David Cutler and Lawrence Summers of Harvard University have produced a brief (c1,300 words) but excellent summary of the costs of COVID-19 on the US economy, and you can read it here.
The Economic Costs of the Pandemic
The authors put the total estimated cost to the USA at $16 trillion, or about 80% of the USA’s annual GDP, with the costs split evenly between economic and health factors. The economic cost is the direct loss of income to the nation caused by the COVID-19 pandemic, and its ensuing negative feedback effects. The health costs are the estimated economic losses due to shorter and less healthy lives, including deaths from COVID-19, increased deaths from other causes, long-term health complications, and the toll on our mental health caused by fear, isolation, and the suffering of others.
It is a staggering amount, as the authors have noted:
“The economic loss is more than twice the total monetary outlay for all the wars the US has fought since September 11, 2001, including those in Afghanistan, Iraq, and Syria.
By another metric, this cost is approximately the estimate of damages (such as from decreased agricultural productivity and more frequent severe weather events) from 50 years of climate change.”
And yet, it is likely to be an underestimate, as the trajectory of the outbreak has deteriorated since the paper was written in October 2020. The authors assumed at the time that another 250,000 deaths would occur in the USA before the outbreak was brought under control in Autumn 2021. But 200,000 deaths have already been recorded since then, and it is far from certain that the USA’s vaccination program will have the outbreak controlled before the end of the year.
The Return on Investment for Public Health Programs
The authors go on to advocate for a test, trace, and isolate program to temper these costs. Given the scale of these depressing numbers – both the lives lost and the economic costs – perhaps they felt the need to offer the reader some hope.
The high returns on investment for public health programs – both in direct cash savings and in better future health outcomes – is well-established. A review of public health interventions in the UK put the median ratio of return to investment at 14.3 to 1, with national programs offering significantly higher returns again. The WHO produced a similar analysis for the EU, noting, for example, that cardiovascular disease cost the EU about 36 million ‘DALY’s per year, while cancer cost half as much again.
In a similar vein, Cutler and Summers produce an estimate for the return on investment of a comprehensive test, trace, and isolate program. Assuming that 100,000 people are tested, then traced and isolated where appropriate, they find that a $6 million investment in this protocol can offer comparable returns to those described above:
“the projected economic return from the test and trace strategy is approximately 30 times the cost (ie, investment of approximately $6 million leads to averted costs of an estimated $176 million).”
What Does This Mean For Ireland?
There are three points that should be clear to us:
1. The costs of this crisis are inconceivably large;
2. Those costs are increasing every day; and
3. Investments in national public health programs have a very high return on investment, both in future cost savings in preservation of health and well-being.
Using Gross National Income, an equivalent analysis for Ireland would put the cost to the nation at €160 – 200 billion. But again, it is debatable as to whether Ireland will have the outbreak under control before the end of the year, so that estimate should probably be higher still.
We must recognise that the longer this crisis continues, the greater the costs to our nation. There is no interpretation of the data through which allowing the virus to circulate in our society saves us money. The sooner the virus is gone, the better for our economy. Moreover, an elimination protocol will involve large investments in public health tools and capabilities like rapid testing and a robust contact-tracing program. As we can see from this paper, those investments will be well-rewarded in future costs and lives saved.
The alternative is that we wait for the world to supply us with enough vaccines to reach herd immunity, thereby incurring the maximum possible financial and health costs, and all the while running the risk that the virus mutates in such a way as to decrease the effectiveness of our vaccines. What a depressing vision for 2021.