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Coronavirus fatality rates are way down – why has the government not taken this on board?

Coronavirus fatality rates are way down – why has the government not taken this on board?

King Canute has had a bad press. The monarch sat on the beach on his throne with the deliberate intention of demonstrating to his courtiers that he could not stop the waves from coming in.

But in popular thinking, he is the deranged king who believed he could control the sea.

In this spirit, step forward two modern Queen Canutes, Nicola Sturgeon and Jacinda Ardern of New Zealand. Both appear to think they can eliminate Covid-19.

Our own Matt Hancock is showing dangerous signs of succumbing to this syndrome.

On a more sober note, it is certainly true that new cases are rising not just in the UK but across Europe – except in Sweden.

But there are major differences between this wave of infections and that experienced in March and April.

The key question is not really how many people might get Covid-19. It is how many might die as a result. In the jargon, this is the case fatality rate (CFR), the probability of dying from the disease if you catch it.

As ever, the Oxford Centre for Evidence Based Medicine is a font of wisdom.

A month ago, the Oxford researchers showed that in the UK the CFR had fallen from six per cent in the summer to just 1.5 per cent.

This could of course be due in whole or in part to the fact that the majority of infections are now in the young, who are at essentially no risk at all themselves.

But the Oxford group showed last week that something even more important is going on. They analysed data from Germany, which is more detailed and specific in terms of ages than in the UK. The results are striking.

In the 60 to 79 age group, in the March and April period the CFR was nine per cent. By July and August this had fallen to just two per cent.

In the very vulnerable group of the over 80s, in March and April the CFR was a frightening 29 per cent. By July and August this was down to 11 per cent.

So deaths remain very low not just because it is mainly the young now catching Covid-19 or because the elderly are shielding. Both of these are true.

More fundamentally, fatality rates amongst those who actually have the virus have fallen sharply. Treatment has improved. Social distancing means less strong doses are being caught. Whatever the reason, CFR is down.

Government advisors and health care professionals appear not to have taken this on board. They speak and act as if a second wave will be as lethal as the first.

Some might think they are as mad as the King Canute of popular legend. It is more likely that they are simply suffering from confirmation bias.

This is the tendency to search for, interpret, and recall information in a way that confirms or supports one’s prior beliefs or values.

They have long thought that a second wave would be devastating. The emerging evidence should not be allowed to get in the way of this. Their irrational behaviour is costing us all dearly.

As published in City AM Wednesday 9th September 2020
Image:  Covid Testing by via GiiPe via Wikimedia
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On coronavirus, governments have been the most irrational of us all

On coronavirus, governments have been the most irrational of us all

Decisions, whether by individuals, companies or governments, are often made with imperfect and incomplete information.

This is so obvious as to hardly seem worth stating. But for well over a century economic theory assumed that decisions were made with complete information. Economists knew full well that this was not always the case. The problem was that building a formal model without this assumption was a formidable task.

It was solved in the late 1960s by the American economist George Akerlof. His paper, the enigmatically titled “Market for Lemons”, won him the Nobel Prize. The article is probably the most cited in the entire history of economics.

The coronavirus crisis provides an almost textbook example of how different amounts and quality of information affect the decisions which are made.

In March, initial data from China suggested the death rate was between three and four per cent, a real pandemic. The chaos in the health system in northern Italy was a prominent feature in the media.

Little wonder that, against Boris Johnson’s libertarian instincts, a compulsory lockdown was introduced. Little wonder that people reacted with fear to the virus.

Six months later, whilst there is still much to discover about Covid, far more is now known.

It is well established that almost everyone who has died had some serious pre-existing health condition. Perhaps even more importantly, virtually no-one under the age of 40, or even 50, has died.

Many people have reacted to this information in an entirely rational way.

Those who perceive themselves as being either elderly or having a health problem continue to shield. The young see they are at essentially no risk at all and start to behave as they did before the virus appeared.

In Scotland, for example, it seems that around half the new infections are in mere whippersnappers under the age of 25. More generally across the UK, although the reported number of new cases is rising, hospital admissions remain very low because new infections are concentrated amongst the young.

These behavioural responses have arisen entirely spontaneously as the quality and quantity of information has improved. Many have weighed the costs and benefits in the light of this information and have made rational decisions.

The idea that people would change their behaviour during a pandemic was of course almost entirely absent from the mathematical models used by epidemiologists. It is this which led to absurd predictions both of half a million deaths in the UK in the first place and of fears of a second wave with even more deaths.

