Lockdown Australia: Economics professor flunks his own subject
In the desperate hands of its supporters, lockdown seems to be either everything or nothing – everything when it comes to ‘saving lives’ but not that much, really, when it comes to its economic cost, at least according to one economics professor in Australia (Professor Richard Holden, University of New South Wales) who manages to flunk his own subject by incorporating both extremes in his cost-benefit analysis of lockdown in Australia. Holden is is probably representative of the breed of lockdown-supporting economist, and the core principles of his cost-benefit analysis methodology are likely to be shared by them.
The professor magics up figures claiming to show that the lockdown will cost Australia only (only!) $90 billion but will avoid a $1 trillion cost from lives which would otherwise be lost to the virus ($1 of lockdown pain for $12 of economic gain).
He achieves such awesome figures by bulking up the benefits of lockdown with the assumption of a virus fatality rate of 1% (the Original Sin of Professor Neil Ferguson’s epidemiological model, a figure which we now know to be at least double its real rate) and then applying an “Australian value of a statistical life of $4.9 million” to each life saved by lockdown. Nowhere does Holden consider the advanced age at death of the bulk of virus victims whose remaining statistical life value would surely be heavily discounted when compared with working-age people in the productive, wealth-generating economy or with children being educated for it. It’s as if our lockdown-loving economist believes that the industrial dynamo powering the Australian capitalist economy is mostly the work of ailing octogenarians in nursing homes and hospitals, the favourite stalking grounds of the Son of SARS virus.
On the other hand, our professor dilutes the cost of the lockdown by assuming that “most of the economic costs of the recession are likely to be due to the pandemic itself rather the shutdown”. Amazing! I read that sentence twice, and it still said the same thing the second time around – the massive cost of the deliberately-induced recession brought on by the jumping-at-shadows, Nervous Nellies who pass for our political leadership will be cavalierly excluded from the cost of the lockdown, leaving only the far smaller health costs of the virus which contribute to the economic contraction. Our learned scholar will, essentially, subtract the cost of the lockdown from the cost of the lockdown.
Our amazing professor, clearly running out of room on the back of his envelope, also advances the novel argument that government stimulus spending in response to its own policy of lockdown is not a cost to anyone. OK, fine, then we’ll charge the massive government debt to the professor and not to muggins taxpayer who is going to wind up footing the bill through increased taxes and austerity.
Finally, our expert economist’s cost-benefit ‘analysis’ also conveniently assumes that deaths caused by the lockdown policy itself, which look set fair to outstrip the deaths from the virus many times over, will be ‘tiny’ and can be safely ignored.
No wonder our lockdown-supporting economist gets the results he intended to.