The value of life in lockdown math

India’s national lockdown has been extended for another two weeks with some relaxations, taking the total duration to nearly two months. It’s not debatable that the initial lockdown was necessary, even in its severity. In fact, one working paper found that cities that reacted quickly and aggressively to the 1918 flu pandemic also had stronger economic growth after the crisis.   But as India enters Lockdown v3.0, one has to ask: do the benefits still outweigh the risks? The marginal health benefit of a lockdown falls with its duration, but the increase in the economic cost is disproportionately more. The scales continuously tilt as the lockdown goes on. But can we weigh economic risks against lives saved? Is it possible to put a dollar value on a life? To do a cost-benefit analysis?
What is disturbing is that the government has not presented to the Indian public any kind of cost-benefit analysis, coming clean on the trade offs involved between a protracted lockdown and the lives that may be saved versus the worsening damage to the economy and livelihoods and the attendant human, social and, economic costs. Why extending lockdown could be catastrophic, Financial Express
“The 90% economy”   The clearest estimate of an economic cost, economist Rupa Subramanya goes on to write in the Financial Express article, came from policy think-tank Niti Aayog, in a not-so-widely-reported event on 13 April. It laid out three lockdown scenarios, among which Scenario 2 assumed a lockdown until mid-May, as it has come to be. In that case, it predicted, India’s real GDP would contract 2-3% this fiscal. The worst case scenario—an extended lockdown due to “virus resurgence”—is expected to contract real GDP by 8-10%.   If 10% seems extreme, think again. Data suggests if Americans chose to avoid person-to-person proximity of the length of an arm or less, occupations worth about 10% of national output would become unviable, according to The Economist. That, it says, will create the “90% economy.”   But those are the calculable effects. Economist Sanjeev Sabhlok, writing in The Times of India, says we should also count the indirect, or second order, costs. Perhaps the biggest of which, he says, is “the cost of life not lived fully”—the mental harm of not experiencing a normal life. That, he says, can precipitate suicide, domestic violence or child abuse, while The Economist says it can hamper innovation. Besides, the lockdown can also lead to an increase in thefts and murders. And in inequality.   The balance of life and death   Political analyst Yogendra Yadav, writing for The Print, calculates the loss of lives arising from poverty-stricken families unable to access or afford quality health care. India has about 2.4 million such “preventable deaths,” each year, he says. Meaning, a 1% rise due to the lockdown would mean 24,000 more deaths; a 2% increase pushes it to 48,000.   In the same 15 April article, Yadav calculates 50,000 Covid-19 cases in India by the end of Lockdown-2 (which was supposed to be on Sunday, 3 May and we are closing in on 43,000 as I write) and under 200,000 cases by the end of May. He assumes another 200,000 over the rest of the year. That’s much less than the one million cases expected in the US at the time. Using a 4% fatality rate, he calculates 24,000 lives saved (16,000 deaths instead of 40,000 if there were one million cases).    Of course, this is more illustrative than scientific. But, just as in the case of deaths, this also excludes the second order benefits. Or lives saved due to the lockdown. How?    For starters, by the drop in road and rail accidents, by the lack of access to tobacco, alcohol, drugs and other addictive substances, by forced communal harmony (over 50 people died in the Delhi riots in February alone). This is also excluding the health benefits of doing housework, walking to buy groceries, or working out, even if to kill time.   All well and good, but can you compare lives to GDP? Turns out that you can.   Cold, hard stats   Nobel Laureate Thomas Schelling, a game theorist, coined the term “value of a statistical life” (VSL) in 1968. The VSL is derived by asking how much people pay to avoid small risks of death—for example, by buying safety equipment or avoiding a dangerous job. Today, it is widely used in developed countries to evaluate how much economic harm is justified by regulations like, say, reducing mortality due to pollution or accidents.   The VSL for these countries ranges from about $3 million for New Zealand to $10 million for the US, and appear to be in a rather stable range of multiples of a country’s per capita GDP, Narayan Ramachandran writes in Livemint. Using the same multiplier range, he estimates the VSL for India to be $250,000 to $500,000, or Rs 2 crore to Rs 3.8 crore, with a central estimate of about Rs 3 crore. Another measure, which is close to the US-based system, put the VSL at Rs 4.5 crore ($590,000) in 2018.   There are very few recent news reports talking of VSL in South and Southeast Asia, like this one that pegged the VSL for the Philippines at roughly $1.2 million. The closest I got to a list was in a 2016 World Bank report on the “Methodology for Valuing the Health Impacts of Air Pollution.” 