Some individuals who are at little risk remain paralysed by fear. They are still relying on outdated information and so behave in non-rational ways.

But it is governments which right now are the least rational of all. Nicola Sturgeon wants to eradicate Covid when even New Zealand, a country which can seal its borders, could not.

And governments persist in incurring the costs of lockdown, when people have shown that they are capable of behaving in sensible and rational ways without government interference.

As published in City AM Wednesday 9th September 2020
Image: Closed Due to Covid-19 Sign by via Pixabay
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The national productivity recovery depends on getting people back to the office

The national productivity recovery depends on getting people back to the office

Office workers continue to display reluctance to return to their workplaces, despite encouragement from the government for them to head back.

The immediate consequences for the service jobs in cities which depend on people commuting into the office are apparent, hence the government drive. But is office work a good thing for the workers themselves?

An important concept in economics is that of revealed preference. Economists believe that preferences are revealed not in surveys, but by the decisions which people actually make.

So could it be that the Covid crisis has given office workers the chance to reveal their true preferences in terms of work-life balance?

This is almost certainly true for the senior staff who make the decisions. They will typically live in large houses in agreeable surroundings, with space to dedicate a room as an office.

It is much less obviously the case for many younger staff. Working with your laptop on your knees in a bedsit, unable to socialise with colleagues, may lead you to prefer the commute instead. But there are constraints on being able to reveal this preference, such as potentially annoying your boss who enjoys working from home.

Furloughed workers, meanwhile, have merely revealed a preference to be paid a large part of their regular pay and not work at all. This is particularly true of public sector workers, who receive their full salary regardless. They have no incentive to change their work patterns.

An obvious incentive for companies is that, if working from home persists, they can save on office costs. They may even be able to adjust salaries downwards, especially for staff who commuted long distance from cheaper locations.

In the very short term, there will be little, if any, loss of productivity to offset this. Most office jobs consist of performing routine, well understood tasks. Within the discipline of an established framework, some people may even be able to do their jobs more efficiently at home, encountering fewer distractions.

This is true even for jobs which require analytical skills. The business model of a number of large consultancies, for example, can be thought of as follows.

The company hires bright young graduates, who come equipped with a stock of the latest ideas — what economists call human capital.  The short-term pressures in the big consultancies to make money are so intense that they have little chance to refresh this during their careers. Essentially, they run down their human capital. By the time they make partner or director in their forties, they are operating on half-remembered ideas from graduate courses.

This is why the company requires a steady flow of new recruits, to refresh the business. The challenge with remote working over time will of course be to not only integrate new young staff into the organisation, but to ensure that their ideas percolate.

Productivity will grow more slowly over time if extensive homeworking persists. In part, this will be due to factors internal to the firm. The tacit knowledge and creativity sparked by informal exchanges will be lost.

The real loss, though, is through factors external to any individual company. A huge amount of evidence shows that the higher the density of employment in an area, the higher its productivity.

The drive to get people back into their offices, therefore, is about far more than saving city cafes and restaurants. The government should incentivise firms to get staff back to work, in order to avoid lost productivity — for the entire economy.

As published in City AM Wednesday 2nd September 2020
Image: London Underground by via Pikist
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Sweden shows us whether lockdown was worth the economic cost

Sweden shows us whether lockdown was worth the economic cost

Did Sweden get it right in its response to Covid? There is increasing interest in this question.

Contrary to widespread belief, the Swedes did introduce a few legally enforceable restrictions on behaviour. For example, public gatherings of more than 50 people were forbidden in March. Private ones were exempt from the ban.

But, overall, compared to other European countries, Sweden had effectively no lockdown.

At the start of the outbreak in March, the epidemiologists in the UK were quick off the mark with their dire predictions.

Professor Ferguson and the Imperial College team, in a highly influential paper of 16 March, argued that without any policy changes “we predict approximately 510,000 deaths in Great Britain”.

They also suggested that the peak of mortality would take place after approximately three months.

The peak of mortality was reached after just three weeks, not three months — on 8 April in fact.

A model based on the Imperial one was calibrated on Swedish data in April. The outcome was a prediction of some 80,000 deaths.

To date, the number of deaths in Sweden due to Covid is less than 6,000.

The estimates which emerge from standard models of epidemiology clearly cannot be relied upon.

