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Earlier this week, I posted a graph from blogger “Arguably Wrong” forecasting total deaths in America under different scenarios. Now, from “Arguably Wrong,” a new model of the tradeoffs of the costs of shutting down vs. death and disease:

Epidemiological modeling – costs of controls
Posted by arguably wrong March 12, 2020

… Assume that completely uncontrolled, the R0 for the virus is 2.0. This probably incorporates small personal, relatively costless changes like better handwashing, sneeze and cough etiquette, etc. Evidence from China suggests that their very strong controls brought the R0 down to about 0.35. We’ll assume that those level of controls mostly shutdown the economy, reducing economic activity by 90%. U.S. 2019 GDP was about $21.44 trillion, so we can estimate the daily cost of these extremely stringent controls in the U.S. as being about $50 billion.

Next, we’ll guess that the daily cost of imposing controls gets harder as you go lower – it’s not linear in R0. Instead we figure that every 1% reduction in R0 costs the same amount. So, to drop R0 from 2.0 to 0.35 we estimate would cost about $50 billion, and thats 173.42 1% reductions, so each 1% reduction would cost about $288 million dollars per day. There’s one other thing to keep in mind for cost accounting: it’s much, much cheaper to impose controls when the total number of infections is low. In the low regime, you can do contact tracing and targeted quarantine rather than wholesale lockdowns. So if the total number of infections in the population is below 1,000, we’ll divide the cost of controls for that day by 500.

Finally, we need to balance the costs of infection controls with the benefits from reduced infection and mortality. All cases, including mild, non-critical cases, cost personal lost income: about $200 a day (median income of ~70K, divided by 365). For critical cases in the ICU, about $5000 a day For critical cases in a general hospital bed, about $1200 a day. For critical cases at home, no additional marginal cost. Deaths will cost $5 million.

The red line is the cost of the disease itself, largely due to deaths. The green line is the cost of maintaining infection controls throughout the epidemic. The dashed line is the total cost, all in billions of dollars. Note that with no controls, our estimate of the total cost to the US is $14.8 trillion dollars, or about 2/3 of the total US GDP.

There are two local minima on the total cost curve. The first is right around R0=1.50. This makes the spread slow enough that hospital capacity is never overloaded, greatly reducing the number of deaths and thus the cost of the disease. This reduces total cost to $7.45 trillion dollars, just about half of what the uncontrolled cost would be. Note that even with this small amount of reduction, the majority of the cost is due to the controls rather than directly due to the disease.

The second local minima is at the far left, right around at R0=0.35, or about what the Chinese managed in Wuhan. This slows the spread of the disease so fast that we rapidly enter back into the much cheaper contact-tracing regime where wholesale lockdowns are no longer necessary. This reduces total cost to $3.11 trillion dollars, half again the cost with only moderate controls.

The cost savings with very serious controls imposed as soon as possible comes from two sources: First, lower disease burden in deaths, hospitalization, and lost productivity. Secondly, it’s cheaper to impose very serious controls because they need to be imposed for a much shorter period of time to control the disease.

So it looks like the best strategy is to Crush It Now, then ease up in late spring?

Obviously, these depend upon the parameters. Mr. A. Wrong is a smart, serious guy who is making reasonable guesstimates, but it would be nice to also have him make his models interactive online so anybody could try out different figures.

Another thing Mr. A. Wrong could do is a graph that’s his take on the various non-quantitative freehand conceptual Flattening the Curve graphs, like this one from Carl T. Bergstrom:

The point of these Flattening the Curve graphs is to show that if we just let the virus rip, our medical care system will be overwhelmed and people with, say, heart attacks will be dying in hospital lobbies because there are no more beds or doctors to care for additional patients. The problem with them, however, is that the blue curve looks awfully dreary because the controls to flatten the curve extend so far into the future before Herd Immunity finally kicks in and ends the crisis. Many look at this graph and figure, At least with the red line, we get it over with faster.

What’s missing from Bergstrom’s graph is that a third strategy, Crushing the Curve Now, might work pretty fast, as we’ve seen in Wuhan. There’s some combination of a harsh shutdown followed by easing off that will keep R0 under 1.0 so the epidemic just dies out. Mr. Wrong has the models to build a graph showing how a strong, fast approach would compare to Do Nothing and Do Something Slowly.

 
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  1. Yahya K. says:

    There are two different approaches to public policy: the theoretical approach and the pragmatic approach. The theoretical (apriori) approach works from abstract concepts and is based on generalizations and ideological frameworks. Theoreticians like Milton Friedman, John Maynard Keynes etc. use this approach. The pragmatic (aposteriori) approach works from empirical evidence. It asks the question “where has this idea been proven to have worked?”. Practitioners like Lee Kuan Yew, the Meiji Reformers, and Dwight Eisenhower etc. used this approach. The pragmatic approach, in my opinion, is a sounder way of formulating public policy. The theoretical approach doesn’t work too well because no mind is smart enough to anticipate all the consequences of a-priori ideas when they are applied in complex systems. People who attempt it sometimes produce devastating unintended consequences (see: Marx, Communism). It’s usually best to stick with the tried and true.

