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How many WELLBYs is the corona panic costing?

April 8, 2020 - 21:24 -- Admin

How much unhappiness is created by the unemployment of millions of people in Western countries (mainly N-Am +Europe) caused by the corona panic? How much unhappiness has been created due to the vast expansion of loneliness and physical inactivity? And in terms of the tradeoff between the quality of life and the length of life, how many “equivalent lives” are the isolation policies costing us via our reduced quality of life?

In an earlier post I calculated the loss of life due to the economic recession caused by the hysteria to be at least 10 million whole lives in the whole world, probably closer to 50 million. This was essentially calculated from taking the discounted economic loss to be at least 50 trillion and combining it with the rule of thumb that the value of a statistical life in the world is around 1-4 million each, a bit higher in the richer countries and much lower in the poorest countries. 10-50 million lives lost was thus the expected loss of life in the decades to come due to less government services, poorer nutrition, and increased social tensions of the type we are now seeing in India.

Now I want to consider the importance of the quality of life, focussing just on the billion or so living in the West, using a wellbeing criterion: the likely effect of the social isolation and the economic collapse on the levels of life satisfaction of the population. The basic unit of analysis is the WELLBY, which is one point change in life satisfaction for one person for one year when measured on a 0-10 scale. As a rule of thumb, the average year of life in richer countries is worth about 6 WELLBYs, less in poorer countries where average wellbeing levels are lower. Then a whole life of 80 years, which is the average life expectancy in the West, is worth about 480 WELLBYs.

I will look only at the two items that I think are the most important components of the WELLBY loss involved in the panic and the social isolation policies: unemployment and the mental health costs of isolation.

We cannot accurately know the full WELLBY costs from unemployment and loneliness caused by the corona panic, but we can make an educated guess using the estimates around on the economic collapse, the social collapse, and what we know from the wellbeing literature. Over the fold, I detail why I think another month of mass isolation will cost the West at least the equivalent of a million deaths in terms of reduced quality of life.

First the unemployment levels. What we know from past recessions is that unemployment goes up very quickly and then goes down much more slowly. An important consequence of this is that a large recession is far worse than a few small ones spread out over time as you then have a much larger glut of individuals being unemployed for much longer. So for instance, the US in 2019 still had not recovered all the jobs lost in the 2007/2008 Global Financial Crisis. Basically, the cost of a recession is close to quadratic in its severity, not linear, so it rather matters how severe it is.

This one is looking to be a very large recession. In the US already over 6 million people filed for unemployment in the last few weeks, and in the UK in March the Department for Work and Pensions reported nearly a million more welfare claimants in just 2 weeks in March 2020. That is over 3% of the entire workforce. The joblessness is thereby rising many times faster than in the GFC when similar surges took months. This has lead many labour economists trying to estimate how bad it is going to get, with some estimates that we’re in for 20% unemployment levels within about 3 months time. That spike is more than twice as high as the GFC and even above the level of the Great Depression.

Labour economists (which I used to count myself amongst) do not expect those people to find jobs within a few weeks if the isolation restrictions are lifted: whole industries are collapsing and hundreds of thousands of companies are close to bankruptcy. That kind of thing does not magically “sort itself out quickly”, or at least it hasn’t in the past.

So let us take the worst-case scenario first: 20% unemployment of the labour force in Western countries, taking a decade to get re-absorbed into the economy. That about 80 million additional unemployed in the first year, and 400 million excess unemployment years till the excess unemployed are finally re-absorbed in the economy.

From a large literature on the effects of unemployment on wellbeing, we know the effect of unemployment to the unemployed is at least 0.7 WELLBY per year. On top of that, there is a likely multiplier effect in terms of the increased desperation and anxiety among the family and friends of the unemployed, as well as the increased anxiety among the employed. At the high end, this multiplier is believed to be about 3. So at the high-end estimate, every year of unemployment costs society 2.1 WELLBYs. So that’s a loss of 820 million WELLBYs due to the recession. This is equivalent to 2 million whole lives lost. In terms of deaths of individuals with, say, 5 good years of life left, which is generous if you look at the victims of the corona virus, these 820 million WELLBYs are equivalent to about 30 million deaths.

That is the high-end estimate. The low-end estimate is that this recession will have a spike in unemployment of no more than 5% above the previous level and that this recession will be over unusually quickly, say within 5 years. Then the excess number of unemployment years is only 70 million. If we then dismiss the notion of a social multiplier on the misery of the unemployed, this would amount to only about 50 million lost WELLBYs, equivalent to about 100,000 whole lives or 1.7 million deaths of people with 5 more good years left.

