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

What the pandemic teaches us about our priorities, our planet, and the degrowth movement

Certain environmentalists have long argued that economic growth must end for the sake of the planet. “Degrowth” is concisely defined by one proponent, Riccardo Mastini, as “the abolition of economic growth as a social objective”.

Degrowth represents the view that sufficiently sharp reductions in carbon dioxide emissions cannot be achieved through new technology, pricing incentives or even major investment in energy and transport systems. The only thing that will work is economic growth itself coming to an end, permanently.

The pandemic is giving us a taste of what an end to growth might look like. So what lessons should we learn?

The lockdowns have indeed suppressed carbon dioxide emissions, but less than we might hope. The climate science website Carbon Brief estimates that emissions in 2020 are likely to fall by about 5 or 6 per cent relative to emissions last year. That would be the largest fall on record.

What might be a surprise is that it is not enough. If the cuts were compounded at that rate for the rest of the decade, we’d still fall short of what the UN Environment Programme estimates would be needed to restrict global temperature rises to 1.5 degrees. (A 2 degree target would be easier: five pandemics in the next decade would suffice.)

Evidently, hitting demanding emissions targets through crude degrowth would be hopeless. The human misery would be immense.

So would the political backlash. Relative to the slow-burning crisis of climate change, coronavirus is vivid and immediate. It is killing people by the thousand, every day, often in the world’s richest and most famous cities. It should be easy to get people to rally round the idea of making sacrifices to defeat the virus. Yet there is still a vocal minority opposed to any economic sacrifice whatsoever. That should unnerve any of us who worry about the far more diffuse threat of climate change.

Refined policies beat crude ones. The reason we opted for the hardship of a lockdown was that we hadn’t developed any better options. We didn’t have a vaccine, we didn’t have much in the way of treatments and, in many countries, we couldn’t even get together the basics such as testing stations, contact tracing and protective equipment for medics.

Refined beats crude for climate change, too. We could, of course, crush livelihoods to prevent ecosystem collapse, just as we have crushed them to prevent mass death from Covid-19. But that, too, would be a last resort, an admission that we had no alternative.

We do, in fact, have plenty of alternatives, although we have hesitated to use them: research subsidies for green technology; support for the smart grids necessary to harness ever-cheaper solar and wind energy; carbon pricing. The last has been a tough sell, politically, but I am willing to bet it polls better than a deep green perma-depression.

Of course, while many environmentalists would nod along with Greta Thunberg’s sentiment about “fairy tales of eternal economic growth”, most would acknowledge that the priority is not actually to reduce gross domestic product growth to zero or below, but instead to reduce emissions, restore natural ecosystems and sustain human flourishing and freedoms.

Fine. Yet if ending growth is not the objective, but the means to an end, might I suggest that it is not a very effective means? “Abolish economic growth” works as a radical political slogan, but when we’re looking for policy levers to pull we find ourselves coming back to specific taxes, subsidies, public investments and regulations. So why don’t we stop talking about degrowth and focus on the particular policies that might address environmental degradation?

We might find that those policies, applied with sufficient vigour to save the planet, would indeed have the side-effect of bringing economic growth to a halt. I doubt it. But the way to find out is to try; we might be pleasantly surprised at how flexible economic activity can be, and how much fun we can all have while respecting planetary limits.

Here, again, the pandemic sharpens the point. Because in the short term we have left ourselves few options, we have fought the virus with lockdowns. The lockdowns have damaged growth. But there are no “degrowth epidemiologists” arguing that throttling economic activity is the aim rather than the unwelcome side-effect, and that vaccines and contact tracing are fairy tales peddled by neoliberal economists.

The virus has taught us that our way of life is more vulnerable than we might hope. It has taught us the importance of making sacrifices now to prepare for predictable risks in the future. It may even have reminded us that driving to work, or flying half way around the world for a meeting, are not always necessary, and of the joys of walking or cycling through quiet streets.

These lessons may help us deal with the threat of climate change that still looms over us. But my friends in the environmental movement should take one more lesson to heart: if degrowth is the only solution we can find to our problems, perhaps we haven’t looked hard enough.

Written for and first published in the Financial Times on 1 May 2020.

