By JOHN F. BANZHAF. Originally published at ValueWalk.
Deadly Scientific Laboratory Experiments Beginning; How Many Deaths v. How Many Dollars; Also Behavioral Economics
Q1 2020 hedge fund letters, conferences and more
WASHINGTON, D.C. (May 1, 2020) – While some doctors and epidemiologists are aghast at decisions by over two dozen states to relax social distancing restrictions on various activities imposed because of the COVID-19 pandemic, and many others with different perspectives – including angry protestors – are welcoming the changes as long overdue and demanding that other states do the same, an interdisciplinary scholar sees them as one of the best ways to use the states as “laboratories” to help resolve difficult questions involving science, economics, political science, behavioral economics, and moral philosophy.
While there has been tremendous speculation about what will happen when various restrictions are lifted, no expert can predict with any certainty, and many, including even scholars in academia, are placing less reliance on conflicting epidemiological models and scenarios, says public interest law professor John Banzhaf, who is also mathematician and game theorist, an engineer and inventor, a political scientist and public health activist, and a statistician and creator of the “Banzhaf Index.”
Since many different states will be lifting a variety of restrictions under varying conditions (e.g., population density, urban v. rural, regional customs, etc.), we should know very soon what if any effect these moves had on increasing various reasonably reliable metrics regarding the dangers of the pandemic.
These metrics could include, for example, the number of patients admitted to hospitals with a COVID-19 diagnosis, the number of COVID-19 patients placed on ventilators, and the number of deaths attributed by medical personnel to the virus.
Experiments On Loosening Restrictions
These are scientific and factual issues as to which we will soon have answers because experiments on loosening restrictions will be happening in more than two dozen states and many different local jurisdictions. This variety will provide far more useful data than if restrictions are applied and then adjusted on a national basis as they have been in other countries, says Banzhaf.
Indeed, says Banzhaf, here the different states are acting as what Supreme Court Justice Louis Brandies called “Laboratories of Democracy,” praising how under our federal-state form of government, a “state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
This is what we do now with different state legal rules related to gun control, self defense, abortion, the death penalty, and other issues as to which citizens in various states have very different views.
Looking at the metrics noted above should be more accurate than predictions by experts, and/or calculations of numbers such as the infection rate, the transmission rate, etc., because we still do not have enough testing to make reliable estimates of these factors, says Banzhaf.
The Economic Effect Of Removing Restrictions
We should also know almost immediately what the economic effect of removing various restrictions are, because they should show up very quickly in various reasonably reliable metrics such as the number of people still receiving unemployment compensation, sales tax and other revenue from businesses, etc., suggests Banzhaf.
But what we will not know – and indeed may never even agree on – is how to balance increased economic activity and economic gain against the increase in the corresponding number of deaths and disabilities (e.g, permanent damage to lungs, kidneys, the heart, etc.) caused by relaxing various restrictions. Here, science cannot provide an answer.
Thus, while most would probably have to agree that reducing social distancing by relaxing various restrictions will increase the number of COVID-19 deaths, we can only speculate as to how many, and what that increase will mean.
If, for example, the number of new increased deaths is low, society might be willing to accept them as the unfortunate cost of increasing the economic benefit to many people. But, if the number of new increased deaths is high, we would be less willing to accept the loosening of restrictions.
That, after all, is the concept behind cost-benefit analysis; a system of analysis used by virtually every federal agency in trying to decide thousands of different issues ranging from how much testing should be required before a drug may be put on the market to which city intersections should be selected for new traffic lights.
Deaths Per Dollar
But balancing lives against dollars – how many deaths per dollar are we willing to tolerate – also involves issues of moral philosophy, as to which there can be few final answers since the issues are not amenable to the scientific method and the finding of measurable facts.
These experiments in the various states also raise interesting issues not only of classical economics (e.g. supply and demand, elasticity, etc.) but also of behavioral economics.
In other words, although classical economics often assumes that people always act completely rationally in making decisions with economic consequences, behavioral economics recognizes that this is often not correct.
For example, while experts might assure the public that eating at a restaurant which observes social distancing criteria is quite safe, potential diners may have an fear of eating out which is an irrational reaction to overly alarmist news reports, the death of a friend from the virus, etc.
On the other hand, young diners, who may incorrectly believe that they face little danger from the virus, and tend to be more willing to generally overlook risks, may flock to trendy restaurants even if experts proclaim that the risk of infection is high.
Similarly, while the law may, for the first time since the crisis began, permit a restaurant to serve customers seated at indoor tables provided certain requirement (e.g. seating distances, masks for waiters, etc.) are followed, a restaurant owner may still refuse to take advantage because of a higher-than-normal concern about not contributing even indirectly in the death of a customer.
So, although most experts will correctly predict that deaths will go up at the same time many will benefit economically, there is enough uncertainty regarding both results that society probably cannot make a reasoned cost-benefit analysis now regarding the lifting of various restrictions, although – thanks to our federal-state separation of functions – we should be able to do much better by the end of May, predicts Prof. Banzhaf.
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