COVID 19:The Value of Lives Saved versus the Cost of the Shutdown

Economics is all about trade offs. In response to COVID 19 politicians have made these decisions. Ironically, the politician most directly responsible for well over 10,000 deaths, New York Governor Andrew Cuomo, has argued that human life is’”priceless”’ But politicians always put lives at risk and imply a value. Had a national health care system existed as progressives like Gov Cuomo support, his defense may well have been that those deaths were justified as a matter of national health care policy.

The practical pending question is who should get the vaccine first. Ezekiel Emanuel, Obama Care designer and Biden COVID adviser, would give the over 65 group, which accounts for 80% of U.S. deaths, the lowest priority for the vaccine based on their age, whereas the CDC recommends the opposite based on risk.

Productivity Finances Health Care

In a purely private system, the population would save for lifetime health care expense directly or through insurance companies and decide to what extent they would do so. Individual “value of life” determinations would depend on income and wealth, both reflecting individual productivity. In a fully socialized system, all lives would be valued equally based on the country’s ability to pay, reflecting average national productivity, I.e., still subject to aggregate fiscal and actuarial constraints. Whereas about 10% of households in the French National Health System top it up with private insurance and care, the British NIH system operates more like the Soviet System, with the political elite leaving the country for private care beyond the standard.

Market based systems require a large life cycle accumulation of capital, for retirement and medical expenses, both back-ended and virtually indistinguishable. Socialized systems could – and arguably should – do the same.The U.S. has a hybrid (many would say Rube Goldberg) health care system, with Medicare, like Social Security, entirely pay-as-you-go with a faux Trust Fund. Social Security has relied on general tax revenues for over a decade and Medicare will as well in about four years.

National health care systems are funded entirely by progressive taxation. In the US. payroll taxes and progressive income taxes pay for about half of all insurance costs: Medicaid (20%) covers the poor, Medicare (15%) the elderly, Obama Care the working population (16%), the military (5%) and almost all the rest receive tax-subsidized employer insurance. Government also provides partial explicit unemployment insurance for lost productivity paid by taxing workers, with an occasional top-off in a pandemic.

Society benefits from the additional wealth accumulation of funded systems in the form of enhanced national productivity and economic growth, expanding the tax base. This allows the wealthy to opt out, but progressive politicians may find the increased longevity “unfair” and tax that wealth away, implicitly an advanced estate tax. Liquidating wealth has the same macro-consequence as increasing government debt to finance current health care, reducing future well being and potential tax revenues.

The Value of Life: to Whom?

Because productivity limits potential health care expense, lives aren’t priceless except in sentimental poetry and political rhetoric. Most economists have applied the value of a statistical life (VSL) to COVID 19 deaths, usually set at $10 million. This relates to a hypothetical market price of risk to construction workers that is mis-specified, mis-calculated, and as I will show irrelevant to the task at hand. For one thing, using one value for all ages is misleading for many reasons.

James Broughel and Michael Kotrous (B&K) use the net present value of all gross future earnings by age as a measure of the COVID loss due to death. But this is the upper limit of what individuals can spend on everything necessary to live, pay taxes, etc. If you think of it as an amount you could loan the individual for life saving health care to be paid back, it would be much less, only their taxable surplus labor. I accept the analogy to indentured servitude or even slavery, but even in a socialist system that is essentially what happens as resources are involuntary diverted (an involuntary Obama Care tax, according to the Supreme Court Chief Justice).

COVID 19 targeted the elderly infirm. Democracies spend a hugely disproportionate share of health resources on the infirm elderly because their political power far exceeds their remaining productivity and often their remaining quality of life. Medicare in the U.S., for example, doesn’t pay for long term end of life care, generally defined as over two weeks. Nevertheless. 10% of all Medicare expense occurs in the last month of life. The British system is also not willing to pay just to postpone death. The aging of the baby boom generation will require a big Medicare tax increase and/or a large reduction of end of life expenses.

A significant majority of COVID 19 victims age 75 and above (over 95% by some estimates) were already receiving expensive treatment when their lives were shortened by by COVID for weeks to months, a net saving to the health care system. So I chose a net average value of life lost for the >=75 COVID 19 victims of zero (heartless, but I’m almost there).

The rest of the Chart (below) starts with B&K total net present value of future earnings. I value the surplus at 10% for the >=65 age cohort, which is coincidentally about what the British NIH will pay to provide an additional year of a quality life – called a QALY.

