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Want people to get the Covid vaccine? Pay them

Want people to get the Covid vaccine? Pay them

The vaccines seem to be coming thick and fast.

The task now is to ensure that enough people get them to keep the virus under control.

The first issue is one of logistics. The track record of the UK’s health bureaucracy during the crisis has not been good. But the NHS does have experience of administering millions of flu jabs every year, and the process seems to work well.

The real challenge is how to persuade enough people to come forward and be vaccinated.

There is clearly a section of the population, revealed on social media, which will never agree to it. Some believe that the vaccine is a sinister plot by a tight-knit cabal to control the world.

True believers in such conspiracy theories are probably relatively small in number. The problem will be if they succeed in undermining the science behind the strategy of vaccination and manage to convince others.

Here, members of SAGE getting on TV to urge vaccination are a liability. They are almost doing the anti-vaxxers work for them.

The credibility of these scientists is being shot to pieces. The 1960s avant-garde artist Andy Warhol is currently enjoying a revival. He once memorably pronounced “in the future, everyone will be famous for 15 minutes”.

The huge numbers of hitherto totally obscure academics on SAGE and its various sub-committees are living proof of the accuracy of Warhol’s prediction.  They fall over themselves to appear in the media with ever more gloom-laden predictions, most of which are rapidly exposed as being wrong.

This is a serious problem for the government.

Local GPs do seem to still have a high level of credibility and trust with the public. These doctors should be the ones promoting the message of vaccination. Government scientists and SAGE members, who have become figures of controversy, should simply keep quiet.

Even so, there may be many individuals who carry out a simple cost-benefit analysis for themselves. Virtually no one under 40 in reasonable health, for example, has died of Covid-19.  If the vaccine has unpleasant side effects, they may decide not to have it.

Incentives need to be put in place. There are externalities involved: if I refuse to have a vaccination, I can infect others. That means vaccination cannot simply be left to individual self-interest.

Some negative incentives seem obvious. For example, anyone who refuses the vaccine could be excluded from treatment if he or she caught the disease. Fines or even prison could be applied in vaccine refusers who are shown to have spread Covid.

But such measures would create the wrong sort of climate.

The best incentives in the current circumstances are positive ones. The idea being floated of a “vaccine passport” that would enable immunised people to experience more freedom in their day-to-day lives might work, though it would immediately create a market in forgeries.

But there is a much simpler way: people should be paid when they get vaccinated.

This would not have to be a vast amount from the government’s perspective. Even £25 per jab would amount to a drop in the ocean in the overall context of what has been spent on Covid. A cash incentive would particularly motivate poorer areas where health in general is a real problem.

Thus we solve the vaccine conundrum not with more doom-mongering scientists on TV, but by delegating the task of persuasion to a local level via GPs, and backing it up with real cash incentives. That is how we will beat Covid-19.

As published in City AM Wednesday 25th November 2020
Image: Vaccine by Pixabay
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It is science, not lockdowns, that will save the world

It is science, not lockdowns, that will save the world

The various new vaccines announced over the past two weeks give real hope of a return to normal life.

Of course, many practical questions remain. How will these vaccines be delivered? Do they stop the transmission or simply the symptoms of the virus? Exactly how effective will they be outside a controlled trial environment?

But despite these legitimate queries, the scientific community has made massive progress in a very short space of time, and should be celebrated.

The good news makes a very welcome change to the dreary and damaging pessimism offered by the epidemiologists.

Still, scarcely a day goes by without SAGE boffins popping up in the media pronouncing that the lockdown is not strict enough, it should have been brought in earlier, more will be needed when this one has ended. Even in the wake of the news of the Moderna vaccine, Public Health England’s Dr Susan Hopkins was warning that, when the official four-week lockdown ends on 2 December, the previous “Tier” system should be strengthened. That makes the prospect of households being able to mix indoors and businesses being permitted to reopen look far from likely.

As I have written before, if the only tool you have is a hammer, everything looks like a nail.  And the only tool the epidemiologists seem to have is lockdown.

Many of them do not seem to grasp that epidemics can ultimately be contained only by either behavioural change or by scientific innovation — and preferably a combination of the two.

Two admittedly somewhat extreme examples illustrate the importance of each. We used to throw the contents of our bedpans into the street from the bedroom windows, spreading all manner of disease. The change in our behaviour did indeed save lives.

But we also need scientific advancement to progress. David Ricardo, the greatest British economist of the nineteenth century and an immensely wealthy man, died at the age of 51 from an ear infection which would now be routinely cured in a few days.

The sharp contrast between restrictions which the epidemiologists want us to endure and the bright life which scientific innovation brings extends far beyond the current crisis.

It is at the heart of the debates over climate change, for example — or, more precisely, over what our response should be.

Climate change could indeed be stalled by reducing living standards to those of, say, Ricardo’s time, some 200 years ago. The Industrial Revolution was then half a century or so old. By then, people had just enough to eat in order to keep them alive and do some work. The famines which characterised all previous human history had been vanquished in western Europe. But life was pretty grim.

