Those who say the value of human life cannot be measured may not know one of the dark secrets of economics.
As we hear about the monstrous death rates from COVID-19 in Italy and Spain, we must face the fact that whenever there is a cost to keeping people from dying — whether in traffic accidents or from rare diseases — there is always a trade-off.
According to the calculations of economists, human life does, indeed, have a price.
And after Texas Lt.-Gov. Dan Patrick suggested it may be time for grandma and grandpa to risk sacrificing themselves for the economy, it is inevitable that those of us approaching the cut-off date may be getting a little nervous.
“As a senior citizen, are you willing to take a chance on your survival, in exchange for keeping the America that all America loves for your children and grandchildren? And if that’s the exchange, I’m all in,” said Patrick, 70, this week in a much-quoted and much-shared clip from Fox News.
Texas Lt Governor Dan Patrick: Grandparents/seniors should be willing to die from <a href=”https://twitter.com/hashtag/coronavirus?src=hash&ref_src=twsrc%5Etfw”>#coronavirus</a> to maintain the economy. <br><br>Where do jerks like him come from? <a href=”https://t.co/sTNSzCjbct”>pic.twitter.com/sTNSzCjbct</a>
It brings to mind Christopher Buckley’s satiric novel Boomsday, in which baby boomers are paid cash up front to commit to being bumped off when they reach age 75 in order to save money for younger taxpayers.
A character in the 2007 book remarks it’s “the fate of many propositions to begin as heresies and end as truths.”
If Patrick is to be taken at his word, suddenly, that economic heresy may be coming to life.
The human life calculator
Of course, reports show the new coronavirus does not just kill old people.
But with death rates for those who catch it rising with age to as high as one in five after age 80, there’s been a backlash.
Essentially, critics say similar statements by U.S. President Donald Trump — to the effect that the country needs to go back to work soon to restart the economy — will likely lead to hundreds of thousands of additional deaths.
“We cannot let the cure be worse than the problem itself,” Trump tweeted in capital letters.
As Chris Fievoli from the Canadian Institute of Actuaries said Wednesday, there is no question in the insurance industry that lives have measurable value. He recalls working in the 1980s, when the AIDS epidemic was killing young people, and each young life lost cost the industry more than if they had been able to grow old.
The insurance industry has this handy widget called the Human Life Value Calculator intended to show how much life insurance you need, but which also shows a decline in value in senior years.
COVID-19 crisis has brought out the ageists
Similarly, various government agencies, including the U.S. Environmental Protection Agency, have estimates for how much should be spent to protect people from hazards. According to the New York Times, the EPA’s estimate is $9.5 million US per life saved.
In the 1990s, the agency tried to include a provision that the lives of people over 70 were only worth two-thirds of those of younger people before being scared off by AARP, the U.S. lobby group for older people.
Here in Canada, Marissa Lennox, chief policy officer for CARP, AARP’s northern sister organization, is outraged by what she sees as an increase in bias against older people caused by the new pandemic.
“I think COVID-19 has brought the ageists out in force,” said Lennox. She deplores the use of the phrase “boomer remover” that she says has swept social media.
WATCH | U.S. President Donald Trump is anxious to get the economy running again:
Even worse, she says, some medical authorities around the world are discussing putting an age limit on who gets treatment, which she sees as an implication that seniors are expendable.
Comments like Trump’s and Patrick’s, she warns, may be a slippery slope.
“Any rhetoric around sacrificing the ‘old’ for the sake of the economy is purely ageist, and it is dangerous,” said Lennox.
Caring for the elderly has a cost
As Buckley’s satire Boomsday laid out clearly that caring for the old has a public cost, especially in the U.S. where pensions remain an unfunded government liability. Here in Canada, most pensions come out of a fund based on your lifetime contributions.
But sacrificing the weak and old has a cost, too, leaving each of us wondering which group will be next.
“The true measure of any society can be found in how it treats its most vulnerable members,” Indian civil rights leader Mahatma Gandhi reportedly said, an idea that clearly represents a different kind of economic calculus.