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The cost of keeping schools closed will be grave

British parents received mixed messages this week. On one hand, most children would not be going back to school until September at the earliest. On the other, zoos would be reopening. It’s a shame about the decay in maths and reading skills, but look on the bright side: penguins!

The closure of schools in many countries around the world puts the dilemmas of the pandemic in particularly sharp relief. There are no easy answers, but I worry that the question is not being given enough priority. We are at risk of making a mistake now with consequences that will last.

Children are not at much risk from the virus. As a parent I understand the impulse to protect your own children at any cost, but in England and Wales, just two children from the age of five to 14 have been recorded as having died with Covid-19 between March 28 and May 29. To put those two tragedies into context, over the same time period we would typically expect eight children to be killed in road accidents. Our children are very safe, by historical standards. If they return to the classroom, Covid-19 will not be the biggest risk they face.

When a society closes its schools, then, it is doing so not for the sake of the children.

What about the teachers, who must stand in front of 30 little viral vectors while some of us write newspaper columns from our homes? I would certainly not want to demand that my children’s teachers go to work while I stay home — doubly so for those in higher risk groups. But the evidence suggests that most teachers who decide to return to school would not be at grave risk. Data from England and Wales studying deaths registered before April 21 — many of whom would have been infected before lockdown — found that construction workers, cleaners, care workers, nursing assistants, taxi drivers, chefs and retail assistants were among those at higher risk. Teachers were not. Nobody should feel compelled to enter a workplace where they feel unsafe and we must find ways to make schools safer. But there is no sign that teachers should feel at greater risk than many others.

The final argument to keep the schools closed is that closures might be an essential component of a general effort to contain the virus over the medium term. But are they? That is unclear. Children will find it even harder than the rest of us to wash hands, avoid touching their faces and maintain distance from one another. Classrooms put them in close proximity, indoors, for an extended period of time. That must risk spreading the virus.

That said, the evidence suggests schools are just one of many places where the virus can spread — and that workplaces are just as risky, while restaurants and public transport are riskier still. In late May, researchers at the Center for Global Development looked at 20 countries that had reopened schools, usually as coronavirus infections were on the wane. In three of them, there was some evidence — albeit weak — that the epidemic had worsened after the reopening. In most, if I showed you a graph of new cases you’d find it impossible to guess the point at which schools returned.

This doesn’t prove that schools pose no risk. In particular, societies may often open them only when they are sure that other measures are keeping the virus under control. Such measures, for example contact tracing, should not be overlooked. Yet the broad fact that so many reopenings have succeeded does suggest that the risk is manageable when done right.

Meanwhile, what of the risk of keeping classrooms closed? That is higher than many seem to realise. It is damaging for the careers of many parents — mothers especially, I suspect. It is hard to see an economy bounce back when so many people’s jobs depend on their children being safely supervised at school.

As for the pupils themselves, we have evidence from numerous school strikes around the world that children’s education suffers when their schooling is interrupted. There is an active debate in academia over whether long summer breaks set back the learning of all students, or only that of those who were already disadvantaged. Either way, a break in schooling of six months or more seems likely to put a serious dent in the skills of many, permanently damaging their chances of flourishing.

Schools are trying to provide resources to help children maintain their momentum, but it is self-evident that some of these distance-learning offerings are much weaker than others. None of them can entirely deliver what young children need.

Reversing lockdown is a perilous moment. If it is bungled, and the virus springs back, we risk combining the health costs of openness with the social costs of lockdown. But we cannot sacrifice our children’s education indefinitely, purely to benefit their elders.

The problem of reopening schools has become central to the pandemic response. It requires wisdom, diplomacy and close attention. So far, the British government has displayed none of those qualities.

Written for and first published in the Financial Times on 12 June 2020. (The original is free to read and packed with links to original sources.)

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Undercover Economist

The pros and cons of libertarian lockdowns – or “don’t be a dickhead”

In March, an employee of a Melbourne bank was sacked after the bank concluded they had falsely claimed to be infected with coronavirus, triggering alarm for everyone working in the same building. The hands-off response of the local police chief: “It’s not against the law to be a dickhead”.

