Op-Ed: How to balance saving lives and rescuing the economy as coronavirus rages on (via latimesopinion)
New York Gov. Andrew Cuomo, whose state is suffering the worst coronavirus outbreak in the nation, asked recently whether it’s necessary to shut down the entire economy to save a single life.
A prolonged and draconian economic freeze will have its own negative health and social effects. And it is the job of policymakers to weigh competing costs and risks. We do it all the time.We set the speed limit at 65 mph, and in 2019 more than 38,000 Americans died in auto accidents. A lower limit — say 30 mph — would vastly reduce the number of deaths.
Not all of these policies were necessarily optimal; the point is that public policy involves trade-offs, with costs on either side. And politicians should be encouraged to openly debate these trade-offs.No one likes to speak of the economic costs of lives, but doing so is embedded in what economists do. Loggers receive higher pay than warehouse workers — partly as “payment” for performing a job with an enhanced risk.
The stimulus will help, but the strength of the economy isn’t our paper but our economic output. That can shut down perhaps for a period of weeks without long-term damage, but an economic freeze that extended many months would have extremely serious consequences — including, eventually, higher mortality, widespread avoidance of health regulations, smuggling, black markets and lawlessness.
Behind each of those small businesses is an entrepreneur, often a family, that invested capital, work, hope and a portion of their lives. These are the engines of job creation in the future. Letting them fail in large numbers would have catastrophic consequences. Models work well when the subjects being modeled cannot adjust their behavior to affect the result. But, as we have seen time and again in the financial world, modeling can fail. In the face of a financial panic, for example, selling can provoke panic selling far beyond what a model might have predicted.
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