With Rickard Nyman, a young Swedish computer scientist currently based at UCL, I have compared the trajectories of deaths in Sweden and the UK to provide an estimate of how many lives lockdown really did save.

The first death in Sweden was registered on 11 March. On that day, there were seven deaths in England and Wales (EW).  But our population is nearly seven times that of Sweden, so the death series in the two countries start at the same level, adjusting for population size.

The peak death rate was observed in Sweden on exactly the same day as in EW, 8 April.

Further, the paths followed between 11 March and 8 April are almost exactly the same.  For example, deaths reached half their eventual peak value on 1 April in EW and on 31 March in Sweden.

So lockdown had no impact on the build up to the peak.

There is no doubt, however, that the number of deaths fell more sharply here than in Sweden after the maximum level was reached.

Deaths had dropped in EW to half the 8 April peak by the end of April and to only a quarter of the peak by the middle of May. In contrast, in Sweden the “half peak” value was only seen on 12 May, and the quarter by the middle of June.

These differences in the trajectories of the death numbers after their peak in early April tell us how many lives were saved in the UK as a result of lockdown.

It is not 500,000. It is just 20,000, a tiny fraction of the Imperial figure.

So, yes, lockdown did save lives. But the massive economic and social costs, let alone the adverse effect of lockdown on people suffering from other illnesses such as cancer, can hardly be said to justify the saving.

Paul Ormerod
As published in City AM Wednesday 26th August 2020
Image: NHS Heroes by Jernej Furman via Flickr CC BY-SA 2.0
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Busting the myth of the selfless bureaucrat

Busting the myth of the selfless bureaucrat

There seems to be a fundamental problem with quangos. Hardly a day seems to go by without some new story of incompetence and mismanagement emerging.

Public Health England (PHE) is at least going to be put out of its misery by health secretary Matt Hancock, and replaced with a new agency specifically focused on pandemics.

An anonymous government minister is attributed as saying early in the crisis “we didn’t really know what PHE actually did, except from time to time they would put their head over the parapet and try and ban something like Coco Pops”.

PHE is by no means the first government body to have a slightly dubious record of effectiveness. The Highways Agency, set up by John Major’s government, was of such legendary uselessness that David Cameron renationalised it just before the 2015 election. It rose again as a “government owned company”, Highways England. As such, it has been responsible for the funereally slow works which install so-called smart motorways.

Network Rail, meanwhile, seems to have the Midas touch — for its contractors and consultants, that is, as it fails to complete Crossrail and the costs of HS2 soar out of control.

And the shambles at Ofqual over A-levels is beyond parody.

The simplest way from the outset would have been to accept, as a unique one-off event, the predicted grades of teachers. That is all that the quango need have done. The problem of who to admit would have been devolved to the universities, which are the bodies with the ultimate financial interest in these matters.

Now, the situation is even more complicated — places have already been assigned based on algorithm-assigned grades before the U-turn, and universities have mere days to work out how they will teach thousands of additional students, rather than months to work out a reasonable system.

In the case of each individual quango, there will be reasons as to why those specific problems occurred. But there are so many examples that there must be some more general principles at work.

As usual, economics can help. There is a long history of work around the concept of what has come to be known as “public choice” theory.  The American economist James Buchanan did more than anyone to establish it as a standard and wide-ranging tool of economics, and he was awarded the Nobel Prize for this as long ago as 1986.

Too often in public discourse, a contrast is made between self-interested companies and government bureaucrats working in a seemingly selfless way for the public interest.  Indeed, some of the bodies pilloried above were set up with the explicit aim of taking politics out of decision making in the relevant areas.

In essence, Buchanan believed that bureaucrats and politicians behave in the same self-interested way as everyone else. This does not mean that other motives are absent, but that rational self-interest is an important driver of behaviour.

We can see this clearly in the way the teaching unions have reacted to the Covid crisis.  Many teachers are dedicated and committed to their pupils. Equally, however, there is a significant minority who do not act in any way as selfless professionals. Their revealed preferences have been to draw full pay and do little to no work, regardless of the consequence for children.

Detaching public policy decisions from direct political control has been very fashionable for the past few decades. The performance of the UK’s quangos shows that it is high time for a change of mind.

Paul Ormerod
As published in City AM Wednesday 19th August 2020
Image: NHS Heroes by Bill Nicholls via Geograph  CC BY-SA 2.0
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