Pandemic Economic estimates & why they are wrong.

[JJackson]

I have written around this topic many times before but have never been very happy with the results. Unlike gsgs I am not particularly bothered about experts not putting probabilities or numbers like deaths, economic losses etc. against a potential pandemic but I am very unhappy about what I see as a potentially catastrophic failure to understand the relationship between severity and its effects on the economy.
<o></o>
There are several factors that need to be considered and I will try and talk a little about each and their influences. I have been goaded into to writing now by two of today’s posts.
Lloyd's Report - Pandemic - Potential Insurance Impacts http://www.flutrackers.com/forum/showthread.php?t=83249
&
Flu Pandemic May Cost World Economy Up to $3 Trillion http://www.flutrackers.com/forum/showthread.php?t=83211
In 2005 the World Bank made an $800 billion estimate and now they pick $3 trillion. Lloyds go for a 1 to 10% drop in Global <st1:stockticker>GDP</st1:stockticker> given a 1918 style pandemic (Global <st1:stockticker>GDP</st1:stockticker> ~ $50trillion so ~ half a trillion per percent). I would argue this is like estimating a figure for medical costs given only that the patient has been shot with no indication of where the patient was hit or by what.
<o></o>
The first point is estimating the range of severities of a pandemic. Again I have posted on this several times before but the main points are
* We don’t know what will cause the next pandemic. With over 6 billion people spreading into new areas the scope for zoonotic emergence has never been higher and HIV, SARS and the ongoing situation in South Africa have given us fair warning.
* H5N1 is still our most immediate threat and we only have reasonable data on 3 past flu pandemics which is in not a large enough data set to draw any useful conclusions about the range of symptoms flu could present. Worst case scenarios based on 1918 could be little more than wishful thinking.
* H5N1 - unlike all previous human flus (as far as we know) - is Highly Pathogenic (HP) and can therefore cause systemic – rather than localised – infections which further reduces the usefulness of comparisons with previous seasonal or pandemic flus.
<o></o>
The previous section concerns the futility of trying to say anything too dogmatic about the range of events which planners may need to accommodate. Now we need to concern ourselves with the consequences of different types of pandemic.
It is my opinion that the relationship between severity and public reaction (or more accurately public fear) and so to economic damage looks linear initially and then turns exponential. To try and explain lets look at three scenarios.
1] If a pandemic starts and it seems like an ordinary flu season, or a little more severe (1957/1968), then economic damage would be in the form of days lost, like any other flu season, based on the public going to work as usual. Changed behaviour would be limited to some social distancing hitting concerts, sporting events etc.
2] If the pandemic was like 1918 then many, if not most, individuals would personally know someone who had died or been close to it. The fear of lost income would become secondary to the fear of becoming infected, or worse, bring the infection home to your family. A sizeable portion of the population in the richer industrialised countries would switch modes to one in which the primary driver of all actions would be to avoid the infection of themselves and those they love. If available to them they will shelter in place (SIP), run up debt on essential items, ignore non essential bills and wait it out. Newly industrialised nations dependent on the production of manufactured goods will have no orders, subsistence farmers will – paradoxically - be least effected economically and the 60% of the population of Somalia, and all those others dependent on food aid, will starve and die in their millions.
3] If the pandemic is 1918+ the effects will be as above but cut deeper.
<o></o>
This quote from Jason Gale’s article
<o></o>

``People's efforts to avoid infection are five times more important than mortality and more than twice as important as illness'' in terms of economic impact, the authors said. In the worst-case, they assumed that air travel would slump by 20 percent for the whole year, and that tourism, restaurant meals, and use of mass transportation would decline by the same amount.

