Posted on 03/30/2020 8:46:05 AM PDT by Kaslin
It is vitally important, literally life and death, that the proper costs and benefits are weighed with the decision on how much and how long to shut down economic activity through the pandemic.
As the coronavirus pandemic continues across the world, leaders and policymakers have scrambled to respond to the growing health crisis. In the United States, multiple state governors have issued statements urging their citizens to follow social distancing guidelines.
Other governors have taken more extreme measures, issuing orders to effectively lock down entire state economies. The current goal of these responses has been to slow the spread of the virus in the hope of reducing the strain on the health-care system. Discussion over the proper precautions is a necessity in such a time.
There have been forecasted estimates of virus-related death totals for the United States from as high as 10 million, to 2.2 million, to more conservative estimates of 5,000. The models used to estimate the potential death rates are not without criticism and repeated adjustment. Sampling bias may be a significant problem. These data errors are an important problem to resolve as policymakers use these models to inform their responses.
The difference between social distancing and complete economic shutdowns is too dramatic not to be taken seriously. It is imperative that more testing be conducted to provide better access to data, as well as the health benefits that come with knowing who does and does not have the virus. However, as important as it is to get the cost of not shutting down right, it is also important that policymakers properly weigh the cost of the economic shutdowns themselves.
Getting the cost right is not simply a matter of valuing “profits over people,” as the social media memes may suggest. Rather, even in times of crisis, the ability to operate in a functioning economy is important for the people within it.
The economy is the people, and the people are the economy. The ability to continue to function in a market system does matter to individuals within the system, particularly when the ability of business to remain open and continue to employ them is in question.
We have already started to see some of these human effects as the unemployment has quickly rocketed beyond even the early initial projections. A rise in unemployment is correlated with a number of negative socio-economic effects. For some, these effects can be quite deadly, particularly when the changes are rapid, as is currently the case.
The economic predictions for the shutdowns may be as varied as those for the virus itself. The Federal Reserve’s James Bullard has noted that unemployment may rise to as much as 30%. Treasury Secretary Steven Mnuchin has estimated a possible unemployment rate of 20%.
Bullard’s number is higher than the unemployment seen in the United States during the Great Depression (25%), and both estimates are significantly higher than the unemployment during the Great Recession (11%). Even if we take the more conservative estimate of 20% unemployment, that is a 16.5% rise in unemployment from its recent historic lows of 3.5% unemployment.
Although it is difficult to estimate how long this downturn may linger, that is a severe shock to the economic system. It is possible that people return to work and economic activity returns in strength in short order after the shutdowns are lifted.
Even then, the costs of shutting down will have been quite large. However, it is also possible that some businesses who had to pause activity for a month or more may not be able to return at all. The recession could be longer than some economists are projecting. If the economy does linger in its downturn, the human costs to the shutdown will inevitably begin to increase.
A 2017 National Bureau of Economic Research paper finds a 3.6% increase in the opioid death rate per 100,000 people for a 1% rise in unemployment. There were 14.6 opioid death rates per 100,000 in the United States in 2018. If we use the more conservative estimate of a 20% unemployment rate without a quick return to lower levels, then there would be an estimated 59.4% rise in deaths per 100,000, leading to an increase of 8.7 deaths for a total of 23.3 for opioids.
With a current U.S. population of 331 million, there are 3,310 groups of 100,000, meaning there is potential for an additional 28,797 deaths from opioids annually. Consider that for 2018, the Centers for Disease Control reports that there were 67,367 deaths from all-drug deaths, with 46,802 of those coming from opioid use. The 46,802 deaths were considered an opioid crisis. A possible 75,599 should not be dismissed quickly.
The negative effects will not be felt just through opioid use either. The numerical increase in deaths provided above is only for opioid users, but the all-drug death number will rise as well. In a 2018 study, Bruguera, et al, found that of the 180 drug users they surveyed about use during the Great Recession, 58.3% reported an increase in use while only 25.6% reported decreasing use, resulting in greater all-drug use for the period.
Similarly, Mulia, et al, (2014) connects a rise in alcoholism to economic loss during the Great Recession. The CDC estimates that 2,200 people die in the United States just from alcohol poisoning annually, not to mention the additional alcohol-related deaths that occur. In 2017 alone, there were also 22,246 deaths resulting from alcoholic liver disease. As the jobless rate increases and the economic losses continue to mount, these numbers are likely to rise.
The deaths related to economic downturns go beyond those from chemical dependency, also. The mental toll is not inconsequential. For example, Blakely, et al, (2003) find that being unemployed may also increase the risk of suicide two to threefold. Milner, et al. (2014) similarly finds that unemployment is associated with a higher relative risk of suicide, with prior mental health issues being a key factor in that association. While a study by Kerr, et al, (2018) did not find that unemployment is directly linked to suicides, it did find a significant link between poverty, suicide, and alcoholism.
