Week 3

Measuring Benefits and Costs, Roadmaps to Reopening (and what’s with negative oil prices?)

This week we address the issue of the (potential) tradeoffs between the economy and health. We kick off with Joshua Gans’ introductory chapter from his forthcoming book that uses a production possibilities model where the shock from the epidemic introduces a convexity into the frontier, upending our traditional thinking. We will likely revisit Gans when we talk about innovation and the development of medical technologies.

The Conover and Thomson-DeVeaux pieces provide a pretty interesting overview on how quantifying the willingness to pay to reduce mortality risk translates into the unfortunately-titled value of a statistical life (VSL).

Matthew Yglesias summarizes a poll from the IGM forum on economists’ views of moving forward, and Tyler Cowen at Marginal Revolution pulls together a number of sources addressing these questions. This tees up two research papers that provide some preliminary estimates along these fronts that suggest we should sit tight for a bit. The slides for 4/23 walk through how the Imperial College risk estimates (Ferguson et al., 2020) are integrated with the VSL concept to give a perspective on the value of social distancing and safe-at-home type measures.

Moving forward, we have a series of papers about moving forward. Ed Yong at The Atlantic warns us that we are in this for the long haul: ““I think people haven’t understood that this isn’t about the next couple of weeks.  This is about the next two years.” That notwithstanding, we have two roadmaps for reopening — one from Harvard and one from the American Enterprise Institute. The overlap is considerable.

Finally this week, we saw a bizarre bout of negative oil prices. I suggested we drain the Viking pool and store the oil in there for a bit, but that didn’t go over as well as I thought with the swimmers. James Hamilton knows more about oil markets than most people, and he provides us some insight into what just happened.

Benefits and Costs

Moving Forward

Negative Oil Prices

  • James Hamilton, “Negative Oil Prices,” Econbrowser, April 21, 2020  (for those of you who wanted a finance course!) 
Gans, Economics in the Age of COVID-19, MIT Press