Severe acute respiratory syndrome is affecting the global economy in an interesting way. Actions by people to avoid getting SARS and public health measures to avoid its spread are the primary cause of economic loss rather than the disease itself.
Business for hotels, restaurants and many retail businesses in Beijing, Hong Kong, Toronto and other affected cities is in the doldrums. Airlines that serve Asia, including Twin Cities-based Northwest, cannot fill seats. Some have canceled flights. Economic forecasters are lowering their GDP estimates for affected countries such as China, Singapore, Canada and Taiwan and, more broadly, for Asia and the world as a whole.
These are large economic impacts for a disease that to date has killed fewer than 500 people. While the media portray death tolls as high, one has to keep in mind that with the global population above 6 billion people, at least 250,000 people die every day.
Moreover, SARS deaths are far fewer than those from better-known maladies. Recent reports on endemic disease in Africa point out that some 3,000 children still die of malaria each day in that poverty-stricken continent. HIV/AIDS, also a communicable disease, similarly kills thousands daily and is altering the population and labor force structure in several countries. So why the big scare about SARS?
There are a number of factors and they illustrate how humans react to unfamiliar and distant risks. Psychologists and behavioral economists note that people are more influenced by their personal scenarios of “something happening to themselves” vs. “something happening to somebody else.”
People tend not to care much about high murder rates as long as the murders take place in a “bad part of town.” They worry much more when killings occur in their own neighborhoods or areas they frequent. The public is more frightened by random stranger killings than by murders committed by family members. Their reasoning goes: “The stranger might kill me when I walk through a park but nobody in my family would try to hurt me.”
Similar reasoning applies to SARS. Since it is infectious, even if not highly so, and deadly to some 5 percent or more of people who contract it, potential travelers can picture themselves getting the disease and even dying of it.
They may be deterred from traveling to Toronto or Beijing even though they would not blink an eye at traveling to cities where HIV rates are high and malaria common. They know that they won’t get HIV if they avoid sexual contact and drug injections and that they are not likely to get malaria if they stay in a luxury hotel or if they take anti-malarial drugs.
These human reactions to risk of SARS would put the kibosh on a lot of travel even if there were no international or local quarantines. But such quarantines and other sensible public health measures do add markedly to economic impacts.
The relatively low communicability of SARS means that the disease may be controlled by traditional public health measures — speedy diagnosis and isolation of patients together with quarantine of those potentially infected. Such measures have been known for centuries but still can be highly effective.
Unfortunately, both spontaneous and mandated reductions in travel have much greater impacts on modern economies than would have been true in the past. Airplanes and our propensity to conduct business in person mean that travel and hospitality account for a larger proportion of economic output.
The economic impacts of travel restrictions are large relative to the costs of SARS cases experienced, even with public health measures. They are, however, small compared to the economic costs of the deaths that might occur without measures to identify, isolate and quarantine.
An uncontrolled outbreak of SARS could kill millions. So it is important to recognize that the benefits of travel restrictions are deaths and economic damage avoided by such public health measures rather than deaths that still occur in spite of them.
One other notable factor is that economic losses to travel and hospitality industries in major cities or developed countries are highly visible. When a group of 12,000 physicians cancels a convention in Toronto, it makes the news immediately. Large airlines and hotel/restaurant industry associations know how to voice their pain.
HIV/AIDS and older diseases such as malaria, schistosomiasis and river blindness have sapped output and incomes in Africa for years.
But the loss of output to traditional economies does not make newspaper headlines in wealthy countries.
© 2003 Edward Lotterman
Chanarambie Consulting, Inc.