The Lockdown Strategy Called to Account

Writing in The Australian, Janet Albrechtsen has pointed out that the statistical value of life used in regulatory assessment is $4.9 million for someone expected to live another 40 years — $213,000 per year  Such measures are income-dependent; in the US the value was put at $9 million and a 2012 study for Turkey put it at five and a half years per capita income or $59,000. Such measurements offend self-righteous claims that “every life is priceless” but such notions, if followed, would impose costs that would bring about other and additional loss of lives.

While Albrechtsen’s column is written in the context of coronavirus expenditure, she does not extend it to examining the worthiness of the measures put in place to address the pandemic.


Possible person-lives saved by lockdowns and spending

We have had 97 coronavirus deaths as of the time of writing and are witnessing a welcome tailing-off of new cases, now running at around 24 per day, with a recovery rate of 86 per cent.  We don’t know how many of the deceased were likely to have expired earlier than their cohort groups, a relevant point in view of the fact that the vast majority had co-morbidities. Conservatively, we may estimate the ultimate deaths at 250 (10 per million).  We could compare this to the speculative outcome for Sweden, the poster child nation for the no-lockdown policy, where deaths currently stand at 274 deaths per million.  As with Australia, Sweden’s numbers may eventually be double that.  This would put the lives saved in Australia at 338 per million for a total of 8,450.


Value of the Australian lives saved

The average age of Australians recorded as dying of coronavirus is 80, and the life expectancy of the average 80-year-old is 9.5 years.  Hence, conservatively the number of person-year lives saved (9.5 x 8450) is 80,275.  In cold cash terms, at $213,000 per life-year that comes to a little over $17 billion.

The government’s headline figure for its own spending in combatting the virus is $320 billion but it would expect to recoup at least 90 per cent of one element of this (the $150 billion of credit support) which would put outlays at $185 billion. On that basis, the benefits of $17 billion are outweighed elevenfold by the costs at $185 billion.

However, that is only the government’s own costs.  The Treasurer has estimated a cost to the economy of the close-down measures at $4 billion per week.  Assuming this cost applies to the current state of the economy and it starts opening up again by the beginning of June that would mean 10 weeks or $40 billion. After that, costs would remain — say at an average of $500 million per week for another 20 weeks until deep into October — bringing a further $10 billion or $50 billion in total.

On that basis the government and policy-induced costs (excluding the loss of individual freedoms) would bring total costs to $235 billion. That would represent fourteen times the value of life-years saved.   


The initial scenario

From these estimates and viewed in hindsight, the policy response is excessive. But the government was basing its actions on the estimates of Deputy Chief Medical Officer Paul Kelly. Drawing on the estimates of the hapless Neil Ferguson’s Imperial College model, Dr Kelly estimated 100,000 dead.  If the measures would have saved 80 per cent of these at a life expectancy of 30 years (although in March the young were already known to be less affected, the weighting towards older people was not as clear) they would have saved 2.4 million person years. 

On that basis, with the benefit per person year at $219,000, the benefit in terms of person-life years saved would be $526 billion, solidly ahead of the total likely costs of $235 billion. 


Concluding comments

While in retrospect it seems likely that the government has over-reacted in its response to the coronavirus pandemic (and some part of the expenditure seems to have been driven by a discredited Keynesian pump-priming philosophy) based on the health advice it received the measures appear reasonable.  

However, the theoretical costs per person-year cannot be used to address mass death events.  Thus, at $219,000 per person-year to save likely deaths of 800,000 — 24 million person-years –would cost over $5000 billion, much more than double GDP.

We will see such crises in the future and we need to be better prepared to tailor the measures according to capacity to pay. In addition, we cannot take action based on health estimates when they are 20 times the levels later discovered to prevail. 

Alan Moran is the author of Climate Change: Policies and Treaties in the Trump Era

9 thoughts on “The Lockdown Strategy Called to Account

  • March says:

    Another way to realistically evaluate numbers saved might be to compare to Swine flu pandemic of 2009. Then we had no lockdowns, positive cases were quarantined and some schools closed for short periods. Essentially level 1 restrictions. There were 191 registered deaths. If covid19 is 10 times worse then projected deaths might have been around 2000 given we didn’t move beyond level 1. Given we have spent $235B that’s 60x the value of life-years saved.
    Put it another way it measures the value of a statistical life year at an astonishing $12.4 million. Who knew we were worth so much! Will the government be using this figure to balance cost benefits in other policy areas in the future?

