At one of his daily briefings last month, New York Governor Andrew Cuomo spoke about his plans for reopening the economy amid the coronavirus pandemic, saying: "The fundamental question which we are not articulating is, how much is a human life worth? […]To me, I say the cost of a human, a human life, is priceless. Period."

As a moral statement, few would disagree with Mr Cuomo. However, notwithstanding the significant value of human life, one cannot possibly ascribe infinite value to it. Indeed, human lives are finitely priced all the time by civil courts, regulatory agencies and businesses.

The thought of ascribing a monetary value to human life often provokes ethical outrage, but this process is necessary for good public policy. No government can spend a limitless amount of money to protect citizen life or health. Hence, to formulate effective policies, they need to know how many lives would be affected, and how much those lives are worth.

LOST LIVES VERSUS LOST INCOME

Measures to combat the pandemic, such as social distancing and lockdowns, can help minimise widespread infection, ensure that hospitals are not overwhelmed, and save thousands of lives. However, doing so will also mean that schools, businesses and factories will be immobilised, and the economy will suffer. Therefore, we must inevitably face the trade-offs: lost lives versus lost livelihoods.

To work out the trade-offs, we must first put a dollar value on human life.

One approach, commonly used by economists who conduct cost-benefit analyses, is the value of statistical life (VOSL). It measures the loss or gain that arises from changes in the incidence of death, by eliciting people's willingness to pay for small reductions in the probability of death, or their willingness to accept compensation in exchange for tolerating a small increase in the chance of death.

For example, if an employee is willing to accept a higher wage remuneration, for example, $1,000, for an increase in risk of death of 1 per cent, then it can be inferred that his VOSL is 100 times that, or $100,000.

Similarly, if an employee is willing to pay $100 to install safety equipment that will lower the risk of death by 1 per cent, then his VOSL is 100 times that, or $10,000. In Singapore, the first local study on VOSL applied to transport projects (done in 2007) reported a VOSL estimate then of about $2 million for an average commuter's life.

Taking the example of a complete lockdown, we can estimate the potential number of lives saved - based on infection and fatality rates and applying them to epidemiological models - and multiply that by VOSL to compute the dollar value of saved lives. If this number exceeds the costs of a faltering economy under a complete lockdown, then we know that the hardline policy is desirable.

ASSESSING POLICY OPTIONS

Nonetheless, a systematic assessment of the trade-offs need not imply that we must choose between complete lockdown or zero restriction.

Indeed, assessments that weigh the benefits of a policy against its costs can be made for any given form of restriction - such as social distancing, work-from-home rules and limits on inter-household interaction - or degree of lockdown, including stay-at-home or quarantine orders and travel bans. As such, one can compare between several different policy options that range between complete lockdown and zero restriction, to pinpoint the best possible course of action.

Looking around the world, we have already seen numerous forms of restrictions being imposed to varying degrees. In the Asia-Pacific, countries such as India, Malaysia, New Zealand and the Philippines implemented nationwide lockdowns, severely restricting the movements of residents outside their homes. Others such as Japan, South Korea and Taiwan only encouraged social distancing, while relying on other policy options, such as mass contact tracing, to contain the coronavirus.

Countries that have opted for severe restrictions would have placed an uncompromising emphasis on saving lives, while those that have chosen weaker measures would appear to have weighed the benefits of saved lives against the cost of a faltering economy more methodically.

THREE RECOMMENDATIONS

Here in Singapore, residents were put under a circuit breaker - effectively a lockdown with severe mobility restrictions, with some exceptions - from April 7 to June 1. While some essential services have been allowed to open, the broader economy has basically come to a halt. The elephant in the room is: Could it be any different?

Here are three recommendations to consider when weighing trade-offs between livelihoods and protecting lives.

First, the VOSL approach should be used to inform policymaking in the current outbreak. Moreover, since we now know that Covid-19 predominantly affects the mortality of the elderly, an age-adjusted VOSL or quality-adjusted VOSL, both of which reduce VOSL by taking into account remaining life expectancy and health status respectively, ought to be used.

Second, activities which are valuable but unpriced ought to be included in the calculation of costs and benefits. Currently, most societies are fixated on potential fatalities versus losses to their economies in terms of lost gross domestic product and rising unemployment.