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We’re missing cost benefit analysis in our COVID19 discussion

Summary:
Cost-benefit analysis is a useful tool for working out what things to do. Most activities have costs, even if it’s only the time it takes to do them. We could have used that time to do something else. We ask if the gain we achieve is worth the time spent doing it. Some activities have risks, and we ask if the benefit derived from the activity justifies the level of risk involved in doing it.Some surprisingly mundane activities have measurable risk of serious injury or death, including going upstairs, taking a bath, or crossing a road. Some activities have more obviously higher risks to be weighed against the benefits. Mountaineers know that people are killed every year climbing mountains, but do it anyway for the thrill of performing a difficult and dangerous task, and the exhilaration of

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Cost-benefit analysis is a useful tool for working out what things to do. Most activities have costs, even if it’s only the time it takes to do them. We could have used that time to do something else. We ask if the gain we achieve is worth the time spent doing it. Some activities have risks, and we ask if the benefit derived from the activity justifies the level of risk involved in doing it.

Some surprisingly mundane activities have measurable risk of serious injury or death, including going upstairs, taking a bath, or crossing a road. Some activities have more obviously higher risks to be weighed against the benefits. Mountaineers know that people are killed every year climbing mountains, but do it anyway for the thrill of performing a difficult and dangerous task, and the exhilaration of a successful achievement. 

Cost-benefit analysis only works if both sides of the equation are considered, the gains as well as the possible downside. One problem today is that people have become so accustomed to a safety-first culture that they look only at the risk and ignore the benefits. Yes, some children might sustain injuries playing conkers, but they derive pleasure from playing it, a pleasure denied them when over-cautious schools ban the activity. 

Traditional village sports, such as annual cheese-rolling, are now routinely banned by health and safety officers looking only at the possible sprains and fractures that might come from rough and tumble activities, and ignoring the pleasure derived from participating in traditional community activities. Most people can’t live in cotton wool, and don’t want to. They want to make their own decisions about the balance between risks and benefits.

The precautionary principle represents this culture taken to extremes, with benefits ignored because of possible unknown and unquantifiable risks. Genetically modified foods have been widely consumed in the US for many years without ill-effects. But the safety-first brigade tell us there might be risks involved. Indeed there might be, as there might with more conventional cross-breeding, but the gains of abundant and cheaper foods, and of efficient land usage, seem to far outweigh that unknown and seemingly minute risk on the other side.  Even so, the EU culture is hostile to such innovation, as it seems to be to most innovation — seeing only dangers, instead of opportunities.

Cost-benefit analysis has been notably absent in handling the corona pandemic. The economy has been virtually shut down to minimize risk, without regard for the benefits that a functioning economy provides. People have been confined to their homes to minimize possible infection, without consideration of the benefits that derive from social interaction, in terms of mental health and happiness. 

The authorities do not seem to have considered trying to achieve a better balance between risk and reward, taking an increased, but acceptable, degree of risk in return for keeping the benefits of a still-functioning economy and social interaction tempered by cautious behaviour. It will be instructive to see the results of Sweden’s attempt to achieve such a balance. 

There is no right degree of risk and reward. These are matters of judgement. But both should be taken into account and weighed against each other. That’s what cost-benefit analysis is all about.

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