Tim Harford The Undercover Economist

Undercover EconomistUndercover Economist

My weekly column in the Financial Times on Saturdays, explaining the economic ideas around us every day. This column was inspired by my book and began in 2005.

Undercover Economist

The virus picks us off unevenly, and an efficient response must recognise that

It is the end of the beginning: lockdowns after the first wave of coronavirus are being tentatively lifted. It is not a step we are taking with any great confidence of success. Rather, we’re easing the lockdowns because we can’t bear to wait any longer. That will mean some difficult decisions ahead, in particular about how we look out for each other in a world where our experiences and the risks we face are dramatically diverging.

It is clear enough that the virus could easily rebound: a systematic study conducted by the Office for National Statistics suggested that 100,000 to 200,000 people in England alone were still infected with the virus in early May. The lockdown has merely bought us time.

One hope is that we can now contain the virus through widespread testing, contact tracing and the supported isolation of infected people. One cogent plan for this comes from the Safra Center at Harvard University.

But the UK seems in no position to implement anything like this plan. Boris Johnson, the prime minister, has promised a contact-tracing system by June 1 that will be “world-beating” — an obnoxious synonym for “excellent”. I do not believe him, particularly since his government has repeatedly misrepresented its record on testing.

The Safra Center plan calls for 2 per cent to 6 per cent of the population being tested every day. In the UK, that would be 1.3m to 4m people daily; we are currently testing well under 100,000 a day. For now, then, we are stuck trying to maximise the benefits of reopening while minimising the risk. That suggests drawing bright lines between those who should unlock and those who should not.

We have long accepted that a supermarket is more of a priority than a restaurant, but other dividing lines would be uncomfortable. Would we be happy for London to reopen while Manchester stays closed, or vice versa? There is a powerful moral case that we should all be going through the same sacrifices at the same time, but if we seek to save the greatest number of lives while destroying the fewest livelihoods, we may have to start drawing distinctions that make us squirm.

The most obvious such distinction would be to ease the lockdown only for the young. In the five weeks from late March to the start of May, nearly 29,000 people over the age of 65 died from Covid-19 in England and Wales. Only 375 people aged under 45 died in the same period. Late boomers and Gen-Xers like me, aged 45-64, are in the middle: nearly 3,500 of us died.

Could we countenance a plan to allow the under-40s back into pubs and restaurants, while the rest of us stick to Zoom and Ocado? Then if signs of herd immunity emerged, we could send in the reserves — the 40-somethings like me.

Is this really a good idea? I am genuinely unsure. Perhaps the practical objection is insuperable: it might be impossible to protect vulnerable people while allowing the virus to run riot in the young. But I suspect the real objection is not practical, but moral. Something about sending half the population out while the other half stays indoors feels unfair. That is true even if it is not entirely clear which side of the age divide is worse off — the ones enduring boredom and isolation inside, or the ones facing the virus.

And what of people who find themselves able to drink in public one day, then banned from their own 40th birthday party the next? Clear distinctions on a spreadsheet or graph start to seem absurd in everyday life.

And it could be much worse. Ethnic minorities are at greater risk; are we to advocate whites-only restaurants and whites-only public transport on the grounds that it is not safe for those with dark skin? The idea is self-evidently repugnant.

Yet the virus does not care about our moral intuitions. It picks us off un­evenly, and an effective response must recognise that. We are going to have to develop a language of social solidarity even as our individual experiences diverge. Even during the lockdown, many people have continued to experience the freedoms and anxieties of going to work as normal. The very nature of the lockdown means it is easy to forget that other people are leading very different lives. One doctor friend of mine, on a video call a fortnight ago, asked: “So . . . have the rest of you really just been at home, seeing only your families, for the last six weeks?” Yes. We really have.

We must develop new ethical codes. “Stay at home, protect the NHS” was a start, but over the coming months we must look for principles that offer the same moral force but far more practical subtlety. “Grandparents: stay home so that your grandchildren can go back to school.” “Home workers are heroes too,” because they reduce density in the big cities. We are all in this together.

And yet increasingly, we are all in this separately. That is a challenge we have yet fully to confront.

Written for and first published in the Financial Times on 22 May 2020.

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Undercover Economist

The statistical detective work required to lift the lockdowns

Anyone prone to cynicism about “damned lies and statistics” should be prompted to think again by the pandemic. Admittedly, distorted or fictional statistics have been press-ganged into their familiar roles of spin and propaganda.

But the real thing — statistical information, carefully gathered — can save lives.

The UK Office for National Statistics has announced a new survey of 25,000 people, designed to test a demographically representative cross-section of the UK population for infection and antibody response. Given that the UK already tests many tens of thousands of people a day for infection, that news might provoke a shrug. But it is an example of the data detective work that we desperately need if we are to find our way through the crisis.

Consider the question we’re all desperate to have answered: when is the right time to lift the lockdowns? Without delay? In a week or two? Months from now? The answer depends on how much weight we put on livelihoods versus lives, and on how quickly we can prepare ourselves to carry out mass testing and contact tracing.

But it also depends on just how deadly the virus really is, something we do not yet know. Clearly, Covid-19 is dangerous. It has already killed more people than the Indian Ocean tsunami of 2004, and nobody is asking whether tsunamis are dangerous. But the degree of risk remains unknown.

