The Scythe versus the Hammer: Health and Economic Costs of COVID-19 Control in Australia

Abstract

We evaluate whether a lock-down to control COVID-19 infections is justified by estimating the economic costs for the ‘scythe’, the absence of any government-imposed suppression measures and the ‘hammer’, an early lock-down intended to drastically reduce community transmission. Using a fit-for-purpose compartment model for Australia estimated from actual data, and a value of a statistical life year (VSLY) to measure welfare losses of COVID-19 patients, we find: (1) economic costs of the scythe are several times greater than the hammer; (2) VSLY welfare losses of fatalities equivalent to GDP losses from a lock-down indicate that for the hammer not to be the preferred strategy requires that Australians prefer more than 30,000 deaths to an 8-weeks lock-down; and (3) in a high-income countries, like Australia, the preferred response to COVID-19 from both a public health and and economy perspective is to ‘go hard, go early’.

Keywords: Coronavirus, SARS-CoV-2, suppression controls, compartment models, VSLY

JEL Classification: I10, C63, Q58