For weeks, much of the world has been locked down in an attempt to suppress the spread of the virus. The severity of the rules, and the relentlessness with which they have been enforced, has varied from place to place, but the broad theme has been the same: the rules are wide, restrictive and legally binding. Flout them and you will be punished: so it is “against the law to be a dickhead”.

It is easy to lose sight of an alternative approach: a libertarian lockdown. If you want to open a nightclub, rub shoulders in a choir, or offer to shake hands with everyone you meet in a hospital: “It’s not against the law to be a dickhead”. The sanctions will be social or commercial, not legal.

Before considering the objections to this idea — and there are plenty — take a moment to consider its appeal. First, freedom is valuable. To make something punishable by the power of the state is not a step to be taken lightly.

Second, most people try to do the right thing. We are social animals: we look out for each other, especially in a crisis, and we also fear being ostracised. In the UK, the vast majority of people complied with the lockdown, and not because they expected the police to come knocking.

Still, we do not rely on peer pressure as a substitute for making murder illegal. When life and death are on the line, laws and punishments are reasonable.

So the third argument is, I think, the most persuasive: the next stage in the fight against Covid-19 requires a subtlety that the law cannot provide. With coronavirus spreading rapidly, there was a strong case for a blunt, one-size-fits-all message: “stay at home, save lives”. But now the task is different. We are not trying to suppress a spreading epidemic; we are trying reopen our countries where possible while preventing a second wave. That means seeking out the most effective ways to prevent infections while still allowing both the economic activity that supports our livelihoods and the social activity that makes life worth living.

Last week, I discussed ways in which the government might try to discriminate — between young and old, or between different regions. But there is an alternative, which is to let people decide for themselves.

To use Friedrich Hayek’s phrase, making the right judgments from now on requires “knowledge of the particular circumstances of time and place”. Every workplace, every social setting, every classroom, is different. There is no law that can accommodate all the different ways in which people might try to protect themselves and each other while still maintaining some semblance of normal social and economic activity. And while firm guidelines and ­standards can be useful, no law can reflect my own intimate judgment about how much risk I am willing to take.

The case for a libertarian lockdown, one that relies on voluntary action and social pressure, is strong. But there is also a powerful case against.

First, and most crucially, this is an infectious disease. Each case of infection risks sparking many others. As I weigh the balance of benefits and risks I may downplay the risks to others, and endanger them. If I am not thoughtful and altruistic enough, people may die.

Second, while we should normally give each other the benefit of the doubt in judging our own best interests, this virus is a novel and invisible killer. We are figuring things out in a stew of ­misinformation, quack remedies and questionable advice. Can we expect mere common sense to be sufficient?

Third, people may lack either the power or the information to make a real choice. If a restaurant reopens, I am free to decide whether it’s safe to show up. The restaurant staff may feel they have no such freedom. And if the restaurant looks conscientious at the front of house but is taking risks in the kitchen, would market forces really punish that hidden offence?

A middle way is, of course, possible. Governments can outlaw the riskiest activities, while allowing free choice to prevail elsewhere, bolstered by firm guidance. The more clarity, trust and social solidarity there is, the more likely voluntarism is to work. It is a shame that the UK government has done so much to corrode that clarity, trust and social solidarity this week in the row over the lockdown odyssey of the prime ­minister’s chief adviser Dominic Cummings.

Yet the idea is hardly doomed. We will have to start figuring out how to stay safe, making difficult judgments in ambiguous situations. And it is striking that Denmark, which has lifted many restrictions, has not yet seen a second wave of infections. Perhaps “don’t be a dickhead” is enough after all.

Written for and first published in the Financial Times on 29 May 2020.

My NEW book The Next Fifty Things That Made the Modern Economy is NOW OUT. Details, and to order on Hive, Blackwells, Amazon or Watersones. Bill Bryson comments, “Endlessly insightful and full of surprises — exactly what you would expect from Tim Harford.”

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Undercover Economist

What happens when you smash your own face in, in the middle of a pandemic?

My initial instinct, after hitting the road face first, was to call out to assure my wife that I was fine. My second instinct, as I looked at the rapidly spreading puddle of blood, was that perhaps I wasn’t.

