Guest post by Ted Malloch
Most people don’t speak “economics” or quite fathom the dismal science. Yet, they have (perhaps, had) a job, want more and better goods and services, and realize there is this silly thing called, supply and demand which directs prices.
But when it comes to comprehending tradeoffs and balancing one thing or action over another they clam up.
A tradeoff in economics is commonly expressed in terms of the opportunity cost of one potential choice, which is the loss of the best available alternative exchange where you give up one thing in order to get something else that you also desire. A tradeoff is illustrated graphically by a ‘Pareto frontier’ (named after the economist, Vilfredo Pareto), which shows the greatest (or least) amount of one thing that can be attained for each of various given amounts of the other.
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A simple example of a tradeoff is when you have to put up with say a half hour commute in order to make more money. You generally do it.
Risk-benefit tradeoffs refer to the balance of negative and positive effects on achieving a goal, such as one’s health. Medical decisions allow for choices that can affect longevity. Risk can be defined as the extent to which deteriorations in health are perceived by a patient or on a larger scale even an entire population.
All tradeoffs are a kind of compromise that involve giving up something in return for getting something else, i.e., the trade.
In the present Coronavirus pandemic, President Trump, as does any national political leader, has a tradeoff to make.
Weighing the medical benefits that many experts in the field of epidemiology suggest for closing down activity, quarantining the public and shuttering economic output for a period of time in the crisis has certain benefits. It could save a number of lives and lower the extent of the disease, including its rapid spread. But it comes at a real cost. That cost is measured as the economic good of income, investment, economic growth and general prosperity that would otherwise result.
Man does not live by bread alone, as the ancients said. But they didn’t live without it, either.
The most important question of the day, month, year, is when to reopen the economy and stop the haemorrhaging we are experiencing in overall economic damage.
The two goods—medical health and safety AND economic prosperity, each have their own curves. We have focused almost exclusively on flattening the morbidity curve over the past few months or so. We see diminishing returns as we make progress. Now we are rightly starting to ask, when we can resume the economic curve that was until the pandemic headed in a positive upward direction.
THE TWO CURVES INTERSECT. PRESIDENT TRUMP HAS TO MAKE THE CRITICAL CALL. IT IS WHAT LEADERS DO. HE HAS TO LISTEN TO BOTH THE DR. FAUCI’S AND TO THE DR. NAVARRO’S, THEN DECIDE.
He has to balance the cost to the US economy and its greater public against the benefit of the health of what is a declining number of people, mostly in a certain higher age group, with underlying conditions.
The numbers tell the story.
But this is not narrowly a scientific choice. It is a legitimate trade off. It is a policy decision of the first magnitude.
Since the medical models have been so deplorably bad in predicting outcomes, (IMHE: http://www.healthdata.org/covid/media, especially) it behoves us to look more closely at the economic statistics, because they do not lie. Markets are gaugeable. The unemployment numbers, diminished growth rates, bankruptcy and destruction of wealth cannot continue, or we will witness a deep and wide depression and all that that implies.
Already, we see China going back to work. Germany and Denmark are returning to normal, even reopening schools. Brazil, Iceland, Japan and Sweden never closed down. And South Korea, Hong Kong and Singapore, seem to have made the decisive trade off and moved to restart their economies, even if they continue to wear facemasks and practice social distancing.
The US must make a decision by Easter.
Easter is a religious holiday of renewal, rebirth and resurrection. It would be fitting if President Trump on that very day announced that the US economy, under his careful watch, would start to reopen by the end of April.
That could be on a rolling basis; in certain communities first, and then phased in across the land; and, perhaps in certain critical sectors before others. The Green lLght—the tradeoff – would send a signal that we will and have started beating this novel virus. It would work magic. It would also reassure the re-election of a true wartime leader.
THEODROE ROOSEVELT MALLOCH is a scholar-diplomat-strategist whose latest book is Trump’s World: GEODEUS.