Here at Clubtroppo, we have been saying for well over a month now that a quick look at the economic damage and the health damage of the responses to the corona virus tells you they dwarf the possible benefits of suppressing the virus, anywhere in the West. This has lead to the prediction that the narrative will flip very soon such that the lock downs will be openly recognised as extremely unhealthy for the population, far worse than the virus. That shift is indeed occurring right now in Australia.
A team of befriended policy wonks in the UK – Richard Layard, Gus O Donnell, Nancy Hey, and others – have now openly adopted the same methodology we have used here at Troppo and that I have co-developed the last three years in the UK. Their paper is here. If you read it properly you will find it says exactly the same as I have done, but tries to soften the message a bit to make it palatable to the politicians. So they dont quite say that the UK politicians have been total buffoons for having instigated the lock downs and that the damage of the lock downs is far greater than their potential benefits, but they sort of say exactly that. As Yes Minister could have said, a very courageous stance. Well done!
Let’s take the paper apart and see how they apply the WELLBY approach and the tricks they have had to resort to, to soften the message. Walking through their paper and their assumptions is a great way of learning the logic of wellbeing cost-benefit analyses and the real tradeoffs the UK and our world have faced.
The basic idea of using the WELLBY.
Firstly, they buy into the notion that we should pick our policies on the basis of how many WELLBYs are generated at what costs, whereby a WELLBY is one point in life satisfaction on a 0-10 scale for one person for one year. I was the first to coin the WELLBY and it was first seen in a peer-reviewed paper recently (Frijters et al. 2020) though I have been teaching it for two years now at LSE. The first mention on national television was by our very own Gigi Foster on ABC Q&A this week! Much of the methodology followed is in a Handbook I co-wrote with one of these authors (who did the numbers on this paper) for the UK government, which these authors have read and in essence follow. 
So the name of their exercise is to try and track for every month in the near future, starting in May 2020, whether or not to lift the lock downs in the UK based on the stream of WELLBY of the two scenarios (continued lock down versus no lock down).
Of course the crucial thing here is the assumptions on what would happen in these two scenarios: continued lock down or no lock down. As is usual in this kind of exercise, they do not fully flesh out either scenario because that is somewhat impossible, but they implicitly assume many things by how they say things would progress in them. Indeed, they give a lot of “flesh on the bone” for their scenarios.
Lock Down versus no Lock Down, what do they mean?
In their “continued lock down scenario”, they envisage sustaining another 100 thousand new unemployed every month. In the “no lock down” scenario they say people will get out of unemployment at the same rate they went in (several hundreds of thousands per month). You might say that is rather generous towards “no lock down” since we know the bounce back in recessions is nowhere near as fast as how quickly the problems mounted, but this in actuality lets the government off the hook because it pretends the economic disaster can be fully remedied in only a few months. They assume something similar for the income losses. If you think it through, this reduces the costs of the implied recession by a factor of about 10 versus what the IMF and other economic forecasters are now saying (which I first anticipated and then simply followed in my later posts). If only! Continue reading