    So, with regards to the corona-virus, which countries have successfully contained the virus the best? Here is a good chart:

    https://pbs.twimg.com/media/ES7biiVXgAENfJF?format=jpg&name=large

    South Korea, Taiwan, Singapore.

    What are some of the things they have done, that have been proven to have worked?

    1) Inform citizens of symptoms and their responsibilities.
    2) Aggressive detention and isolation of anyone tested positive.
    3) Widely-available testing.
    4) Judicious hospitalization of the ill (not just everyone).
    5) Early ban on travel from high-case countries.
    6) Set up a coronavirus hotline. Provide twice-daily updates about the latest cases.
    7) Make sure hospitals have enough equipment so they are not overwhelmed.

  2. Yahya K. says:

    There are two different approaches to public policy: the theoretical approach and the pragmatic approach. The theoretical (apriori) approach works from abstract concepts and is based on generalizations and ideological frameworks. Theoreticians like Milton Friedman, John Maynard Keynes etc. use this approach. The pragmatic (aposteriori) approach works from empirical evidence. It asks the question “where has this idea been proven to have worked?”. Practitioners like Lee Kuan Yew, the Meiji Reformers, and Dwight Eisenhower etc. used this approach. The pragmatic approach, in my opinion, is a sounder way of formulating public policy. The theoretical approach doesn’t work too well because no mind is smart enough to anticipate all the consequences of a-priori ideas when they are applied in complex systems. People who attempt it sometimes produce devastating unintended consequences (see: Marx, Communism). It’s usually best to stick with the tried and true.

    So, with regards to the corona-virus, which countries have successfully contained the virus the best? Here is a good chart:

    https://pbs.twimg.com/media/ES7biiVXgAENfJF?format=jpg&name=large

    Hong Kong, Japan, South Korea, Taiwan, Singapore.

    What are some of the things they have done, that have been proven to have worked?

    1) Inform citizens of symptoms and their responsibilities.
    2) Aggressive detention and isolation of anyone tested positive.
    3) Widely-available testing.
    4) Judicious hospitalization of the ill (not just everyone).
    5) Early ban on travel from high-case countries.
    6) Early ban on schools and universities from opening.
    7) Set up a coronavirus hotline. Provide twice-daily updates about the latest cases.
    8) Make sure hospitals have enough equipment so they are not overwhelmed.

  3. …it would be nice to also have him make his models interactive online so anybody could try out different figures.

    Better yet, turn it into an online video game. I bet it would go (PTE) viral. Collect the data.

    Five Nights at Fong’s.

  4. vhrm says:

    Why would deaths cost $5m? Even on airline cra she’s they’re ~$1m.

    And if we taking about the already aged and infirm the cost might actually be a savings. (as ghoulish as that is to say).

  5. Does he take into account the net benefits to society of having a bunch of people die? The bubonic plague was great for the people who lived through it. I mean, since he’s super serious about counting.

  6. Why aren’t the number of deaths climbing faster over the last couple days? It stands at 40 in the US now. Is it supposed to get really bad in April?

  7. What does Arguably Wong say? He’s closer to the action.

    Arguably.

  8. danand says:

    How much money will will these germ fighting robots save? The have been shown to kill coronavirus.

    Cleaning robot at Medical Center helps fight off coronavirus:

  9. Anon[195] • Disclaimer says:

    Python is preinstalled on your Mac, and A. Wrong’s code is clearly documented. If you change the variable assignments and run the code you can see different possibilities.

    I’m not sure what he’s using for the graphs.

    But an online interface would be good if journalists and Twitter influencers started playing with it and they publicized their results.

    • Replies: @Steve Sailer
  10. @vhrm

    And if we taking about the already aged and infirm the cost might actually be a savings. (as ghoulish as that is to say).

    When the cigarette companies were sued for causing charges to the public health system, their experts were able to show that, in fact, the early demise of smokers actually caused net savings of tens of billions in foregone social security and Medicare expenses.

    I am sure the coronavirus would be no different. It may be a humanitarian catastrophe. But culling sick and non-working people is no loss to GDP.

    That’s one reason the stock market is arguably over-reacting. To the extent it actually prevents people from working, it may lower GDP. But otherwise it will simply move the nation’s spending from some companies (e.g. travel and in-person entertainment) to others (e.g. medical care and home entertainment). It should be heavily disruptive of spending patterns, but it also shouldn’t be a massive overall loss of GDP or corporate profit.

    Again, the main economic cost should be the number of actual workdays lost.

  11. @vhrm

    And if we taking about the already aged and infirm the cost might actually be a savings. (as ghoulish as that is to say).

    When the cigarette companies were sued for causing charges to the public health system, their experts were able to show that, in fact, the early demise of smokers actually caused net savings of tens of billions in foregone social security and Medicare expenses.

    I am sure the coronavirus would be no different. It may be a humanitarian catastrophe. But culling the sick and non-working people is no loss to GDP.

