Cyprus Mail
CM Regular Columnist Opinion

Cost-benefit analysis of easing lockdown

IN ORDER to decide if a social investment or a decision by the government, such as the relaxation of the coronavirus measures this week, are compatible or incompatible with the national interest, we compare the social cost to the social benefit to establish which is higher. In economics this is known as a cost-benefit analysis. In plain language, if the benefits are higher than the cost, the project is justified. If, on the other hand, the cost is higher than the benefits the project is not worth pursuing.

Here is a very simple example. The average number of road deaths from 2010 to 2019 was almost 60 per year. It would be extremely easy to end this loss of life on the roads. How? By the government banning the use of all cars. Of course this is inconceivable because the cost of such a decision would be colossal and would far outweigh the benefits of preventing the loss of 60 lives. The naked truth, in other words, is that we would not be prepared to see our standard of living sink to the level of that of 1910 (when Cyprus had no cars) so the lives of 60 of our countrymen were saved.

Let us look at the announcements made by the government after the partial lifting of the restrictions in the last week. We have been told that the full lockdown could be re-imposed and continue for months if there was a surge in infections. This could be taken to mean that the aim of the government was to reduce the number of deaths regardless of the cost, basing its decision exclusively on the advice of the epidemiologists and other experts on public health. The epidemiologists, undoubtedly, know how to restrict the spread of a contagious virus, but they do not know how to supply food daily to 230,000 families, when most of the population is forced to stay at home. Neither are they in a position to evaluate the lost opportunities, while we are in lockdown, or the cost in jobs and the long-term reduction in the quality of education.

In Europe, they are questioning whether the restrictive measures imposed by governments kill more citizens than they save, because without doubt deaths are cause by such drastic measures even if the link is not obvious. Some elderly people might die because they have no relatives to take care of them, while their neighbours are indifferent. In addition, isolation has its cost as it has negative effects on mental well-being. For years, psychiatrists have been telling as that “loneliness kills” – according to some studies it increases the risk of premature death by 30 per cent. The increase in unemployment and reduction in GDP leads to more deaths.

As a result of the lockdown divorces are expected to increase and these, unfortunately, also have a big effect on life expectancy (it is estimated that there is a 23 per cent higher possibility of premature death, including a significantly increased risk of suicide {SL Brown, ‘Social Support’). Of course, some of these consequences will not be seen now, but years after the crisis is over, which is why they are underestimated.

It is for these reasons that we should have a broader and more diverse team of advisors, so that there can be a more balanced evaluation of the action and its disadvantages. There should have been a small team of social scientists that would put on one side of the scales the benefits of the lockdown and on the other the costs to establish which side weighs more, thus giving the politicians a better understanding of the consequences of their decisions. I hasten to clarify that social scientists in their professional capacity are morally neutral, and therefore cannot tell politicians what they should do.  They would, however, present to politicians a full picture of the problem and enable them to take decision better aligned to the national interest.

The government’s decision to open the schools on May 21 perhaps signals a new phase in dealing with the pandemic, based on a cost-benefit analysis. Certainly, the risk, even though small, of some children being infected if the health protocols are not strictly adhered to will exist and we hope that risk is acceptable to society, as is, for example, the risk of students going on excursions in a bus.

The government’s decision is reinforced by the Dutch Institute of Public Health and Environment (RIVM) which meticulously investigated how Covid-19 spread in 54 households, with a total of 123 adults and 116 children up to 16 years of age, and did not find a single family in which the child was the first confirmed case that passed on the virus to others. Also, of the 43 traced contacts of the teenagers and children with Covid-19 none had been infected. Based on these findings, the government of the Netherlands was persuaded to open the schools.

In Cyprus, if 100,000 students return to their desks, it would free one third of the working population that is now obliged to stay at home and look after their children. Without this freeing up of workers, restarting the economy will not be possible. The government has obviously decided that opening the schools was reasonable risk to take because the benefit will be greater than the cost.

George Koumoullis is an economist and social scientist

 

 



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