It was science and innovation that improved life beyond measure and that now enables us to enjoy modern living standards. That same innovation can also be harnessed to combat climate change.

Innovation need not be on the grand breakthrough scale of the Covid vaccines. A series of modest scientific advances can have a lot of impact.

For example, until recently Australia, despite its wonderful sunny climate, had very few solar panels. The reason was that energy from coal and gas was much cheaper. Now that the panels have gradually become much more efficient, the reverse is true. As a result, there is a massive boom in installation by households. Companies are building gigantic farms of panels in the deserts.

Hair shirts imposed by blinkered academics and those with a central planning mentality will not work. Ingenuity and innovation permit permanent solutions to many of the problems we face.

As published in City AM Wednesday 18th November 2020
Image: Vaccine by Bicanski on Pixnio
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The public are not to blame for the second lockdown

The public are not to blame for the second lockdown

Justice secretary Robert Buckland last week blamed the public for England’s new lockdown.

In particular, the fault was with people failing to self-isolate properly.

Of course, in a purely technical sense Buckland is right.

The virus spreads by contact with an infected person. If people do not self-isolate, Covid-19 will continue to percolate across the population.

But this is to miss the point. The real question is: why have people been so cavalier about following the regulations in recent months?

Back in March and April, lockdown rules were widely observed more or less to the letter. At first, regulations which banned crowds at sporting events and closed pubs were accepted as being reasonable. Later, the entire nation accepted the government’s message to stay at home except in extremely limited circumstances.

However, as the summer unfolded, the authorities began to give a more mixed message.

Tens of thousands took part, for example, in Black Lives Matter marches. The police, far from dispersing these events, appeared to offer support.

A reasonable inference to draw was that the authorities did not really believe that mass outdoor gatherings spread Covid in any serious way. The official line of the various UK governments, however, continued to be that the virus remained a major threat.

This kind of public information obviously plays a part when people decide what course of action to follow in terms of, say, self-isolation or not visiting crowded bars. But each person also has information which is private to that individual, or at most shared by a few close family and friends.

Many people, for example, visited crowded beaches and did not seem to catch Covid. And in their immediate circle, most of those who did catch the virus experienced no real problems.  It was not the killer the government scientists warned it was.

Over time, the public has gradually come to place more weight on their own private information, and less on the set of public information provided by the government.

To the scientists on SAGE, this appears to be wholly irrational. Private information by definition is only partial. Public information gives a more complete and hence more accurate picture.

But it can be entirely rational for a person not to just to give increasing weight to one of these, but to come to rely exclusively on either private or public information.

A famous 1992 paper in the Journal of Political Economy by Sushil Bikhchandani and colleagues of the University of California explains why.

A key driver of the change is the relative weights which other people use. The more the people you know rely on their own information rather than that put out by the government, the more rational it is for you to do the same.

The California economists coined the phrase “information cascade” to describe this process.

The UK government allowed doubts to creep in about the reliability of its information. Mass gatherings were a Bad Thing, but the police did nothing to stop them. As such, the information they are giving out now about the importance of self-isolation is being viewed with scepticism.

It was not inevitable that the public message would be undermined. But thanks to other communication debacles (the wildly misleading Whitty-Valance charts, for example), momentum is now firmly moving against government messaging.

Such a trend can only be reversed by drastic action. The justice secretary should look close to home for the culprits of our current predicament. Sacking some prominent scientific advisers could get the “information cascade” flowing back in the government’s direction.

As published in City AM Wednesday 11th November 2020
Image: Stay Safe sign by Stephen Craven via Geograph  CC BY-SA 2.0
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Lockdown 2.0: A creative destruction revolution, or the death knell of innovation?

Lockdown 2.0: A creative destruction revolution, or the death knell of innovation?

So Boris Johnson has failed to follow his own government’s guidelines on cost-benefit appraisal.

Study after study by economists show that the costs of lockdown far exceed the benefits.

The NHS — the “envy of the world” — has conspicuously failed to develop sufficient capacity to deal with a second wave, despite having had months in which to prepare.

The Prime Minister’s cronies have failed to deliver on his claims of various “world-beating” devices. We are reminded of Glendower’s boast in Henry IV Part 1: “I can call the spirits from the vasty deep”, and Hotspur’s withering reply: “Why, so can I, or so can any man. But will they come, when you do?”

From this litany of failure, one certainty emerges. The economic recession will now be even longer and deeper than it need otherwise have been.

Perhaps there is a silver lining. In the 1930s, the Harvard economist Joseph Schumpeter coined the memorable phrase “gales of creative destruction”.

He developed an original insight of Karl Marx, who argued that under capitalism firms are under constant pressure to innovate. Failure to innovate increases the chances of going under.