<o></o>
illustrates the problem nicely. <st1:stockticker>IMO</st1:stockticker> it correctly identifies that the indirect consequences of the publics attempts to avoid infection will far outweigh the direct ‘days lost due to illness’ but then vastly underestimates the damage done to tourism and air travel “In the worst-case”. Even if 1918 were the worst case I just don’t believe 80% of people would not change their ‘tourism’ plans and airlines will be lucky if they keep 20% of their customers. <o></o>
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<o></o>
Next I would like to look at the effects of the behavioural phase change predicated above.
The ongoing global economic instability conveniently illustrates the effects of ‘efficiency’ in the global market.
In the computer age we have become able to accurately calculate the probabilities of a wide range of events for which we have statistically significant quantities of data. This has had the effect of tightening margins in the insurance industries as all the competing companies know exactly what the probability of my being killed in a car crash given my age, job, address, insurance history etc. The only remaining variable is how much more they can get away with charging than their actuarial tables say they will pay out. Scale of operation, along with the reinsurance of risk, further reduces the dangers to the insurer of aberrations from the statistical norm. The system in extremely efficient but at a cost to its resilience. If claims exceed expectations then reinsurance spreads the load to an ever wider circle and the hit is absorbed the corollary is that if the hit is too large, and exceeds the planners’ models, then the reinsurers fall like dominos and the problems is uncontained and uncontainable. The same basic rules apply to the efficiencies of the Just-in-Time (JIT) economy. All the savings made in not holding dead stock are predicated on the global conveyer belt not breaking down and, as it never has before, it is assigned a low probability of failure in the future. On the other hand it has never had to deal with mass global absenteeism before; there is no other system capable of delivering food to the vastly increased, and newly urbanised, global population. The question is how much slack is there in this system and – like the sub-prime market – at what point does it cease to be self-righting.
<o></o>
As I am neither a biologist nor economist please treat the above as a personal opinion offered as a basis for discussion.<o></o>

 

[mixin]

Re: Pandemic Economic estimates & why they are wrong.

JJackson,
2] If the pandemic was like 1918 then many, if not most, individuals would personally know someone who had died or been close to it. The fear of lost income would become secondary to the fear of becoming infected, or worse, bring the infection home to your family. A sizeable portion of the population in the richer industrialised countries would switch modes to one in which the primary driver of all actions would be to avoid the infection of themselves and those they love. If available to them they will shelter in place (SIP), run up debt on essential items, ignore non essential bills and wait it out.

I'm not sure I agree with this one. Even back during the 1918 pandemic, if I've read history correctly, people weren't very agreeable to being sequestered and most of it was mandated by the local govts. The people didn't even like wearing masks out in public; wasn't it San Francisco that had to impose fines for not wearing them?

As they were seeing people drop in the streets in 1918, and still went out in public and without wearing their masks, I doubt that will change much if another pandemic hits.

At this moment, I only know 1 family that is well-stocked to the point that they actually can sip for a number of weeks.

 

[tropical]

Re: Pandemic Economic estimates & why they are wrong.

#2:
"The people didn't even like wearing masks out in public;"

Ehm, mixin, you forgot that the majority of folks ~100 years ago know barely to read, for not mention that they don't understand a virus ...

JJ. wrote it right in #1:
"... the corollary is that if the hit is too large, and exceeds the planners? models, then the reinsurers fall like dominos and the problems is uncontained and uncontainable. The same basic rules apply to the efficiencies of the Just-in-Time (JIT) economy. ..."
___

We all can see the actual "neronicon" which results are payed socialized debts by the taxpayers worldwide.

 

[sharon sanders]

Re: Pandemic Economic estimates & why they are wrong.

Thank you JJackson.

 

[mixin]

Re: Pandemic Economic estimates & why they are wrong.

#2:
"The people didn't even like wearing masks out in public;"

Ehm, mixin, you forgot that the majority of folks ~100 years ago know barely to read, for not mention that they don't understand a virus ...

No, they may not have understood a virus but they likely understood the danger. I hope I'll be proven wrong about people not voluntarily sequestering themselves and wearing masks. I've worked wearing dust mask for about 20 minutes before I'm ready to rip it off.

From this thread http://www.flutrackers.com/forum/showthread.php?t=74789
Conclusion:
? Initially, many people wore face masks willingly and voluntarily, in deference to both the importance of public health and patriotism during World War I.
? As time went on, however, especially in areas where mandatory face mask laws were enacted, political and legislative debate and grassroots resistance often developed.
? Communities were much less likely to support disruptive NPI when ordered a second time.
When community-wide social distancing measures were lifted and then reinstated and then followed by further restrictions or ratcheting-up, the historical record suggests that non-compliance and resistance were likely to follow.
------------------------------------
And thanks from me, too, JJackson. I agree with most of what you wrote.

