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The costs of lockdown could far outweigh the benefits

The costs of lockdown could far outweigh the benefits

Radical leaders such as Jacinda Ardern in New Zealand and Nicola Sturgeon in Scotland have gained plaudits through their relentless focus on eliminating Covid-19.

But this comes at an obvious economic cost. Tourism is some 15 per cent of New Zealand’s GDP, and major destinations such as Queenstown in the Southern Alps have been devastated. Here in the UK north of the border, Scottish businesses are increasingly frantic about the economic damage done by the rigorous lockdown.

Health experts and epidemiologists have not helped. They have remained firmly enclosed in their own silos of expertise, unable or unwilling to see the broader picture.

But good policy is not made in a vacuum. A key concept in economics is that of trade-offs.

An obvious health related example is road accidents. As a society, we trade off the 1,800 deaths and 250,000 injuries a year in road accidents against the benefits of using vehicles.

Trade-offs between alternatives have always been central to our economic policy and political debate. Lockdown is no different to any other policy. It has both benefits and costs.

The benefits of lockdown were never in doubt: the policy was intended to save lives. But there is now increasing awareness of the potential economic costs. Ironically, some of those most shrill in favour of lockdown are now crying out for jobs to be saved.

David Miles, an Imperial College economist and former member of the Monetary Policy Committee, along with two medical specialists published last week a valuable assessment of the overall costs and benefits of lockdown.

Miles argues that we must normalise how we view Covid-19. Its costs and risks are comparable to other health problems, such as cancer, heart problems and diabetes, where governments have made resource decisions for decades.

The lockdown is a public health policy, and Miles and his colleagues value its impact using the standard tools developed by the National Institute for Health and Care Excellence to guide healthcare decisions in the UK public health system.

A key concept in this is QALYs — quality of life adjusted years. Essentially, the benefits of any policy in terms of QALYs are compared with its costs.

Economists have developed a broad consensus on the value of saving a single quality of life adjusted year. Macabre though it may seem, some metric like this is necessary in order to have any meaningful assessment of the costs and benefits of different decisions.

Miles’ conclusions are stark. The estimate of lives saved by lockdown in his analysis is deliberately chosen to be the one at the very top end of the range of such estimates. This way, his team cannot be said to be underestimating the benefits of lockdown.

Even so, in the authors’ own words: “we find that having extended the lockdown for as long as three months consistently generates costs that are greater — and often dramatically greater — than likely benefits”.

Gerard Lyons and I warned in early April that, while it was necessary to introduce lockdown, it needed to be relaxed rather swiftly because of the costs it would entail. The work of Miles and his colleagues confirms, in impressive detail, this view.

As published in City AM Wednesday 8th July 2020
Image: Playground by Jlbirman1 via Wikimedia CC BY-SA
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The government should have been working on multiple tracing apps all along

The government should have been working on multiple tracing apps all along

The NHS contract tracing app has been scrapped in favour of a system developed by Google and Apple.

Although health secretary Matt Hancock has been heavily criticised for this failure, the UK is by no means alone.

For example, Denmark, Germany and Italy each tried to build their own app, based on the same type of centralised system as was attempted in the UK. But they have already ditched their efforts and taken up the decentralised approach of Apple and Google.

Australia is widely perceived as having had a “good” Covid-19 crisis. But the same cannot be said of its tracing app. It seems to have had serious problems working with iPhones at all.  The Aussies, too, are now taking the Google/Apple approach.

The simple fact is that most technological innovations fail.

The government can be criticised legitimately for not appreciating this fundamental feature of new technology. But it is a more subtle critique than merely pointing to the failure itself.

Given the importance of the tracing app, it would have been perfectly reasonable for the government to have pursued parallel tracks. At the same time as trying to develop its own NHSX app, it could have been collaborating with Apple and Google too.

Critics might have tried to pan this as an example of waste. But there is rarely such a thing as wasteful competition.

Spending on two completely different approaches at the same time would have been a hedge against the uncertainties which are inherent in the development of new technology.  No matter how smart you are, or how much prior information you gather, you just do not know whether an innovation really will work.

The tech companies themselves protect against this uncertainty by holding far more cash than conventional economic theory regards as rational. At the start of the Covid crisis, Apple, Microsoft and Google’s parent company Alphabet between them held over $450bn in cash or marketable securities.

Pharmaceutical companies face a similar challenge  Most new drugs fail. They fail when they are still in the lab, and they fail once they go out for testing to get regulatory approval.

In America, for example, there are three phases to the test process, each more demanding than the last.

The time scales are long. Andrew Lo, an MIT polymath, and his colleagues published a paper last year in the journal Biostatistics. They gathered a sample of over 400,000 clinical trials carried out between 2000 and 2015. Even after all the initial development work in the lab was completed, the typical successful drug took 8.3 years to obtain approval.

This puts into perspective the current frantic efforts to develop treatments and vaccines for Covid-19.

The probability of obtaining regulatory approval varies widely across categories. But overall, when a candidate drug enters phase one trials, its chances of eventual success are less than 10 per cent.

