Robert N. Stavins, an RFF university fellow, Harvard professor, and RFF Board member, recently hosted Scott Barrett on an episode of his Environmental Insights podcast. Barrett, a professor at Columbia University’s School of International and Public Affairs, specializes in both climate change mitigation and disease eradication. In the podcast interview, Stavins and Barrett discussed lessons from historic pandemics, how economists can help with policymaking surrounding the coronavirus, and what the “post-pandemic economic equilibrium” might look like. An abridged version of their conversation is transcribed below.
Robert N. Stavins: How was it that you broadened your scope, from a focus on environmental and natural resource issues, to include global health issues?
Scott Barrett: First off, a lot of the environmental issues that we study are health issues, right? For example, 99 percent of the reason we're looking at air pollution is its effect on human health. No one in environmental economics bats an eye about that; that's just accepted. But for some reason, infectious diseases are seen to be in some other territory and not part of ours, and I've never understood that.
Another analogy we use in environmental economics is exploitation of a fishery. This is us going into a biological population and harvesting for our own benefit. And you can think of pathogens as being kind of the flip side of that, which is that they're the predators, we're the prey, and they're dipping into us. What we want to do is take measures that will reduce the harm that's caused by that.
That's interesting. I mean, it's also the case that there's siloing of environmental studies and environmental issues from population studies and population issues, which a lot of people would say that's a major part, obviously of environmental problems or population pressures.
I think in general, environmental economists have not really grasped the scale issues. When you look at climate, for example, we're always focused on decarbonization, which is really a technical and investment issue. But when you think about what's driving emissions, it's not just that—it's also population. It's income per head. And of course, ultimately, we need to decarbonize, for sure.
As an environmental economist who has thought long and hard now about global health challenges, I am very interested to hear your reaction to what you see happening now in the world, with the coronavirus pandemic.
This is a very difficult time for all of us, as individuals, as families. Our whole lives have been thrown up in disarray, and a lot of people are suffering. So there's that side to it, which is, of course, very concerning. There's another side to it, though, which I find is ultimately just incredibly fascinating: With infectious diseases, you read history. And one key thing about the situation we’re in right now is that, in some respects, it’s completely new. But in other respects, it’s just been a long part of human history, because there’s always been the emergence of what we would call a “novel infectious disease.” It’s really shaped humanity over a very, very long period of time.
What are the kinds of ongoing influences you’re talking about?
The plague decimated the population in Europe, which of course made labor scarce. As it made labor scarce, not only did it increase wages, but it also shifted power in the direction away from landowners toward the laborers. There’s evidence that it actually helped result in the end of serfdom as an institution. And even to go further than that, historians have argued that it did quite extraordinary things like usher in the Enlightenment and create space for the development of universities and for the appreciation of science.
As we look to the current situation, we’re concerned with what’s happening today. But there’s another side to this—that this is going to have profound changes that will last at least a generation, and it’s hard to know exactly what those changes will be. But there are going to be changes in terms of how we understand our relationship to each other, to technology, to science, to government, to international institutions.
Looking at shorter time horizons, I’m convinced that the post-pandemic economic equilibrium is going to be quite different in some specific ways from the pre-pandemic economic equilibrium. One of the obvious ones is that corporations around the world are going to realize that they can save a huge amount of money without a massive loss in benefits by avoiding international travel, and by using Zoom and other platforms for meetings.
I think that’s right. We’re basically being forced to do things differently. But of course, you’re going to have other consequences and real devastation to the economy.
The equity issues are going to stand out very starkly—confidence in government, the role of the private sector, and whether all parties are chipping in. All these different things are going to be very important and shape how we look at the future.
You mention government. What’s your candid assessment of the policy that’s been coming out of Washington?
The approach that the world has taken has been very fragmented, and that’s also been true in the United States. One thing that really stands out is just the failure of the United States to be prepared. This issue of preparedness is serious, and it’s clear that our inability to do testing has really compromised the health and well-being of Americans.
I did want to say, since you and I are interested in climate change, that with climate change, you get these long lags between the time you need to act, and when you actually get a result. Of course, if you act to avoid climate change, and you do avoid climate change, then you’re never quite sure: Was that because you acted, or would it have happened, anyway? Here, of course, everything is moving very quickly, and you’re seeing in the data that you can practice social distancing. But it takes a while for that to start to show in the statistics.
There have been some articles describing some economists’ thinking about how they would approach appropriate policy to address the pandemic. One facet is a focus on the potential use of a benefit-cost framework, or net present value analysis. These articles have raised the correlated need to quantify the benefits of reduced mortality risk, in order to be able to compare them to the economic cost. And that brought up the whole notion of the “value of statistical life” (VSL), which is quite controversial. I would love to know what your thinking is about that.
With the value of a statistical life, it is a vexing topic for a lot of reasons. But I think it’s very important that we can make as explicit as possible the consequences of different choices that can be made.
So let me ask you this. There is a lesson that could be learned from what economists are doing in climate change policy and in other areas of environmental policy that would avoid the controversy and the necessity to use VSL: instead of doing benefit-cost analysis, doing cost-effectiveness analysis. Take some policy objective—such as maximum mortality number, target mortality risk reduction, or the specified case transmission rate—and then compare alternative policy instruments, in terms of their respective economic costs. What do you think of the potential use of cost effectiveness as a useful tool in this current policy situation?
In the area of public health, cost-effectiveness analysis is dominant. That’s certainly true with infectious diseases. But I think for a lot of the decisions we’re interested in, that’s not the right way to go. Should we eradicate a disease? Should we develop a stockpile of vaccines in the case of an outbreak? All these kinds of decisions—I think that they're much more appropriately looked at in a cost-benefit framework.
One last thing about this is that when people started talking about cost-benefit analysis, the focus is often on the totals, and not the distribution. One thing we can say about COVID-19 is that it’s a pretty equitable scourge. You've got healthcare workers and people working in grocery stores and Tom Hanks and the wife of Prime Minister Trudeau all infected. It’s in everyone’s interest now that we control it.
Where are we going to be with this pandemic a year from now?
It looks to me like this is a persistent challenge. I know that China and some other countries have had some success in limiting cases. I think we’re going to get better at it in some respects, but I want to go back to this thing that’s very fundamental, the essence of economics—incentives, and how incentives drive behavior.
What's critical about this is that if you live in an environment where it's risky to stand close to people and not to wash your hands, then you change your behavior, which is what people are doing now. People are responding to a very powerful incentive for survival. As the disease becomes less prevalent—as you see less of it—the risk falls. And therefore, that behavior is going to be modified, and people will take more risks.
It's really hard to know, but I think the battle is still going to be waged a year from now. We'll move a little bit more towards normalcy, but it’s still going to be there.
Robert N. Stavins
University Fellow; Member, RFF Board of Directors; A.J. Meyer Professor of Energy & Economic Development, John F. Kennedy School of Government, Harvard University
Vice Dean of Columbia University's School of International and Public Affairs