 

[AlaskaDenise]

Re: Pandemic Economic estimates & why they are wrong.

JJ:

Very good writeup. I agree with you.

In a worst-case-scenerio, I believe many "rules" will be temporarily completely thrown out, e.g, utility billing, hospital billing, insurance payments (will be zero), etc.

Just as countries are now saving-at-all-cost their biggest and best banks, countries will save-at-all-cost their basic utilities and food distribution systems as best they can.

The best-off unprepared people will be folks living in agricultural communities.

Jason's 20%?????.........if any MSM article wrote about the true potential, they'd be ignored and ridiculed as kooks. If I was writing an article and wanted the ideas to have serious consideration, I'd push the stats to the max, but within the sphere of believability, even if I suspected otherwise. If the investment world ignored Buffet's prediction of a weapon-of-mass-destruction, how can we expect the general public to seriously consider a CFR that has the potential to greatly exceed 1918?



.

 

[Amish Country]

Re: Pandemic Economic estimates & why they are wrong.

#2:
"The people didn't even like wearing masks out in public;"

Ehm, mixin, you forgot that the majority of folks ~100 years ago know barely to read, for not mention that they don't understand a virus ...

Actually I think I read somewhere a while back the percentage of literacy in the US was at its highest historical point in 1920. However back to the flu, in 1918 people were well experienced in dealing with the sick and communicable diseases because they had to be. There were epidemics of smallpox, scarlet fever, whooping cough, cholera, dysentery, pellagra, typhus, mumps, rubella and diphtheria. If they did not use facemasks with other communicable diseases they may have felt them unnecessary for a mere flu bug.

Even today as far as taking precautions or wearing masks? Technology is faster to change than human nature. Despite all the information currently available about the potential dangers of an influenza pandemic or biological attacks many people are still unwilling to take the simple steps and make the investment to stock up enough food, water and supplies that would enable them to shelter in place with their families. Todays parents may not be able to fully comprehend the danger because so few have had to cope with it or anything even remotely similar.

 

[tropical]

Re: Pandemic Economic estimates & why they are wrong.

mixin #5:
"... people not voluntarily sequestering themselves and wearing masks. I've worked wearing dust mask for about 20 minutes before I'm ready to rip it off."
___

That's right also, and like A.C. wrote in #7:
"Todays parents may not be able to fully comprehend the danger because so few have had to cope with it or anything even remotely similar."

Imagin how is it working with full rubber/filter mask for hours ...

But the mass-proposed masks type can be provided with an exhaust valve (easier to breath with minor sweath).
___

A.C. #7:
"...
However back to the flu, in 1918 people were well experienced in dealing with the sick and communicable diseases because they had to be. There were epidemics of smallpox, scarlet fever, whooping cough, cholera, dysentery, pellagra, typhus, mumps, rubella and diphtheria. If they did not use facemasks with other communicable diseases they may have felt them unnecessary for a mere flu bug.
Even today as far as taking precautions or wearing masks?
..."

Unfortunately the above is right, but it's also precisely how they thought of it today also:
"it's only mere flu, not tuberculose, or spox."

But at that time unfortunately subentrate a severe pandemic strain.

People at 1918 as A.C. wrote, realy must dealt with a whole bunch of deadly infectious diseases later debelated in many countries only many decades after, mainly because of vaccines, ring quarantine and vaccinations, better worldwide health and decontamination practices, with running water, better food/antibiotics and life quality (more jobs, better payed).

If we start from the presumption that they understood the danger of being exposed to infected droppings in place of gatherings, than what reason was why they don't wore masks?

I think I'm not err if I said that many think they would look like "silly" if wearing a mask, when many don't want to.
Today's folks have the same atitude.

It's enaugh to look how many unvaccinated and respiratory infected people came in a bus, train, subway, at work, coughing and spreading the illnesses further.
Rarely they spit in a handerchief and covert himself, nor they stay at home.

