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Want people to get the Covid vaccine? Pay them

Posted by on November 25, 2020 in Behaviour, Blog, Health, Science | Comments Off on 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

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

Posted by on November 18, 2020 in Blog, Economy, Government, Health, Uncategorized | Comments Off on 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

The public are not to blame for the second lockdown

Posted by on November 11, 2020 in Behaviour, Blog, Government, Health | Comments Off on 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

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

Posted by on November 4, 2020 in Blog, Business, Economy, Innovation | Comments Off on 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

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

Posted by on October 28, 2020 in Behavioural Economics, Blog, Economists, Economy, Government, Health | Comments Off on 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

The government must take back control of the Covid narrative

Posted by on October 21, 2020 in Behavioural Economics, Blog, Economy, Government, Health | Comments Off on The government must take back control of the Covid narrative

The government must take back control of the Covid narrative

The word “narrative” is usually seen as being a posh way of saying “story”.

But the idea of narratives is one which is gaining traction in economics.

Last year, for example, Nobel laureate Robert Shiller of Yale published a book entitled “Narrative Economics”.  He argued that it is the perception of events and the stories around them which are the key drivers of the economy.

There is a lot to be said for this view. A good example was provided during one of the many crises of the euro in the 2010s.

In 2012, the then president of the European Central Bank, Mario Dhragi, pronounced that he would “do whatever it takes” to defend the euro. He then did precisely nothing. The euro promptly strengthened. His statement alone was enough to create a positive narrative which was believed by the markets.

We have not had an old-fashioned sterling crisis for many years. But during the Labour government of Harold Wilson in the 1960s, Treasury officials were forbidden from using the word “devaluation”, even in top secret memos. The fear was that a leak would immediately precipitate the collapse of sterling. The pound was indeed devalued eventually, but in circumstances a bit more under the government’s control.

Narratives are important right now. If companies believe, for example, that a successful Covid vaccine will be introduced by the new year, they will feel much more confident about carrying out new investments now and keeping people employed than if they are sceptical.

In terms of boosting confidence, both for individuals and firms, the government has lost control of the Covid narrative.

In March, it made perfect sense for the government to emphasise the data on both hospital admissions and deaths. A new disease had appeared from China which appeared to kill between three and four per cent of those who caught it.

The frightening charts on deaths and hospitalisations served two key purposes. They legitimised the enforced lockdown, and they encouraged people to change their behaviour.

We now know much more about Covid-19. The infection fatality rate, for example, is far lower than originally feared. Vulnerable groups have learned to shield effectively.

We also know that lockdowns themselves generate massive costs. Cancer patients go untreated. Hip operations get postponed. Mental health deteriorates. Jobs are lost and poverty rises.

Today, cases, hospital admissions and deaths are indeed rising again, but at a much slower rate than in March and early April. Yet the government persists in allowing scientists who focus exclusively on Covid to dominate the narrative.

According to the Project Fear charts put up by Chris Whitty and Patrick Valance on 21 September, there should now be nearly 100,000 new cases a day on the official data. There are less than 20,000.

The Prime Minister must change the narrative. Charts on the costs of lockdown should take centre stage, and the benefits of future lockdown restrictions should be presented alongside metrics showing the risk they pose to the economy and society.

A period of silence by SAGE members would also be welcome. At this point in the crisis, we cannot afford to cede control of the narrative to a group of taxpayer funded scientists who are fixated by a single disease.

As published in City AM Wednesday 21st October 2020
Image: Covid  Daily Briefing via Flickr  CC BY-NC-ND 2.0 

Heavy-handed Westminster diktats have eroded trust — now only localised Covid policy can restore it

Posted by on October 15, 2020 in Behaviour, Blog, Economic Theory, Government, Health | Comments Off on Heavy-handed Westminster diktats have eroded trust — now only localised Covid policy can restore it

Heavy-handed Westminster diktats have eroded trust — now only localised Covid policy can restore it

Last month, the official group of scientific advisers — SAGE — warned the government that only a quarter of those who need to self-isolate due to coronavirus symptoms were in fact doing so.

This illustrates a concept which is of great practical importance: namely the conflict between individual and collective rationality.

Consider Margaret Ferrier, an SNP MP (who has since had the whip removed) who travelled by train from London to Scotland despite knowing she had tested positive for Covid-19. Better for her personally to be at home in Glasgow than stuck in a London hotel for a week, but worse for society as a whole as she risked spreading the virus to everyone on the train with her.

The textbook model of economics neatly sidesteps this potential problem. It sets up an idealised situation in which there is no conflict between individual and collective rationality.  The task is then to discover what assumptions about behaviour are needed to be compatible with such an outcome.

It is a very challenging question, and several of the early Nobel Prizes in economics were awarded for work in this area.

Economics itself has moved on in recent decades and pays much more attention to the potential rift between what is good for the individual and what is good for society.

