GOVERNMENT MANDATED LOCKDOWNS DO NOT REDUCE COVID-19 DEATHS: Implications for Evaluating the Stringent New Zealand Response
The following extracts are published here with the kind permission of Professor Gibson. The full paper can be downloaded from the link at the end…
Abstract:
The New Zealand policy response to Coronavirus (Covid-19) was the most stringent in the world during the Level 4 lockdown. At least ten billion New Zealand dollars of output (3.3% of GDP) were lost then, compared to staying at Level 2. For lockdown to be optimal requires large health benefits to offset these output losses. Forecast deaths from epidemiological models are not valid counterfactuals, due to poor identification. Instead, I use empirical data, based on variation amongst United States counties, over one-fifth of which just had social distancing rather than lockdown. Political drivers of lockdown provide identification. Lockdowns do not reduce Covid-19 deaths. This pattern is visible on each date that key lockdown decisions were made in New Zealand. The ineffectiveness of lockdowns implies New Zealand suffered large economic costs for little benefit in terms of lives saved.
I. Introduction
On March 23, 2020 New Zealand’s Prime Minister announced a nationwide lockdown for four weeks, to start on March 25. On April 20, the lockdown was extended until April 27. The lockdown was Level 4 of the Coronavirus alert system – the ‘eliminate’ level. The levels had been introduced just two days earlier, starting first at Level 2 – the ‘reduce’ level – and jumping to Level 3 – the ‘restrict’ level – during the Prime Ministerial statement. With these decisions, between March 25 and April 27, New Zealand had the most stringent settings for Coronavirus in the world, based on 17 indicators of government response (Hale et al. 2020). Figure 1 shows that the New Zealand stringency index from March 25 exceeded that for countries like Italy, Spain and France who by then had thousands of Covid-19 deaths.
Treasury assume that output at Level 4 was reduced by 40%, at Level 3 by 25%, and at Level 2 by 10% to15% (Treasury, 2020). Even with a V-shaped shock rather than a U or L, 33 days of Level 4 and 19 of Level 3 (that ended May 13) would reduce output by ten billion dollars (~3.3% of GDP) compared to staying in Level 2 throughout. If there is hysteresis in unemployment, or spillover effects in business failures, then long-term economic costs of jumping to Level 4 are likely far higher. Roughly speaking, the brief time at Level 2 had restrictions slightly less stringent than what Australia maintained throughout (Figure 1).
One would assume that rigorous cost-benefit analyses accompanied the decision to set the most stringent policy response in the world. Yet Cabinet papers released six weeks later suggest not: the government ignored advice from the Ministry of Health to stay at Level 2 for 30 days, instead jumping to Level 3 after just two days, then Level 4 two days later (Daalder 2020). Two epidemiological simulations seem to have played a key role: the Imperial College forecast of 0.51 million Covid-19 deaths in the U.K. and 2.2 million in the U.S. if no changes in individual behavior or in control measures occurred (Ferguson et al. 2020) and forecasts by University of Otago academics with an on-line simulator (http://covidsim.eu) that ranged from seven Covid-19 deaths (assuming low infectiousness, R0=1.5 and 50% general contact reduction for nine months) to 14,400 (highly infectious, R0=3.5, just 25% contact reduction for six months), with a mean across the six forecasts of 8,300 deaths (Wilson et al. 2020)…
… A final example is the University of Otago forecasts, which had assumed no case tracing and isolation. Using the same simulation model, Harrison (2020) set tracing and isolation success at 50 percent and forecast deaths fell by 96 percent…
Whether a county had a lockdown has no effect on Covid-19 deaths; a non-effect that persists over time. Cross-country studies also find lockdowns are superfluous and ineffective (Homberg 2020). This ineffectiveness may have several causes. Real-time activity indicators suggest the threat of Covid-19, rather than lockdown itself, drives behaviour (Chetty et al. 2020)…
…
3. Summary and Implications for New Zealand
Lockdowns are ineffective at reducing Covid-19 deaths. Variation amongst counties in the United States, where over one-fifth had no lockdown, shows no impact from lockdowns. Specifically, one cannot reject the hypothesis of zero difference in deaths between lockdown and non-lockdown counties, even after three months. Thus, there is no evidence to suggest that lockdowns saved lives. Using these results to inform a counterfactual of what would have happened if New Zealand had not gone into a Level 4 lockdown faces the criticism that the setting is different. Yet it is a universal force of human nature – privately taking steps to reduce exposure to a new risk – that likely makes lockdown ineffective compared to just practicing good hygiene and social distancing.
A non-economist might say ‘what difference does it make?’ If people would reduce interactions anyway, due to perceived Covid-19 risks, having government force them to stay home would seem costless. Yet as economists know, a government diktat approach runs into the central planning problem, namely, that no central planner has all the information (collectively) held by parties involved in voluntary exchange (Hayek 1945). For example, absent lockdown, if a butcher felt they could operate safely and if customers felt they could safely shop at this butchery, voluntary and beneficial exchange could have occurred. Instead, under the central planning approach applied in New Zealand, butchers were shut but supermarkets selling meat were not. Potentially, much economic surplus (for both consumers and producers) was lost.
In terms of implications for the future, these results add to the cross-country evidence that lockdowns were ineffective (Homberg 2020, Stone 2020). This was also the prior view in public health. Inglesby et al (2006, p.371), for example, noted that ‘It is difficult to identify circumstances in the past half-century when large-scale quarantine has been effectively used in the control of any disease.’ So, when the next pandemic occurs, the Covid-19 lockdowns should not be considered a success that should be replicated, no matter how strong an attempt by media and others to present that narrative. In terms of the (recent) past, the ineffectiveness of lockdowns implies that New Zealand suffered large output losses, of ten billion dollars or more, for no likely benefit in terms of lives saved as a result of the decision to move almost immediately from Level 2 to Level 4. Notably, this decision went against Ministry of Health advice to stay at Level 2 for 30 days. If decision-making from March and April is reviewed, any claim that lockdown was necessary to save lives can be treated with strong scepticism. It is especially concerning that there were data available, on the dates of those key decisions, that show that lockdowns are ineffective at reducing Covid-19 deaths.
To read Professor Gibson’s full paper (complete with figures, footnotes and references), please download the document by visiting the economic research website HERE.