Nobody stop them mainly, or stimulate to stay at home, and nobody wear any mask, even at the infection units entering tract triage.
Why?
Haven't they 21century scientific infos about? They have.
But the health system procedures don't force them to do that!
As mixin wrote:
"... people not voluntarily sequestering themselves and wearing masks."

But about the spitting, and mask willingness, the chinese changed such behaviour at the SARS time.

We saw at TV how the masses wore face masks, and there were desinfected even the streets, and concrete walls.
But than the illness was already there.

 

[JJackson]

Re: Pandemic Economic estimates & why they are wrong.

Mixin makes a perfectly valid point that I am guessing at public reaction to pandemics of different severity. I don’t think that people’s reactions are going to be homogeneous; for any given level of perceived risk there are bound to different levels of bravado. Circumstance will also play a large part in an individuals need to expose themselves to risk. A retired couple who have been reading FT for years and have extensive stores are not in the same position as an hourly paid breadwinner with a young family and no savings.
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In the developed nations death by communicable disease and infant mortality are - compared to 1918 - extremely rare, as a society we are just not habituated to deal with it in the same way. A much higher proportion of our income is spent on things we can survive without. This means many more people's income is dependent on the discretionary spending of others. Regardless of exactly where each person draws their personal line regarding risk and reward my central point is that as the consequence of becoming ill become more severe people will not risk exposure for more trivial reasons. Parents will not let children out to play with friends if the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-comffice:smarttags" /><st1:stockticker>CFR</st1:stockticker> is 50%, nor will the family decide to eat out or go to the cinema. For each behavioural change their will be an economic consequence. Initially it may be the luxury yacht salesman and travel agent but take away their spending power and someone else must suffer. The question then becomes at what point does the whole economic system begin to fray around the edges.

<o></o>
How might it work? Let’s take a mythical small business man, say a self-employed plumber, let’s call him Joe.
The pandemic starts and is ‘1918 like’; horrendous news stories of mass fatalities and gory symptoms. Even before it reaches Joe’s area work drops off a bit, then all he gets are calls for leaks and emergencies. When he gets there they are very polite but chat from the other side of the room about how awful it is; when he has gone they pick up his coffee mug with rubber gloves and plunge it into hot soapy water. Much of Joe’s business is for people putting in a shower room, changing their bathroom or kitchen, especially when they move house. Now no one is moving house or all that bothered by the avocado bathroom suite so Joe’s income has dropped by 40%. Joe was not badly off, but normally his income did not vary by more than 15% and his fixed outgoings can not be met so Joe quickly hits his overdraft lift. The bank is not too helpful, they are very short staffed and Joe is not alone in needing help. Joe tries to sell some stocks but some vicious bears are ripping the market to shreds. The pandemic has a second wave and by the time people are becoming confident there will not be a third Joe is 6 months behind on his mortgage, and everything else. In fact everyone is and no one has much of a tax liability so the government basically doesn’t have an income either. Sovereign States are as likely to be insolvent as their citizens. It is not all doom and gloom as although the pandemic, and attendant depression, may bankrupt us like a global war it did not actually damage the infrastructure, and we managed to meet some of our CO2 emissions targets. The new world slowly emerges but is very different to the old, the nation state pecking order has undergone a bit of a shuffle and people’s priorities have changed, at least for a while. ‘Never again’ they pledge but over time the horror of the 150 million dead (remember our population has tripled since 1918) fades and idealistic promises get watered down.
<o></o>
The End.
(Film rights available by negotiation)
<o></o>
I feel a bit like Hari Seldon predicting the fall of the Galactic Empire but I have no Psychohistory to offer. However I think with attention paid to preparation now, a serious investment in vax plants (not egg based) and a call to personal preparedness the damage done can be greatly mitigated. Regardless of the severity of any pandemic the simple holding of basic food items in quantity and the ability to make water safe to drink will vastly reduce unnecessary contacts and buy time. Time is what counts; for the pandemic to pass it must run out of victims. In practice this means either most people have had it or have had shots of an effective vaccine. If catching it is likely to kill you the only option is to wait for vaccine but with our current manufacturing system and capacity Joe is likely to be insolvent before the first vial comes off the line and may need to wait for years before his lottery number comes up and his family get their shots. The quicker we can get the vaccine to the people the smaller the initial damage and the quicker the recovery. It is the only thing that will end the pandemic. Tamiflu, and anything else we have in our armoury, may help at the outset but only the vaccine will end it.

