New metric compares economic health to public health
BRYAN, Texas (KBTX) - Economists at the Texas A&M Private Enterprise Research Center have created a new way to measure the success of COVID-19 responses across different states and communities.
The product is called the Pandemic Misery Index and it compares public health to economic health to create a ratio capable of explaining how well leaders at different levels and various locations have done in the fight against COVID-19.
Watch the full interview on the new metric above.
Erika Fernandez: How did you come up with the idea for a Pandemic Misery Index, or PMI?
Dennis Jansen, Director of the Texas A&M Private Economic Research Center: Well, I am ‘of a certain age’ and remember the presidential contest between Jimmy Carter and Ronald Reagan, the first presidential election in which I could vote. I remember Ronald Reagan beating up on Jimmy Carter with the Misery Index, in which he added together the inflation rate plus the unemployment rate of the entire US economy. This was probably especially effective because, as I later learned, Jimmy Carter used the same concept in his election campaign against Gerald Ford. I also learned, later, that the Misery Index was actually proposed years earlier by an economist, Arthur Okun. So it was perhaps natural to think of a pandemic misery index, especially when Texas was being beaten up in the media for having a surge in cases over the summer, and to me being compared rather unfavorably to other states including New York. It came to me that we could add up a measure of economic health, the unemployment rate, with a measure of public health, the Covid-19 death rate, to get a Pandemic Misery Index that, in some ways, told the same type of story as the original Misery Index. The PMI illustrates a tradeoff between public health and economic health in a simple, easy to understand index.
EF: What kind of use does the PMI have?
DJ: The Pandemic Misery Index illustrates, in a simple way, the total misery facing a state, a combination of its economic health and its public health. To some extent, it also indicates a potential tradeoff between the two. Certainly, it simplifies the issues, just as did the original Misery Index, but it does serve to focus attention on the two things that matter, the economy and the public health, and it also shows the potential tradeoffs that were made between the two.
EF: Looking at the national, state-by-state PMI, what, if any, conclusion can be drawn?
DJ: Clearly New York and New Jersey are outliers, with large unemployment and large death rates. Texas, Florida, and California have all fared better, despite my impression that Florida and Texas have been beaten up a bit in the popular discourse. Texas has the lowest PMI of the four largest states, because it has the lowest unemployment rate and it has a relatively low death rate, although its death rate is slightly higher than California. Some states have done very well according to the PMI, usually rather sparsely populated states west of the Mississippi and not on the Pacific coast.}
EF: Could you infer that Nevada and Hawaii are heavily reliant on tourism?
DJ: Absolutely. Hawaii has a very low death rate, but a very high death rate. It has essentially closed its borders to tourism, with a very long quarantine period. Since it relies on tourism, the result is a very high unemployment rate, the price Hawaii has paid for its success at keeping Covid-19 at bay. Nevada also has a high unemployment rate, again because of the lack of tourism, and a higher death rate than Hawaii. In a sense, Hawaii is a poster child for how to achieve, at a very high economic cost, a good public health outcome.
EF: Looking at the state level for Texas, what, if any, conclusion can be drawn?
DJ: Texas is in the middle of the pack in terms of the PMI, and is lowest of the largest four states, and lower than many other larger states such as New Jersey. Texas has accomplished this with a combination of a comparatively low unemployment rate and a middle of the pack death rate. The early opening of the state back in June, somewhat but not totally reversed in July, and since then loosened in stages, has helped Texas’s economic health at some cost to its public health. Certainly, Texas has fared much better to date than either New York or New Jersey, and according to the PMI better than Florida or California.
EF: Do these data sets make the case for local, customized responses over blanket state or federal policy?
DJ: These data, combined with information about state policies such as pursued by Hawaii, or Texas, do indicate a trade-off between public health and economic health. If citizens of different states have differing willingness to trade off economic and public health, then a case can be made that a state response may better meet citizen preferences than a federal response, and by the same token, a local response may better meet citizen preferences than a state response. However, there are some benefits to the coordination of certain activities so I don’t want to push this too far.
DJ: What was the most interesting takeaway your team was able to draw from compiling this data?"
EF: I think our most interesting takeaway was the variety of PMI values across the country, and across the MSAs within Texas. Some of the differential results are no doubt exogenous to state policies and local MSA policies, such as the timing of occurrence of the disease and the type of industries within the various governmental entities, but some of the differential results are due to the speed of opening of the economy or the type and severity of business restrictions imposed by the various governmental entities. So College Station-Bryan, for example, does quite well in comparison to other MSAs in Texas, partly because it has a low unemployment rate and partly because it has a somewhat low death rate. This may be somewhat exogenous to local governmental decision-making, but it does indicate a real advantage of the local area in terms of combined economic plus public health.
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