Look, there’s no denying that this topic is fraught with moral and ethical dilemmas. But, as Sabhlok says in TOI, “Sooner or later the financial situation will become so dire that all wishy-washy talk of ‘saving all lives’ will get replaced with ‘let’s do whatever it takes to save our country’. And it is better that this ‘whatever it takes’ is based on rational analysis.”
The Health of Philippines’ remittances
Jum   The Philippines is right to worry about increasing pressure on its understaffed healthcare systems. The country has indefinitely banned medical professionals, including nurses, from applying for jobs abroad to keep “mission-critical skills” at home in light of the Covid-19 pandemic.   But once that ban is lifted, there’s no stopping Filipino nurses from leaving Manila as demand from countries looking to boost their healthcare capacities is only expected to increase.   The Philippines has long been one of the world’s biggest sources of migrant workers, such as nurses and seafarers. Between 2012 and 2016, an average of more than 18,000 Filipino nurses left to work in countries like the US and UK every year. Critics have blamed this medical brain drain on the lack of local employment opportunities in the past, as well as measly salaries, which could be up to 10X lower than what developed countries were willing to pay.    Case in point: when Covid-19 cases started soaring in late March, the Philippines’ health department asked nurses to volunteer at hospitals treating infected patients for a daily stipend of US$10. Following outrage from the medical community, the department instead agreed to hire nurses at a salary 20% higher than basic pay. Nurses in the Philippines earn between US$200 and US$350 per month.    On the flip side, the demand for Filipino nurses overseas may partly offset the decline in other overseas Filipino worker (OFW) jobs, and provide crucial support for falling remittances.   As of 25 April, almost 20,000 OFWs who lost their jobs abroad have returned to the Philippines, of whom most are seafarers working on cruise ships.    As such, the World Bank sees Philippines’ remittances, a key driver of the economy as it fuels household consumption, contracting by 13% this year from the record US$30 billion that OFWs sent home in 2019.
A not-so-Prime bag of goodies
Savio   When practically the whole world closed for business, most of its population would have turned to Amazon (and whoever its local rivals are) for home delivery. After all, more than 150 million people globally have Amazon Prime memberships, which comes with one-day delivery, free delivery, Prime Video, and a bunch of other perks.   But in the past month, the Twitterverse has been abuzz with Prime members demanding cancellations and/or refunds given Amazon was not able to fulfil its promise of quick delivery, or any delivery in some cases.
Amazon has been gamely saying members should enjoy Prime’s other benefits. The problem is, very few people signed on for those other services. A 2018 global survey by PwC showed three out of four respondents bought Prime for its delivery promises.    In a February 2020 survey, 64% of the respondents said they would consider buying elsewhere if free shipping were not offered. And while 55% were willing to wait three to four days for free shipping, only a meagre 9% were willing to wait more than eight days.   But hey, these are not normal times. And maybe Amazon can declare Force Majeure, blaming the pandemic and lockdowns for not fulfilling its Prime contract. Except that many other companies are doing it another way. Disneyland has extended the expiration dates of annual passes, while BT Sport and Sky Sports are allowing members to pause subscriptions or get refunds.    Look, Prime is incredibly important to Amazon. Last October, Chief Financial Officer Brian Olsavsky specifically pointed to the move to one-day shipping as the catalyst for the acceleration in North America’s revenue growth.   But Prime also has a problem, and not just that the frequency of customers is dropping. So is its subscription revenue (which includes Prime, audiobooks, e-books, and other services besides AWS).   Subscription revenue rose 28% in the January-March quarter, notching the second slowest growth among Amazon’s six revenue streams. It’s also slower than 47% growth in fiscal 2018 and 36.5% in fiscal 2019. In an earnings call last week, Olsavsky said Prime customers were shopping more often now and had larger basket sizes. But, like the company’s customer service, he also talked up the other benefits.