 

[sharon sanders]

Re: Pandemic Economic estimates & why they are wrong.

Thanks Jason for a great article! Thanks everyone for the posts.

I think the costs of a pandemic are not predictable. For instance, how are opportunity costs calculated in such an event? It is impossible to really estimate the full cost. It will be immense.

 

[Laidback Al]

Re: Pandemic Economic estimates & why they are wrong.

A sizeable portion of the population in the richer industrialised countries would switch modes to one in which the primary driver of all actions would be to avoid the infection of themselves and those they love. If available to them they will shelter in place (SIP), run up debt on essential items, ignore non essential bills and wait it out. Newly industrialised nations dependent on the production of manufactured goods will have no orders, subsistence farmers will ? paradoxically - be least effected economically and the 60% of the population of Somalia, and all those others dependent on food aid, will starve and die in their millions. . . .

As the pandemic scare started to emerge across the internet in 2005, Sheltering In Place (SIP) was seen as a panacea and the only way to protect one?s family and loved ones. But SIP is not a long-term viable strategy in high CFR, multi-wave pandemic. The collateral damage to our fragile world?wide, Just-in-Time production and distribution system will be tremendous.

It is not very forward thinking to simply stock up on food, water, and medical supplies and hunker down for the duration of the pandemic. You need to have a plan for when you emerge from SIP.
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After a severe pandemic it would be folly to expect the world, or even your local community infrastructure, to function normally. Depending on the severity, you may not be able to buy a tank of gas, you may not have a job to go to, and you may not be able to buy any food no matter how much cash you have in wallet.
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In this regard <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-comffice:smarttags" /><st1:City w:st="on"><st1lace w:st="on">Jackson</st1lace></st1:City>?s comment about subsistence farmers is worth pondering as is AlaskaDenise?s comment that ?The best-off unprepared people will be folks living in agricultural communities.?<o></o>
<o></o>
Perhaps it is time to develop a new acronym, SIPSS, Shelter in Place with Self Sufficiency. Individuals need to develop a proactive SIP plan where they and their family and neighbors can be self-sufficient during and after the SIP. For example, you could capture rain water, plant survival gardens, educate yourself and learn practical skills that will be needed to rebuild. Do not be a burden on your local community during the period of rebuilding after a pandemic. Plan on making yourself useful and help your local community by being able to provide the basic necessities such as clean water, food, and heating in colder climates to support yourself and your family.

During the post-pandemic period, the global economy, if it exists, will be fragile. Anything you can do for yourself and your local community such as being self sufficient, will greatly help the rebuilding process and provide you with a greater sense long-term security once the pandemic is over.

 

[AlaskaDenise]

Re: Pandemic Economic estimates & why they are wrong.

Which yardstick should we use to "measure" pandemic economic estimates?

The value of the dollar/pound/euro, etc. may change to reflect a new reality. Furthermore, should we measure impact only in monetary terms?

OR should we measure impact by quantifying the:

- ability of all systems to return to an ability to service the basic needs of society.

- ability of the post-pandemic economic systems to reach a functional level which allows for "trade" to resume beyond the immediate community.

- the extent to which "wealth" is decreased to a point where a social unit has no/little medium of trade.

- ????

Another major factor could be timing. IF a severe pandemic starts at the beginning of winter (in either hemisphere) it is bound to be worse.

.

 

[Giuseppe]

Re: Pandemic Economic estimates & why they are wrong.

Evaluating the Economic Consequences of Avian Influenza [World Bank - excerpts]

Evaluating the Economic Consequences of Avian Influenza(1)
Andrew Burns, Dominique van der Mensbrugghe, Hans Timmer(2)

(1) This analysis was updated in September 2008. It was originally published in a slightly different form in the World Bank?s June 2006 edition of the Global Development Finance, available at http://www.worldbank.org/gdf2006.
(2) Andrew Burns and Dominique van der Mensbrugghe are Lead Economists in the Prospects Group of the World Bank Development Economics directorate. Hans Timmer is manager of the group.