This is the most important question in the world right now: what is the “infection fatality rate”, the number of infections — measured or unmeasured — which end in death? It is a hard thing to judge.

We do not know how many people have died of Covid-19: official figures overcount in some ways, by attributing deaths to this virus that would have happened at much the same time without it; they undercount in others, when people are killed by the virus at home or in a care home without a formal diagnosis.

In the UK, for example, Financial Times research suggests that there have been more than 50,000 excess deaths in this epidemic, and many are plausibly attributable to Covid-19.

More problematically, we are still guessing at how many infections have occurred below the radar. Everyone agrees that the official global case-count of more than 3.5m misses many mild or even asymptomatic cases. But much hinges on just how many of those undetected cases there are.

Let’s explore two possible scenarios, then. If the true infection fatality rate in the UK is 1 per cent, an estimate consistent with much of the alarming early modelling, then that suggests up to 5m people have been infected, 60m people have not, and an incautious relaxation of lockdown could cause a second wave of deaths even worse than the first.

In contrast, if the true infection fatality rate is around 0.1 per cent, as asserted by the veteran Swedish epidemiologist Johan Giesecke, then that implies that the clinical cases are the tip of the iceberg. It would also mean that up to 50m people have been infected in the UK, enough to confer herd immunity on the entire country, and the lockdown should be lifted now.

Knowing the truth would be of enormous value — which is why systematic serological surveys are now so vital. Serological tests look for the antibodies that suggest a person has already been infected. These antibody tests should give more clarity but the early results remain a statistical patchwork for now.

A serological study conducted in Santa Clara, California, suggests an infection fatality rate as low as 0.12 to 0.2 per cent. That would be very good news, if true.

But serological data from New York City, in contrast, suggests an infection fatality rate above 0.5 per cent and perhaps even close to 1 per cent. If so, the frightening forecasts of hundreds of thousands of deaths if the virus was not suppressed in the UK were not far wrong. A study from Germany points somewhere in the middle.

Which is correct?

None of this work has been peer reviewed and, as much as I would love to believe the Santa Clara results, they seem fragile. One problem is that participants were recruited on Facebook. The study might be packed with people who signed up because they were convinced they’d been infected; that would overstate the prevalence of the virus and understate the true death rate.

The New York data, regrettably, look more plausible. But they are hardly conclusive. New York City’s death rate may be unusually high due to nursing homes being centres for viral outbreaks — a fate other places might avoid.

Tempting as it is to adjudicate, we need more and better surveys, from all over the world — such as the one now in progress from the ONS. The results will help us make informed decisions as we lift the lockdowns.

Because the threat we face is both serious and novel, there is no hope of producing a well-calibrated response without this kind of information. We need solid statistics to blow away the fog of this epidemiological war.

Written for and first published in the Financial Times on 8 May 2020.

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Undercover Economist

To combat climate change, release the brake

A couple of years ago, the Nobel-Prize winning psychologist Daniel Kahneman spoke to a distinguished group of social scientists, and shared with them what he regarded as “the best idea I ever heard in psychology”. The idea derived from Kurt Lewin — described by Prof Kahneman as “my intellectual grandfather”.

Lewin was a great German-born psychologist who — thankfully, given his Jewish origins — escaped to the US in 1933. Lewin described behaviour as a balance between driving forces and restraining forces: the accelerator and the brake, if you will. We often try to change behaviour, especially that of other people, by pushing harder on the accelerator. The proposition that so impressed Prof Kahneman was that it is better to try to release the brake.

The vehicular metaphor has seemed particularly apt of late, as my wife and I ponder replacing our disintegrating diesel car. A friend urged us to buy a Tesla: “Sometimes you just need to do the right thing,” he opined, although I suspect the “right thing” probably involves the bicycle and the train rather than an energy-hungry vehicle perfectly capable of causing accidents and traffic jams. Still, let us accept the premise for the sake of argument. What could induce us to “do the right thing” and buy an electric car?

The UK government seems to favour loading on the incentives — it taxes fuel and subsidises electric cars to the tune of up to £3,500. But as Lewin might have observed, rather than asking, “How can I get them to buy an electric car?”, perhaps the British government should be asking, “What’s stopping them?”

What is stopping us, in brief, is a lack of charging points. We live in Oxford and the good news is that Oxford City Council is on the case. The bad news is that they have been on the case since we first contacted them in 2017. They say they plan to install a “super-rapid charging hub” at a park-and-ride car park. That won’t happen until 2022 and it will be impractically far away — 20 minutes’ drive across a congested city. There’s a slower charger in the neighbourhood, but that would require parking, walking 10 minutes home, and then walking 10 minutes back again to collect it some hours later — a regular chore we could do without, although I suppose it’s no worse than walking a dog.

We asked the council if we could run a cable from our house power supply through a drainage channel that already exists. “Not an idea the council will consent to”, came back the reply, citing a “dangerous trip hazard”. That leaves us no closer to doing the right thing than we were three years ago.