When breaking the population into age groups, Lin and Chen (2018) do find that unemployment does have a direct impact on older portions of the population, the portion of the population many of the current shutdowns are most meant to protect. Whether it is the direct unemployment effect or the potential poverty produced from the economic shutdown that leads to greater suicides, an increase from the 48,344 suicides and 1,400,000 suicide attempts in the United States in 2018 should give decision-makers pause during their response to this pandemic.
Increased harm to oneself is not the only harm caused by economic downturns. There is also the threat of rising crime in general. Ajimotokin, et al, (2015) estimate that a 1 percent change in unemployment will increase the property crime rate by 71.1 per 100,000 people and the violent crime rate by 31.9 per 100,000 people.
With our estimated 16.5% rise in unemployment, we could see a significant increase in both property and violent crimes. The violent crime also may add to the death toll in this period. Kposowa and Johnson (2016) find that unemployed workers are more than 50% more likely to become homicide victims than those who are employed. They also find people not in the labor force are 1.3 times more likely to be victims than those who are employed. As workers become discouraged due to an inability to find jobs during a recession, their lives as well as their livelihoods are called into question.
The future during such a pandemic is largely uncertain, and misinformation is rampant in the current panic. Policymakers face tough decisions as they navigate the issues of data collection, virus transmission, and economic ramifications of doing too little or too much. It is vitally important, literally life and death, that the proper costs and benefits are weighed with the decision on how much and how long to shut down economic activity through the pandemic.
This article originally appeared from the American Institutes for Economic Research and is reprinted with permission, with slight alterations to implement AP style plus an editor-chosen title and subheds, as is the industry norm.
Econ 101 - Opportunity cost
Maybe Democrats want it to get worse, so they can get Joe Biden in. It is easy to manipulate someone with dementia.
We’re all gonna die!! The sky is falling!!!
No no no!!! We have to sacrifice ourselves so that we may be saved.
Is being homeless really so bad?
Come on.
I for one have unattended to eye issues. Glaucoma and macrodegen. run in my family. Have been waiting for April 1 to come and get on medicare. Not going to do any good, have put of cataract surgery for 2 years now so my medicare pays for it.
Would it have happened eventually, maybe, maybe not? We'll never know now. This lockdown indirectly lead to this death.
In China, a country with about 250,000 traffic deaths each year, their 2 month shut down prevented over 40,000 traffic fatalities.
We are already seeing the same thing here in the USA.
FWIW
It doesn’t matter.
The economy is largely shut down until 4/30 now. Trump is listening to the Doctors and that’s the deal.
Frankly, I’m willing to be right now that it will be shut down until Memorial Day rather soon. As this keeps spreading it’ll be obvious. And it will spread, as all of these asshats return from Spring Break carrying the virus all over the country.
His mention of June 1st last night was already softening for the blow IMO..
Funny thing, I just read a Barron’s article where some restaurant worker claimed he needed to stay home because being at work only benefited the S&P. Of course, the liberal nitwit wants the S&P companies to pay him to stay at home but he has no idea how that money will be generated if everyone stays home.
“Possibly 28,797 More Deaths from Opioids”
That would be a Self-Selecting cohort.
We should also be seeing a huge life savings from closed abortion clinics as well. Unfortunately not all have been closed in every state because killing babies is still very dear to “progressives”.
Grim but needs to be considered by all.
Americans are not at all in as good shape as in the first Great Depression. Not 100% but we now have much lower community cohesiveness (as discussed in Bowling Alone: The Collapse and Revival of American Community a nonfiction book by Robert D. Putnam. )
Families with great grandparents and grandparents nearby in town are rare. People sharing interests all over America is a rarity-—we have Balkanized groups as Bill O’Reilly writes, where each has a TV series, a hobby, and a political belief group often directly at odds with all the others. Pelosi can’t even agree to stand with Trump against a virus!
From my Macro economics class in college...….
“ You can never recover lost wages.” That’s a fact.
Excellent point
“Let me explain to you how this works. You see, the corporations finance Team America. And then Team America goes out, and the corporations sit there in their... In their corporation buildings, and, and, and see that, they’re all corporationy, and they make money. Mhm.” - Tim Robbins F.A.G.
That would not surprise me one bit.
A pundit — maybe a doctor (I can’t recall) — was giving suicide stats yesterday. He said that, because of unemployment, in two days in his area there were more suicides than there were in all the first three months of the year.
The info in this thread, as well as stats this man gave, need to be firmly living in POTUS’ head for the next time the reporters grill him on “acceptable number of deaths”. Also, get the data on 1929 suicides.
And there is info about deaths from domestic abuse increasing during poor economy, especially unemployment hardship.
This should be obvious, but I watched even nominal conservatives claim that reopening the country would be “sacrificing lives for the stock market.”
It’s magic, man, it’s magic!
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