Avian influenza
The continued spread of avian influenza among poultry and wild birds (or bird flu, also known by its scientific identifier H5N1) with extremely rare bird-to-human transmission comprises part of the baseline forecast published in the World Bank?s Global Development Finance, 2006.

Economic consequences of a further spread of bird-to-bird flu
The principal economic impact of the H5N1 virus so far has come in the rural sectors of several Asian economies where the disease is enzootic. Its appearance in a number of European and African countries in 2006 suggests that the disease may become as prevalent among the wild birds of these continents as it is currently in Asia.

Table 1 [not represented] reports an effort to estimate the macroeconomic impact of such a spreading of the current bird-to-bird flu.

The reported results are based on a scenario where bird-to bird flu becomes enzootic throughout the world to the degree observed in Vietnam in 2004 (approximately 12 percent of all domestic birds died from the disease or were culled to prevent spread).

While direct costs are small (only 0.1 percent of world GDP),1 differing degrees of international specialization and cost structures suggest that, allowing for interactions with other sectors, regional impacts could be as high as 0.7 percent of GDP.2

Because the poultry sector is more important in developing countries and relatively labor intensive, job losses could represent about 0.2 percent of the global work force, or some 5 million jobs during the time it takes the global economy to adjust.

Possible economic consequences of a human influenza pandemic
Even a flu with ?normal? characteristics in terms of transmissibility and deadliness could have serious consequences for the world economy if the world?s population has limited immunity.

Estimates suggest that such a flu could infect as much as 35 percent of the world?s population (WHO 2005), spreading throughout the world in as few as 180 days (RTI, 2006). As compared with a normal flu season, where some 0.2?1.5 million die (WHO 2003),3 deaths from even a mild new flu might include an additional 1.4 million people worldwide.

A more virulent form, such as the 1918-9 flu, which was more deadly for healthy adults than a normal flu, could have much more serious consequences, killing as many as 1 in 40 infected individuals (Barry 2005) or some 71 million, with some authors suggesting that as many as 180?260 million could die in a worst-case scenario (Osterholm 2005).

Table 2 [not represented] reports the results of three separate simulations of the economic consequences of a pandemic (McKibbin and Sidorenko 2006).

The first (mild) scenario is modeled on the Hong Kong flu of 1968-9; the moderate flu has the characteristics of the 1957 Asian flu; and the severe simulation is benchmarked on the 1918-9 Spanish flu.4

Each of these scenarios assumes that efforts by individuals and official agencies to limit the spread of the disease are no more effectual than those observed during previous epidemics and reflects differences in population density, poverty, and the quality of healthcare available.

For the world as a whole, a mild pandemic would reduce output by less than 1 percent of GDP, a moderate outbreak by more than 2 percent, and a severe pandemic by almost 5 percent, constituting a major global recession.

Generally speaking, developing countries would be hardest hit, because higher population densities and poverty accentuate the economic impacts in some countries.

Figure 1 and Table 3 [both not represented] present the results of an alternative modeling of a pandemic.

It is based on a pandemic similar in terms of mortality to the Spanish flu epidemic of 1918/9.

This scenario is presented with a view to better understanding the factors driving the aggregate numbers in such simulations.

The scenario distinguishes among three sources of impact: economic losses due to mortality, economic losses due to illness and absenteeism, and economic losses due to avoidance behaviors.

As Figure 1 shows, the relative magnitude of these three factors differs considerably: people?s efforts to avoid infection are 5 times more important than mortality and more than twice as important as illness .

The first column of Table 3 shows the impact in terms of GDP lost in the first year of the pandemic purely from additional deaths (here roughly equal to McKibbin?s severe scenario).

The second column builds in the impact on aggregate productivity resulting from the infection of some 35 percent of the population.