Local councils have been hamstrung by deep spending cuts, and Tim Schwanen of Oxford university’s Transport Studies Unit told me that this is by no means just an Oxford problem. Despite Prime Minister Boris Johnson’s pledge to make sure that no one is ever more than 30 miles from a charging point, the government’s willingness to fund the infrastructure is doubtful. The business model for private charging is unclear. This is not insuperable, but it is a problem nonetheless.

And obstacles abound elsewhere: motorway service owners, for example, grumble that the electricity distribution network operators are the bottleneck for fast-charging stations.

It is an exciting prospect to think that electric vehicles will unleash the potential of renewable energy sources. Wind and solar offer a clean — and increasingly cheap — way to top up their batteries. Meanwhile a large pool of electric cars, connected to a robust smart grid, could use their batteries to smooth out fluctuations of wind and sun. Affordable electric cars are arriving, but that smart renewable-powered grid still seems some way off.

Governments are capable of focusing on brakes rather than accelerators; the question, “How can we make it easy?” is at the heart of the “nudge” approach to policy. In the spring of 2012, for example, the UK’s Department of Energy and Climate Change and the Behavioural Insights Team, known as the “nudge unit”, experimented with offering some people inexpensive insulation for their attics while others were offered a higher price for insulation but it came coupled with a loft clearance service. For homeowners who opted for clean-up, a crew of workers removed the stuff from the attic, giving the household a chance to go full Marie Kondo. The insulation was installed, and then the crew recycled or donated unwanted items and put back family heirlooms. It was a clever idea, based on the insight that a major obstacle to installing the insulation was not price, but the daunting prospect of sorting through a loft full of junk. Did it work? Quite possibly, but the study was too small and the results too shaky to be sure. The political spotlight moved elsewhere.

That is a shame. We should be thinking harder about such opportunities. Too often we are stamping on the accelerator with the handbrake on. When we switch from asking, “How can I persuade them to do the right thing?” to, “Why aren’t they doing the right thing already?”, empathy and insight begin to flow.

Written for and first published in the Financial Times on 28 February 2020.

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Undercover Economist

How to stop our economies from falling like Humpty Dumpty

The peak of the pandemic is passing in Europe, but at a grievous economic cost. If we reopen, there is every reason to expect coronavirus will come surging back. What then? Another lockdown?

The difficulty is that we are looking at two exponential processes pitted against each other. Before social distancing measures, cases were doubling every few days, meaning a week’s difference in the timing of lockdowns in March might well have represented the difference between a healthcare system idling below capacity, and one being utterly overwhelmed.

It is reasonable to guess that the economic cost of lockdowns also grows exponentially — if not addressed by policy. One day’s lockdown is little more than a public holiday. Two weeks’ lockdown threatens those who are already in a precarious position. Three months’ lockdown can do widespread damage that lasts for years.

Economic distress is contagious, too. A shuttered restaurant creates jobless waiters and cooks, landlords with no rental income and food suppliers in distress for lack of clients. Let’s not even think about the impact of a worldwide pandemic-induced default on too-clever-by-half debt-backed derivatives.

The economy has fallen off the wall — pushed, deliberately, for good reason. We need it to spring back like Jackie Chan, not crack like Humpty Dumpty. The aim must be to prevent temporary economic injury from causing permanent scars.

One delightfully crazy plan, popularised on the Marginal Revolution blog, is to take the concept of daylight savings time to an extreme. Governments would simply stop the clock: Thursday 30 April 2020 would become Friday 30 April, then Saturday 30 April. Your rental payment, due on May 1, would — like orphan Annie’s “Tomorrow” — always be a day away, at least until lockdowns end. Your landlord’s mortgage payment would also be postponed indefinitely. The messy co-ordination problems of who will forgive or forbear on debt, from whom and for how long, disappear in a stroke of a pen on a calendar.

This solves a lot of problems. Unfortunately, it creates many new ones. As Joshua Gans puts it in a new book, Economics in the Age of Covid-19, “much of the economy needs to actually keep running — some more intensively than before — which means that just calling a timeout won’t do”. Still, the time-stop idea is on to something: it’s vital to stop a cascade of debt defaults bringing down healthy businesses. Ad hoc forgiveness will not be enough, since landlords and banks have their own frailties to worry about.

Professor Gans argues that governments should be transferring debt obligations to themselves: if a restaurant can’t meet its rent, the government should offer to do so. The restaurant now owes the government, but the manoeuvre buys breathing space. Much later, the government can collect repayment on an income-contingent basis, perhaps through a modest surcharge on business taxes. Like a state-backed student loan, it would be repaid only by those with a solid income.

A company that springs back strongly thanks to the support will be able to repay the loan. Another may limp back into action, unable to repay but able to employ staff, serve customers and pay suppliers. In that case, the government gradually forgives the loan, and the cash injection will have been public money well spent.

The scale of economic support from governments around the world has been encouraging. As with the lockdown itself, in the short term it is better to do too much than too little. However, economic damage will be minimised if we can return to some kind of normality without triggering a second outbreak. Current economic and public health measures have had to be crude, the equivalent of operating with a hacksaw; now we need to figure out how to do keyhole surgery.

One hopeful scenario is that we have already reached herd immunity without realising it. If so, antibody tests will soon make that clear. But since we should plan for the worst as well as hoping for the best, we must energetically plan clever reopening strategies.

