Health Economics and the Pandemic
(Continued) ...
April 2021
The World Health Organization declared, “The outbreak of a Public Health Emergency of International Concern on 30 January 2020, and later a Pandemic on 11 March 2020. As of 9 April 2021, we have confirmed more than 134 million cases, with more than 2.9 million deaths attributed to COVID-19, making it one of the deadliest Pandemics in history.”
The Blog of Many Concerns
Over the past thirteen months, Dr. Goodman has introduced readers to many areas of Health Economics. As with many blogs, the introduction of topics usually reflects underlying current events. As a result, the focus shifts freely with the larger conversation of the day. To help our readers follow along, I (Dr. Sase) performed an analysis of topics to provide our audience with a sense of focus for today. In reading through the series of blog entries to date, I sorted the subjects into groups and subgroups. I discovered that almost half of the coverage focuses on Forecasting supported by a range of Subtopic issues.
The Subtopics that feed the matter of Forecasting appear as eight areas of concern. The primary considerations include Vaccine Development and Distribution, Medical Matters, and Evaluation of Progress made by all human participants against the COVID-19 virus.
In addition to these focal areas, this blog addresses the role of relevant Sciences, Testing Procedures, School and Workplace Shutdowns and Re-openings, and the subgrouping of multiple subjects into Urban and Rural Location and Society.
In this episode, we focus on Forecasting Health and Economic events—a favorite topic in the minds of many economists, attorneys, and others. Where feasible and appropriate, I (Dr. Sase) have included the blog dates of publication for those who wish to follow along. Note: for the sake of brevity and style for Legal News publication, we have condensed elements of the blog through the use of brackets and other tools.
We have seen staggering destruction of the stocks and value of capital goods over the past nine months. However, Dr. Goodman reminds us that as of the last week of 2020, 337,842 Americans have died of COVID-19. He states, “We have lost the equivalent of six World Trade Center bombings in the past seven days. We have seen staggering destruction of the stocks of such capital goods in the past nine months. [Goodman supplies a categorical list of major losses:]
1. Loss of life–Valued at (a conservative) $5 million per person, [as of the end of 2020], we have lost nearly $1.7 trillion dollars in productive capital.
2. Loss of education–In 2019, approximately 57 million students attended elementary and secondary schools. [We will remember the massive education displacement from the shift in teaching methods during March 2020 until Fall 2021.] One could easily argue that each of those students has lost at least one-half year of learning. Some (particularly those in the early years) probably will catch up.
3. Buildings–Thousands, if not millions of [structures], have experienced accelerated depreciation or advanced obsolescence. The physical capital [of the] retail sector (malls and many urban shopping areas) has already reeled from online competition. [We will need to reimagine] the office sector from top to bottom.
Crowded cubicles, obsolete ventilation systems, uncomfortably close stairways, elevators, comfort facilities, and common areas will have to be changed at the costs of billions of dollars. School classrooms will also have to change, for similar reasons.”
Dr. Goodman reminds us that policymakers often conduct sensitivity analyses based on plausible parameter estimates of the spread and the impact of disease.
We must make decisions based on careful analysis, not a hunch that “it’s going to get better soon. COVID-19 does not care that ‘America is a great country’ any more than it has cared about China, Italy, Iran, or Spain being great countries. Sober analyses of good conceptual models must guide our policies in these difficult times. [He states that] [i]t is almost inconceivable that we would have enough ventilators and masks, even if the Trump Administration had not dismantled a National Security Council directorate at the White House charged with preparing for another Pandemic [in 2018]” (24 March 2020).
Forecast Generale?
In March 2021, Dr. Goodman reminded us that “[a]s we enter the thirteenth month of COVID-19, our short-term prospects are promising. Over 70 million Americans have received at least one dose of vaccine. Opportunities are being opened for more and younger people to be vaccinated. We can look forward in the next several months to large numbers of Americans with the immunity that the vaccine brings.” Nonetheless, he raises a series of relevant questions, which includes the following:
1. “Will we be able to travel and ... where?”
2. “Will we be able to fly (more easily) across oceans [and] international borders?”
3. “Will we be able to go to events with large numbers of people ... and when?”
4. “Will public schools and [universities] in Fall 2021 look like schools in 2019 ... or more like 2020?”
5. “Will we be able to [dine] at restaurants where wait-staff do not have to wear gloves and masks?”
6. “Will downtown office spaces in 2022 look like 2019 or 2020 [spaces]?”
7. “Will people continue working from home occasionally, or almost always [as of] Fall 2021.”