Value of Lifes

Due to COVID 19



$ in thousands

Net PV of future



maximum pandemic

US total

total net value


total value

in thousands



of lives lost


of life


























































I chose 20% of the as the net surplus value of life for the working age population. Note that this assumption reduces the B&K estimated costs of COVID deaths from $44 billion to $7.7 billion, which turns out not to be very significant to the final conclusions.

Had this virus killed about as many, but focused on the prime working age brackets like the 1919 Influenza, the toll would have been $29 billion, seven and a half times greater but still less than the $1.8 trillion valuing all the lives lost equally at $10 million under the VSL system (for high risk construction work, which I once did for $5/ a rigger on the Sagamore bridge). Parenthetically, the death benefit for US soldiers conscripted to fight to “make the world safe for democracy” in 1919 wasn’t $10 million or even $1 million 2020 dollars, just a free burial with a headstone. That’s more than most who died in that pandemic got. Historically, countries – particularly socialist – have put very little value on life.

This discussion is meant to ballpark the costs of lives lost to COVID and illustrate the importance of the age demographics. Others would fine tune the value of life, e.g., Democrats valuing community organizers highly, Republicans small businesses but not trial lawyers, etc. Even had the death count been double with the same age demographic, the cost would still only be $15 billion, not trillion. Governor Cuomo likely made a triage decision to save the hospital space for younger patients. That turned out not to be entirely necessary, but was the correct executive triage decision in a pandemic given the forecast. His lock downs saved medical costs up front, offset by a greater subsequent revenue loss.

Indirect Health Care Costs

In the case of the COVID 19 political pandemic the data was scarce, misleading and frequently mis-interpreted the existing models seriously flawed or inapplicable, medical understanding imperfect and learned from scratch, and understanding of how it spread continuously revised. But even had CDC epidiimological scientists had perfect knowledge and foresight, for them COVID 19 lives are implicitly priceless and other lives not counted as outside their area of responsibility. Executive decisions have to be made regarding national health.

Allocating resources to COVID has caused a crisis of infant mortality, and a host of other problems, from cancer to suicide. A quarter of those in the age group with the highest value of life seriously contemplated suicide. The COVID 19 forced consolidation is predicted to permanently raise future health care costs. While total deaths are still above trend line due to COVID 19, this may reverse in future years as a delayed response for these other causes.

The Economic Consequences of Shutting Down Education and the Economy

The OECD estimates the costs of shutting down the U.S, education system at $15 trillion. There does not appear to have been a benefit as compared to Sweden, where schools stayed open.

Most estimates of the economic costs of the shut-downs are between $1 & $2 trillion. But there is arguably more downside risk than upside potential to those forecasts based on the drag of the $3 trillion to $6 trillion in additional federal debt, and rising bankruptcies.

B&H make a heroic attempt to quantify the net economic costs and benefits, concluding: “net benefits of suppression policies are likely substantial, possibly as high as $800 billion, but net benefits may also be close to zero.” What assumptions are necessary for the benefits of lock downs to exceed the costs? First, the B&K savings include the full value of estimates of lost productivity, far above what private individuals or public health would insure (and wildly over-estimates the productivity of my age cohort) but this only closes the gap by about $40 billion. Second, they cite models indicating that the death toll would have been five to seven times greater without the lock downs, which has been later shown to be highly unlikely. The experience of Sweden refutes any improvement in the death rate.

Perhaps most importantly, the “slavery analogy” made by AG Barr is applicable to valuing lost productivity due to lock downs. While some households can maintain there productivity, others are able only to replace outside services with household do it yourself chores. The fact that they get government transfers doesn’t reduce the productivity loss, which could easily be 90% or more.

While there are scenarios in which the total lockdown would be a net benefit, it appears for COVID to be a statistical outlier.

Banning politicians to the basement out of communication may be valuable, but government suppression over and above common sense or serious citizen input is hard to justify with fiscally and actuarially sound economic-cost benefit analysis.

Kevin Villani

Kevin Villani, chief economist at Freddie Mac from 1982 to 1985, has held senior government positions, has been affiliated with nine universities, and served as CFO and director of several companies. He recently published Occupy Pennsylvania Avenue on the political origins of the sub-prime lending bubble and aftermath.