The most straightforward require mass testing to trace new outbreaks. If that capacity does not exist, there are workarounds. One idea is to let everyone out for four days, then go back into lockdown for 10 days to wait for any symptoms to emerge. Another, proposed by Philip Clarke, Amanda Adler and others, is that people living in odd-numbered houses are allowed out for a day, then must withdraw, letting even-numbered households take their turn. (The Queen could toss a coin to see who starts.) This quasi-randomised trial would rapidly give us information about the effect of reopening. Or we could release the under-50s early, which would be intriguing in my household, since my wife and I are on opposite sides of that divide.

Each exit strategy has problems, but it’s time to choose one and start planning for it. The Humpty Dumpty economy is still in freefall. It is not too late for us to bounce back.

Written for and first published in the Financial Times on 24 April 2020.

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7th of May, 2020Undercover EconomistComments off
Undercover Economist

We’re actually decent people in a crisis – and stories claiming otherwise do harm

First there was the panic buying. Then came the selfish, reckless refusal to maintain physical distance: the beach parties in Florida and the house parties in Manchester; the 500-mile round trip to admire the Lake District and the mass sun-worshipping in London parks. And there’s worse: the scam artists; the people who use coughing as an assault; the thieves who loot medical supplies from hospitals.

These coronavirus stories perpetuate a grim view of human nature. That grim view is mistaken, a persistent and counterproductive myth. There are some terrible people in the world, and some ordinary people behaving in a terrible way, but they make headlines precisely because they are rare. Look more closely and the evidence for mass selfishness is extremely thin.

Start with the reports of panic buying, which for many people were the first glimmers of the trouble that lay in store. By the middle of March in the UK, the newspapers were full of stories about shortages of toilet paper, flour and pasta. The natural assumption was that we were a nation of locusts, stripping the supermarkets as we selfishly piled shopping carts high with produce.

But Kantar, a consultancy, told me that a mere 3 per cent of shoppers had bought “extraordinary amounts” of pasta. Most of us were merely adjusting our habits to life spent away from restaurants, sandwich bars and offices with their own loo paper. We all went shopping a bit more often, and when we did, spent a little more. No cause for collective shame, but it was enough to strain supermarket supply chains.

What about those who ignore pleas to keep their distance? Again, the misdeeds are exaggerated. Lambeth council grumpily closed Brockwell Park in south London, complaining of 3,000 visitors in a single day — not mentioning that the park might easily see 10 times that number on a normal sunny Saturday, nor that taking exercise in a park is perfectly permissible.

Exaggerating problems might drive web traffic or make zealous officials feel important, but these tales of misbehaviour are likely to be counterproductive. If we are told that others are acting selfishly, we feel inclined to be selfish, too. As Yossarian of Catch-22 put it, “I’d certainly be a damned fool to feel any other way, wouldn’t I?”

The psychologist Robert Cialdini has, with colleagues, studied this insight in the Petrified Forest National Park in Arizona. When visitors were told that the forest was being endangered because others were stealing petrified wood, they stole too. When tourists were told — truthfully — that the vast majority of visitors were leaving the wood untouched, they did likewise I would not be at all shocked to learn that scolding reports of sunbathing only encourage more of us to sunbathe.

The surprising truth is that people tend to be­have decently in a crisis. To the British, the all-too-familiar example is the cheerful demeanour of Londoners during the Blitz. In hindsight that seems natural. But Rutger Bregman’s forthcoming book Humankind points out that in the 1930s Winston Churchill and others feared pandemonium if London was attacked from the air. Britons failed to take this lesson to heart: they assumed that when German cities were bombed, German civilians would crack. They didn’t. These myths have fatal consequences.

Nor is calm co-operativeness restricted to times of war. In the wake of a catastrophic earthquake in Turkey in 1999, the emergency relief expert Claude de Ville de Goyet berated media organisations for propagating what he called “disaster myths”. “While isolated cases of antisocial behavior exist,” he wrote, “the majority of people respond spontaneously and generously.”

The writer Dan Gardner, who punctured the disaster myth in a series of viral tweets, was repeatedly rebutted by people who regarded New Orleans after Hurricane Katrina as a potent counter-example.

That only underlines the malevolence of the myth. At the time, rumours ran wild about the murder and rape of children inside the Louisiana Superdome; but when the national guard showed up, armed and prepared for pitched battle, they were met instead by a nurse asking for medical supplies. Fear of civil disorder may well have caused more harm than the civil disorder itself — as when people trying to walk out of New Orleans across the bridge to nearby Gretna were turned back by armed police.

This pandemic has no exact precedents, but the evidence from past disasters suggests that we should expect more of each other. Many people and businesses took voluntary action on social distancing while both the British and US governments dithered; the UK administration was also surprised by how many people quickly volunteered to help with transport and supplies for vulnerable people.

We can be both nimble and altruistic, and perhaps the authorities should start taking that into account in their future policies. Given clear guidance as to the best thing to do, most of us try to do it.

Rebecca Solnit wrote in A Paradise Made In Hell: “What you believe shapes how you act.” Let’s start by believing in each other; kind acts will follow.

Written for and first published in the Financial Times on 17 April 2020.

