Have you ever wondered about how much your life is worth? Economists have always tried to give monetary value to people’s lives. Nowadays, this issue gets even hotter, since policymakers have to take into account all costs and benefits deriving from shutting down the world economy: when will the benefits of saving lives by ‘flattening the curve’ of infected individuals be outweighed by its costs?
A global lockdown has severe economic costs. People lose jobs, small shops and firms go bankrupt, financial lenders and borrowers struggle. States need to intervene in the economy, but not everyone has the same budgetary strength to do it properly. Some rich countries can cheaply finance fiscal stimuli through debt, while others face enormous costs due to disproportionate debt-to-GDP ratio accumulated in the past years. Even worse, poorest countries just cannot bear this financial effort. When people will start lacking basic commodities, the state will not be able to lock them in their houses. “It’s better to die (by the coronavirus) than starve like this” say poorest Indians who cannot work anymore because of the lockdown.
A couple of weeks ago, US President Donald Trump stated that “we cannot let the cure be worse than the problem itself”. Namely, he was wondering about whether the damages created by the economic shutdown would be worse than those caused by the virus.
To answer this question, we must consider the (estimated) economic value of the main expected benefit of such a measure: to save lives. Of course, following their purely empathetic nature, most people believe that the lives of thousands, millions of people are inestimable. But let’s try to monetize it for this analysis.
Michael Greenstone and Vishan Nigam from the University of Chicago calculated the monetary value of lives saved by the lockdown in the US. They relied upon simulation models for the US to compare a no-policy scenario, where the virus was let spread without any restriction, with a mitigation scenario, i.e. a moderate lockdown. According to their estimates, the latter would avoid 1.7 million deaths by the 1st of October. To estimate how much is one life worth in monetary terms, we turn to the concept of VSL (Value of Statistical Life) from economic theory.
Basically, it is the amount of money that a person would be willing to trade for a small change in the probability of death. The researchers rely upon the VSL elaborated by the US EPA (Environmental Protection Agency), that is equal to $11.5 million. Summing up, and considering that the VSL for the elderly is lower than that for the young people because of lower incomes and shorter life expectancies, the economic benefits of social distancing by the 1st of October in the US amount to $7.9 trillion. Therefore, it seems that the paper gives support to the lockdown approach.
Things are much more complicated though. The longer the lockdown, the higher the costs of keeping everything shut down and the harder it will be to go back to normal. For example, workers might find it much more difficult to re-enter in the labour market due to the erosion of their skills. Moreover, you cannot force people to stay at home for too long. This comes at big expenses to citizens living in wealthy democracies, who attach high values to social life and the freedom of movement in general.
Even more importantly, if the quarantine can avoid deaths to rise, it also puts in danger the lives of people experiencing domestic violence, poor people suffering from malnutrition and disabled people whose cure and physical activities have been limited. And, last but not least, higher levels of depression, stress and anxiety derive from new fears and the feeling of disorientation due to the uncertainty of tomorrow: will I get the virus? will I lose my job? when will I be allowed to see my beloved ones again? With respect to these conditions, the most vulnerable are the mental ills, the lonely people and, more broadly, the psychologically fragile individuals. Sadly, we already see an increase in the number of suicides.
To sum up, let’s go back to the original question: has social distancing been useful?
On one hand, it surely helped in gaining precious time and avoiding virus-related additional deaths. Fewer people around mean fewer infected seeking medical assistance and fewer deaths by the coronavirus. The healthcare system is, therefore, able to increase medical capacity and cope with future peaks of demand.
On the other hand, social distancing turns out to have seriously bad consequences when prolonged and lacking a re-opening strategy that completes the picture of how governments want to deal with the problem in the medium-long run. For instance, Italy finally set up a committee to discuss how Phase II shall be conducted only one month after the national quarantine.
Policymakers are not in the shoes of a Roman Emperor deciding on the gladiator’s life or death with an up- or down-thumb. They have a much harder challenge: to carefully find the right balance between costs and benefits of their strategy.
 Michael Greenstone and Vishan Nigam, (2020), “Does social distancing matter?”, Becker Friedman Institute for University of Chicago