The government should embrace the idea that money spent on technology or drugs which fail is not money wasted. Indeed, the real mistake is not to risk enough, to stake everything on a single project.

This is the true failure of NHSX.

As published in City AM Wednesday 24th June 2020
Image: Covid tracing app by Gerd Altmann via Pixabay
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What can we learn from the Black Death? Be prepared, trust entrepreneurs, and have faith

What can we learn from the Black Death? Be prepared, trust entrepreneurs, and have faith

Can we learn from history?

An excellent book by Ben Gummer on the Black Death in fourteenth century Britain, The Scourging Angel, shows that we can.

Published 10 years ago, the book offers many intriguing parallels with the Covid-19 crisis.

Of course, the Black Death was almost incomprehensibly more lethal.  Around 50 per cent of the total UK population died in 1348–49. That is 33m deaths in current terms.

Modern scholarship has overturned the long-held idea that the plague was spread exclusively by fleas on rats. Contemporaries knew that it was spread from person to person by breath. The new coronavirus  is transmitted by droplets from the nose and mouth. Both diseases lingered on clothing and objects.

People back then worked out very quickly how plague might be avoided. Those who could fled from infected areas. If possible, they locked themselves away in castles or monasteries.

The peasantry — the vast bulk of the population — had far fewer options. But they did try to cut off contact with the world outside their own immediate village as much as possible.

Then, as now, there were inequalities in health outcomes. Because of their greater ability to practise social distancing, the nobles and church leaders had much lower death rates. Even so, these were still some 20 per cent.

There were arguments over the Medieval equivalent of PPE. In London, the demand for gloves rose dramatically. Master glove makers enticed away their rivals’ employees.  Unlicensed glove production, often of dubious quality, soared. The city fathers had to step in and enforce the regulations more effectively.

On a lighter if macabre note, a “William of Liverpool” was convicted of a different scam. A neighbouring village had no burial ground. For a substantial fee, he agreed to take the bodies and bury them on what he claimed were his extensive fields. Essentially, he then fly-tipped the corpses on his way home.

Then there is the economy. The current chancellor has had to be very innovative with his schemes to preserve jobs. The Black Death created the opposite problem: a massive shortage of labour.

But an equally innovative and imaginative solution was found. Maximum wage rates were fixed by legislation. The local nobility and gentry were given an incentive to enforce it: any fines collected from workers paid more than was legal could be offset against the overall amount of tax due from the county.

Two positive themes emerge towards the end of the book.

First, the authorities then took steps to try to mitigate the impact of any second wave of the plague almost as soon as the first had passed. The streets of London, for example, unimaginably filthy to modern eyes, were kept cleaner.

Here is a key lesson for Covid-19. If a new wave arrives in the winter, there is no excuse if the government is not prepared. The time to start is now.

The second point is that economic activity recovered remarkably quickly. London in particular was soon buzzing again. It was not state action which delivered this — it was confidence on the part of both entrepreneurs and consumers.

Now, as then, confidence is the key to recovery.

As published in City AM Wednesday 3rd June 2020
Image: Coronavirus street art by Evelyn Simak via Geograph CC BY-SA 2.0
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Mythbusting coronavirus is vital for life to go back to normal

Mythbusting coronavirus is vital for life to go back to normal

As the government plans the timetable for getting Britain back to work, opinion polls continue to show strong support for the lockdown.

An Opinium poll at the weekend is typical. Unsurprisingly, given the overwhelming scientific evidence on dangers associated with large gatherings, a massive 84 per cent of respondents thought stadiums should not be reopened on 8 May.

We might, incidentally, usefully recall that on 14 March Sir Patrick Vallance, the government’s chief scientific advisor, stated that shutting down mass events would not have a big effect on reducing the spread of the virus. Had he never been to one himself?

At the onset of the pandemic, it was entirely rational for people to support a lockdown.

The early figures from China suggested the death rate might be in the range of 3 to 5 per cent of those who caught the virus. Television screens were filled with horrifying images of the North Italian health system being overwhelmed.

On the basis of the available information, people acted as rational economic agents. Social distancing took off, offices closed, transport use dropped, all before the compulsory lockdown came in on 23 March.

Much more information is now available. For example, well over 90 per cent of deaths from Covid-19 in hospitals are of people with at least one underlying medical condition.

For someone in reasonable health, the chances of dying from the virus are very low indeed. At least 40 million people – probably nearer 50 million – in the UK fit into this category. There have been just over 1,000 deaths of such people. Do the arithmetic.

Of course, it is both a new risk, and there is a very sensible reluctance to want to avoid infecting the vulnerable. But, rationally, the information hardly warrants the strength of support for stringent lockdown.

We need to turn to behavioural economics to get an insight into current opinion. People acted rationally at the start of the crisis, but less so now.

A well-established phenomenon is that of “ambiguity aversion”. Even when risks exist, most people feel much more comfortable in situations where they feel they have a reasonable understanding of them than when they do not. They know you can be killed or injured driving, but they still do it.

Even during bad flu years, when tens of thousands of those in ill health die, there is no clamour for a lockdown.