Rather than being based on dollars and cents, it is a social contract in which the more active and wealthy work to support the more vulnerable. After all, as Lennox points out, most of us will eventually need the help of a caring society.
“One of the things we love about CARP members is how much they love their children and their grandchildren,” said Lennox. “And I would hope those children and grandchildren feel the same.”
But even if politicians don’t care about the idea of a social contract, they may be inclined to listen, because repeated studies show that old people vote and the young don’t.
Follow Don on Twitter @don_pittis
Coronavirus economy: Recession or depression? – Aljazeera.com
More economists are warning of a recession in the United States, Europe and globally as coronavirus containment measures bring entire sectors of the world’s economy to a halt. Many have also compared the swiftness and severity of the coronavirus slowdown with the Great Depression that began in 1929.
Are we looking at a recession? Or a depression? And what exactly is the difference?
What is a recession?
A recession has traditionally been defined as two consecutive quarters or six straight months of negative economic growth. In the US, though, the National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
What does the NBER mean by ‘real’? And while we’re at it – what is GDP?
Real means “adjusted for inflation”. GDP stands for gross domestic product – a measure of the value all the goods and services produced by an economy within a certain timeframe.
Got it. So why do we care what the NBER says?
Because the NBER dates the business cycle – the peaks and troughs of economic activity – it actually has the measurements to determine when a recession is, well, a recession.
The NBER is not a government entity, by the way. It’s a private, non-profit, non-partisan research organisation. It also publishes really interesting working papers, like this one examining what the Spanish flu pandemic of the early 1900s can tell us about the economic fallout from coronavirus.
Understood. So how long can recessions last?
It depends. By NBER’s definition, a recession does not necessarily have to last a minimum of 6 months. And some downturns continue for well over a year. The Great Recession in the US started in December 2007 and lasted until June 2009. That’s 18 months in total. Nigeria fell into its first recession in a generation at the start of 2016 and did not emerge from it until the second quarter of 2017.
What made the Great Recession ‘great’?
The “Great” Recession earned that moniker because it was the worst crisis the US economy had experienced since the Great Depression of 1929. The name also turned out to be appropriate because it was the longest-lasting of the 17 recessions that the US has experienced to date.
What is a depression, then?
There is no set definition for a “depression”, but when a country is faced with a prolonged economic downturn that is measured in years, rather than quarters – then you can be pretty certain it is experiencing a depression. The Great Depression, for example, began in 1929 and lasted until 1939.
Could the coronavirus pandemic trigger a recession?
Most economists have come around to that view. Last week, the International Monetary Fund said it sees negative global growth this year, and warned that we’re facing “a recession at least as bad as during the global financial crisis or worse”.
Many Wall Street economists also see a recession in the cards. Goldman Sachs thinks US economic output could nosedive 24 percent from April through June compared with a year earlier, and that the unemployment rate could peak at nine percent in the months ahead. Capital Economics sees second-quarter US economic growth plunging 40 percent from a year earlier and unemployment spiking to 12 percent.
OK, this is sounding scary. Could we be heading for a (gulp) depression?
No one can say for sure what the future holds. Some economists think that economic activity could actually pick up in the second half of this year, depending on government stimulus packages, when the coronavirus crisis peaks and other factors.
So why do we keep hearing the words ‘coronavirus’ and ‘depression’ together?
When you do hear or read the word “depression” alongside “coronavirus”, it is usually analysts drawing comparisons with the suddenness and severity of the economic slowdown that happened in 1929.
But what do veterans from the 2008 financial crisis think?
Economist Nouriel Roubini, who warned about the 2008 financial crisis as early as 2006, thinks a rebound later this year is unlikely. In a column for Project Syndicate, Roubini – aka “Dr Doom” – argued that public health responses in advanced economies have fallen short of what is needed to contain the pandemic, and that fiscal packages are “neither large nor rapid enough to create the conditions for a timely recovery”. For these reasons, he says, “the risk of a new Great Depression, worse than the original – a Greater Depression – is rising by the day”.
On the other hand, former Federal Reserve Chairman Ben Bernanke, who stewarded the US economy through the 2008 financial crisis, told business news network CNBC that the current shock the US economy is experiencing from coronavirus is “much closer to a major snowstorm or a natural disaster than it is to a classic 1930s-style depression”.
