Economists think about these issues all the time. Admittedly, the pandemic is especially challenging. Any intervention, or inaction, has a long list of potential costs as well as benefits. There is also a tendency to look only at those that are most visible and easiest to measure.
Policy-makers must therefore be aware of the “identifiable victim” problem, or putting too much weight on those most at risk from Covid, and not enough on the harms done to others by policy responses.
In this case, an assessment of the potential benefits of locking down the economy might start with the reduction in illnesses and deaths from Covid itself. But this list should also include the prevention of other deaths and harms (to young and old) if the NHS is overwhelmed with Covid patients, the reduction in other communicable diseases, such as flu, and the potential for a stronger economic recovery in the longer term from getting on top of Covid more quickly.
On the cost side, it is natural to think first of the collapse in economic activity, including business closures, job losses and lost income, and the impact on the public finances. But some interventions, such as strict rules on self-isolation, could also make it harder for an under-staffed NHS to treat people with any condition.
We also need to take account of other costs of Covid restrictions in terms of the impacts on mental health and wellbeing, harms to education and job opportunities, especially for the young, and the damage to civil liberties and confidence in government itself.
This is clearly far more difficult than just saying we should “follow the science”. The high degree of uncertainty means that even the most confident economist would accept these judgments have to be made by elected politicians.
Nonetheless, there were several independent attempts at a comprehensive cost-benefit analysis of Covid lockdowns last year, including studies led by Prof Richard Layard at the London School of Economics, and by Prof David Miles, published by the National Institute of Economic and Social Research.
These studies were controversial, but they did at least lay down some frameworks for thinking about the relative merits of different policy responses. I also think it fair to say that most economists would agree that the welfare costs of prolonged lockdowns – not just the economic damage but also other social harms – significantly outweigh the benefits.
Julian Jessop is an independent economist. He tweets at @julianhjessop.