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Undercover Economist

For peace of mind in the pandemic, let go of impossible To Do lists

Nearly a century ago there was a grand café near the University of Berlin. Academic psychologists who took lunch there marvelled at the memory of one of the waiters: no matter how large the group and how complex the order, he could keep it all in his head. Then one day, or so the story goes, someone left a coat behind. He hurried back into the café, only to find that the waiter didn’t remember him. This feat of amnesia seemed almost as remarkable as the feat of recollection that had preceded it. But the waiter had no trouble explaining the discrepancy: “When the order has been completed, then I can forget it.”

Two of the psychologists in the group, Kurt Lewin and Bluma Zeigarnik, decided to investigate. In 1927, Zeigarnik published research demonstrating that people had a much greater recall of uncompleted tasks than completed ones — a finding that became known at the Zeigarnik effect. Do you lie awake at night churning through everything you’ve promised yourself you’ll do? That’s the Zeigarnik effect tormenting you. The blessed release of forgetting comes only when you, like the waiter, know the task is complete.

That brings me to the pandemic, which has done nothing to reduce the number of our sleepless nights. Some of us have children to homeschool. Some of us have elderly relatives to worry about; some of us are the elderly relatives in question. Some of us have never been busier; others have already lost their jobs. One experience is common, however: wherever the virus has started to spread, life is being turned upside down.

It’s a strange time, but some of the anxiety can be soothed by harnessing the Zeigarnik effect. Our stress levels are rising in part because that long list of things to do that we all carry around — on paper, digitally, or in our heads — has been radically rearranged. It’s as though the Berlin waiter had, mid-order, been asked also to chop onions, answer the phone and draft a shopping list.

Simple jobs such as getting a haircut or buying toilet paper now require planning. Paperwork has multiplied, from claiming refunds on cancelled holidays to writing letters of condolence. Many of us have intimidating new responsibilities, notably the guilt-inducing task of organising our children’s home schooling. In many cases, the old tasks haven’t even been cancelled, merely postponed, with delivery dates to be confirmed. Our subconscious keeps interrupting with reminders of incomplete — sometimes incompletable — tasks. No wonder we feel anxious.

Fortunately, the psychologists E J Masicampo and Roy Baumeister have found that a task doesn’t have to have been completed to trigger that pleasant slate-wiping forgetfulness. Making a clear plan for what to do next will also work. That Berlin waiter could have saved some of his mental energy if he had decided to write everything down. So, to harness the Zeigarnik effect to keep your sanity in a lockdown, get your to-do list in order.

Start with a piece of paper. Make a list of all the projects that are on your mind. David Allen, author of the cult productivity manual Getting Things Done, defines a project as “any multistep outcome that can be completed within a year” — anything from trying to source weekly groceries to finding a new job.

That list should have three kinds of projects on it. First, there are the old projects that make no sense in the new world. Write down the mothballed tasks and file them away; you’ll see them on the other side. Other tasks will disappear forever. Say your goodbyes. Ten seconds of marking the fact that the project has been obliterated may banish a vague sense of unease in the long run.

Then there are the existing projects, some of which have become more complicated — like that haircut. Again, a few moments with a pen and paper will often tell you all you need to know: What’s changed? What do I now need to do? What, specifically, is the next step? Write all that down.

Third, there are brand new projects: set up a home office; keep the children busy and entertained; help out vulnerable neighbours. In each case, the drill is the same: sketch out the project, ask yourself what is the very next action that needs taking, and write it down.

Occasionally, you may encounter something that’s on your mind that has no feasible next step. Some people fret about the fate of western civilisation. I worry about an elderly relative, suffering dementia in a locked-down nursing home and unable to comprehend a video chat. If there is literally nothing to be done except to wait and hope, acknowledging that can itself be a useful step.

I won’t pretend that in this frightening time all anxiety will be banished by clarifying a to-do list. It won’t. But you may be surprised at how much mental energy the process saves. There will be no convivial meals at any grand cafés for a while; the sooner we can acknowledge that, the sooner we can mentally unclench our grip on that half-completed order for lunch.


 Written for and first published in the Financial Times on 10 April 2020.

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Undercover Economist

How do we value a statistical life?

The coronavirus lockdown is saving lives but destroying livelihoods. Is it worth it? I’ve been accused of ignoring its costs. For an economist, this is fighting talk. Love us or hate us, thinking about uncomfortable trade-offs is what we economists do.

Three points should be obvious. First, we need an exit strategy from the lockdowns — a better strategy than President Donald Trump’s, “One day it’s like a miracle, it will disappear.” Expanding emergency capacity, discovering better treatments, testing for infection and testing for antibodies could all be part of the solution, along with a vaccine in the longer term.

Second, the economic costs of any lockdown need to be compared with the costs of alternative policies, rather than the unachievable benchmark of a world in which the virus had never existed.

Third, the worth of a human life is not up for discussion. The man who persuaded me not to quit economics, Peter Sinclair, died on 31 March after contracting Covid-19. He was a man of unlimited kindness, and I shall miss him very much. His life, like the life of any named individual, was priceless.

Yet no matter how much we want to turn our gaze away from the question, it hangs there insistently: is this all worth it?

We spend money to save lives all the time — by building fire stations, imposing safety regulations and subsidising medical research. There is always a point at which we decide we have spent enough. We don’t like to think about that, but better to think than to act thoughtlessly. So what are we willing to sacrifice, economically, to save a life?

