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 it is that the country has returned to its autarkic past! The pandemic is forcing the country into isolation once again, with all the lost trading opportunities. What NZ needs is a good dose of Covid 19 to bring them back into the real world!
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