[Note:] “Auditoriums [built] for several hundred students will seat [approximately] fifty. Classrooms for forty students ... become classrooms for ten. [This remains] about the extent of their planning” as of 18 March 2021.
Stipends
Let us return to March of 2020 for a moment. Dr. Goodman states [Proposals emerged in the latter half of the month] to send checks to millions of American households. “These checks should be large ($1,000 per month) and continuing ([for] at least six months).” Goodman reminds us that “Without them, aggregate demand will collapse,” noting Personal Consumption Expenditures constituted 70 percent of the economy as of 2019. Also, he notes that “a 10 percent decrease in Consumer Spending will drastically affect the economy. Incomes and levels of wealth will fall. Forget the Great Recession...think the Great Depression!” (08/01/2020).
In his blog, Dr. Goodman states that though he admonished his readers to think of major stimulus packages when he spoke of a $1,000 per month a stimulus check in early 2020, his view had changed by the end of July of that year. He cites that a graph posted by New York Times on 30 July 2020 shows a downturn in GDP in the United States, unprecedented since at least World War II. NYT described it as “A Collapse That Wiped Out Five Years of Growth, With No Bounce in Sight.”
On 14 August 2020, Dr. Goodman writes: “People die. In economic terms, their ‘health capital’ has deteriorated to the point that it cannot sustain life. Think of your favorite old car that lasted 150,000 miles with some tender loving care, usual maintenance, and a little luck. You thought about getting a new one and the old one up and died. The car’s capital stock depreciated to the point that it either wouldn’t run or wasn’t worth fixing.” Dr. Goodman wrote this piece at a time when Estimated Deaths rose above normal. “During the months of March through July, 219,000 excess deaths occurred in the United States. By applying a figure of $10 million that economists often attribute as the value of an entire human life, the loss accruing to these 219,000 excess deaths translates to $219 billion dollars.” In contrast, he has estimated the cost of building a new hospital at $1 billion dollars. Goodman states that we had “lost the equivalent of 219 hospitals” in March through July of 2020. (08/14/2020).
Health Economist Goodman states that “COVID-19 has shown itself to be distributionally unfriendly.... People of color have suffered illness and death in disproportionate numbers [in comparison] to the rest of the population. Low-income and service workers, in dangerous occupations also have suffered disproportionately. No ‘compensation’ has been offered that [comes] close to indemnifying those groups that have suffered so greatly.” He expects that more subtle distributional impact will emerge during the reopening the economy. He states that, “The younger and healthier members are urged to go back to work (albeit with request that they waive the ability to sue for COVID-19 related illnesses or death). The argument is that if they get sick, they will for the most part recover, and go on about their business. If this happens with enough people, we may get to some kind of herd immunity and the pandemic will die out. [Therefore,] people over age 60 should stay at home, out of harm’s way, until the pandemic is over. (06/20/2020).
In late June 2020, Dr. Goodman offered a closer-to-home example of how ending the Pandemic can go awry. He provides an example of how a toxic combination led to a new wave of COVID-19 cases in the Grosse Pointe community. Dr. Goodman states that “In recent days, at least 30 new COVID-19 cases have tied to an outbreak at a popular East Lansing bar almost 100 miles away. He describes how “Harper’s Restaurant & Brew Pub saw shoulder-to-shoulder crowds after reopening.” This gathering included “some college students from the affluent Grosse Pointes who unknowingly got infected and brought the virus back home. According to multiple families that went into quarantine, one of the students who visited Harper’s came into contact with a friend who held a huge house party in Grosse Pointe Woods. There, the student said, dozens of friends partied without masks and social distancing. According to parents, the students held the party on a Friday night. The host, symptomatic during the party, got sicker over the weekend and tested positive for COVID-19 on Monday. However, the student did not share the test results with friends until Tuesday night. By then, the virus had spread among college-age kids hanging out for the summer. County health officials stated that the number of COVID-19 cases linked to Harper’s Brewpub had increased to 76 as of late Friday.” (28 June 2020).
