Putting Monetary Values On Health Costs Of Coronavirus

W. Kip Viscusi delivered the Presidential Address at the (virtual) Southern Economic Association meetings last November on the subject "Economic Lessons for Coronavirus Risk Policies." The paper is forthcoming in the Southern Economic Journal; for now, it's available at the SSRN website a Vanderbilt University Law School Working Paper (Number 21-04, January 21, 2021). 

Viscusi is known for, as he says early in the paper, attempting to "strike a meaningful balance between risk and costs," even though "[e]conomic analyses in these domains are sometimes challenging and necessarily involve treading on controversial terrain. 

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Thus, his analysis starts with standard estimates for the "value of a statistical life" of $11 million. The idea of a VSL is discussed here and here.  But the key point to understand is that the number is built on actual  real-world choices about risk, like how much more do people get paid for a riskier job, or what safety requirements for a car or a consumer product are judged to be "acceptable" or "too expensive." For example, say the government proposes a regulation that costs $110 million, but it is projected to reduce risks in a way that saves 11 lives in a city of 1.1 million people. That decision is implicitly saying that it's worthwhile for government to spend of $10 million per life saved. This reduction in risk is referred to as a "statistical" life saved. Using the standard measure of $11 million, mortality costs alone for COVID-19 in the US were $3.9 trillion through December 2020.

It's a little harder to use these same statistical methods to measure morbidity, rather than mortality, because morbidity covers everything from feeling crappy for a few days to a long and life-threatening hospital stay. But Viscusi uses some studies based, for example,  on what people are willing to spend to avoid hospitalization, and argues that the health costs of morbidity may add 40-50% to costs of mortality.

As one more health-related cost, Viscusi has long argued that at some high level of lost income (or high costs), the reactions to those lower income levels will also raise the risks of death, and he cites some of his own recent work to this effect: 

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