07 May 2020
Leaving the Lockdown
Who decides?
By Frank O’Nomics
Everyone has a view about when the lockdown should end. This view varies enormously according to your definition of what constitutes a lockdown. Nevertheless, there are those that feel that any delay that saves more lives is worth enduring, and others who believe that the economic and social effects of continuing to maintain the constraints are potentially more damaging. In many respects, where you stand on the debate will largely be dictated by whether you fear for your own or your families health, or your livelihood. In balancing the two views whose help should we seek to make the decision?
The government has set 5 tests that need to be met. The NHS would now seem to have adequate capacity and the R rate looks as if it is below 1. It could also be argued that the death rate is falling in a sustained and consistent manner. It is less easy to say that testing and PPE capacity is sufficient, and the risks of a second wave developing on ending the lockdown is very hard to assess. Overall there is a high degree of subjectivity in the test assessments, implying that conditions will be eased “when it feels right to do so”. Should the deciding guidance come from scientists or economists? In trying to seek a balance between the two disciplines, the Centre for Economic Performance at the LSE has come up with the concept of WELLBYs – a measurement of well-being – which balances all of the positives and negatives of ending the lockdown over time, to produce an optimal date. But can such an approach possibly work?
The team at the CEP have looked at the various areas of our lives that would be improved by ending the lockdown; income, employment, mental health, education, public confidence etc., and compared these with the costs of doing so, principally an increase in Covid-19 related deaths, but also increased pollution and road deaths resulting from a fully functioning economy. By attributing a value to all of these factors they produce a net number that, once positive, determines the date at which we should end the lockdown.
In essence this type of cost-benefit analysis is nothing new. I have written in these columns before about the concept of QALYs (Quality-Adjusted Life Years) as a way of deciding which charity to give donations. For many years the NHS has used QALYs as a generic measure of disease burden. Any intervention that produces a fully healthy additional year of life would have a value of 1, but if it gave a year of impaired life, either physically or mentally, that value would be lower. The CEP concept of Wellbeing-Years (WELLBYs) is very similar. WELLBYs are calculated with a standard 0-10 index used by social scientists when asking people how happy they are. On this scale the average wellbeing in the UK is 7.5, so the loss of one year of life is 7.5 WELLBYs lost.
So how does the CEP analysis calculate the date of a full end to the lockdown? Regarding the positive elements (income, health, education etc.) the longer the lockdown, the greater the value of the WELLBYs. While for the negatives (largely the number of deaths) the value is constant. For example, they assume that income is 28% down on 2019 and that, if the lockdown were to end this month, it would take a year for output to return to previous levels, while if we wait to September it would take 2 years. They then translate the value for each 1% increase in income into WELLBYs, which for May lockdown end is 48 and August 103. This process is applied to each of the positive factors to produce a total that is then compared with the negatives of staying locked down. For the negative number they assume that each person that dies from the disease would have lived a further six years (producing a WELLBY of -158), and that the effects of a fully functioning economy on road deaths and deaths from pollution are constant. Their numbers are to a large extent only illustrative, as they appreciate that there is a subjective element to the weightings that are put on each of the components. Nevertheless, they do produce a date when the balance swings in favour of the positives – and that date is June1st.
Just in case anyone thinks that the CEP has created the optimal decision-making solution, it is worth noting just how many assumptions need to be made in making such a calculation. While the work is a combination of inputs from scientist and economists, it does incorporate the standard economic process of assuming all other factors remain constant. As we have seen, the lockdown impact has changed over time, particularly as people have become accustomed to working from home. There is a great risk in assuming that the process of ending the lockdown can be boiled down to a number. What economists often do is confuse a puzzle, which can be solved, to a mystery, which cannot. Covid-19 may ultimately be regarded as a puzzle, but for now its cure and its evolution remain a mystery.
All of this brings us back to the governments 5 tests. The team at the CEP is clear that politicians ultimately have to make the decision. They also make it clear that they have produced a framework for measurement, not a supportable conclusion, acknowledging that others could argue different weightings. They hope that their initiative will spark further study which will help develop the science of ‘wellbeing”. A decision has to be made, and it is inevitable that there will be those who argue that the timing is wrong, but as a number of people have recently commented – hindsight is a 2020 experience.