18 thoughts on “COVID 19:The Value of Lives Saved versus the Cost of the Shutdown”

  1. The real cost/benefit problem we have is that for most politicians, there is absolutely no cost to them of their actions, so their only incentives are to do what personally benefits them, and their cronies/political allies. There is nothing Andy Cuomo could do that will ever make him lose reelection. He is going to sit there forever until he makes a hopeless run for president, or is indicted for corruption. There is nothing he or his party could do that will ever make them lose power in NY. Which means that fundamentally the people of NY are hostages to their political whims. (Yes, “the people should get what they vote for!111!1!!!”, but thanks to one person, one vote, most of the state has no political power, and many people who vote against the Dems have left, and the ones who remain are utterly demoralized.) So it’s actually not in his interest at all to try to succeed at this point. Far better to trash the state and blame it on Trump. It’s quite horrifying.

  2. Definitely agree, Brian, but I think it’s even worse since the only way Cuomo could lose his power would be to make the majority of Democrats mad at him so his incentive is to cater to whatever they demand.

  3. The real cost/benefit problem we have is that for most politicians, there is absolutely no cost to them of their actions, so their only incentives are to do what personally benefits them,

    This also applies to government employees whose compensation has continued. One ironic exception is firefighhters in California who have had a 10% pay cut.

  4. The entire system runs on arbitrary and epic half-assery. There is no accountability for politicians or government bureaucrats that is linked to either their performance or their morals. The few occasions where they are held accountable and receive the slightest amount of censure (see Billy-boy Clinton’s impeachment as an example), the event is rarely connected to either performance or any real criminal act. While Clinton was held accountable for lying under oath and tried for it, the reality is that the specious little prick should have been on trial for high treason related to the selling of his office. For evidence of that, see Loral and everything related to that sale to China. Among other things, like locking up all that coal in Utah at the behest of the Indonesians who dumped billions into the Democratic Party.

    The system is capricious, and if you think of the whole of it as a set of Skinner boxes for training politicians and leaders, you start to realize that the behavioral conditioning they get is unlikely to produce anything like an honest politician.

    My take on the whole thing is that while the Founders were amazingly prescient, they had a blind spot: They did not think of what would happen once a class of professional politicians and bootlicking sycophants thereof grew up and took over. As such, there are no checks and balances for such creatures built in.

    Me? I think they’re ‘effing inevitable, and the system ought to reflect it. You want the minimum of corruption? Put everything out in the open, such that if Microsoft wants to get legislation passed, it pays for it up front. Give the f**kers a monopoly if they want it–So long as they pay for it, and it goes up for bid. With the money going into the Treasury, instead of into the pockets of the legislators.

    Same with foriegn aid–You want it? You buy it. Pay me, bitches–You want American troops to throw the Iraqi Army out of Kuwait? Here’s the auction–You win it, you get it, and the US government keeps the cash to pay out to the widows and orphans, and for what it cost us to do the dirty work for you. Same with NATO. Don’t want to contribute? Fine; here’s the f**king bill. Don’t want to pay? Buh-bye, hope you’ve been working on your Russian-language skills.

    Get the corruption out into the open. Hell, with the right encouragement, like giving Pelosi and Feinstein a percentage of the take, I bet money we’d erase the debt in short order, and keep those two busy bringing money in. I mean, they’re old and raddled-out whores anyway, why don’t we become their pimp?

    Politicians and their families ought to be audited at the beginning of their term, and again when they go to run for re-election. Unexplained income gets confiscated, and they go to jail in proportion to how much it is. Dodges like book contracts and all the rest should be illegal, period. I shudder to think what all those book deals are getting the publishers, because other best-selling authors sure as hell don’t make that kind of money for advances. And, judging from the volume of books I see on remainder shelves, I doubt they’re really selling like that, anyway…

  5. “My take on the whole thing is that while the Founders were amazingly prescient, they had a blind spot: They did not think of what would happen once a class of professional politicians and bootlicking sycophants thereof grew up and took over. ”
    No, no, no. They of course thought of that. The problem is that the system they built, which spread power around among different sectors of society and was designed to prevent that, has been basically completely dismantled. The last vestige of it is the existence of the Senate, but even that is fundamentally unrecognizable from its original intent.

  6. The Progressive “movement” in the 1890 to 1920 era is what killed off the original concept of government. The Civil War did a lot but the system snapped back pretty well until Wilson and the Progressives. The income tax provided the loot. Direct election of Senators made them tame and the Federal Reserve opened the spending spigot.

    The 1920s, instead of being a time of corruption, were the boom era of new technology. Somewhat like then 90s, which ended with a recession, the 1929 panic was the result of the death of Ben Strong. Coolidge predicted the crash but believed that the NY Stock Exchange was the responsibility of the NY Governor, a guy named Roosevelt.

    And here we are.

