For those who care about New Zealanders’ wellbeing, the central issue is if the benefits of any given level of lockdown plausibly exceed the costs.
About four months ago, I calculated it might be worth sacrificing 6.1% of one year of New Zealand’s GDP if doing so was sure to permanently avoid 33,600 Covid deaths. Alternatively, a cost of 3.7% of one year’s worth of GDP might be justifiable to avoid 12,600 Covid deaths.
The analysis was merely illustrative. After all, a one-off lockdown is not a permanent solution and GDP could fall a lot anyway. But more can be said about the costs and benefits now.
For example, some serious empirical research on the experiences of different states within the US was completed by Professor John Gibson at the University of Waikato. He found state lockdowns “do not reduce Covid-19 deaths.” Spontaneous behavioural responses do. (Elimination within a single US state is not really possible.)
Separately, David Heatley at the New Zealand Productivity Commission tentatively assessed the Government’s decision on 20 April to extend the Alert Level 4 lockdown for a further five days. He suggested the net cost to the community was the equivalent of reducing GDP by a whopping $741 million, or 22,453 quality-adjusted years of life.
What about the current lockdown situation? In May, the Reserve Bank warned lockdown levels 1, 2, 3 and 4 would reduce GDP by 3.8%, 8.8%, 19% and 37%, respectively. For some perspective, consider that Auckland accounts for 38% of GDP.
On this basis, two weeks at the current Alert Levels – compared to Level 1 – will vanish about $1 billion of national income. This is about 0.3% of one year’s GDP. That money, if spent on road safety, might have saved perhaps 200 lives. (In another example, the $50 million to be spent on the recovery at Pike River could have saved over 10 statistical lives if used elsewhere.)
To spend all that money on the current lockdown might be justifiable if it could be confidently expected to permanently avoid over 1000 Covid-19 deaths. But how plausible is that?
“Back-of-an-envelope” exercises like these show why policy-makers’ decisions need to be informed in advance by far more rigorous benefit-cost assessments – and these should be published for the public’s benefit.