Then loneliness. The mass incarceration of the population we are now seeing in the West is putting abused people together with their tormentors, “for their safety”. It is also in many other ways doing exactly the opposite of what health services and government agencies have been advocating the last couple of years, which is to have lots of close physical contact, being in nature, socialising, exercising.

At worst we are killing good habits of exercise and socialising for a whole generation, thereby increasing health problems for decades to come, something which would kill many tens of millions outright in the decades to come if any of the previous pronouncements by health authorities on the importance of good behaviour are to be believed.

However, let’s not take the worst case scenario on the effects of social isolation on lifetime health behaviours, because that would lead one to the immediate conclusion that the current policies on isolation are monstrously misguided and damaging, causing health emergencies that dwarf the worst projections on what the corona virus could do. It would make a total mockery of the health advisers who say staying inside is the only safe to do. Let’s be a little less dramatic.

Consider the somewhat simpler case that the effects of social isolation will wear off over time as people get rid of the excess weight and gradually re-socialise. As a rule of thumb we know that medium level depressions cost at least a WELLBY per year, and basically halve in severity in each subsequent year, so let’s say that a year of social isolation costs twice the amount of WELLBYs lost in that year due to the isolation.

How much is the isolation hurting individuals via loneliness, anxiety, etc.? This is hard to know as many surveys on this very issue are only in the field right now. A report on over 2,000 British teenagers surveyed between March 20-25 showed huge increases in mental health problems, particularly anxiety, easily worth half a WELLBY per teenager if they would last a year. Still, teenagers are not the whole population and anxiety cannot be expected to last that long.

We do know that warm social relations are the single most important thing for wellbeing, even more important than money or physical health. So someone emotionally and socially lonely without any close friends and family will be at least one WELLBY below the average in the population.

My current guess is that the whole population is at least a quarter of a unit of life satisfaction lower than before because of the social isolation and the stresses associated with it. This is less than half what the effect at a glance looks like for the interviewed teenagers, so I am being somewhat conservative.

Scaled up to the population of over 1 billion people living in the West, this means a loss of 250 million WELLBY for every 6 months of social isolation, because the presumed half-life of the mental health problems is a year. If we take this as a linear thing (which basically means we take the number of people whose mental health is severely negatively affected as the thing that increases linearly), then per month of isolation, that’s about 40 million WELLBY.

By that kind of calculation, social isolation in the West is costing about 70,000 whole lives per month, or the equivalent of a little over 1 million deaths of individuals with 5 more good years on average left.

If we then look at how long the social isolation would need to be kept up to “flatten the curve” long enough not to overwhelm the health system, the estimates vary from months to years (several Dutch modellers now think it would take years, as do some of the Americans and even Australians). A year of mass social isolation would then be equivalent to about a million whole lives lost and 12 million deaths of those with 5 more good years left. The unemployment costs should also be thought to be at the higher end of the estimates above if we are talking about over a year of isolations.

All this only counts the West and we’re not even talking about other big costs, such as all the health problems that are now not addressed because of the focus on the corona virus, as well as the costs of the health problems being created by social isolation.

So however I look at it, it seems clear that the unemployment and emotional costs of mass social isolation far outweigh the threat of the virus and the immediate lifting of nearly all involuntary isolations is warranted. Indeed, it is a moral imperative. Even the worst-case scenarios of how many more people would get ill and would overwhelm the health system are dwarfed by the damage we are doing every minute we keep up this mass social isolation. I think we should simply accept that the hospitals cant cope. Our lives have more meaning than merely being there to prevent hospitals from overflowing.

To sum up. Data will come soon to give clarity on the WELLBY cost of social isolation, and thus the running costs of continuing the isolation, but my current best guess is that we’re talking the equivalent of at least 1 million deaths per month, which basically comes from saying that 6 months of social isolation will lead to something like 10% higher depression/anxiety rates.

The WELLBY costs via unemployment are harder to link to ongoing isolation, but it is probably fair to say that every month of mass isolation will cost at least 1% more unemployment than the current damage if we lifted all restrictions (this is far less than the current spike in new welfare cases suggest, which seems to suggest 2-5% is more realistic, particularly for the next month). On the margin, and taking the best-case scenario as to the current damage already done (5% more unemployment), this means the next additional month will cost about 25,000 whole lives or 400,000 deaths of people with 5 more good years. The month after that will cost over 30,000 whole lives and over 500,000 deaths (the costs go up higher than linear). If we start from a middle-base (10% higher unemployment already), then we are well over the equivalent of 1 million deaths for the next month of mass isolations for the West as a whole.

So basically I estimate another month of mass isolation to cost the West about 1.5-3 million deaths just in terms of reduced quality of life alone. It will cost the world as a whole far more.

Do provide a counter-estimate in the comments, preferably by trying to tackle the other costs of social isolation that I left out.