What’s Involved With A Cost/Benefit Study

The idea of a cost/Benefit study is to understand the benefits you will receive and at the same time know what you must give up to get them. Despite what governments would have you believe, nothing is free.

There was an interesting article in the Wall Street Journal recently wherein an academic claimed that if there were an honest Cost/Benefit study done on the idea of pandemic lockdowns, no one would recommend them.

What would such a study try to discover?

What are the objective benefits?

The rate of spread changes in time. In practice,  a lockdown will not minimize infections, just spread them out over time. The idea being to avoid overwhelming healthcare facilities. The secondary idea is to allow time to develop vaccines thus creating immunity without the need for infection. It allows time to develop better treatment protocols. All of these make sense. There will be dislocations that result.

Government spending overcomes the economic dislocations that result from closing businesses. That causes unemployment, reduces revenues for governments, and increases costs for many businesses and some government agencies.

What does not make sense is emphasizing benefits without recognition of costs. That would be half a plan. You cannot understand the whole thing by looking at the benefits, alone

What are the objective costs?

The money is easy to assess. The government has no money of their own. They must take it from the people, usually later. They can do that with taxation or inflation. In the short run they borrow it which adds another cost – interest. It could increase the cost of existing debt too.  Adding a lot of debt hurts your credit rating. While more complicated than an individual’s situation, the idea is similar.

Ultimately how are you going to pay it back? What happens if you don’t? What happens if you do?

It is hard to see opportunity cost. Money the government spends and then recovers from the people cannot be spent on any other thing. You can only spend money once. Spend now and then take money from the people that would have / could have been spent some other way. If you spent it on relief in the pandemic, you cannot spend it on scientific research later.

How are the people affected? While not widely reported, it appears that overdose deaths and interventions have risen. Domestic abuse seems to be higher.Substance abuse is up, especially alcohol. People are avoiding hospitals even with serious disease symptoms. Heart attack. Cancer treatments are deferred. Depression is becoming a serious thing.

Some people have been consumed by fear. Never a good thing. It minimizes your ability to think rationally.

Some are becoming antisocial. Do you see people who abuse others over masks.

With the lack of transparency, conspiracy theories abound.

Children are out of school and are affected. Some for the better, others for the worse. We can estimate that distance learning works for children. It likely does for some. The ones who are disciplined and have the necessary equipment. What about the others. It is wise to notice that all are in the same storm but not all are in the same boat.

Mistrust of society’s traditional institutions abounds. I don’t know how you fix that. Maybe over two generations.

Other effects? T

There are several of these. The one that seems most insidious for the longer term is this. Governments, both politicians and bureaucrats, like power and telling people what to do is important to them. You must question whether they actually have better ideas than others. High intelligence and serious training in one field does not automatically allow you to know enough to make decisions in complicated situation outside their experience. Believing you are smarter than everyone else and thus able to make decisions for everyone is hubris and commonly fails without cost to the decision maker. Learn nothing.

International relations are shifting faster than we can keep up to the meaning. What is the relative power status of China, the United States, Europe, and Russia? What was it a year ago? How will it be in 24 months?

How is the economy moving? Growing and if so where? Shrinking in important areas?

How does telecommuting affect things? Do we know about productivity and job satisfaction? Are important soft values lost? Like chat over the water cooler. Do we know how it will affect how much office space an organization needs? How about car sales because physical commuting reduces. Public transit? Road maintenance? Will daycare facilities sirvive?

Why it matters.

If there is no feedback and assessment of costs and benefits, future actions in the same decision space will not benefit from what we have learned at great cost. Education is expensive and even more so if you pay the cost but don’t notice the lesson.

More government is not an answer to any known problem.

Other countries notice weakness and act to advance their own cause. As Henry Kissinger pointed out, “Countries don’t have friends; countries have interests.”

If you create wrong incentives people make poor decisions.

I help people have more income and larger, more liquid estates.

Call or email don@moneyfyi.com or in Canada 705-927-4770

One Comment on “What’s Involved With A Cost/Benefit Study

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: