Paste your Google Webmaster Tools verification code here

Vaccine passports: a free market and plentiful pubs mean they won’t work in the UK

Vaccine passports: a free market and plentiful pubs mean they won’t work in the UK

As the country emerges slowly from lockdown, the debate over so-called vaccine passports gathers pace.

Yesterday, Matt Hancock confirmed Britain was looking into the proposition for international travel.

Countries such as Greece and Spain have a strong incentive to develop a system with us. Each attracts large numbers of British tourists in a normal year.

Whatever the details of the system might be, they would be monitored and enforced by officials at borders.  Despite potential bureaucratic inefficiencies and delays, it would work.

Could the idea be applied with the UK itself?

The Israelis are opening up their economy with vaccine passports.  But already almost half the population has been jabbed

Last spring, the idea of allowing the young to move about freely gained some traction at a high level in the UK.  Then, the argument was that there is very little health risk to them from the virus.  A key reason it was dropped was the obvious discrimination against older people.

The reverse argument applies now.  Younger people would feel justifiably aggrieved if regulations prevented them from enjoying freedom of movement granted to older, vaccinated people.

Mass testing, which the government is keen on, appears to resolve this age-related problem.  Freedom could be granted to anyone with either proof of vaccination or of a recent negative test.

The problem here is that the tests would have to be done so frequently that many would soon come to see them as an imposition.

Perhaps, as we move through the year and the vaccination numbers rise, the free market will do the job of regulation.

Already, some leisure and retail outlets are raising the idea of barring those without proof of negative status. This would give an incentive to bear the inconvenience of frequent testing and avoid being discriminated against in this way.

However, Milton Friedman argued many years ago that the free market would prevent this from working.

Quite simply, he thought that companies which discriminate impose avoidable costs upon themselves. As a result they will be driven out of business by their competitors.

As ever in economics, the strength of the argument depends upon how well its assumptions correspond to reality.  The key one here is of a “competitive market”, one with many companies, none of which can exercise any real power over the market as a whole.

Expensive restaurants in affluent areas do not need to put in their adverts, as Basil Fawlty once memorably did in Fawlty Towers, “no riff-raff”. They do have a degree of localised monopoly power over a specialised part of the market.  Discrimination would work here.

But for many hospitality and leisure outlets in towns and cities, Friedman’s assumption seems reasonable.  If a pub keeps you out because of a lack of certification, there is another reasonable one not far away.  The situation is not quite the same in rural areas.

But why leave it to either the regulators or the pubs themselves to say who can and cannot go into a pub?

Just let individuals decide for themselves which outlets to use, like they have always done.  That will be true normality.

As published in City AM Wednesday 24th February 2021
Image: Restaurant via Pixabay
Read More

The economics of tourist overload

The economics of tourist overload

I am in Edinburgh for a few days at the Festival, where even Jeremy Corbyn has appeared. Disappointingly, he was not playing the role of Carmela Soprano, the mafia don’s wife who is always present but never involved.

Previously, I had been on Skye. Last month, I attended a conference in Venice. Edinburgh, Skye, Venice, all these locations bring home directly the problem of tourist overload.

This tendency of tourists to flock to certain places, whilst neglecting most others, raises questions for the economic theory of rational consumer choice.

Skye is very attractive, but so are other Scottish islands. The Piazza San Marco is stunning, but so are the cathedral squares in other Italian cities. From a rational choice perspective, it seems hard to account for the fact that visitor numbers here are so much greater than in their competitors.

The theory does help explain why Skye as a whole is much more popular than, say, Mull. It has a bridge, whereas the other islands have ferries. So less time and effort are required to get there.

But this framework appears to struggle with the massive concentrations of tourist numbers at particular locations on the island itself.

To escape the crowds, I suggested to my wife that we drive down Glen Brittle, an austere and bleak glen which finishes at a dead end.

I was astonished. A few miles along, the single-track road was virtually blocked by hundreds of vehicles, both on the road and balanced precariously on the boggy verges. The attraction was the Fairy Pools, a series of small pools and waterfalls in one of the many streams which flow down from the hills.

Now, there are literally hundreds of such waterfalls in the Highlands, many of which are more dramatic. From a rational perspective, there seems to be no basis for the massive popularity of the Fairy Pools.

But Sushil Bikhchandani and colleagues from the University of California published a paper in the top ranked Journal of Political Economy way back in 1992. It has become very well known in economics.

The specific purpose was to account for “herding” behaviour within the framework of rational choice. Or, as the authors put it, to identify when it is optimal for an individual to follow the behaviour of others without regard to his or her own information.

In their model, an individual has both private and public information and assigns weights to the two when making a choice. A new piece of information arrives, and the weights are updated.

When you read on the internet that the Fairy Pools are fantastic, you increase the weight on the public information which you have. It is easy to see how, in such circumstance, certain things can become incredibly popular. They are not necessarily popular on account of their inherent characteristics. They become more popular simply because they are already popular.

It was consoling, as we pondered how to escape the massive traffic jam in remote Glen Brittle, that rational choice theory is indeed able to explain the phenomenon.

Paul Ormerod 

As published in City AM Wednesday 22nd August 2018

Image: Edinburgh Fringe by Wikipedia is licensed under CC BY-SA 3.0

 

 

 

Read More