Apr 6, 2020

When Economics Abandons Common Sense

The novel coronavirus raises questions about how economists value human lives
James Broughel Senior Research Fellow , Hayden Warlick Staff Writer

As the novel coronavirus threatens our nation’s health and economic stability, government officials are conflicted about how long the United States can sustain widespread shutdowns. The pandemic is forcing a difficult conversation on public health experts and economists: how do we address the tradeoffs between promoting public safety and preventing mass unemployment? And what should we do if medical shortages arise and there isn’t enough life-saving equipment to care for everyone who becomes sick?

The United States isn’t the only country facing difficult choices. Recent news articles have highlighted an uncomfortable reality facing Italian hospitals. Without sufficient resources to treat every patient that comes to them in need, doctors in Italy have had to make difficult decisions about who gets access to medical equipment and treatments that can mean the difference between life and death.

Some Italian doctors are giving priority over respirators and hospital beds to the young and relatively healthy. New guidelines from an Italian medical society suggest, if it comes to it, giving preference to those with the highest probability of therapeutic success in trying times like these. In practice, this could end up amounting to an age limit on who gets treatment, as well as restrictions on treating those with certain pre-existing medical conditions.

It’s tempting to tell ourselves that this problem won’t reach our part of the world, or that American ingenuity will save us from having to make such stark choices. But the coronavirus outbreak in Seattle has already spurred state officials there to draft triage plans in case hospitals become overloaded. Health officials in New York are making similar preparations.

On one level, these kinds of tradeoffs make us all uncomfortable—most of us would rather not think about the relative value of people’s lives. On another level, however, we recognize that these kinds of uncomfortable realities must be confronted sometimes. Resources are scarce; the same resources used to give one person a few extra months in an assisted living facility might give another, younger person decades of productive life.

For that reason, many people would see some sense in the Italian hospitals’ decisions to prioritize those with the best chances of survival. A similar logic underlies the heuristic of saving “women and children first.” Children have not had a chance to fully enjoy life yet, and they generally have many more productive years remaining to contribute to society. Women, on the other hand, were likely given preference in the past for their role in child-rearing, although this justification may be less relevant in the 21st century.

Triage plans being drafted in New York and Washington state look similar to the Italians’. Namely, they are prioritizing those with the highest likelihood of survival, rather than using a policy like first-come, first-serve, which could disadvantage those with lesser means. In cases where people are equally likely to benefit from treatment, it could even come down to a lottery.

Because the government is often also in the difficult position of making life and death decisions that affect us all, you might expect these kinds of common sense social mores would extend to government policy, and in some cases they do. For example, a common metric used to examine the cost-effectiveness of health interventions is called a QALY—or quality-adjusted life-year. Some governments, such as the United Kingdom, use this metric to prioritize which treatments get paid through national health policy.

Strangely, the US federal government’s predominant approach to valuing life is virtually the opposite of the one medical professionals take. The approach of federal regulatory agencies, for instance, does not focus on the quality or length of life or the potential to contribute, but instead emphasizes people’s ability to pay for safety. That emphasis has critical implications for public policy.

The federal government often uses the “value of a statistical life” (VSL) method, which is a measure of what people are willing to pay to reduce their own risk of death. Imagine how much you are willing to pay for the safety belt in your car, for example, or for a security system in your house. Given the probability of accidents or break-ins in your area, a shrewd analyst could use this information to estimate how much you value your own life in dollar terms.

One problem with this approach is that what people are willing to pay is largely driven by how much they have. The ultra-rich, not surprisingly, are willing to pay for the most expensive security systems and the most advanced treatments and medications to extend their lives. This explains why the average VSL is much higher in rich countries than in poor ones.

With this wealth-centered approach, federal agencies assume that whatever people are willing to pay to reduce risk in their lives, the government should be roughly willing to pay as much too. But this defies common sense. Consider the following hypothetical:

Imagine if, rather than a rule like “women and children first,” one was instead guided by the ability of passengers on a sinking cruise liner to pay. A clever economist on board suggests a survey be conducted to determine the willingness of each passenger to pay to be rescued. It seems likely that under that approach, the most prominent, wealthy, and elderly citizens would be prioritized, along with high-earning men in the prime age of their working lives. These are the groups with the greatest wealth, and therefore the greatest willingness to pay, so they would get the first seats on the limited lifeboats available as the ship goes down.

In short, young and healthy adults might well end up getting the least priority under such a system. And yet, if the length of life, its quality, and the contributions people are likely to make in the future is the top concern, it’s the young, healthy, and relatively productive that should be prioritized—exactly the same choice hospitals seem to be making.

Hopefully, the doctors in Seattle and New York City won’t be forced to make the kinds of brutal decisions facing their counterparts in Italy. But if it comes to that, they can sleep better knowing that their approach is both logical and moral. Doctors and ethical experts agree that the ability to pay shouldn’t drive these kinds of life-or-death decisions. That’s just common sense. It may even be good economics.

Photo by Misha Friedman/Getty Images

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