One of the most influential thinkers in this area is Elinor Ostrom who received the Nobel prize in economics only three years before her death in 2012. Her work is very relevant in the Covid crisis.

Her doctoral dissertation was on how farmers and others in Southern California solved the problem of water management in their local area. For individuals with favourable locations, it was rational to grab as much water as they could. But collectively, this was a bad outcome. Others would be short of water.

The key feature of Ostrom’s work was to show that individuals were capable by their own actions of avoiding conflicts of individual and collective rationality. It was not necessary to have a heavy-handed regulator trying to impose a solution from above.

Like the Nobel laureates before her, she basically worked out what assumptions were needed for this to happen.

An essential element is that those involved must have some feeling of being part of a group. Further, disruptive and self-serving behaviour should be speedily identified and punished, in ways which are seen to be fair within the group. People also need to feel a sense of ownership of any restrictions which are asked of them.

When Boris Johnson announced lockdown on 23 March, in effect the nation was the group. For a period, most people behaved with proper regard to others.

The subsequent maze of complex and often contradictory diktats issued by health bureaucrats and politicians since then has eroded much of this trust.

Countries such as Germany which had locally based Covid strategies from the outset have fared much better than the centrally planned attempts in the UK, in part because they have been able to maintain this trust and sense of community.

At long last, the UK government shows signs of being willing to trust local authorities to do what is best for their area — in the form of local lockdown rules. They may still get it wrong, but local autonomy on Covid policy at least gives the chance of restoring the trust which is essential to any successful strategy.

As published in City AM Wednesday 14th October 2020
Image: icsilviu via Pixabay

Following the science? This government lacks a basic grasp of the scientific method

Posted by on October 8, 2020 in Behaviour, Blog, Experts, Government, Health | Comments Off on Following the science? This government lacks a basic grasp of the scientific method

Following the science? This government lacks a basic grasp of the scientific method

Verification and validation. It is hard to imagine a more nerdy phrase.

But it is, in essence, how science makes progress. It is what we have to do to check whether a scientific claim or theory is correct.

And it has been seriously neglected during the Covid-19 crisis.

Just over a century ago, for example, Albert Einstein revolutionised the world of physics with his general theory of relativity. The verification part of the process was to check that his high-powered maths did what he said it did.

Einstein claimed his theory was superior to the very longstanding one of Isaac Newton. This had to be validated by confronting it with real world evidence before it was believed. Some of the tests were pretty esoteric, involving things like fluctuations in the orbit of Mercury.  But Einstein’s theory passed with flying colours. It was both verified and validated.

Last week, Matt Hancock, the secretary of state for health, claimed that without the new lockdown measures there could be “hundreds of thousands of deaths”.

A quick but effective piece of validation shows the scientific model on which this is based is most unlikely to be true.

The evidence now suggests that, at the peak of the epidemic in late March/early April, there were around 100,000 new cases each day. Total deaths in these months were around 40,000.

So to get “hundreds of thousands” of deaths — which means at least 200,000 — simple arithmetic shows that there would have to be a minimum of half a million new cases every day.

We can add to this calculation the combination of better knowledge of how to treat the virus and the continued shielding efforts of the most vulnerable, which have caused the death rate to fall sharply.

If Hancock’s claim is correct, there would have to be a million new cases a day at a second peak.

Even Chris Whitty and Patrick Vallance in their horror slideshow last week only felt able to claim 50,000 cases each day.

But the gloomy pair appear to have ignored the basic principles of verification and validation way back in February and March.

The lockdown was triggered by the predictions of Neil Ferguson and his team at Imperial College. Unless it was introduced, they projected, there would be 510,000 deaths.

Almost as soon as it was published, a range of scientists raised questions about verification of Ferguson’s model. Did the computer code do what was claimed? Ferguson himself tweeted “I wrote the thousands of lines of undocumented code 13+ years ago to model flu pandemics”.  For many weeks after it was not available for scrutiny.

It was rapidly pointed out that the model did not allow for any change in behaviour.  In the face of a pandemic, it assumed that people would carry on behaving exactly as they had always done — hardly consistent with the evidence of how people really do behave in these circumstances. Yet this was the basis for the lockdown restrictions we have seen over the past six months.

Verification and validation: boring words indeed. But their neglect by the government’s advisers has saddled us with the enormous social and economic costs of lockdown.

As published in City AM Wednesday 7th October 2020
Image: COVID-19 testing by Tom Wolf via Flickr  CC BY 2.0

And this week’s winner for the Stupid Scientist award is…

Posted by on September 30, 2020 in Behavioural Economics, Blog, expert views, Government, Health, Science, Uncategorized | Comments Off on And this week’s winner for the Stupid Scientist award is…

And this week’s winner for the Stupid Scientist award is…

Scepticism about the advice given by government scientists about Covid-19 is rising sharply.

In areas like Bolton infections are high. Interviews with the locals reveal that so, too, is disbelief in the veracity of the statements made by members of SAGE, the government science advisory group.

