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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
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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
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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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A tip for Dominic Cummings: Don’t hire anyone who fails to grasp the power of incentives

A tip for Dominic Cummings: Don’t hire anyone who fails to grasp the power of incentives

The job advert issued by Dominic Cummings for people to work in government has attracted a wide range of comments. One particular focus has been on the sorts of skills he is looking for.

Computer science, forecasting, artificial intelligence, causality theory — all these topics excite his interest. Cummings advocates a small selection of scientific papers with which applicants should be familiar. He believes that humanities graduates are unlikely to be aware of them.

The papers are indeed quite challenging mathematically. Even the smartest arts graduate might struggle to cope with their content simply because of the language — maths — in which they are written.

The implication is that those with expertise in the humanities need not apply. Indeed, economics is conspicuous by its absence from the now notorious reading list.

I can empathise with his focus on the hard sciences. But economics does have one very powerful, general insight into behaviour that Cummings should heed. In fact, everyone — whether working in the civil service, think tanks or university social science departments — should be familiar with it.

It is, quite simply, that agents respond to incentives. When the set of incentives faced by an individual, a company, or a government changes, behaviour changes too. Different decisions are made as a result.

Two snippets of recent news, chosen almost at random, can illustrate the power of the concept.

Beggars have started to travel from Glasgow to Carlisle to ply their trade. In Scotland, the penalty for aggressive begging is up to a year in jail and a £5,000 fine. In England, it is only a £1,000 fine. These facts are sufficient to explain why Carlisle has become more attractive.

On a note that will be more relevant to most people, more than a million people a month now fail to turn up for GP appointments. From June to November last year, a record 7.8m patients did not attend.

This bad behaviour imposes extra costs on the NHS and makes it more difficult for people who really need to see a GP to get appointments.

A simple solution is to charge for visits to the GP surgery. It would not eliminate the problem, but it would make a big difference.  Once having paid, people would be much more likely to turn up.

Any proposal to introduce charges in the NHS causes the left to froth at the mouth. The standard argument is that charges would deter poor people from accessing healthcare.

It does not seem to do so in countries such as Ireland and Sweden. Both charge people to see their doctors. The impact is mitigated in the former by an annual cap on charges, and in the latter low-income people can visit for free. Other EU countries have similar schemes — in France, the principle of health services is pay upfront, get reimbursed later.

It is not necessary to believe that people act in a completely rational way all the time. They obviously don’t. But incentives work. Empirical examples of the principle can be found every day, in every situation.

A simple, sensibly designed set of incentives is worth a tonne of regulation. A clear understanding of this principle should be the key thing Cummings considers when hiring a new set of government “weirdos” to shake up the civil service.

As published in City AM Wednesday 15th January 2020
Image: Trending Topics via Flickr licensed for use CC BY 2.0
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From World War II to the financial crisis, our institutional memory is fading fast

From World War II to the financial crisis, our institutional memory is fading fast

The young contestants on Lord Sugar’s reality TV show The Apprentice sparked outrage last week.

They appeared to have virtually no knowledge about the Second World War.

The online clips of the sequence capture to perfection their expressions of bovine outrage at even being expected to know such an esoteric thing as how long the War lasted. For many viewers, it was a powerful argument for an immediate raising of the voting age to at least 35.

Trying to be fair, I reflected on my own knowledge of the Boer War. The gap between that and my birth is not that much more than the one between World War II and Lord Sugar’s wannabes.

I have to confess that it is very sketchy. I know it was around 1900. The Boers nearly pulled off a shock victory, but our boys pipped them in extra time. And there was a siege at somewhere called Mafeking.

That said, the Second World War is of far more historic significance than Britain’s colonial skirmishes. The participants in The Apprentice might, one would think, be expected to know more about it.

Their ignorance reflects a more general trend towards what can be described as a shortening of cultural memory.

This can be seen in many seemingly unrelated ways.

Baby names, for example, are important indicators of culture. The example may seem slightly frivolous but, as the American polymath Stephen Pinker has written, the choice of name “encapsulates the great contradiction in human life: between the desire to fit in and the desire to be unique”.

Whenever there is a royal birth in the UK, the name given to the new baby enjoys a surge in popularity as people copy what is fashionable. But there is also the desire to give your baby a distinctive name.

In the twenty-first century, the turnover in popularity of names has increased dramatically.  It was steady for almost the whole of the twentieth century – once a name had made it into the top 10, say, it tended to stay there a long time. But the “churn” is now running at a rate nearly 10 times greater.

The outcomes of behaviour on the internet provide a more obvious example. At any point in time, the most popular memes on Twitter or the most viewed videos on YouTube are often millions of times more popular than the average. But their popularity is ephemeral.

In what many would regard as far more serious areas of economic activity, away from popular culture, this shortening of collective memory may have disturbing consequences for all of us.

In financial markets, for example, there is a traditional tale that a crisis happens precisely when the institutional memory of the last crisis has faded. But if traders and decision-makers develop shortened memories, crises could become more frequent.

Already bodies such as the International Monetary Fund are warning about the build-up of private sector debt, even though it is scarcely a decade since such debt precipitated the global financial crisis.

The apparent ignorance of The Apprentice candidates offers a warning to us all.

As published in City AM Wednesday 6th November 2019 
Image: World War Two posters by Andrew Curtis  via Geograph licensed for use CC BY-SA 2.0
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