Principal investigator: Viviane Ribeiro
Paper Title: Economic, social and political issues raised by the COVID-19 pandemic
Authors: Clement A. Tisdell
Location of the Intervention: Global
Sample Size: Not specified
Main theme: Health Insurance
Main Variable of Interest: COVID-19
Type of InterventionAnalysis of the trade-offs of the COVID-19 pandemic
Methodology: Economic Models
The occurrence of pandemics is not a recent phenomenon. Several factors facilitate the emergence and spread of highly infectious diseases, such as high population density and high human mobility. Considering the general historical background of previous pandemics, Tisdell (2020) contributes to the evaluation of public policies for controlling the incidence of COVID-19 by providing a model that can be used to prioritize the admission of COVID-19 patients to the hospital and by specifying a second model to evaluate desirable social choices involving the trade-off between the severity of social restrictions and the level of economic activity.
Evaluation Context
The emergence of highly infectious diseases that have become pandemics, such as COVID-19, has created serious health and economic problems due to the various global social and environmental transformations that have occurred as a result of economic development. The economic and social structure of contemporary societies facilitates the transmission of diseases that depend on human contact or presence, especially those involving airborne germs or those that persist on commonly used surfaces. In this context, it is observed that several factors facilitate the emergence and spread of these infectious diseases, such as high population density in urban centers, as well as high human mobility in all geographical dimensions.
Greater economic specialization and a greater division of labor, coupled with expanding markets and increasing economic globalization, increase the risk of individuals coming into contact with sources that facilitate the occurrence of highly contagious diseases, such as influenza and COVID-19. The adverse economic consequences of new forms or types of these diseases can be severe, given the high degree of interdependence of economic activity in modern economies. For example, worker absenteeism due to such infections, or the risks of such infections, can disrupt workplace production. Similarly, supply chains can be disrupted by these pandemics and, moreover, generally have negative effects on aggregate demand for commodities. This is evident from the COVID-19 outbreak, which resulted in a major global economic depression.
Intervention Details
Considering the general historical background of previous pandemics and the economic and social problems associated with managing those pandemics, Tisdell (2020) seeks to provide his own insights into the economic issues raised by COVID-19. Thus, the author emphasizes the importance of evaluating the COVID-19 pandemic in relation to the historical context, impact, and nature of previous pandemics. Initially, the study provides a brief overview of the history and nature of a variety of pandemics and compares them to the COVID-19 pandemic. Subsequently, the choice issues involving available hospital capacity and the prioritization of hospitalizations for those with COVID-19 are considered. Next, attention turns to the consideration of social choice and the economic trade-offs between the incidence of COVID-19 infections and the level of economic activity. Finally, a critical discussion is conducted on the advisability of isolating social groups in order to control the incidence of COVID-19 and possibly reduce the economic losses of the pandemic. The important question of the extent to which individuals should have freedom regarding the control of COVID-19 is investigated, and brief notes follow on the factors that may hinder economic recovery from COVID-19.
Methodology Details
The study conducted by Tisdell (2020) analyzes the types of trade-offs that must be considered and choices that must be made at different stages of the COVID-19 pandemic. This analysis was carried out using some simple economic models. Furthermore, factors that may hinder economic recovery after the period of socioeconomic hibernation (designed to limit the incidence of COVID-19) are identified and discussed. First, a brief historical and comparative overview of selected pandemics is presented, particularly in relation to the COVID-19 pandemic. Second, the study provides a simple original model that can be used to prioritize the admission of COVID-19 patients to the hospital (taking into account available hospital capacity). Third, a second model is specified to evaluate desired social choices involving the trade-off between the severity of social restrictions (taking into account their impact on the incidence of COVID-19) and the level of economic activity. Bergson-type welfare functions are used in the second model.
The proposition that isolating social groups is a desirable method of limiting the incidence of COVID-19 is also critically examined. This leads to consideration of the extent to which personal freedom of choice (liberty) should be restricted in response to the COVID-19 pandemic. Subsequently, a brief outline is presented illustrating the factors that are likely to hinder economic recovery from COVID-19. Special attention is given to the moral and ethical issues raised by the policies for controlling this pandemic.