Even though individuals are only temporarily unavailable from work, the impact on output here is more than twice as large as from the loss of life, because the affected population is so much larger.

The third column shows the largest impact. Here individuals are assumed to change their behavior in the face of the pandemic by
(a) reducing air travel in order to avoid infection in the enclosed space of a plane,
(b) avoiding travel to infected destinations, and
(c) reducing consumption of services such as restaurant dining, tourism, mass transport, and nonessential retail shopping.

The degree to which such reactions would occur is necessarily uncertain.

In this scenario it was assumed that for the year as a whole air travel would decline by 20 percent and that tourism, restaurant meals, and consumption of mass transportation services would also decline by 20 percent.

The assumed 20 percent declines are well below the peak decline of 75 percent in air travel to Hong Kong during the SARS epidemic and an average decline of 50-60 percent during the four-month period the outbreak was active.

Retail sales declined by 15 percent at the peak, and by about 9 percent over the four month period, implying about 15 percent decline from trend (Siu and Wong, 2004) over the four month period or about 5 percent on an annualized basis. Sharper declines on an annualized basis are assumed in these simulations because a flu pandemic would last more than a year (pandemics are typically experienced in at least two waves with peak period of infection during the winter).

In the scenario presented in Table 3 above, the total impact of a shock combining all these elements is 3.1 percent for the global economy.

The impact ranges from 4.4 percent in Latin America and the Caribbean to 2.6 percent in the East Asia and Pacific region, mainly reflecting the relative importance and labor intensity of tourism and other services in each region. In this scenario of a moderately severe pandemic, the total cost to the global economy would be slighly more than $2.0 trillion. In the case of a more severe pandemic, however, such as one causing a 4.8 percent drop in economic activity (see Table 2 above), the total cost to the world economy is estimated to be about $3.13 trillion.

The modeling attempted to take into account the possibility that the economic effects of a pandemic would be greatest in the country where the human-to-human strain originates, the main factor here being private and public efforts to isolate and contain the disease by avoiding travel and imposing quarantines. However, simulations of an outbreak beginning in Thailand suggest that whatever additional costs the originating country might endure, these would be dominated by secondary effects as the disease spreads to other countries and global economic activity declines.

Conclusion
Given the tremendous uncertainties surrounding the possibility and eventual nature of a pandemic inflation, these simulations must be viewed as purely illustrative.

They provide a sense of the overall magnitude of potential costs. Such costs could be on the order of $2 trillion in a moderately severe pandemic and more than $3 trillion in a severe scenario.

Actual costs, both in terms of human lives and economic losses, may be very different, however.

That said, these simulations serve to underline the importance of mobilizing global efforts to meet this potential crisis. Monitoring outbreaks of bird-to-bird and bird-to-human infections and culling infected flocks appear to be effective strategies to reduce bird-to-human transmission and reduce the likelihood that the disease will mutate into a form that is easily transmissible between humans. The fact that there have been no reported cases of bird flu in Vietnam in the 2005-6 flu season suggests that such preventative efforts can be effective.

However, even with such efforts, an eventual human pandemic at some unknown point in the future is virtually inevitable (WHO, 2004). Because such a pandemic would spread very quickly, substantial efforts need to be put into place to develop effective strategies and contingency plans that could be enacted at short notice. Much more research and coordination at the global level are required.
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1 Direct costs are small. Six percent of the world population of domestic poultry amounts to some 170 million birds. At a retail price of $2 per bird, and assuming (based on the Vietnamese experience) 0.75 cents in costs associated with monitoring and culling infected birds, this would amount to about $760 million worldwide, or about 0.02 percent of world GDP.
2 While the poultry sector represents less than 0.2 percent of the GDP of high-income countries, its share in developing countries is about 1.2 percent of GDP, rising to 2.4 percent of GDP in the East Asia and Pacific region.
3 The World Health Organization (2003) estimates between 200,000 and 500,000 deaths each year. Osterholm (2005) reports a higher death toll of between 1 million and 1.5 million people worldwide from influenza infections or related complications, making it the third most deadly infectious disease after AIDS and tuberculosis, but ahead of malaria.
4 McKibbin and Sidorenko also model an ?Ultra? flu, which is not based on any known previous pandemic, but has the characteristics of the Spanish flu, plus higher mortality for older people. This simulation is not reported here.