The scientists, rational beings themselves, may ascribe this to the inability of the general population to process information.

Yet it is their own pronouncements which have fostered scepticism. Scepticism in turn brings reluctance to follow advice, even when it is good.

Which brings us to the winner of this week’s Stupid Scientist award. It is a close-run thing, but step forward Nicola Steedman, Scotland’s deputy chief medical officer.

Students at universities in the Glasgow region are effectively being held under house arrest in their halls of residence. According to this particular Nicola, it is for their own good.  The students are apparently at serious risk of dying from coronavirus.

If we turn to the data to see how many people under 30 have died from Covid in Scotland since the pandemic began, the number is in fact zero.

Given this, why should any credence be given to anything which Ms Steedman now says?  There have been zero deaths amongst student-age groups, yet she appears to believe that they are at serious risk of death.

Runners up for the award are the well-known duo of Chris Whitty, chief UK medical officer, and Patrick Vallance, chief scientist. They pronounced there could be 50,000 cases of Covid a day by mid-October. If cases doubled every week, they would reach this level.

This projection has attracted widespread criticism. New cases have indeed risen in countries like France, Italy and even Germany, but at a rate which is much slower than doubling every week.

The real issue is the dog that did not bark. Not so much what they actually say, but what they do not say.

In France and Spain, for example, during September the number of new daily cases exceeded the previous peak levels reached in April. In France, the daily total reached 16,000 last Friday, double the highest level of April.

Surely the cemeteries and crematoria should be full to bursting?

But they are not.

In France, new cases have exceeded the April maximum since the beginning of September.  At the end of the month, deaths are only one tenth of their April peak level.

In Spain, deaths reached a quarter of the April peak for a couple of days and are now falling sharply.

In Italy, daily deaths remain in very low single figures.

In the UK, too, deaths have risen but are very low compared to the total number of new cases.

The whole thrust of the messaging from pro-lockdown public sector scientists and bureaucrats is negative. Some may think this is because of the incentives they face. The bigger the threat the virus apparently presents, the more their importance and influence grows.

In my view, this is unduly cynical. But it is a cynicism which seems to be prevailing amongst the people of Bolton and other afflicted areas.

As published in City AM Wednesday 30th September 2020
Image:  Chris Witty and Patrick Vallance by Number 10 via Flickr  CC BY-NC 2.0

Incentives are a better way to tackle Covid-19 than blanket lockdowns

Posted by on September 23, 2020 in Behavioural Economics, Blog, Government, Health, Uncategorized | Comments Off on Incentives are a better way to tackle Covid-19 than blanket lockdowns

Incentives are a better way to tackle Covid-19 than blanket lockdowns

A great deal of government policy during the Covid crisis has involved regulation. Given a choice, economists usually prefer to use incentives. Altering the relative costs and benefits of an action is a well-established way to alter behaviour.

Perhaps the government has been listening. A big stick will now be waved at people who fail to self-isolate when they ought to: breaking this regulation can be punished by a fine of up to £10,000.

The size of the penalty seems large enough to deter people from going out and about when they should be staying at home. The case in favour of the policy seems open and shut.

However, the fine alters another incentive in the test and trace regime. The bigger the fine for breaking the rules, the less likely it is that people will supply the correct contact information in the first place.

Which of these two incentives will predominate is a purely empirical matter and one which is hard to predict in advance. Both undoubtedly exist, and the impact on the test and trace system remains to be seen. But it may just blow the scheme out of the water.

We do not know the source of the proposal within the machinery of government.  SAGE, the scientific group which has been advising the government during the pandemic, has no economists as members. But there are well over 1,000 economists working directly for the Government Economic Service. Have none of them made this obvious point to ministers about the different incentives?

On a more positive note, vulnerable groups have responded well to incentives created by the information which has emerged about the virus. No less than 89 per cent of all Covid deaths occur in the over 65 age groups. Even more pertinently, those with pre-existing medical conditions account for 95 per cent of all Covid mortalities.

There is a strong overlap between these two groups. Many of these individuals have altered their behaviour dramatically. They are shielding.  As a result, total deaths remain low given the number of infections.

German has experienced less than a quarter of the number of deaths as the UK. Its case fatality rate – the percentage who die once they catch the disease – among the elderly is the same as in the UK. The Germans have simply been much more effective at preventing the elderly from catching it in the first place.

An absolutely crucial part of any strategy is to try and keep the virus out of care homes. It is not possible for the very elderly in care homes to change their behaviour. Their environment is decided for them.

Care homes already have the incentive of reputational risk to avoid the virus spreading. But it must be worth reinforcing this with a public policy of substantial monetary incentives for those homes which are able to remain virus-free.

Whatever the incentive structure might be, a more subtle and targeted approach is needed than that of blanket lockdowns.  These simply generate huge social and economic costs, with little in the way of overall health benefits.

As published in City AM Wednesday 23rd September 2020
Image:  Self Isolating sign by Tim Dennell via Flickr   CC BY-NC 2.0