U.S. Costs of COVID-19

Here's an infographic from Visual Capitalist:

These are drawn from "The COVID-19 Pandemic and the $16 Trillion Virus," by Cutler and Summers.

Since you're all undergraduates, I do try to clue you in to authors and sources you should pay attention to. 

• Visual Capitalist didn't do the research, just the image. 
• The article was published in the Journal of the American Medical Association, the best or second best journal in the field.  But, it was published in their opinion section, rather than under basic research.
• David Cutler is a professor of economics at Harvard (and a former department chair and college dean). He is one of the top researchers in health economics. Here's Cutler's Google Scholar page (70K cites and an h-index of 107 is crazy), Cutler's biographical page at Harvard, and his Cutler's Wikipedia page. He also served in the Clinton and Obama White Houses. In my view, Cutler might be moving up from the medium to the short list for a future Nobel Prize.
  
• And Lawrence Summers is even bigger. He's a professor of economics and former president of Harvard, He is one of the top researchers in macroeconomics, and was already huge when I was in graduate school 30 years ago. Here's Summer's Google Scholar page (157K cites, and an h-index of 178), and Summers' Wikipedia page. He served in the Clinton White House, topping out at Secretary of the Treasury. He was also Chief Economist at the World Bank. Here's Summers' press biography. And, both his parents were economics professors at the University of Pennsylvania, and ... get this ... each of his parents had a brother who was an economist who won a Nobel Prize. I think Summers is probably a lock on a Nobel Prize in the next decade.

The bottom line is that they will have a huge audience.

The biggest piece of the pie is reduced economic activity. Cutler and Summers draw on the Congressional Budget Office for that number, which is a sum over the next decade. Personally, it seems high, but not outrageous to me.

For regulatory purposes, economists have estimated the value of a human life. Non-economists find this controversial, mostly because we do it at all, but it serves a need. Their figure of $4.4T for premature death uses an estimate of ultimately 625K deaths valued at $7M each (that's a conservative value, I usually use $10M). I find the deaths number plausible, but not the overall total. This is because the $7M figure is for a whole life. While I don't generally agree with the common viewpoint that a COVID-19 diagnosis affects the old, I do think the total number should be cut down by quite a lot ... probably over half.

I am less well-versed in the costs of long-term health impairment. Having said that, I think everyone underestimates this. Since Cutler and Summers can back up their numbers, I'll accept them. The same goes for the mental health costs.

Now let's put this in perspective. It would be incorrect to naively compare this number to GDP. The value above is a stock variable, while GDP is a flow variable. (The authors do this anyway, because it's popular, but I don't encourage my students to do this). A better comparison might be to financial wealth of the United States, which is about $100T. So COVID-19 is going to knock off about a sixth of that. 

That's like a college student with a car worth $12K, and a huge insurance deductible of $2K, getting into a collision: it would hurt, big time.

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BTW: At this time last year, I was ballparking that the costs to China (a smaller and poorer economy) would be in the range of several hundred billion dollars. But, there are researchers in Australia who made the definitive estimates of the costs of SARS-COV-1. And 11 months ago they estimated the costs to the U.S. of COVID-19 would be $1.7T. Cutler and Summer's guesstimate is 10 times as high. Of course, when they published that estimate, the U.S. had a handful of cases in the Seattle area, and it was still a week before Rudy Gobert and the shutdown of the NBA, and everything else after that.