Posts

Covid notepad 2 : Observations and opinions

Government v covid 19: I

Suppose you are the leader  of your country and your chief medical officer came to you with one of the following two statements:

A. “We have detected the rampant spread of a new virus that will kill 10% of those who contract the disease.”

B. “We have detected the rampant spread of a new virus that will kill 1 in 10,000 of those who contract the disease who are under 70 yrs old and 1% of those over 70yrs old.”

What do you do? Clearly, statement A is cause for alarm and justifies radical action from both a social and economic perspective.  Statement B is discomforting but hardly cause for policy action that will force sectors such as restaurants, travel and entertainment into forced bankruptcies and pushing the unemployment rate up 10%.  The policy response to Statement B would be to take action to contain the spread of the disease and protect those most at risk.

Back in March this year, the chief medical officer for every country on earth could justifiably have communicated statement A and the Government could equally have justified the draconian lockdown/shutdown policies that followed.  But now, with the benefit of hindsight, the facts suggest statement B to be the correct one thereby modifying the appropriate policy response…right?  Not so right…

…a second wave of the Covid 19 virus is flaring up in many countries with the response such that partial lockdowns have been commanded in places such as California and Australia.  Borders that were to open remain shut.  Governments globally are openly cautioning that if the pandemic reignites then they will revert to their draconian controls.

As with everything that is repugnant or causes costs on our society (for example crime, pollution, violations of human rights abuses) while the noble objective might be to eliminate covid 19 entirely, the economic cost may well exceed the benefit.  Just as there is an optimal amount of crime in society there is also an optimal amount of covid 19.  Lets hope that this threat to eliminate covid 19 is a scare tactic rather than a genuine policy option.

Government v covid 19 : II

Suppose you are the leader of a country that has successfully eliminated covid 19. You now turn your mind to re-opening your borders. You ask your chief medical officer,

Dear Leader:  What is the chance of covid 19 re-emerging if we open our borders?

Chief medical officer: Absolutely and without doubt I am 100% certain covid 19 will re-emerge no matter what you do

This is arguably the clearest case of ‘Winners Curse’ one could imagine.  Winning the battle against covid 19 simultaneously commits your society to a life of isolation, just like Robinson Crusoe!

New Zealand has achieved this position.  In the 1960s and 1970s NZ was one of the most regulated and closed economies on earth under the Robert Muldoon government.  That isolationist stance didn’t turn out so well, so upon his ouster NZ adopted a radical transformation of policy the country embracing deregulation and free markets.  NZ prospered.

How ironic. NZ needs a good dose of Covid 19 !

 

Do you like what you read? Then subscribe to our blog below…

Covid 19 notepad: Observations and opinions

1. Pandemic preparedness
It is curious how the general media seems to think that every nation should have sufficient medical resources available to deal with the strains of a pandemic. Investing in five times the average daily demand for medical resources in case a pandemic happens is both suboptimal and ludicrous.

The US spends 18% of GDP on health care. If a pandemic requires 5 times this amount of medical resources then the US would be spending 90% of GDP.   Comfortably coping with the rare pandemic event means that the US would almost always have beautiful but empty hospitals , a lot of doctors and nurses standing around doing nothing and little money left for anything else.

Some countries can be criticized for not having a plan to deal with a pandemic but none can be criticized for not having idle resources.

2. Governments are not good at letting go
Lockdown is a hard decision to make but unlocking is even harder. China is tenuously relieving its restrictions in Wuhan with little fanfare while the rest of the world bunkers down. But what is the path back to normalcy? What milestones trigger relief? Very little guidance is coming from governments on these questions.

If you think policy errors have been made dealing with the rise of the pandemic, just wait for the policy errors that are about to happen as the virus abates.  The UK’s 3-year procrastination over Brexit – how to leave the EU? – is the prototype for the pending policy procrastination over Covid 19 – how to restore civil liberties?

Governments are good at passing laws and regulating activities.  They are the wrong people to put in charge of deregulation

3. Air travel will never be the same
It took a decade for the government to allow proper cutlery on aircraft again following 9/11’s policy requiring that airlines use plastic only knives and forks. What is air travel going to look like post-Covid 19?

The main issue for every country in the future will be ‘imported’ cases of the virus.  This means detecting and excluding passengers arriving from another country carrying the virus.  Controlling virus importation will probably require every passenger to present medical proof that they are Covid 19 – negative before checking in.

Once this policy is put in place, how long do you think it will take before the government will let you book an air ticket without a Covid19 negative test in hand at check in? So long as the Covid 19 virus remains in circulation the answer is ‘probably never’.  So here’s a business opportunity – develop a simple yet accurate Covid 19 test and market it through vending machines in airports globally…

On thing is for certain, gone are the days of a quick trip to Bali for the weekend. The days of mass-airline transportation are similarly gone.

4. Autarky

Movement restrictions on labour spill over into movement restrictions on capital and future trade transactions are similarly reduced.  The world is taking a backward step towards Autarky, the extreme case where each economy is self-sufficient in producing what it needs and the gains from trade are left unexploited.  Robinson Crusoe made do on his desert island but pined for civilisation and a friend or two.

Trade could be the biggest resource cost of the Covid-19 in the long run.  The Wealth of Nations just got smaller…

 

Do you like what you read? Then subscribe to our blog below…