    That’s one reason the stock market is arguably over-reacting. To the extent it actually prevents people from working, it may lower GDP. But otherwise it will simply move the nation’s spending from some companies (e.g. travel and in-person entertainment) to others (e.g. medical care and home entertainment). It should be heavily disruptive of spending patterns, but it also shouldn’t be a massive overall loss of GDP or corporate profit.

    Again, the main economic cost should be the number of actual workdays lost.

    • Replies: @Steve Sailer
  12. Anonymous[286] • Disclaimer says:
    @vhrm

    Steve’s life has got to be worth $5M even if he is getting longer in the tooth.

    • Replies: @JosephB
  13. So would you guys sell all your stocks and get out of the market now?

    Also, what do you think about gold?

    • Replies: @vhrm
  14. tc says:

    According to Scott Gottlieb (former FDA commissioner), the US actually has enough capacity to run 22k tests per day, but only a small fraction is being utilized ( https://twitter.com/ScottGottliebMD/status/1238219908527390723 ).

    There needs to be some kind of app that matches up extra testing capacity with places where it is scarce. The CDC guidelines need to be loosened immediately, and the doctors need to actually be made aware of it.

    Furthermore, if there is any excess testing capacity left over, it should be used for randomized testing of potential superspreaders. Like healthcare workers, NBA players, politicians, entertainers, etc.

  15. vhrm says:
    @JohnnyWalker123

    Heh, that’s the question isn’t it?

    If you’ve got a long time horizon (10+years) then prob just ride it out. If you don’t… well, hopefully not all your money was in stocks (or commodities).

    There’s no way to confidently say if it’s near the bottom now or if it’s going to go down another 10% 20% 30% etc. A danger of getting out now is that you basically lock in your loses and if you wait too long to get back in you’ll be worse of than if you just ride it down and back up (e.g if you got out after the 2008 crash already happened and didn’t get back in until a few years later)

    i have some $ invested with these guys’ robo-adviser:

    https://www.cambriainvestments.com/ which does a diversified portfolio with a “trend-following” overlay to get out when things get really bad and then go back in automatically when it gets a bit better.

    and also some in the VMOT ETF from https://alphaarchitect.com which does the same, though only with stocks

    TBH they haven’t performed great the past year, and i may get whip-sawed, but it’s an automatic, systemized thing that follows clear rules. Takes the emotion out of jumping in and out.

    Also interesting is one of Cambria’s ETFs TAIL, if you really think things will go down more and want to be on that in a relatively safe way.

    https://www.cambriainvestments.com/nervous-market-might-time-strategy/

    • Thanks: JohnnyWalker123
    • Replies: @Joe Stalin
  16. @Hypnotoad666

    One concern is the possibility of permanent lung damage to people who survive a trip to the hospital. Having a bunch of Prime of Life people survive but need to carry an oxygen bottle around for the rest of the lives probably wouldn’t be Good for the Economy.

    But that’s all speculative at present

    • Replies: @vhrm
  17. vhrm says:
    @Steve Sailer

    Incidentally, i was surprised to read recently how oxygen concentrators work:

    You compress air in a container with magic dirt and the dirt absorbs nitrogen.
    So the gas you have left has higher concentration of oxygen in it (which you then collect for use).

    Then you release the pressure and the dirt releases the nitrogen it absorbed, which you vent to the atmosphere.

    Repeat the cycle with fresh air each time.

    https://en.wikipedia.org/wiki/Oxygen_concentrator#How_oxygen_concentrators_work

    It doesn’t seem like it should be so easy…

  18. LondonBob says:

    My Chinese colleague from work’s parents have been holed up in an apartment in Zhengzhou for 45 days with only minimal freedom to go out for supplies by appointment, then a virtual battery of heat and temperature tests to get back in the building.
    The city (10 million) hasn’t had a new case for 2 weeks and they were on the verge of relaxing the strict isolation rules.
    Then some Chinese fella who’d been travelling in Europe returned to Zhengzhou, travelled home on public transport doing his shopping on the way, and it turns out he’s infected.
    I don’t know the precise translation from mandarin but it was something like “the whole city want to string him up”

  19. @vhrm

    This pandemic will do wonders for pension funding deficits. I wouldn’t be surprised to see Illinois state trucks spraying COVID-19 in the streets.

    • LOL: Autochthon
  20. dearieme says:

    There’s a rather silly rush to judgement going on. In about five years time it will presumably be possible to look back and see how the various strategies turned out.

    Even the uselessness of the USA’s CDC and FDA might prove to be small beer.

  21. @vhrm

    I heard financial guru Terry Savage say on WGN-TV today that if you are going to sell, sell into strength as she doesn’t think this is the bottom yet.

  22. JosephB says:
    @vhrm

    I view the “cost” as a societal, rather than financial, cost. My parents are retired, but think any public policy should prefer a state where they are alive vs. one where they are dead. As to how much preference? $5 million is a reasonable ballpark. Perhaps for an epidemic it should be lower, but at that point we’re merely negotiating the price.

  23. JosephB says:
    @Anonymous

    I agree, although it pains me to accept a model that assumes Steve Sailer = Nancy Pelosi.

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