Quote “So I think the Prime story is that shopping is really important for people now, especially when they can’t leave their houses. I think the digital benefits are scaling well. I think they are handling the additional demand, and it gives people a good time and reason to use all of their Prime benefits that maybe they hadn’t used as much in the past.” Brian Olsavsky, Chief Financial Officer, Amazon  But that is not what people signed up for, including me. I called Amazon’s customer service in India to try and get a refund on my membership for April. Yes, it is possible. Only, the customer support executive said, “We have no updates on extensions or refunds. I will give your request to the team collating the information.” Collating? Were there others making such calls? He wouldn’t say. So I did what any normal person would. I Googled. And the search trends for the past 90 days were interesting.    Blue line = Searches for “Amazon Prime refund”
Red line = Searches for “Amazon Prime cancel”    This is the trend in the US in the past 90 days: 
Not much of a difference in the company’s biggest market. But in India—the country Olsavsky said was the worst hit among Amazon’s non-US operations last quarter—there could be problems brewing.
Breweries won’t say cheers yet
Olina   Liquor shops are open. Even if you were in Covid-induced hibernation, you can’t miss the kilometre-long lines that have sprung up almost spontaneously in cities across India. Shutting the liquor tap has lost states close to Rs 30,000 crore ($3.9 billion) in taxes during the lockdown.   This definitely eases things for the 70% of the liquor industry that sells through shops or vendors. The other 30%, though, is sold through pubs, bars and restaurants—all of which are still under the state-imposed lockdown.   It’s a curious dichotomy. Shops will make brisk sales today. But breweries, running into huge issues with storing freshly brewed beer, are literally pouring it down the drain. So breweries are asking for their own unique form of relief:
We should be allowed to start take-away facility with beer growlers. By doing this, social-distancing can strictly be followed,” Nakul Bhonsle, president of Maharashtra Craft Brewers Association of Indian, told PTI. Gurgaon brewers start draining beer, ₹700 crore liquor stuck in northern states, Livemint
Not for a standing ovation
 
Savio   Right around these times, in a world that could have been, we would have heard roars of approval, groans of disappointment, and applause from spectators as athletes battled it out in various stadiums around the world. But every sporting event is cancelled.  That doesn’t have to mean eerily empty stadiums, however.    Instead, stadiums have become makeshift hospital wards or testing centres or morgues… anything to help the overwhelmed health care systems.   The New York Times has a stunning collection of photographs capturing this change. Including at the Maracanã Stadium in Rio de Janeiro, where a temporary hospital now stands beside the stadium where Pelé scored his 1,000th goal.
Source: Photograph by Dado Galdieri for The New York Times
In India, too, stadiums are being converted into quarantine centres and blood donation camps. Some even became vegetable markets, as Business Insider documented.
Source: Business Insider
Sports on The Strip 

Savio   But if one US state has its way, we could see basketball, hockey, and football matches played not in stadiums, but on the famous Las Vegas Strip. Nevada is expected to see a 5.3% drop in private employment, the steepest among US states given its dependence on tourism and hospitality. The Strip has casinos owned by the likes of Wynn Resorts, Las Vegas Sands, MGM Resorts, and Caesars Entertainment. And one of them has an outlandish proposal.
MGM Resorts International, the company that has ownership stakes in more than a dozen hotel-casinos in Las Vegas, has pitched several sports leagues, including the N.B.A., W.N.B.A., N.H.L. and M.L.S., on an audacious proposal to house their athletes and necessary support staff to hold their seasons on a quarantined block on the Las Vegas Strip, according to multiple people familiar with the discussions who spoke on condition of anonymity because they were not authorized to comment publicly.
[…]
On an earnings call Thursday, Bill Hornbuckle, the acting chief executive of MGM Resorts, said the company is in contact with sports leagues. “We have been in an ongoing dialogue with leagues and other sporting activities around televised-only events — I think boxing, M.M.A., N.B.A., N.H.L., etc. — and we can host some of that,” he said. Wild Ideas to Bring Back Sports Might Say More About Cities Than Leagues, The New York Times

Leave a Comment