Schumpeter emphasised the “cleansing effect” of recessions. In an economic downturn, trading conditions are hard. The less efficient companies are at greater risk of closing down. This creates an opportunity for new, more dynamic firms to enter the market.

The very deep recession generated by the policy response to Covid-19 might therefore simply sweep out the dead wood. The performance of the economy will be even stronger when the upturn comes.

There is, however, an alternative view to this positive outlook, also developed by a major American economist in the 1930s, which is far less well known outside of economics.

Irving Fisher of Yale set out his theory of debt-deflation while the Great Depression was raging in the west and unemployment rates rose above 20 per cent in many countries.

In the light of the financial crisis of the late 2000s, his perspective is strikingly modern. Fisher regarded major recessions as being created by the balance sheets of companies, and in particular by debt.

In his view, innovation was not stimulated by economic downturns, as Schumpeter thought. On the contrary, it was when the economy was growing rapidly that balance sheets were strong enough to finance innovation, especially of the trail-blazing kind whose outcome is of necessity very uncertain.

In the current circumstances, a lot depends upon who was correct, Schumpeter or Fisher. Is the Covid recession stimulating or reducing innovation?

A timely paper on this has been published in the latest issue of the American Economic Association’s economic policy journal.

Jorge Guzman and Scott Stern, of Columbia and MIT respectively, make excellent use of big data to estimate the quality and the quantity of entrepreneurship and innovation over a 25-year period in the US.

The analysis is complex, and the authors make very proper qualifications to their results. But on balance, their results support Fisher’s view.

Innovation flourishes when the economy is doing well. Yet another reason to exit from lockdown as quickly as possible.

As published in City AM Wednesday 4th November 2020
Image: Pxhere
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Forget the polls endorsing lockdowns and look at how people actually behave

Forget the polls endorsing lockdowns and look at how people actually behave

Economics is at long last storming the bastions of the Scientific Advisory Group for Emergencies (SAGE).

This citadel of epidemiologists and health professionals has for many months resisted the lessons which the so-called gloomy science can bring.

In the context of Covid-19, economics is in fact a beacon of hope.

This week, news broke of a report commissioned by SAGE from Barry McCormick, a former chief economist at the Department of Health. It shows that the benefits of lockdowns are greatly exceeded by the costs they create. On the government’s own standard cost-benefit criteria for judging policy, they should not be imposed.

But If the only tool you have is a hammer, everything looks like a nail.  And the scientists of SAGE only seem to have lockdowns in their kitbags.

Economists have warned of the unfavourable cost-benefit impact of lockdowns for months.

At the end of June, David Miles, a former member of the Monetary Policy Committee, produced a very detailed report showing that even if the first lockdown had saved 500,000 lives — the estimate of professor Neil Ferguson at Imperial, and a figure Miles regarded as absurd — the costs of it were even greater than the value of the lives saved.

Indeed, back in early April, Gerard Lyons and I (while supporting the initial lockdown) laid out our plans to chart a way out of it. We urged the government to do so quickly, precisely because of the costs to the economy and society which lockdown created.

And the government appeared to agree. Rishi Sunak designed his job support schemes on the assumption that the country would soon be opening up for business again, winding down furlough and focusing on how to get the economy moving again.

Then as summer ended, the government was essentially railroaded back into a lockdown strategy by the panic-inducing charts produced by the scientists. The massive inaccuracies of the graphs flourished by Chris Whitty and Patrick Vallance on 21 September simply cannot be emphasised enough. On their projection, there would now be nearly 200,000 cases a day  in the UK. There are actually only around 20,000.

But once the graphs had been released, the government was backed into a corner by public opinion. Opinion poll after opinion poll apparently showed strong support not only for whatever lockdown measures were in place, but for them to be strengthened.

What is the government to do in the face of such a pro-lockdown public?

Here, as it did over the summer, economics can again come to the rescue.

A fundamental concept of economic theory is that of revealed preference. People’s preference can be most reliably inferred not from the answers given to questions in surveys, but from the actual decisions which they make and the actions which they carry out.

Even the scientists on Sage are beginning to grasp that, in practice, the strictures of lockdowns are widely ignored, despite the answers people give to surveys.

For example, while huge majorities will earnestly say they support long isolation periods for Covid sufferers and their contacts, the data shows that barely 10 per cent of people in these categories are actually following the rules. As a result, the quarantine period may soon be reduced to just seven days, in the hope that people will be more likely to stick to the rules if they are less harsh.

Overall, the preference revealed by the British public is that they have had enough of lockdowns. That is not to say that they do not care about reducing transmission — they understand the need to change behaviour.  Many of the over 70s are shielding effectively, while young people are beginning to grasp the implications of unrestrained mingling and are modifying their actions. But when the rules are clearly overly strict, counter-productive, or downright bizarre, people pay less attention.

The government should rely on economists and not epidemiologists to get us out of the crisis.

As published in City AM Wednesday 28th October 2020
Image: Stay Safe sign via Flickr  CC BY-NC-SA 2.0
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