Assessing the wellbeing impacts of the Covid-19 pandemic and three policy types: suppression, control, and uncontrolled spread

The COVID-19 pandemic has forced a trade-off between limiting its health impact and maintaining economic activity. Welfare economics offers tools to conceptualize this trade-off. We review four such tools: value of statistical life (VSL), value of statistical life years (VSLYs), quality-adjusted life-years (QALYs), and social welfare analysis. We find the last tool to be superior. We discuss how to choose policies that affect people’s wellbeing differentially. We argue for evaluating policies using a social welfare function, which should especially consider increasing the wellbeing of the less well off. We propose a model to illustrate how this framework can evaluate two policy types in response to the pandemic: eradication of the virus, and more lenient control of the spread. The evaluations depend on empirical facts but also on key value judgments about the relative importance of health and concern for the worse off. The purpose of this brief is not to make precise recommendations, as conditions vary widely across countries and over time, but to provide a methodology.