Economic Impact of Infection: COVID-19
More data please!
Everyone wants to know when their state or country will be in a spot to get back to something resembling normal. I’m not sure when that will be, but there are plenty of voices talking about the economy dying as the result of the shelter in place. So, instead of trying to have a discussion of dollars vs lives, let’s just talk dollars vs dollars.
What costs more: Sheltering for longer or more people getting infected?
We don’t know how this will affect the economy, but based on the Spanish Flu, we have some examples. We also know that massive changes are under way with how we do business. If we start re-opening the economy, there are two things at stake: lives and money.
We often overlook that infections cost money in terms of loss of productivity, disability, hospitalization, and death. Where is the tipping point? To have some idea, let’s make some estimates and make a very simple model.
Model Assumptions
- Death rate: 5.3% from when there were 764,177 cases in the US and 40,591 deaths.
- Hospitalization rate: 20%
- Hospitalization cost: $75,000
- Quarantine time: 2 weeks, so assume loss of productivity
- GDP/Capita: $63,794.00
Simple Numbers
Using these inputs, we can take a look at the economic impact. This assumes these costs don’t increase as the number of cases increase, which is unrealistic. It doesn’t take into account hospital capacity either. It also doesn’t take into account that if a company were to lose a chunk of their workforce for the year, their ability to deliver would drop as well. So I assume random infections when that’s realistic. The effects are potentially compounding, and I hope someone with more time and expertise investigates.
This table can be boiled down to these two graphs:
This model surely has flaws, but it’s simplicity should only tell us what we already know if we ask the question: How do infections impact the economy outside of the loss of life?
My only fear is that this data will only be interesting for people who already agree or who are already looking at real data rather than the people who are shooting from the hip.
Don’t trust me! Make a better model! I only pray that one day, logic and reason will be as contagious as COVID-19.
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