People have learned about such events and there is little “ambiguity” around them. Healthy individuals know that their chances of catching it are low. And, whilst it is very unpleasant to get it, they are most unlikely to die.

A key task now for the government is to reduce these uncertainties around Covid.

It is a bit of a tricky one. It is not easy to give out the message that for most people the risk is very low, whilst at the same time not creating complacency.

Still, that is for the spin doctors and advertising gurus. Economics gives them insight on the challenge they face.

As published in City AM Wednesday 6th May 2020
Image by Deserted Marble Arch via Wikimedia CC BY-SA 3.0
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Coronavirus: Fake news that an elderly lockdown is remainer revenge could spread

Coronavirus: Fake news that an elderly lockdown is remainer revenge could spread

The attention of policy makers has been focused on the science of how viruses either spread or are contained in social networks.

Just as crucial in the current circumstances is the spread of beliefs and behaviour. Will people continue to observe social distancing once the lockdown is eased, or will they revert to pre-lockdown patterns of behaviour?

For all their sophistication, epidemic models are a product of 20th century science.  Understanding how patterns of behaviour evolve requires the 21st century science of network theory.

Much remains to be discovered in this innovative scientific field. But much is already known.

For example, a recent major study in the top journal Science established that fake news seems to have more novelty and attraction than real news. Fake news tweets typically show a much higher level of emotion in their overall content.

A piece of fake news is not certain to spread and be believed. Most stories just fade away. But fakes have a better chance than true of getting traction.

A recent example is the idea that coronavirus is spread by 5G technology. Fortunately, belief in this seems to have been contained to a relatively small group. But 5G phone masts continue to be attacked.

We now have much more evidence. Across the West, well over 90 per cent of deaths from the virus are of people with an underlying health condition. A fit 70 year old is at far less risk of death than a grossly obese 35 year old.

If a substantial proportion of the 9 million over 70s were to believe they were the target of Remainer Revenge, the police would be totally powerless in the face of widespread disobedience.

The police themselves understand this only too well.  In essence, the phrase “policing by consent” means that the vast majority of people have to hold the belief that the police can be trusted to act reasonably.

Their fear is that this could easily crumble. One idea being floated is that family “bubbles” would be created for social mixing. The former Chief Constable of Greater Manchester made it clear over the weekend that the police would basically not want to be involved in its enforcement.

These are just a few examples of the importance of network science, a discipline which involves mathematicians, computer scientists and social scientists. This must become a key part of “the science” on which the government relies.

As published in City AM Wednesday 30th April 2020
Image by Omni Matryx from Pixabay
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Coronavirus: NHS staff are let down by bureaucracy

Coronavirus: NHS staff are let down by bureaucracy

The praise for health workers dealing with Covid-19 is universal. From cleaners and porters to the most distinguished consultant, all have played their part.

But they are working in an administrative system almost Kafka-esque in its lunacy.

An early example was when NHS workers turned up to be tested at the huge PHE complex at Chessington. The staff were all there, with no-one to test. But the health workers were turned away. They did not have a letter of appointment.

I can echo this from my own experience. I had minor surgery to my hand at the start of last month.

Every single person I dealt with in the NHS was friendly and efficient. But the administrative process was grossly inefficient.

First, I had to see my GP to see if the operation should be done. Fair enough. He had to write a letter to the consultant saying so.

I received a letter from the hospital to see the consultant, who confirmed an operation was needed. I was sent another letter for a pre-operation check.

After this, a letter came with the date for the operation. I had told the hospital I would be in Australia all of February. It arrived mid-February.

Fortunately, my wife was following on the very next day and brought it. The letter told me to phone the hospital to confirm the date and also to sign and return yet another letter saying the same thing. There was an email address. I copied out the wording of the return letter, signed it and emailed it.

I phoned and explained I was in Australia. I had sent an email, would this do? No, I had to return the letter. Why? The woman was honest. She did not know, but that was the rule.

The minor operation was duly performed. The consultant saw me while I was waiting to leave. I would need to fix a follow up appointment. Could I do it now? Well, you have surely guessed: no, I would be sent a letter.

Almost all the mail people get these days is junk. Most serious communication is by email. But the 20th century technology of letters is deeply embedded in the NHS administrative system. At least they have moved on from semaphore.

It is only last year that Matt Hancock, the Health Secretary, had to instruct the NHS to stop purchasing fax machines. It was the largest single buyer of them in the entire world. Few people under 30 even know what they are.

The system appears unable even to provide accurate information on the daily number of deaths and new infections. The Centre for Evidence Based Medicine at Oxford goes through the records meticulously. Quite a number of deaths announced in mid-April actually happened in March. The Centre believes peak death rate was reached on 8 April.

It is no wonder that the task of providing a suitable amount of protective equipment seems insurmountable.  The bureaucracies of both the NHS and PHE are not fit for purpose.

As published in City AM Wednesday 22nd April 2020
Image: NHS Hospital by Francis Tyers via Wikipedia is licensed for use CC BY-SA 3.0
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