  7. @Brian,

    I’m pretty sure that were you to take any of the Founders forward to our times, and let them get a full understanding of what has developed…? Yeah; aside from losing their s**t on their descendants, they’d admit that they did not foresee the modern condition at all. The national mass media, for example? The speed of physical communication, and the potential for corrupting government agencies to influence life down at the lowest levels furthest from the centers of government?

    I don’t think they foresaw the scale of such things, and would act to increase the checks and balances they built in.

    I will second your point about the various and sundry changes we’ve made. I think we ought to do a reset, and return everything to the original language in most areas. Particularly with regard to direct election of the Senate; that’s been one of the biggest influences, via removal of the state government’s role in stopping Federal excesses. The Senate should have acted to stop Obamacare; direct election made that highly unlikely, because what modern Senator gives a damn what his state government thinks about things? The voice of the state governments has been silenced, replaced by super-Representatives who sit for six years, and the whole thing was passed in an absence of understanding. People say that modern Americans don’t understand their government, but the 17th Amendment is proof that problem goes way back…

  8. Actually, I suspect they’d say, “Yep, that’s exactly what government turns into, every time. But, um, people, you DO have lots of guns you know…”

  9. I agree about the 17th amendment but would the absence of the 16th have kept us out of WWI? I once startled a British friend, a retired Colonel in the British Army, by saying we should have stayed out of WWI. I added they should have too.

    Imagine our world with no WWI. Another Franco-German War OK.

  10. I don’t think it’s quite fair to lay the depredations of professional politicians at the feet of the founders. Professional politicians didn’t exist then and probably not until 20-30 years into the 19th century. The few elected bodies at the time were very much amateurs. This includes the English Parliament. Members were elected from a very small franchise and it was a part time job.

    What they spent considerable effort to avoid were the trappings of a royal court. They largely succeeded for 140 years. Roosevelt drastically limited his public appearances to hide the fact that he was paralyzed. He expanded his cabinet to give himself a full measure of courtiers. With the enormous expansion of the government with first The New Deal and then WWII, it’s only gotten worse.

    I think that a lot of Democrats seek ever higher office just so they don’t have to spent time with their constituents without the buffer of security and staff. What’s the largest city where the mayor doesn’t move around with a motorcade of at least 3-4 black SUV’s?

    I think the founders missed term limits because almost all of them had made very considerable financial and personal sacrifices to participate in the various congresses and conventions. They couldn’t imagine that anyone would ever want to make it a career or could afford to. I’ve thought that we should reduce the pay of Congressmen and Senators by $20,000 every two years until we start noticing that there are seats unfilled which would indicate the proper level of compensation.

    The idea of open auditing of public servants has a lot going for it.

    With placing a value on the deaths and avoided deaths we are back to getting politicians to admit that water runs down hill. Would the 38-53 billion (5-7 times your estimate) have paid for the first week of the lockdown?

    Cuomo’s triage decision is only defensible if there was no other alternative. Florida shows that it was negligent homicide at best. At least if you assign any non monetary value to human life. This is usually the place where Libertarians start going around by themselves in ever tighter circles, ignoring and ignored by the main stream.

  11. That is an interesting link to the Broughel & Kotrous paper, Mr. Villani. Thanks for that.

    Bottom line seems to be that you are proposing to value the average life shortened by Covid-19 at around $44,000, versus the standard $10,000,000. That average is much lower because of your justifiable decision to put no net economic value on the life spans of those over 65 — which means (stipulating for now that the CDC numbers on deaths with Covid-19 are meaningful) that about 60% of Covid-19 life shortenings have no economic impact, since the majority of people counted by CDC are over 65. If we consider only the people under 65, it still amounts to only about $103,000 per person — only about 1% of the standard $10,000,000 value often used in analysis.

    All these kinds of calculations are very tricky — what to put in, what to exclude. As you point out in the article, Mr. Villani, we now know that the Lock Down governmental response may have extended the lives of some people but has also shortened the lives of others (e.g. some unfortunate babies, mothers, cancer patients, cardiac patients). Are we ahead of the game economically by trading out some lives for others?

    Just for grins, we could take your 20% of the Net Present Value of future earnings of a 45-year old as an approximation for the economic loss due to those premature deaths caused by the Lock Downs — $220,000 per person. That would suggest the premature deaths of only about 35,000 people due to lockdown would be comparable to the economic loss from the CDC’s 176,000 Covid shortenings. If we lose 1 person for ever 5 whose lives were extended by Lock Downs, the policies have done no economic good — only shifted the loss from one group of people onto another group of people.

  12. }}} The Civil War did a lot but the system snapped back pretty well until Wilson and the Progressives.

