Yes, There Are Tradeoffs Between Disease Prevention & Economic Destruction

Authored by Claus Wiemann Frølund via The Mises Institute,

The COVID-19 pandemic has really highlighted how differently economists and noneconomists think. All over the world, variations of the same discussion have taken place over the last week or so. It goes as follows.

An economist discusses the cost of the governmental responses to the pandemic and is quickly met with accusations of cynically trying to “put a price on a life.” The economist camp tries to explain its reasoning while the noneconomist camp is horrified that anyone would “let old people die to protect the rich” or “prioritize economy over health.”

What is really going on here is that economists and noneconomists have vastly different mindsets. Economists are constantly thinking in tradeoffs. It is second nature. It lies at the very core of economics. All of the problems economists attempt to solve involve various possible choices and finding the most optimal one.

This is based on the understanding that we live in a world of scarcity. All means are scarce, so allocating them to serve certain ends must necessarily leave other ends unsatisfied. Economists attempt to ensure that scarce resources are used efficiently. This is not as simple as putting two numbers on a piece of paper and choosing the largest one. All choices happen under uncertainty. We do not have full knowledge, and as such there is always the possibility of making the wrong choice.

The concept of opportunity costs is one of the first things budding economists are taught. The benefit of every action should be weighed against the missed benefit of the action not taken. Opportunity costs are by definition unseen and thus can be easily overlooked.

Notice that the concept of priorities has deliberately not been introduced so far. Economists and noneconomists alike are generally looking for the choices that will bring the highest amount of human well-being, now and in the future. In this case, economists are questioning whether the extensive actions taken by governments to limit the spread of COVID-19 are hurting the economy too much. Now this is not because the economists are worried about the bank accounts of the richest people in the world, but because economic depressions carry a plethora of bad effects and limit our future options. It is well established that economic depressions lead to more stress-related deaths and suicides. But utilizing our scarce resources to battle COVID-19 at all costs, thus sacrificing our economic well-being and limiting our future growth, also means that we will be relatively poorer in the future and may then be unable to save as many lives then as in an alternative scenario where we do not use such drastic measures against the pandemic.

This basically equates to a trolley problem, the ethical thought experiment in which a runaway train is about to run over five people. The only way to save them is to actively divert the train to a sidetrack, killing another person in the progress. This, of course, represents a clash between utilitarianism and deontology such as Kantianism. It seems that noneconomists, met with discussions about the tradeoffs of the COVID-19 response, unwittingly refuse to acknowledge the limitations of the trolley problem. “We should save everyone—today and tomorrow!” But just as we cannot make the trolley fly and avoid either proposed outcome, we cannot at the same time commit all of our means to multiple ends. There simply has to be a tradeoff. It is no less of a law of nature than gravity.

What many economists these days are imploring is that the decision-makers remember this and do not blindly push all the chips to the middle of the COVID-19 table, with no concern for other valued ends. If they evaluate the benefit of the current efforts and find that they do indeed outweigh the cost, including the unseen opportunity cost, then great! Sharing the analysis with the public will most likely help convince the skeptics that the current course is the right one.

To conclude: no, economists are not cynical bastards who are so blindly obsessed with the stock market that they do not care whether your grandmother dies.

They, like everybody else, want to maximize human well-being. In general, when met with an opinion that seems crazy, there are two options: try to understand the argument or assume that the other person is stupid and/or evil.

These days, too many people are choosing the latter.