Join Hafta-Ichi to find out the article “Without joined-up thinking about Covid and the economy, Britain is just guessing | Tony Yates | Opinion”
During a pandemic, the virus and the economy feed back in a continuous circular loop of causality. You don’t need to be a trained economist or epidemiologist to see that.
As the virus progresses, consumers respond to the risk to their health by cutting back spending on risky activities in leisure and hospitality, such as visits to pubs, cinemas, gyms, nightclubs and restaurants. How much they alter their behaviour depends on how much the virus is a threat to them and those they care for, or how much they know about it. And of course it also affects companies (whose profitability and outlook for the future worsens) and workers who, ultimately, may fall sick and not be able to work, or may fear turning up to risky workplaces. So the virus affects the economy.
The economy also affects the virus. As consumption, investment and work contract and tilt towards less risky activities, we tend to run into one another less, and there are fewer infections generated.
However, contradictory messages from the government – “Eat out to save jobs, but please limit the number of social interactions you have”; “Go back to your offices, but also please work at home if you can” – suggests that policies are being drawn up in unhelpful silos. For the public, it feels at times as if there are two totally different administrations in charge rather than one unified government.
This isn’t an accident, but a design flaw in policymaking. Recall the beginning of the pandemic, when the Scientific Advisory Group for Emergencies (Sage) used the model by Imperial College researchers to project hundreds of thousands of deaths if there were no mitigating measures. These forecasts emerged out of a state-of-the-art epidemiological model encoding detailed information about how different types of people, such as those at school, at work or retired, tended to run into each other. But they excluded economics: that is, they omitted how people would respond to the emerging health risks.
At the same time, on the economics side of the institutional divide, there were analysts in the Treasury, Bank of England and the Office for Budget Responsibility trying to work out what should happen to the main economic policy levers, or what consequences pulling them would have, using models that excluded the spread of the virus.
In broad terms, there is no trade-off between suppressing the virus and economic activity. Suppressing the virus allows economic activity to return to as normal a level as possible and as soon as possible. The main strategy for combating the virus is to enforce social-distancing measures until case numbers are at a level where infections can be suppressed with a national test-and-trace infrastructure. This policy stays in place until further therapies arrive, lowering the mortality of Covid-19 to acceptable levels, and/or we have a vaccine.
But there are difficult choices to make nonetheless, and without entirely joined-up economic and epidemiological analysis, they are being made more out of guesswork than otherwise. For example, a second wave – if that is what we are seeing now – might have been avoided if we had known more about how much voluntary social distancing would relax as lower case numbers lowered the perceived health risks, and therefore the relaxation of the lockdown could have been more finely tuned. A joined-up model could also articulate better the trade-offs that are being made across different groups in society and over time. The young bear little health risk, but are sacrificing their education and careers until the economy heals. The opposite is true of the old, whose careers may be at an end, but they face significant odds of dying from Covid-19.
The central ideal of our current strategy is that there is a given number of risky contacts we can sustain with our current test-and-trace capacity, without infections increasing. A joined-up model would help figure out how to identify the risks attached to certain activities, and weigh up their contributions to tax revenues, or welfare, or their social importance.
Such information would provide more clarity on how our test-and-trace capacity can support higher levels of economic activity. The danger of an absence of authoritative and detailed, joined-up economic and epidemic thinking is that policy is more prey to the political power struggles between lockdown hawks and doves. Decisions could be made using data that could help predict more accurate scenarios, rather than on ideological grounds.
Institutional silos exist for a reason. Without them organisations can suffer mission creep as their leaders try to build empires. Or they can lose focus, becoming experts of nothing instead of centres of well-defined excellence. But new phenomena demand a new institutional division of labour. An official “Centre for Economics and Epidemiology”, producing regular forecasts and underpinning lockdown policies and financial support measures, could improve things. It could cost an estimated £10m to £20m, roughly three to six times the budget of the Office for Budget Responsibility, multiples chosen because one would need more modelling staff and high-performance computing facilities. But this would be a very small figure compared with the sums spent on vaccine and therapeutic research, on the financial support policies through the pandemic, and more importantly on the cost we are seeing in lives.
• Tony Yates is a former professor of economics at Birmingham University
Source: The Guardian
Keyword: Without joined-up thinking about Covid and the economy, Britain is just guessing | Tony Yates | Opinion