    Come on. To be honest. Teddy, really, was the start of all this crap. He was the one who pushed through all the first alphabet agencies and acked the push to change the system from “laissez-faire” government to “we can fix it!” government.

    I’d say your number of 1890 is a bit early for much the same reason — while the initial growth of the movement which Teddy rode upon was in play, then, it really starts more about 1900.

    Prior to that, we have Grover Cleveland, who, I cite, was the last truly GREAT PotUS — he was the LAST one who understood the limitations of government and adhered to them — from the wiki:

    In 1887, Cleveland issued his most well-known veto, that of the Texas Seed Bill.[115] After a drought had ruined crops in several Texas counties, Congress appropriated $100,000 (equivalent to $2,845,556 in 2019) to purchase seed grain for farmers there.[115] Cleveland vetoed the expenditure. In his veto message, he espoused a theory of limited government:

    I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the government, the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.[116]


    And this was hardly his first or only expression of this attitude:

    “When we consider that the theory of our institutions guarantees to every citizen the full enjoyment of all the fruits of his industry and enterprise, with only such deduction as may be his share toward the careful and economical maintenance of the Government which protects him, it is plain that the exaction of more than this is indefensible extortion and a culpable betrayal of American fairness and justice … The public Treasury, which should only exist as a conduit conveying the people’s tribute to its legitimate objects of expenditure, becomes a hoarding place for money needlessly withdrawn from trade and the people’s use, thus crippling our national energies, suspending our country’s development, preventing investment in productive enterprise, threatening financial disturbance, and inviting schemes of public plunder.”
    Cleveland’s third annual message to Congress,
    December 6, 1887.[124]

    While the above two are pre-1890, I think his second term (1892-1896) showed similar attitudes for the most part.

    I love Teddy for a number of reasons, but his movement of the US Federal Government from its proper sphere of government to the modern “We Can Fix It” version is not one of them. He was hardly alone in this, it was clearly a widespread shift, but he got in front and led, rather than acting as the conscience and resisting it.

  13. }}} The 1920s, instead of being a time of corruption, were the boom era of new technology.

    There was also a major shift from an agrarian to an industrial basis for the American economy.

    From 1880 to 1920, fully half the US labor force in Agriculture was made available for industrial development as well as ancillary trade income (this also exacerbated the conditions that led to the Great Depression, of course).


    Only 26% of the work force does not seem like much, but it’s a four-fold increase in people involved in production…
    Trade also boomed in the same timeframe, with the 1870 force of 1,310 more than quadrupling to 5,845, thus making that production more valuable.

    Source: (table 1, page 3)

  14. This is another case where the actual numbers don’t matter while their order of magnitude is crucial. This is also where the can’t-count-past-ten-with-their-shoes-on media will fail us. This would happen even in the absence of a political agenda to make everything Trump’s fault and a commercial agenda driven by the profitability of sensationalism.

    While it would seem important to get it right to prevent making the same mistake again, it probably won’t matter in six months. The reason isn’t some faith in good sense prevailing, but my calculation that the true cost will manifest itself. That even the stupidest politician will have to admit that they can’t do it again. Those that try will, if they’re lucky, find themselves out of power. The unlucky will trouble us no more.

  15. You’ve got at least three domains of coupled ‘system’ here. Infectious contagion, policy compliance and effectiveness, and economics.

    If one of the coupled systems is poorly modeled enough, it does not matter how well you model another. If one of the coupled systems has enough noise, it does not matter how noise free you can make another.

    Does everyone remember analog broadcast TV well enough to reason from that?

    Why do I think policy might be particularly noisy?

    a) There’s the basic mental experiment of whether a centrally designed policy strictly followed can do what is claimed. One might conclude that it can only be effective where an educated population is taking the leeway to patch all of the holes caused by the information that the central policy makers do not and never can have. Such a population would not need micromanagement by central policy organs, and would be aware enough about self sourced bacterial infections to be making the trade off decision, instead of blindly following a policy.

    b) If a central policy of “do not have sex” could be expected to be followed, there would be no need for pre-teen sex education, or for legalized abortion. Supporting either of the latter is a belief that “do not have sex” is not a viable policy.

    c) The ‘BLM has a compelling public health justification’ was effectively an argument that avoidable deaths due to Covid would be less than a year’s worth of benefits from the BLM protests.

    Imagine an autistic kid comforting themselves by stimming, twisting the dial on a TV with power but no antenna.

    If the exercise of figuring this out does us that much good, perhaps it is worth it.

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