We now enter a fifth week with shelter-in-place orders. As the governor contemplates easing some restrictions, it would be useful to know whether or not these rules saved lives, and how much they altered our economy. Unfortunately, we must wait months, if not years, for a clear answer. Those pondering such weighty matters don’t have the luxury of time. Like all of us, they must make decisions based on the best information available at the time. That is how we should judge those decisions.
This column will assess Governor Holcomb’s shelter in place decisions based on what he and his staff could reasonably have understood about the Coronavirus one month or so ago. I won’t argue the unknowable facts about the disease or the economy. I will ask whether this decision was warranted when made, and how wise it appears after a month of new information.
Early stage transmission of diseases relies on pretty basic math, and research can be guided by many good studies of earlier pandemics. A month ago, this math offered frightening mortality rates for Indiana if the disease were to go unchecked. Using early data on Indiana’s known deaths, an exponential model would’ve estimated deaths rising to perhaps 3,000 within weeks. This estimate is right about in the middle range predicted by most epidemiologists. Worst case scenarios offered predictions of deaths that were tenfold higher. To place this in context, Indiana lost just over 1,500 men in the Vietnam war.
That stunning number is what every American governor heard six weeks ago. They also heard from epidemiologists that non-pharmacological interventions, like social distancing and shelter-in-place, could reduce deaths. That is why Governor Holcomb, along with most U.S. governors, ordered significant restrictions, including shelter-in-place orders.
One way to judge these decisions is to update the death projections from actual death data. After full 30 days of restrictions deaths rose in to the low 100s, far short of the predicted 3,000 deaths. It is now abundantly clear that the curve flattened to the lower level of deaths. However, even with the lower death rate, a model of exponential increase in deaths suggests that without a ‘flattening’ of the exponential curve, we’d have seen thousands more die.
To be certain, it is possible the restrictions were too tough or too loose. With 50 states trying 50 different strategies, we’ll learn plenty in the coming months and years. But, the real policy question is whether the benefit of these decisions outweighed the costs. We start by noting that after a full 30 days since our first Covid-19 death, the difference between the ‘exponential’ death curve, and the flattened ‘polynomial’ curve is more than 5,000 souls. That is, the shelter-in-place rules likely reduced short-run deaths by more than 5,000 people.
To weight the lives against the economic loss, we have to place a dollar value on human life. The Environmental Protection Agency uses a value of $9.22 million per life as an average. That figure might be too high considering that many who die are older, with fewer expected years of life before them. If we use the best available data, which is the reported age distribution of New Yorkers who have succumbed to the disease, we get a lower value of life, at roughly $4.5 million on average.
These range of estimates suggest that ‘flattening’ the curve in Indiana saved between $22.5 billion and $46 billion. These policies also imposed a cost on the economy, with lost jobs and commerce. However, much of the cost of this disease happened without any state government intervention. In two recent studies, my colleagues and I project deep economic losses from the Covid-19 disease. Some of these losses are due to supply chain disruptions in China, some from the negative stock market shock, and some from a reduction in labor supply due to school closings. Our estimate of social distancing and shelter-in-place was a deep, short-term shock that reduced GDP in Indiana by roughly 12.8 percent in 2nd Quarter, or about 3.2 percent for the year. This is among the higher annualized estimates we have seen.
Our estimate of total economic damages from the shelter-in-place rules are roughly $12 billion. This is far, far below the lower estimate of lives saved of roughly $22.5 billion. Thus, a conservative estimate is that the benefits of Indiana’s shelter-in-place restrictions exceed the costs by $10 billion to more than $30 billion.
Doubtless many readers will find plenty to quibble with in my estimates. Perhaps my value of life estimates are too high, or my economic damage estimates too low. Some readers might be worried about the long-term erosion of civil rights, or are concerned that the pain is distributed unequally upon citizens. These are all reasonable matters to submit to the marketplace of ideas. Such a debate will be especially helpful to policymakers who are deciding how to wisely resume a more normal functioning economy.
Still, we should judge Governor Holcomb’s decisions on what he and his staff could reasonably have known in March and April as they made and extended the shelter-in-place orders. By that criterion, the shelter-in-place decisions will be judged by history as among the most appropriate and consequential in state history. It may well rank first.
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