*************
References
1-Barry, John M. 2005. The Great Influenza: The Epic Story of the Deadliest Plaque in History, Penguin Books, London.
2-Billings, Molly. 1997. ?The Influenza Pandemic of 1918,? Stanford University. http://www.stanford.edu/group/virus/uda/
3-McKibbin, Warwick, and Alexandra Sidorenko. 2006. Global macroeconomic consequences of pandemic influenza, Lowy Institute for International Policy, Sydney Australia.
4-Osterholm, Michael T. 2005. ?Preparing for the Next Pandemic.? New England Journal of Medicine. 352: 1839?42. May 5
5-Siu, Alan, and Y.C. Richard Wong. 2004. ?Economic Impact of SARS: The Case of Hong Kon.?Hong Kong Institute of Economics and Business Strategy, Working Paper 1084. April.
6-World Bank. 2005. Global Economic Prospects 2006: Economic Implications of Remittances and Migration. Washington, DC.
7-World Bank. 2006. Global Development Finance 2006: The Development Potential of Surging Capital Flows. Washington, DC.
8-World Health Organization. 2003. ?Influenza,? Fact Sheet, No. 211, http://www.who.int/mediacentre/factsheets/fs211/en/index.html
9???. 2006. Avian Influenza (?bird flu?) Fact Sheet. http://www.who.int/mediacentre/factsheets/avian_influenza/en/index.html. February 2006.
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http://siteresources.worldbank.org/EXTAVIANFLU/Resources/EvaluatingAHIeconomics_2008.pdf
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[tropical]

Re: Pandemic Economic estimates & why they are wrong.

#13:
"4 McKibbin and Sidorenko also model an “Ultra” flu, which is not based on any known previous pandemic, but has the characteristics of the Spanish flu, plus higher mortality for older people. This simulation is not reported here."

But that model (4) would be interesting to evaluate.
___

#12: "... which yardstick ..."

The globalized world multivariable ones
(than we feed the "Cray"/.../servers)

For measuring the impact, I opted for:
"- ability of all systems to return to an ability to service the basic needs of society."
___

#11:
"For example, you could capture rain water, plant survival gardens, educate yourself and learn practical skills that will be needed to rebuild. Do not be a burden on your local community during the period of rebuilding after a pandemic."

Frankly, I think that the impoverished part at poor quality landscape and on inernational aid programs (~ 1 bilion ?), and the highly populated developed city part (another few bilions ?) of the world population, could not have or accomplish the above cited basic quality rural way of life. That would be enaugh to create an worldwide tide of collapse itself.

#9:
"Joe is likely to be insolvent before the first vial comes of the line and may need to wait for years before his lottery number comes up and his family get their shots. The quicker we can get the vaccine to the people the smaller the initial damage and the quicker the recovery."

Yes, that's why Joe must be offered now to have a right to namely on a purchase list, reserve his family shot in advance commission, directly from the producer/distributer, or at least through an gov. purchase list.
For that commission Joe must be billed with an additional ticket in advance, or at the starting moment of the purchase production.

This way nobody from the "over structure" can (if the order/law would be provided) further (when a pandemic came) because of money/triage reasons dumped Joe and his family from the pandemic vaccine inoculation priority list.
The same can be arranged for the pre-pandemic vaccines.

 

[JJackson]

Re: Pandemic Economic estimates & why they are wrong.

I had forgotten about this thread or I might have posted this piece on what I called the Global Conveyor in post #1 here. Anyway, if you missed it, it concerns the infrastructure that moves the raw materials and finished goods of our global economy and how it might react to disruption if port restriction or closures were employed to slow disease spread. Link to Economics\supply Chain Issues\Global Conveyor.

 

[AlaskaDenise]

Re: Pandemic Economic estimates & why they are wrong.

Regarding "Global Conveyor, see where BBC's GPS-tracked cargo box is currently located:
http://news.bbc.co.uk/2/hi/in_depth/629/629/7600053.stm

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