The Way of Kirby

Category: Policy

  • Economic Impact of Isolation for Covid in the U.S.

    Economic impact of isolation vs. economic impact of non-isolation.

    Short answer – (TL;DR) – restrictions have a positive economic impact.

    There has been a lot of discussion regarding the cost of restrictions vs. the impact to the economy so I thought I would take a quick crack at answering the question.

    There are a lot of assumptions.  I am ‘showing my work’ so others can re-try the equation or see if the results are still valid as we get more information or add details (such as breaking out deaths by age and the associated economic impact – e.g. an 80 year old death has no impact to economy (might save money) vs. the death of a child that will never return the 9.6M.)

    I won’t argue every assumption – the details are listed at the bottom.  If you think one of the assumptions is wrong – please suggest a better source!  Non-constructive criticism is not helpful.

    Cost of shutting down the economy v. economic losses from deaths

    If shutting down is > additional deaths then the conclusion is that we should leave the economy open.

    If Cost from deaths > than shutting down then we should be isolating.

    Value of life * number of people killed   vs.  Loss of productivity

    BASELINE – patchwork that we have now

    9.6M value of life (1/2 average age) * 1M deaths   AND     22T GDP * 10% contraction* 2 year impact

    4.8T                                                                        AND   4.4T 

    Expected loss from pandemic in US: 9.2T USD

    NO RESTRICTIONS

    9.6M (1/2 midpoint) * 5M deaths   

    Economic loss from no restrictions: 24T USD

    FULL RESTRICTIONS

    22T GDP * 20% contraction * 2 years  

    Economic loss from restrictions:  8.8T USD

    I am open to modifying these numbers or improving them – there are problems and opportunities to improve as I discussed below.

    I am unsure if I can equate GDP to value of a human life – I suspect there is a better comparison, but it’s what I have.

    I used ‘****’ to indicate the best resources I used. See below

    Some assumptions:

    There are different levels of isolation.  E.g. Levels of mitigations 1-4 Per the CDC.
    CDC community mitigation framework (archived copy)

    • The initial analysis will ignore the levels – we will just use ‘as-is’ as a starting point … basically was this a good decision?

    That the different levels will only slow the spread – that we are fire fighting until a vaccine arrives.  And it will take time to distribute the vaccine.

    •  I will use an assumption that we will have widespread availability of a vaccine by June 2021.

    That slowing the spread may save lives by giving hospitals time to process patients rather than overwhelm the hospital.

    • I will be avoiding this assumption, but it is critical to confirm that there are beds or the death rate will increase.

    The value of a person’s life based on economic input to the country.

    • https://en.wikipedia.org/wiki/Value_of_life – U.S. – 9.6M
    • I am assuming that, on average, a person will be halfway through their life.
    • This is likely incorrect given the distribution of deaths, but it’s a starting point.

    The cost in hospital to heal people who are hospitalized. Ignored because of the cost relative to economic costs.

    Economic Impact of Covid – How severe

    Full lockdown impact:

    Death rate from Covid:

    Philosophical argument

                    At what point is a philosophical argument worth death or wage loss?  It’s an equation many people do.  Do I speed or do I accept that I may get a ticket?  What is the cost of that ticket?

    Do I quit a job and lose $100K a year, or accept the insult and keep working?

    In this case, at what point do I accept wearing a mask as opposed to my chance of dying?

    And for the country – at what point do we decide masks are mandatory vs. saving lives [Example is gun ownership – reduced deaths vs. freedom of ownership]

    OTHER TEST CASES

    To see if the equation makes any sense I tested it with an example of something like the flu, with a much lower death rate.

                    Typical Flu

    9.6M value of life (1/2 average age) * 100,000 deaths   AND     22T GDP * 0% contraction

    480B                                                                      

    Expected loss from flu each year in US: 480B USD

                    Flu Lockdown (6 month season)

    9.6M value of life (1/2 average age) * 0 deaths + 22T GDP * 20% contraction * ½ year.

