot be trade-offs in economics is antithetical to what the discipline of economics is all about.