A 1950 study for the US Air Force ducked this question, recommending a suicidal military strategy that valued pilots’ lives at precisely zero. Other early attempts valued lives by the loss of earnings that an early death would cause — effectively making retired people worthless, and the death of a child costly only if the child could not be replaced by a new baby.

The late Thomas Schelling, a Nobel Prize-winning economist, mocked these errors as he imagined the death of a family breadwinner like himself: “His family will miss him, and it will miss his earnings. We do not know which of the two in the end it will miss most, and if he died recently this is a disagreeable time to inquire.”

There must be a better way to weigh the choices that must be weighed. But how? Schelling suggested focusing not on the value of life, but on the value of averting deaths — of reducing risks. A life may be priceless, but our actions tell us that a statistical life is not. The engineer Ronald Howard has proposed a convenient unit, the “micromort” — a one-in-a-million risk of death.

Implicitly, we constantly weigh up small risks of death and decide if they are worth it. Despite inconsistencies and blind spots in our behaviour, we value reducing risks to our own lives very highly, but not infinitely so. We vote for governments that hold our lives in similarly high regard. For example, the US Environmental Protection Agency values a statistical life at nearly $10m in today’s money, or $10 per micromort averted. I have seen lower numbers, and higher.

I am giving most of my figures as conveniently round numbers — there is too much uncertainty about Covid-19 to be more precise. But if we presume that 1 per cent of infections are fatal, then it is a 10,000 micromort condition. Being infected is 100 times more dangerous than giving birth, or as perilous as travelling two and a half times around the world on a motorbike. For an elderly or vulnerable person, it is much more risky than that. At the EPA’s $10 per micromort, it would be worth spending $100,000 to prevent a single infection with Covid-19.

You don’t need a complex epidemiological model to predict that if we take no serious steps to halt the spread of the virus, more than half the world is likely to contract it. That suggests 2m US deaths and 500,000 in Britain — assuming, again, a 1 per cent fatality rate. If an economic lockdown in the US saves most of these lives, and costs less than $20tn, then it would seem to be value for money. (By way of comparison, each 20 per cent loss of gross domestic product for a quarter represents a cost of about $1tn.)

One could quibble with every step of this calculation. Perhaps some of those who die were so ill that they would have died of other causes within days. Perhaps Covid-19 is not quite so dangerous. Yet it is clear that with so many lives at stake, we should be willing to pay huge costs to protect them.

We must remember something else: the risk of being wrong. We will inevitably make mistakes. The measures we take to contain coronavirus might do more damage to people’s livelihoods than necessary. Or we might allow the virus too much leeway, needlessly ending lives. In a spreading pandemic, the second mistake is much harder to repair than the first.

Fighting this virus demands economic sacrifices: not without limit; and not without end. But if not now, then when?


Written for and first published in the Financial Times on 03 April 2020.

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Undercover Economist

Can we contain viral misinformation about coronavirus?

Is there anything we can do to contain the spread? I’m not talking about coronavirus. I’m talking about the misinformation.

The UK’s Daily Express has suggested that the World Health Organization has long known about the disease known as Covid-19. (It hasn’t: it just talked about a hypothetical pandemic scenario involving an equally hypothetical Disease X.) Other newspapers asked if satellite images showed mass cremations of Covid-19 victims. (No.)

In Kenya, audio from a training exercise was widely shared on WhatsApp, leading people to confuse the simulation with reality. Everywhere, social media posts peddle snake oil and trade in conspiracy theories.

A popular Facebook image shows that Dettol’s label claims to kill coronavirus and asks, were they forewarned? Maybe — although it would be quite the bioweapon conspiracy if a bunch of incompetent label designers were in the loop. A more plausible explanation is that “coronavirus” also applies to the viruses that cause Mers, Sars and indeed some varieties of the common cold.

It is important not to exaggerate the reach of such stories but they are too popular for comfort. They are smeared around the information ecosystem by a combination of fear, a mistaken desire to help, the gossip instinct and, perhaps most important, a belief that official sources aren’t telling us the truth.

A few weeks ago, for example, a reader wrote to me: “Whilst the ‘official’ death rate for the coronavirus is repeatedly stated in the media as being 2 per cent, I believe this is a false statistic . . . the real death rate is somewhere between 6 per cent and 18 per cent. IT IS CERTAINLY NOT 2 per cent!” He even added a spreadsheet.

My instinctive reaction was the opposite of those spreading the misinformation: that if the death rate was that high, we’d know about it. And indeed, when I spoke to epidemiologist Nathalie MacDermott of King’s College London, she reassured me that my reader’s otherwise-rigorous spreadsheet had missed a detail which explained his alarming conclusion: some cases are so mild that they never reach the notice of medical professionals.

What stuck with me was an intelligent reader’s mistrust of the “official” number. The Chinese authorities may well have reasons to fear the truth, but there is no reason to believe international experts are engaged in a cover-up. Experts can be corrupt or mistaken, and sometimes one must look behind a curtain of official denial. Yet in technical matters such as the danger of Covid-19, an epidemiologist is far more likely to be right than our untutored intuitions.