    22T * .2 * .5                                                                         

    Expected loss from lockdown 6 months in US to avoid 100K deaths: 2.2T USD

    Conclusion – the example equation says that closing down the economy for flu would have a negative impact.  The break-even point for when a sickness should trigger a lockdown would be around 500K expected deaths.   At 500K the impact to the economy is the same as the loss from deaths

    The equation *seems* reasonable.

  • Starting Thoughts

    Solution for Homelessness.
    So let’s just outline the problem. Housing prices are very high. Many people cannot afford a house when prices are this high.
    Why are prices so high?
    One is that if you have a large amount of money, and want to put it someplace safe, real estate is considered safe. Why? Because the property never goes away. So long as the government will enforce your title (right) to the property you will always have something. The problem is that this creates significant competition for those who actually want to live in the house. This is exacerbated by the concentration of wealth into fewer and fewer people. Income redistribution is outside the scope of this article.

    Another factor is the lack of property available. Why is there a lack of property? There are talks about the costs of building and the ‘onerous’ challenges with getting permits to build. This narrative is pushed by developers who are looking to make many multiples of return on their investment, but there is a much easier solution: zoning.

    Zoning, as a refresher, are the rules governments put into place to make sure all uses of land work together. The classic example is putting a pig farm next to an apartment. The smell makes the apartment unlivable. The solution, that was implemented in the 1900’s-1960’s, was a complex patchwork of zoning to find a way to put all uses of land so we could live harmoniously together.
    Why is that a problem now? A couple of reasons. The first is that the zoning maps of many areas were set in the 1960’s or earlier, and the character of many areas has changed drastically. As an example, in Spokane there are many areas that were planned to be single family, but the companies that would have used them moved away and the more affluent people moved to more desirable areas. The result is an area that is zoned for single family home, that few can afford, and that people generally don’t want to live in. So what can be done about it?

    A zoning change would probably be in order. What would a zoning change do? Right now the area is zoned for single family homes that no one wants to live in, but it is still property that is in central Spokane. There is also still a need for housing. So why aren’t people building lower cost housing or converting to commercial?

    The argument is made that anyone can request a zoning change, and that the zoning board is amenable to such changes. So why aren’t people doing this? Let’s consider a few: The zoning board is not required to approve the change, so it is perceived as risky. If it’s a single neighbor then they may be singled out as ‘destroying’ the neighborhood (a variation of Not In My BackYard (NIMBY)).
    Another, very closely related issue, is that most people don’t know how to go through the zoning process. You have to give notice, you have to appear before the zoning board. It is not something most people are comfortable doing.
    So what can be done? In the early to mid 1900’s cities would determine zoning based on existing uses and then make the hard choices as to what the correct zoning was. Another, very closely related option, has been to have a framework that continuously evaluates zoning, such as what is done in Portland.
    Seems like an obvious solution, so why isn’t it done? The biggest reasons I have heard are: variations of NIMBY that politicians are afraid might scare away support for reelection, and that there are other priorities.

    For NIMBY – the fix is to do the rezones piecemeal. There are blighted areas in most urban areas – either increase density, by making it zoned multi-family or apartment, or make commercial/ industrial. If it is a concern about constituents, I think most will be concerned with not-their-neighborhood.

    Another option is to present rezoning/redevelopment as a way for older families that already own their home, or have a second home, to increase home value for minimal expense. Add a second home if the lot is large enough. Split a large house into a duplex and collect rent after the kids have left home.

    A huge benefit of rezoning is that redevelopment is self-funded. A home owner may be able to build a house on their existing lot – the land is ‘free’ and they are only paying for the construction costs.

    Another one, as discussed above, is that it is the ideal way to reduce housing pressure – allow families to build the housing rather than relying on large developers.

    The suggestion: start looking at rezoning urban areas. Most cities have not done a thorough review of zoning in years – and it shows. Poor usage of land, limited opportunities to develop, and extreme pressure on housing in the largest urban areas.