Older workers will jump-start an economy post-pandemic faster than younger ones, argues Citigroup – MarketWatch
What do older workers have over younger ones as an economy tries to recover from a pandemic? They can potentially breathe life into a shut-down economy faster, in part because they have more money to spend and better health insurance in case they do get sick.
So said Dana Peterson and Catherine Mann, global economists at Citigroup, who poured cold water on one idea circulating among policy makers that would see younger workers allowed back on the job ahead of their older counterparts.
“First, allowing younger people to return to work may help restart the engines of the economy, but they are actually not the ones who drive much of the consumer spending that fuels GDP growth,” said the pair in a note to clients.
They cited evidence that shows peak spending is something that often happens later in life for advanced and emerging economies. “This is because older generations often have reached peak earnings, and own assets (homes and financial assets) that facilitate greater spending.”
Older generations also play harder, meaning they spend more on experiences, such as in the U.K., where those 50 and older spend more than twice as much than persons 18 to 49, while in the U.S., that peak spending on movies, shopping, travel, etc. occurs between ages 45 to 54. And spending stays elevated over the mid-50s to mid-70s range, they said.
The third reason harks back to a scene in the 1991 movie “Fried Green Tomatoes,” in which actress Kathy Bates rams the car of a couple of younger women who swiped her parking spot. “Face it girls, I’m older and I have more insurance.”
Older workers simply have better access to health care in case they do get sick, as opposed to younger co-workers. “In the U.S., which has one of the highest Universal Health Coverage service coverage indexes in the world at 84, younger persons spend the least on health care and insurance, and are also less likely to have health insurance,” the economists noted.
The health-care coverage situation is worse in South Asia and sub-Saharan Africa, and even in countries that have better coverage, younger people can still carry the virus and infect multigenerational households. That has been the case in Italy, where the disease has had a bigger effect with more deaths on the older population.
Finally, the economists argued that the modern workplace needs all ages to function.
“Indeed, older workers may have the experience required to help guide the activities of the younger generations,” said the economists. “Practically, many persons who are in management and positions of leadership skew older. Hence, it seems inconceivable that younger people can return to work in every facet without managers in place.”
It could take three years for the US economy to recover from COVID-19 – World Economic Forum
The US and Eurozone’s economies could take until 2023 to recover from the impact of the COVID-19 coronavirus crisis, according to a new report from consultancy McKinsey & Company.
If the public health response, including social distancing and lockdown measures, is initially successful but fails to prevent a resurgence in the virus, the world will experience a “muted” economic recovery, says McKinsey. In this scenario, while the global economy would recover to pre-crisis levels by the third quarter of 2022, the US economy would need until the first quarter of 2023 and Europe until the third quarter of the same year.
If the public health response is stronger and more successful – controlling the spread of the virus in each country within two-to-three months – the outlook could be more positive, with economic recovery by the third quarter of 2020 for the US, the fourth quarter of 2020 for China and the first quarter of 2021 for the Eurozone.
In these scenarios involving partially effective interventions, policy responses could partially offset economic damage and help to avoid a banking crisis, says McKinsey. The firm has modelled nine scenarios, ranging from rapid and effective control of the virus with highly effective policy interventions to a broad failure of public health measures and ineffective policy and economic interventions.
The economic impact in the US, however, could exceed anything experienced since the end of World War II.
The industries hardest hit by COVID-19, including commercial aerospace, travel and insurance, may see a slower recovery. Within the travel sector, the shock to immediate demand is estimated to be five-to-six times greater than following the terror attacks of 11 September 2001 – though recovery may be quicker for domestic travel. The crisis has also amplified existing challenges or vulnerabilities in the aerospace and automotive industries, which will affect their recovery rates.
As supply chains around the world are disrupted, the report warns that the full impact is yet to be felt. Business leaders must prepare for the effects on production, transport and logistics, and customer demand. These include a slump in demand from consumers leading to inventory “whiplash,” as well as parts and labour shortages due to manufacturing plants shutting or reducing capacity.
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