There are plenty of paranoid conspiracies about Covid-19 circulating on social media — check the website of Full Fact, a UK-based fact-checking organisation, for a selection. They are just a small sample of the falsehoods circulating on all topics. Sometimes they are an attempt to get clicks and thus revenue; sometimes it is deliberate disinformation designed to skew political debate or drown out the truth; sometimes untrue ideas are just catchy. Can we contain all this misinformation any more than we are containing the new coronavirus?

The theory that ideas spread, mutate and evolve much like a living organism — or a virus — was popularised by the evolutionary biologist Richard Dawkins, who in 1976 coined the word “meme” as an analogue to “gene”. The possibility of ideas “going viral” was radical in the 1970s. Now it is a cliché — but it is still instructive.

The sudden interest in the disease, for example, has given new life to dormant posts promoting herbal cures for coronaviruses. Strange ideas mutate and multiply in their own niches, such as social media groups favouring vaccine conspiracies or the idea that mobile phones make you sick. Such groups are inclined to disbelieve the official version of anything.

It is tempting to dream that a grand plan can contain both problems. We hope a new law, or a change in Facebook’s algorithm, will dispel lies — just as we hope that Covid-19 can be foiled by quarantine (ideally of other people) or by the miraculous appearance of a working vaccine.

Such top-down moves can help. A society with strong health services is in a better position to face a pandemic; similarly we can strengthen our institutions against misinformation. Facebook announced this week that it will be “removing false claims and conspiracy theories” — late in the day. But the company has long worked with fact-checkers such as Full Fact to flag false stories.

Yet ultimately, a resilient society needs to practice some bottom-up hygiene, if that is not an unfortunate phrase. To deal with a virus, we should wash our hands and try not to touch our faces. Similarly, the strongest defences against misinformation are people less given to paranoia and to sharing ideas without thinking. We should all stop and reflect before circulating alarming claims. Count to 10, and ask yourself whether this is really the best thing to amplify. Whether fighting a virus, or a viral scare story, each one of us needs to erect small barriers to slow the contagion. Alone, those barriers may seem trivial. Collectively, they work.

Written for and first published in the Financial Times on 06 March 2020.

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Undercover Economist

Why it’s too tempting to believe good news about the coronavirus

Wishful thinking is a powerful thing. When I read about a new disease-modelling study from the University of Oxford, I desperately wanted to believe. It is the most prominent exploration of the “tip-of-the-iceberg hypothesis”, which suggests that the majority of coronavirus infections are so mild as to have passed unrecorded by the authorities and perhaps even un­noticed by the people infected.

If true, many of us — perhaps most of us in Europe — have already had the virus and probably developed some degree of immunity. If true, the lockdowns have served a valuable purpose in easing an overwhelming strain on intensive care units, but they will soon become unnecessary. If true.

But is it true? If it is, it stands in stark contrast to the far grimmer modelling from a group at Imperial College London, which concluded that if the epidemic was not aggressively contained, half a million people would die in the UK — and more than 2m in the US. Models such as this one helped to persuade the British government to follow much of continental Europe in putting the economy into a coma.

The differing perspectives are made possible by the fact that the data we have so far are not very good. Testing has been sporadic — in some places, shambolic — and everyone agrees that large numbers of cases never reach official notice. We do have solid statistics about deaths, and as the epidemiologist Adam Kucharski, author of The Rules of Contagion, observes, a wide variety of scenarios are consistent with the deaths we’ve seen so far. Perhaps Covid-19 is uncommon and deadly; perhaps it is ubiquitous and kills only a tiny proportion of those it affects. Deaths alone cannot tell us.

This uncertainty is unnerving. John Ioannidis, an iconoclastic epidemiologist, wrote on March 17 that Covid-19 “might be a one-in-a-century evidence fiasco”. Prof Ioannidis’s argument is that some infections are being missed, and we have little idea how many. Therefore we have little idea how deadly Covid-19 really is.

He speculates that the fatality rate could plausibly lie between one in 100 and one in 2,000 cases. Either way, it is dangerous; but the difference is vast. And if the scale of our ignorance about coronavirus may seem hard to swallow, bear in mind that the fatality rate for the H1N1 swine flu pandemic in 2009 was still being debated years later.

Prof Ioannidis has form: 15 years ago he published a study with the title “Why Most Published Research Findings Are False”. That claim seemed outrageous at the time, but subsequent efforts to reproduce famous experiments in psychology have revealed that he was on to something important. We know less than we think.

But we are not completely ignorant. Alongside the death total, there are other clues to the truth. For example, thousands of people were evacuated from Wuhan city in late January and February and most of them were tested. A few tested positive and several were indeed symptom-free, but not the large majority that the Oxford version of the tip-of-the-iceberg hypothesis would imply.

The entire population of the town of Vò in Italy was repeatedly tested and, while half of the positive cases were asymptomatic, that is still much less than the Oxford model might lead us to expect.

So while it is possible that most of us could have been infected without ever knowing — and that herd immunity is within easy reach — it is not likely. That may explain why neutral experts have responded to the Oxford study with caution, and some concern that it might provoke a reckless response from individuals or policymakers.