Reader, you can deduce that whatever I did, it was not enough to stop me writing this week’s column. It was spectacular, though. Having your bike chain snap as you stand up in the saddle is not an experience I recommend. Absorbing the impact of the tarmac with your mouth is a strategy that I cannot endorse. Next time I’ll try to land on my backside.

Fortunately, that was not the only lesson I learnt. First, I was reminded that people really do look out for each other in a crisis. The coronavirus lockdown awkwardness of tense people avoiding each other on the street evaporated in an instant when I was sprawled face down in the middle of the road. One woman ran out of her house with tissues and water. An elderly fellow ambled over, proffering hand sanitiser and asking what he could do. Friends with bandages and medical degrees were at my side in minutes — I was cycling through my own neighbourhood — but even once the professionals were on the scene, everyone who passed stopped to offer help. Social distancing matters and the coronavirus is a scary thing. But when a poor soul is covered in his own blood, no one passes by on the other side.

Second, I learnt how impressively a healthcare system can perform when there’s some slack. Given that the UK’s NHS is focused on the twin challenges of treating Covid-19 cases and preventing the spread of the virus, I assumed that dental work would be out of the question. Not a bit of it. At half past eight on a Saturday evening, just a few hours after the accident, I walked into a near-deserted dental surgery, rubbed alcohol gel all over my grazed hands — ouch — filled in a form, paid a few pounds and settled in for a couple of X-rays and a temporary filling. (The damage, it turns out, is permanent but trivial.)

A tetanus jab on Monday at my local doctor’s surgery was even easier to arrange. Astonishingly easy, in fact. No mystery as to why: no one goes to see a doctor right now unless they really need treatment; some people are failing to see a doctor even then. As a result, the parts of the health service with which I interacted had plenty of slack. There was no waiting for an appointment, and ­everything was running to time — more like a restaurant than the NHS I grew up with.

In the short term, it will be impossible to maintain that slack. In the long term, we might decide to regain it. When the NHS reopens, all the postponed procedures must be crammed in; some patients will have acquired more severe and complex conditions for lack of treatment. It will be tough for staff and patients alike. But years from now, I hope we will not lose the memory of a healthcare system with both the flexibility and the spare capacity to see patients promptly. Such extra capacity costs money, of course. But we may find that it is worth the extra expense, even in the good times. It is efficient to stretch a healthcare system to capacity, but the strain imposes countless small costs, from long queues to stressed staff to appointments that are sometimes too brief to do the job. If the coronavirus pandemic has taught us anything, it is that spare capacity can be invaluable when a crisis hits.

The third lesson is one that I have to relearn in every personal crisis: you can change your plans, even those that seem set in stone. It is frustrating to have to delay work, upsetting to cancel long-anticipated pleasures and embarrassing to call others to explain that they will be inconvenienced because I fell off my bike and led with my chin. I am always a little too slow to accept the inevitable, and usually need others — a friend, a colleague, or my wife — to start prying open my iron grip on an obsolete ­schedule.

My own pratfall, bloody though it was, is of course trivial compared with a deadly global pandemic. But the lockdowns are tripping us all up just the same. Our work, our social lives, our holiday plans — all are sprawling on the deck. I see myself and others struggling to let go of our fond aspirations and comfortable habits and, instead, crossing our fingers and hoping things will be back to normal soon. And perhaps they will, but that seems less likely by the day. So we will all have to keep rethinking and adapting. Those people who are quickest to adjust, whether by temperament or sheer happenstance, are the most likely to ­flourish.

The final lesson is the simplest, the most familiar, the most banal — and yet somehow never redundant. I learnt, again, to count my blessings: medically trained friends who sprint to the rescue; NHS staff on duty and happy to help despite the risks; the fact that I didn’t break my jaw. And I am grateful that I work not on television, but in print and radio. Now, more than ever, I have the face for it.


Written for and first published in the Financial Times on 15 May 2020.

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Undercover Economist

The pleasures and perils of precrastination

Many writers are notorious for leaving things to the last possible moment. Not I. I’m always itching to get started and, for that matter, to get finished. I would gladly have written this column on Monday, but in her wisdom my editor pointed out that in a busy week for news, it might be a good idea to wait. So I did, soothing myself by working on an episode of my podcast that I expect to be broadcast early in 2021.