  • Macspee says:

    I’m curious about the role of epidemiology here. In the past they looked at hard data about illness, it’s prevalence, and looked for causative factors: hence final determination of tobacco’s cause of lung cancer and asbestos and mesothelioma, as well as showing that Vietnam vets cancers were at the same rate as the general population because they were a random selection representative of society at the time.
    Now they pluck figures out of the air based upon different diseases in different circumstances at times past and use models known from past experience to be wrong and governments listen to them.
    I don’t get it.

  • Stephen Due says:

    You could add in the value of pain and suffering caused to many thousands through loss of employment, destruction of their businesses, separation from loved ones, and so on. In a scenario where this was caused by negligence or fault the compensation bill would, presumably, be quite large.
    There is also the currently hidden cost that will emerge when the statistics on excess mortality and morbidity not due to the virus are released. These figures can be expected to be quite substantial, based on initial indicators overseas.
    Finally, the government should be held responsible for the decisions it made on the basis of bad advice and inadequate ‘science’. A responsible government would have sought and weighed advice from multiple reputable sources. Similarly it would have properly assessed the costs and benefits of various strategies. It is far too kind to say “it seems likely the government has over-reacted”.

  • Homer Sapien says:

    If life extension is such a big deal, under-eating is the undisputed key to longevity. So, let the government run a nationwide advertising campaign on it. See how this “goes down?”

  • ianl says:

    Taiwan, population 23 million, has to May 5th, six (6) deaths attributed to C-19. As pandemics are measured, this is 3 deaths per 10 million people.

    Aus, population 25 million, has to May 6th, ninety-five (95) deaths attributed to C-19. This is about 40 deaths per 10 million. That is, 13x the Taiwanese rate.

    Yet the Aus MSM and politicians are literally boasting, with people’s lives being destroyed in all manner of ways. Taiwan did *NOT* put people in lockdown, nor smash its’ economy to pulp.

    Berijiklian says she’s over “whines” such as this fact. Nova runs some shallow congratulatory version of the Daily Telegraph with lurid headlines and increasingly irrelevant “statistics”. Credlin still sticks to her sanctimony about incarcerating people over 70 for an indefinite period. Morrison lets Ardern sit in an unconstitutional cabinet (Ardern has locked up the NZ over 70’s population), while Andrews increases his looniness daily.

    And still, all we have achieved is a hiding place in the South-West Pacific Ocean with no way out for a death rate 13x more than Taiwan and a trashed economy that Taiwan had no need to implement.
    Taiwan is not discussed in Aus now – far too uncomfortable.

  • Alistair says:

    I thought that it was interesting that at the first sign of trouble the Liberals reached straight into the Left’s tool box of fixes.

  • DG says:

    I wonder if our pollies are able to ask sensible questions about models, about sensitivity analysis, the variation of parameters, about ‘what if you’re wrong’ questions about assumptions, about calibration, about confidence intervals…I guess not.

    Now, to a matter of style:

    Spot the difference:

    “While Albrechtsen’s column is written in the context of coronavirus expenditure, she does not extend it to examining the worthiness of the measures put in place to address the pandemic.”


    “While Albrechtsen’s column is written in the context of coronavirus expenditure, she does not extend it to examining the worthiness of the measures to address the pandemic.”

    I’ll leave it with you.

  • lloveday says:

    “..Janet Albrechtsen has pointed out that the statistical value of life…..”.
    That link is paywalled, but the article is paywall-free at morningmail.org. (Previous Posts, Headline: Albrechtsen: pandemic—an account to be reckoned with!)

  • en passant says:

    I have a $10 bet that the suicide rate (total suicides versus the statistical average) will exceed the total number of deaths FROM the virus by 1st December.
    Cruel? No, as I am sure the Federal and State totalitarian governments will be still crowing about their success in suppressing the pandemic …

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