Results
The results obtained by Tisdell (2020) show that it is still too early to determine how COVID-19 will eventually compare with previous pandemics. However, like the “Spanish” flu, it has become a global pandemic. It was first reported in Wuhan in November 2019, and in March 2020, the World Health Organization (WHO) declared it a pandemic. It didn't take long for individuals in most nations to become infected. Like Severe Acute Respiratory Syndrome (SARS) and the “Spanish” flu, it is primarily transmitted through droplets and sneezes. Although less deadly than the “Spanish” flu, it has already resulted in an alarming number of deaths worldwide. Furthermore, it has significantly reduced (and disrupted) economic and social activity. However, its negative effects have been mitigated (to a remarkable extent) by advances in Information and Communication Technologies (ICTs). This has allowed many people to work from home, in addition to helping maintain social connectivity.
The study observed that most global pandemics substantially reduce global economic output and increase unemployment. In the case of COVID-19, government measures to contain the spread of the disease and the mortality it generated significantly reduced employment and economic activity worldwide. Given that unemployment increases and aggregate economic activity decreases in the presence of stricter social restrictions, governments face a difficult trade-off problem; that is, how much reduction in employment and economic activity should be accepted as a result of allowing more liberal opportunities for social interaction. This type of choice involves an opportunity cost and a trade-off problem and, conceptually, can be subjected to economic analysis. However, solving this problem is difficult due to the uncertainty about many dimensions of a new pandemic and the problem of devising a widely or universally acceptable social welfare function.
The costs of restrictions appear to vary according to the social structure of individuals, the nature of economies, and the stages of their economic development. Developed countries are in a better position to provide social safety nets to their citizens and support them should their ability to work be restricted as a result of COVID-19. On the other hand, in underdeveloped countries, strict social measures to control COVID-19 impose a heavy burden on the most economically vulnerable population who need income from work for basic necessities.
The choice of government policies to control COVID-19 is significantly influenced by political pressures, the nature of which has changed over the duration of the pandemic. Initially, many governments were slow to impose social restrictions to limit the occurrence of COVID-19. As infections and mortality rates increased, so did political pressure to impose social restrictions to limit the spread of the disease. However, political pressure subsequently intensified to ease these restrictions in order to reduce the economic cost of the virus. As a result, many governments responded by altering their Bergson-type preference functions to account for these political pressures. Furthermore, with better knowledge of COVID-19 and the means to treat it, greater hospital capacity, and lower case occurrence, changes in the ABCDE trade-off function favored less stringent control measures in some countries.
Lessons in Public Policy
Contagious diseases capable of becoming pandemics can take various forms, and therefore, the appropriate policies to control them often differ. Determining appropriate economic policies to respond to the outbreak and spread of COVID-19 among humans has proven extremely challenging because the main measures to contain infection levels and mortality rates from the disease involve a high economic cost in terms of income levels and economic output. These control measures include isolating individuals, restricting gatherings and travel. They were seen as necessary (especially in the early stages of mass COVID-19 infections) to flatten the upward trend in the infection curve and reduce the increase in deaths, and to allow hospitals to increase their capacity to care for patients requiring hospitalization.
The speed and nature of the pandemic recovery may be hampered by both supply-side and demand-side factors. On the supply side, many manufacturers and other businesses rely on international supply chains to sustain their economic activities. This raises a synchronization problem. Nations that are ready and willing to resume commodity production (but rely on international supply chains for their output) may find their ability to do so constrained because their international suppliers cannot meet their demands due to ongoing lockdowns or because of reduced production as a consequence of COVID-19. International deliveries may also be limited by disruptions to transport services, for example, air services.
On the demand side, aggregate consumption tends to recover slowly due to lower disposable income, and consumers may prefer not to buy commodities that increase the risk of contracting COVID-19. Even when government restrictions on international travel are lifted, many individuals may be unwilling to undertake such travel, especially by means that increase their chances of contracting COVID-19. Similarly, many individuals will continue to avoid activities (for some time) that involve mass gatherings.
Industries that recover slowly after the end of the socioeconomic hibernation period designed to control COVID-19 will also delay the recovery of industries with which they have a high degree of economic interdependence. Cross-sectoral analysis (e.g., input-output analysis) can be used to help assess these flow effects. Furthermore, a dangerous international situation may arise. Many nations may begin to adopt protectionist policies to offset the reduction in their level of economic activity and employment caused by the COVID-19 pandemic. This could delay the global economic recovery, harming countries that rely heavily on exports to generate their level of economic activity and employment.
References
Tisdell, C. A. (2020). Economic, social and political issues raised by the COVID-19 pandemic. Economic analysis and policy, 68, 17-28.