I can’t help myself. In a world full of procrastinators, I am a precrastinator. I’ve been like this for a long time. At school, we had homework diaries in which the tasks for each subject and each day would be recorded. However slapdash my work, I itched for the moment of completion when I could score a bold line through each item. Even better, when every piece of work on a page was complete, I would tear out the page with relish. Sometimes, infuriatingly, some ugly outlier could not be completed promptly. It would sit there like an unsqueezed spot.

One of my children has the looking-glass variant of this trait: while I am desperate to get to grips with unpleasant tasks, she is happy to postpone pleasant tasks indefinitely. To her, the highest form of gratification is gratification delayed. Christmas sweets are still in storage come Easter; her chocolate eggs last until her birthday in September; her birthday treats last until Christmas. Coronavirus be damned; we’re in no danger of running out of candy.

My daughter and I are both inverting the natural order of things, in which uncomfortable tasks are postponed in favour of easy pleasures. There are advantages in such behaviour, but traps as well. My daughter’s siblings have realised that her chocolate hoard is a tempting target for sweet-toothed marauders. And a new study from the behavioural economists Paola Giuliano and Paola Sapienza finds that very patient people are also less likely to be happy with their lives — possibly because they delay gratification so long that it never arrives at all.

Meanwhile I am suffering the curse of the precrastinator in a world turned upside down by a virus. I regret my early purchases of cheap rail tickets, given that the meetings to which I intended to travel keep being cancelled. Booking Easter and summer holidays seemed far-sighted at the time; now it seems short-sighted. Or perhaps that is just hindsightedness. We precrastinators enjoy the benefits of better choice and cheaper reservations; in exchange, we have to be willing to accept that sometimes we will face painful conflicts between new opportunities and prior engagements. At times, we must abandon our plans.

I’m an economist, so that’s fine by me; I’m trained to believe the sunk-cost fallacy is a fallacy. While regular humans tend to obsess about spending that cannot be recouped, throwing good money after bad, we economists can sound almost Buddhist on the topic. Attachment to such sunk costs is the root of suffering.

The psychological study that coined the word “precrastination” was conducted by a team of psychologists led by David Rosenbaum. The experimenters showed people an alley, along which were distributed two heavy buckets. The experimental subjects were asked to walk down the alley, pick up a bucket and carry it to the far end. The total distance walked is the same either way, so the easiest way to do this task is to pick up the furthest bucket, minimising the distance over which one has to carry the load. However, the majority of people choose the nearest bucket, instinctively believing “soonest started, soonest finished”.

Psychologists who study old-fashioned procrastination argue that it’s a behaviour designed to manage negative emotions: we avoid tasks that make us feel anxious.

Surely we precrastinate for the same reason: to manage our worries. Here, the dread is not about the process of engaging with the task, but the anxiety of leaving a task unfinished.

It’s plausible that the feeling intensifies as the list of incomplete tasks grows. One suggestive study, by Francesca Gino and colleagues, looked at the emergency room of a hospital. As the department became busier, the doctors tended to favour the easier tasks — healthier patients with simpler problems — presumably because as they felt overwhelmed, they started looking for the quick wins. The researchers dubbed this behaviour “completion bias”, and it seems closely related to precrastination. The busier and more stressed we get, the more desperately we look for opportunities to tick something off the to-do list.

Nevertheless I shall keep precrastinating, and gladly. The advantages of getting stuck into a task are clear enough, so it is a question of managing the downsides. My to-do lists are structured to keep the important stuff in plain sight while the trivia is tucked below the fold. I try not to hold too tightly to my plans.

I will admit that sometimes I go too far. A timeworn saying advises us to eat a live toad for breakfast each morning, to put the worst behind us. There’s wisdom in that. But is there any way I can eat tomorrow’s toad today?
Written for and first published in the Financial Times on 13 March 2020.

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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.

My NEW book The Next Fifty Things That Made the Modern Economy is NOW OUT. Details, and to order on Hive, Blackwells, Amazon or Watersones. Bill Bryson comments, “Endlessly insightful and full of surprises — exactly what you would expect from Tim Harford.”

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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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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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