The cost of being unprepared or the benefit of the precautionary principle? Comparing cost-benefit COVID-19 policies and outcomes in Scandinavia

The Scandinavian countries of Denmark, Iceland, Norway and Sweden
have approached the first months of the 2020 novel coronavirus
pandemic with a range of economic and health policies that have
resulted in disparate outcomes. Though similar in behavioral norms
and institutions, Denmark, Iceland and Norway chose a precautionary
approach that formally shut down schools and businesses to protect
human health, while Sweden took a Business-As-Usual (BAU) approach
aimed at maintaining normal economic and social activities. Iceland
and Denmark have further invested in testing, tracking and containing
the disease. Economic costs of the pandemic and government fiscal and
monetary interventions to reduce their impacts have been dramatic
and similar across countries, while Sweden has had the most severe
loss of life. Using a panel from the four countries since the beginning of
the pandemic, we calculate lives saved from stricter interventions by
estimating cases and deaths as functions of behavior and government interventions with a bioeconomic model, then estimating the additional
lives lost if these interventions did not occur. Comparison of the countries
reveals three important lessons for both policies aimed at the pandemic
and broader goals with high uncertainty levels: (1) the precautionary
approach can be lowest cost, while still expensive; (2) detection and
monitoring (e.g. testing and tracking) are integral to a successful
precautionary approach; and (3) expecting tradeoffs between economic
activity and health creates a false dichotomy – they are complements not
substitutes. Pandemic policy should focus on minimizing expected costs
and damages rather than attempting to exchange health and safety for
economic well-being.