So, what now? First: stay indoors if you want to save many lives and prevent health systems from being overwhelmed. The bitter experience of Italy and Spain demonstrates the importance of flattening the peak of the epidemic. That remains true even if, as we might hope, the epidemic is much milder and more widespread than we currently believe. It might have been tempting to wait and gather more evidence — but faced with an exponentially rising pile of corpses, “wait and see” is not an option.

Second: health systems should expand capacity, buying more ventilators and more protective equipment for doctors and nurses. In all but the most optimistic scenarios we will need them now, we will need them later in the year and we will need them from time to time in the future. This crisis is teaching us that we should have had more spare capacity all along, despite the cost.

Third: test, test, test — and not only using the current tests to detect infection, but new ones for antibodies that should show whether people have already had the virus and have developed some degree of immunity. Sunetra Gupta, a professor on the Oxford team, says that such tests may start to produce results in a matter of days.

The epidemiologists are doing their best, but they are not omniscient. They need facts with which to work. Gathering those facts systematically is one of many urgent tasks ahead of us.


Written for and first published in the Financial Times on 27 March 2020.

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Undercover Economist

Why the crisis is a test of our capacity to adapt

“It’s really quiet,” said the proprietor of Oxford’s best falafel stall when I popped over to buy lunch on Monday. It is even quieter now. Meanwhile, my wife emailed friends to ask if we could help: both of them are doctors and they have three children and a parent undergoing treatment for cancer. “Thanks We will be in touch,” came the reply. No time for more. It may be quiet for the falafel man, but not for them.

There, in miniature, is the economic problem that the coronavirus pandemic has caused, even in its early stages. For everyone who is overworked, someone else has little to do but wait. The supermarkets have struggled to meet a rush of demand for some goods, but that should pass. “We are not going to run out of food, so chill,” Yossi Sheffi tells me. He’s an MIT professor and an authority on supply chains.

While the pressure on the supermarkets may ease, the strain on the healthcare system will not. It is already intense and will get much worse. Yet while clinicians are overstretched, others wonder when the next job is coming from. From the falafel seller to the celebrity chef, the hotel porter to the millionaire motivational speaker, many tens of millions of people around the world are fit and eager to work, yet unable to.

This is a test of flexibility and imagination. Gourmet restaurants are shifting to takeaway service; conference speakers are building portable studios. Best of all is when we find ways to turn idle resources into weapons in the fight against the virus. It is hard not to cheer when reading tales of distillers turning their stills to the task of producing hand sanitiser, or hoteliers offering their empty rooms to doctors and nurses.

But it is a much tougher task, for example, to make more urgently needed ventilators. In the mid-20th century, William Morris, a man who made his fortune manufacturing British cars, turned his workshops to the task of producing “iron lungs” for people paralysed by polio. It’s an inspiring precedent for his successors at Meggitt, McLaren and Nissan scrambling to emulate him by building ventilators to use in the current crisis, but it took time.

Prof Sheffi reckons that it would be straightforward for, say, an automobile parts supplier to retool in a matter of months, and having many thousands of extra ventilators by the autumn would certainly be better than nothing. But to produce complex equipment from scratch in weeks, perhaps using 3D printing, would be a miraculous achievement even if regulations are loosened, as they should be.

Yet harder is to find more nurses and doctors; intensive care units do not operate themselves. And even for less specialist staff, the task is larger than it might seem because of what the late Thomas Schelling, a Nobel laureate economist, called “the acceleration principle”. Let’s say that Europe has 10m hospital orderlies, with an annual turnover of 30 per cent. That means 3m need to be trained each year, 1m at a time on a four-month training course.

Now let us aim to expand gently to 11m over the next four months. It doesn’t sound much — just a 10 per cent increase. Yet the training programme must double in scale to accommodate it, because now 2m rather than 1m orderlies are enrolled in the same four-month window. The same logic applies to anything we need more of, from the personal protective equipment that is in desperately short supply in our hospitals, to the internet bandwidth that we will all be using more of, while working from home.

The task, then, is immense. But we must try. Under any conceivable scenario, we would not regret trying to expand emergency medical care several times over. If it is impossible, so be it. But if it is merely expensive and difficult, such costs are trivial compared to the costs of suspending everyday life for weeks or months.

And there is some hope: efforts are already under way to persuade doctors and nurses who have retired or switched careers to return, and to put medical students to work at once. We could quickly train new medical support staff to perform focused and limited roles. I can only imagine the breadth of the skills needed to be an intensive care nurse, but if we cannot have more experienced nurses with complex skills, let us at least support them with people who can quickly be trained to change an oxygen tank or turn a patient in bed.

Even those apparently ill-suited to intensive care duty — the 75-year-old retired doctor, the community volunteer with first aid training, or even furloughed airline crews — could indirectly support health systems. While medical professionals staff the wards, I would gladly pay taxes to fund online advice from a retired doctor, a virus test administered by an air steward, or stitches and bandages from a St John Ambulance volunteer.

Killing two birds with one stone never sounded easy to me. But there is no excuse now not to be radical. This crisis is a test of many things. Not least among them is our capacity to adapt.


Written for and first published in the Financial Times on 20 March 2020.

My NEW book The Next Fifty Things That Made the Modern Economy is out in the UK in May and available to pre-order; please consider doing so online or at your local bookshop – pre-orders help other people find the book and are a huge help.

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