04 Apr 2020 18:02 IST

Economics and dharma in times of Corona

Rarely in human history have ethical decisions and social goals been highlighted as during the pandemic

A few days ago I watched a news-clip where doctors in US and Europe were faced with the agonising decision of having to choose Covid-19 patients for treatment. Patients had been arriving in large numbers and almost simultaneously, and doctors were facing a dilemma — who should be given priority for treatment. The same situation has begun to happen in India as medical facilities, equipment, and health service providers including doctors are in extreme short supply relative to number of patients. In these trying times doctors at the helm would be asking themselves, “What should be their dharmic choice in selecting patients? What choices would be considered ethically correct?”

And, it is not just about the doctors’ dilemma. Democratically elected leaders around the world, like India’s prime minister, Narendra Modi, are hard put to it to explain the decision to impose a lockdown to contain the spread of the Covid-19 pandemic. There is a trade-off between accepting the deaths of thousands, nay millions of citizens, on the one hand, and accepting the lockdown-led disastrous economic prospects of the ordinary citizens, on the other. The consequences of these dharmic dilemmas of doctors and leaders have just begun to unfold.

Trade-offs in policymaking

Neoclassical economics, the standard scientific workhorse of economists, has long resolved the trade-offs involved in policy making by measuring welfare gains and losses using cost-benefit analysis. Economists have a natural bias towards efficiency as a moral value that guides alternative choices that can be made. Efficiency is defined in terms of its goal — maximising net potential satisfaction of consumers and producers expressed in rupee terms using market information. The Covid-19 pandemic offers an interesting contrast for comparing efficiency defined by economists and the efficiency that can be defined by a wider dharmic or ethical goal. The elements of such a contrast were well described by Jonathan B. Wight in his article published in the Handbook of Economics and Ethics.

To adapt and paraphrase Wight’s example, consider a private hospital in a town where two busloads of patients arrive simultaneously. There are a total of 20 patients, 10 in each bus. However this private hospital has only 10 doses of the life-saving serum. If not treated, all patients will die. Assume that the antidote for Covid-19 is found but it is impossible to procure more doses in the short-run. The condition of patients in bus A is such that if the serum is given to these 10, they all will survive. On the other hand, condition of the patients in bus B is worse, and their survival rate is only 50 per cent even after giving serum to each one of them. If you were the doctor, what would be your goal and how would you allocate the serum?

While economists call the allocation method as a rationing rule, healthcare professionals call it a medical triage. One would argue that the goal should be to save as many lives as possible, and, hence, the scarce serum should be allocated to patients of bus A, saving 10 lives. If you were to allocate the serum to the patients in bus B, one would save only 5 lives. Of course, though the serum is given to patients in bus A, this efficient allocation did not imply that lives of patients in bus B were less valuable.

Dramatic shift in approach

But imagine what the goal would be if one were given the following additional information: Passengers in bus A are an elderly group with an average age of 85 years, and passengers in bus B are from an anganwadi (child-care centre) with an average age of 5 years. With this information, perhaps the new goal will change from saving lives to saving life-years! In saving life of a child, you would extend the person’s life by, say, 80 years with a probability of 0.5. This amounts to a total of 400 extended life-years for the 10 patients from bus B.

On the other hand, allocating the serum to patients from bus A would result in perhaps extending the life of a patient by only 5 years. This would amount to a total of 50 extended life-years for the 10 patients from bus A. Hence the serum will be allocated to patients in bus B alone. Of course, though the efficient rationing rule allocated serum to patients of bus B, it did not imply that the lives of patients in bus A were less valuable.

Ethical considerations

What this points out is that the changed efficient rationing rule is based on dharmic or ethical considerations and not scientific ones alone. Moreover, imagine for a moment that this private hospital were to apply the market-driven rationing rule where the serum is sold to the highest bidder. If patients in bus A can be assumed to be quite financially sound as the elderly people generally are, market rationing rule would imply that the serum will be sold to the patients in bus A, with higher reservation prices, and all the children would die.

Thus, the market solution does not seem to be efficient as compared to the earlier social perspective. And yet, in the long-run, market solution may be defended on the basis of profit incentive which results in more production of serum with economies of scale and product innovation. On the other hand, medical triage may have the potential for shortages, black market and corruption.

What is true for the doctors’ dilemma is also true for the democratically elected leaders the world over. One can calculate the disastrous losses to the economy due to lockdown in terms of unemployment, migration, shortages, and negative GDP growth. The estimates may vary based on methodology and assumption. However, on the other hand, it is impossible to gauge the value attached to the millions of lives saved or lost in the short-run and in the long-run due to Covid-19 disease. This will involve lives of both the paupers and the prosperous.

Such ethical goals are not measurable but extremely important. If the Covid-19 pandemic is not checked in time, human loss will be unimaginable. If citizenry survives, economy can be revived; however, if we are not there, what of the economy? Making a policy trade-off between the measurable and non-measurable is extremely challenging. India and the rest of the world are witnessing an epochal event. And the importance of normative efficiency and social goals is being underscored as never before in human history.

(The writer is Professor, Economics Area, Indian Institute of Management Ahmedabad.)

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