Approaching the first anniversary of COVID-19 last month (March 2021), Dr. Goodman provided an insight into where we have been: “Detroit emerged as one of the first metropolitan areas to be decimated by COVID-19 in March and April 2020. Michigan started serious lockdown procedures early in the Pandemic.” Dr. Goodman reminds us that “Cases seemed to wane in May, a good part of June, and early July before starting an inexorable rise that led to the highest rates in November and December 2020. [In Spring of 2020], CDC experts worried about a ‘second wave.’ Looking carefully at Oakland County, [MI,] we saw a “first wave” in April, a ‘second wave’ in June, and a ‘third wave’ in November and December. [However,] the data indicate otherwise. [As of 8 March 2021,] [w]ell over 1,000 persons per day are still dying in the United States from COVID-19, a figure that would have been frightening until it became normal not very many months ago. The virus is still infecting and killing a large number of people. It spreads rapidly when people are together. This is a classic Economic Externality. One smoker in a stadium does not impact others–a thousand smokers certainly do.” (03/08/2021)
A year before, on Wednesday 1 April 2020, Dr. Goodman writes “In the past couple of days, the Trump Administration has released potential COVID-19 predictions of between 100 and 200 thousand deaths, if, as according to Deborah Birx, ‘if we do things almost perfectly.’ At a news conference on Tuesday [31 March 2020], the President noted that if we ‘did nothing,’ the number of deaths would be close to 2 million.”
On 1 January, 2021, Dr. Goodman titles his blog entry “The Economy in the New Year.” He writes, “To date, 355,361 Americans have died of COVID-19. With a few days left in December [2020], according to the University of Minnesota, over 65,000 Americans had died in December. Several vaccines are now available.
Although the ‘roll-out’ has been slow, observers hope for large-scale immunization to occur sometime within the next six to twelve months. Will things ‘snap back’ to the heady growth that we enjoyed through most of the last decade? [American Economist] Paul Krugman thinks, ‘yes.’ In his New York Times column this morning, [Krugman] writes that he expects ‘rapid growth once people feel safe going out and spending money.’ He thinks that will be soon. He is also optimistic about the job-creating capabilities of new technologies, which he likens to the surge in information technology in the early 1990s, leading to the productivity surge from 1995 to 2005.”
The Fourth Wave
In March 2021, reporters asked Dr. Anthony Fauci, American immunologist and head of the U.S. National Institute of Allergy and Infectious Diseases, about the possibility of a Fourth Wave. Fauci replied, “... when you see plateauing at a level of any way between 50,000 and 65,000 cases a day, that is absolutely no time to declare victory, because we know from previous searches that we’ve had over the year, that when you see that leveling off at a high level, there’s always the risk of a surge back up.”
We can find an example of a fourth wave that lagged behind the first three during the 1918 Pandemic in which 675,000 died in the United States and life expectancy dropped by 12 years. With no vaccine to protect against the virus, medical science urged Americans to isolate, to quarantine, to practice good personal hygiene, and to limit social interaction. We still may have a lot to learn from this tragedy of a century ago.
Economic Fallout
In 1917, the U.S. population numbered 103,268,000, the year before the killer flu appeared. The 675,000 deaths resulting from the Pandemic of 1918 constituted .65% (two-thirds of one percent) of our population by the end of 1920. On the economic side, the Fourth Wave may have been due to the Federal Government advising farmers to plant more crops in the Spring of 2019 because of an expected shortage of food in battleground Europe. However, Europe recovered very quickly. Consequently, the demand by Europeans for American meat, grain, and produce fell dramatically. Many American farmers faced bankruptcy because the foreign demand for our exports dwindled. In turn, many of the younger generation of rural America headed for the cities to find work and economic vibrancy. The rapid post-war urban boom may have triggered the Pandemic spike in mid-1920.
For a present-day comparison, our population numbered 328,239,523 in 2019. As of 15 April 2021, U.S. COVID-19 deaths had reached 564,489—.17% (one-sixth of one percent of the Pre-COVID population).
We hope that the rapid response by Medical Science and Vaccine Manufacturers as well as an informed and conscientious response by Americans will keep the death rate under control and prevent a Fourth Wave from occurring. We would like to thank Dr. Allen Goodman for his contribution to our column. We look forward to his future blog entries on both the Health Economics of the current Pandemic as well as other topics.
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Dr. John F. Sase teaches Economics at Wayne State University and has practiced Forensic and Investigative Economics for twenty years. He earned a combined M.A. in Economics and an MBA at the University of Detroit, followed by a Ph.D. in Economics from Wayne State University. He is a graduate of the University of Detroit Jesuit High School (www.saseassociates.com).
Gerard J. Senick is a freelance writer, editor, and musician. He earned his degree in English at the University of Detroit and was a supervisory editor at Gale Research Company (now Cengage) for over twenty years. Currently, he edits books for publication (www.senick-editing.com).
Julie G. Sase is a copyeditor, parent coach, and empath. She earned her degree in English at Marygrove College and her graduate certificate in Parent Coaching from Seattle Pacific University. Ms. Sase coaches clients, writes articles, and edits copy (royaloakparentcoaching.com).
