Option value

Like most of us, I’m not expert on epidemiology. But I have spent most of my life studying risk management. In the current crisis, one of the most relevant issue,s and the one that policymakers seem to be ignoring is that of option value. To see what’s involved, consider a policy choice like shutting down bars and cinemas, as opposed to waiting two weeks to see what happens. If, in two weeks time, it turns out the virus has been contained, the ban can be reversed and the loss is that of the two week shutdown,. On the other hand, if the virus spreads through contact in these venues, there is no way of limiting the damage to two weeks.

Nearly all the time, this reasoning favors aggressive early action. The exceptions are actions like cancelling events scheduled some months in the future. Deferring the decision would increase losses in the event of a cancellation, but keep open the option of going ahead if the situation improved.

Sadly, there seems to be no sign that those in charge of the policy response understand this. Rather, the reasoning seems to be to wait until they are sure a risk-reduction measure is necessary before implementing it. That is a recipe for avoidable disaster.

64 thoughts on “Option value

  1. “Sadly, there seems to be no sign that those in charge of the policy response understand this.”

    They probably do understand this. But they don’t want be criticised by the likes of Alan Jones for panicking and acting too soon. Put Alan Jones in your option value model and you’ll get a different answer.

  2. You are correct J.Q. The costs of doing too much, too early in an exponential growth of risk scenario are far cheaper than the costs of doing too little too late. I suspect we are in the too little too late basket already. The government’s early primary focus was economic when it should have been on medical and public health measures. They were attempting to protect (non-living) wealth rather than lives. The exponential growth of the crisis is now wiping wealth off the map in any case. This was always going to happen. The right action was to take measures to save lives and to give basic income to people who lose jobs and businesses.

  3. I think option value is understood. The most controversial issue at present is school closures, where there are legitimate arguments on both sides. There is large uncertainty with the parameters and there are legitimate questions as to the tradeoffs between expected life years saved (if any) by school closures versus expected economic damage. One issue that I have not seen discussed is one of class. The upper and middle classes are usually able to work at home (and are demanding that option), and can therefore look after their children if schools close, whereas those in manual jobs and those requiring face-to-face contact do not have that option, so the cost for them of school closures is very high. This factor should be taken into account.

  4. The crisis shows the need for planning. You can’t implement a plan in real time while you are still formulating the plan.

    Example: herd immunity. There is a genuine debate to be had about whether this strategy might work, the underlying premises and the risks. Epidemiologists have varying opinions. But the time to have this debate is during periods of calm, not in the midst of a crisis.

  5. “Example: herd immunity. There is a genuine debate to be had about whether this strategy might work, the underlying premises and the risks. Epidemiologists have varying opinions. But the time to have this debate is during periods of calm, not in the midst of a crisis.”

    So many variables involved though – like :
    how contagious is the virus we’re dealing with?
    how fatal is it? (we still don’t know)
    How much capacity is available to deal with critical cases?
    How global is it?
    How restricted are (international) supply chains for medical supplies?
    What level of hysteria is being driven and what level of action is being demanded?
    What ecomomic and social impact is such action having?
    etc etc…

    How can you model all that?

  6. > How can you model all that?

    You don’t, you discover it by experiment. In this case it looked as though the UK was going to boldly go where 60M people have never gone before, but then their government had an attack of common sense/feared that people wouldn’t die quietly in their homes, so they cancelled. But the question of whether you can willingly spread a pandemic and then stop is also a valuable research topic. You’d never get it past an ethics committee, but politicians don’t have to consider ethics before performing experiments.

  7. Looks like the Dutch are going to try herd immunity. Since the Netherlands Belgium Luxembourg borders are all still open, it’s going to be a Benelux experiment.

  8. Consider our recent, and not so recent, crises such as climate change, bushfires (around the world), more severe hurricanes, storms, floods and droughts, along with worsening epidemics (SARS, MERS, Avian Flu, H1N1, Ebola, Zika, SARS-2 (COVID-19) and others. A pattern is emerging. What that pattern is saying is that our economic and political economy systems are configured incorrectly. Even oue ethics, mores and expectations are configured incorrectly. The current configuration is leading to mass extinctions of wild life and personal, social, national and civilizational existential danger. That is to say, the current configuration of our economic and political economy systems is leading homo sapiens towards collapse and extinction.

    Behind all the specific crises lies the finance system of capitalism itself. “Every single Ebola outbreak was preceded by an influx of capital.” – Evolutionary biologist Rob Wallace author of “Big Farms Make Big Flu”. These are empirical outcomes uncovered by extensive research. Our capital systems enable the damaging processes which push back forest boundaries, lead to human incursions, force wild species to adapt to and come into closer proximity with humans finally leading to zoontic diseases, those that spillover from wild populations into humans. Rob Wallace has also studied how the same capital which enables incursions of agriculture into wild land also flows through the local economies to increase bush meat exploitation and wet markets.

    This changes everything as Naomi Klein clearly wrote. It means we have to change our ethics, expectations, mores, society, economics and politics. If we don’t do this we are all finished. Persisting with unregulated capitalism is clearly omnicide. Switching to full democratic socialism just might save us and the biosphere.

  9. Then there cases like Hong Kong who a month ago was exactly where the western world is now regarding hysteria, panic and empty supermarket shelves. They have transitioned through that back to some form of normality now. One assumes there’s an acceptance associated with that fed by a bit of hysteria fatigue.

  10. Isn’t closing pubs, cinemas, schools etc at this juncture for two weeks just like kicking the can down the road for two weeks?

    Since a vaccine isn’t likely for 12 to 18 months, a 2 week slowdown in transmission seems futile.

    Provided re-infection is unlikely (which is the view of most experts) , the better option seems to me to be to:

    (1) allow herd immunity to develop in those most able to handle infection with only mild symptoms,

    (2) isolation of the small proportion at the population at grave risk, which is mainly the over 70’s and folk with a discrete number of pre-existing conditions (diabetes etc) , until such time as herd immunity is well established, and

    (3) periodic lockdowns (closing pubs, cinemas etc) to flatten the infection curve so that the healthcare system can better cope (noting however, that cope is a relative word in a disaster such as this).

    Anyway, that’s just my amateurish keyboard worrier musings.

  11. Hugo, even the UK has backed away from the “let the weak die” plan you’re proposing.

    Coronaviruses generally mutate quite quickly so its possible that immunity will be more like immunity to flu than to measles. That’s one of the things we are currently trying to work out by watching what happens.

    Slowing things down is exactly the right response whether or not herd immunity is possible. Unless you’re in a country that has a surfeit of intensive care beds then the wider you can make that curve the better. Look at the graphs that are floating round and consider that the horizontal “healthcare system capacity” line varies between nations… ours is less than half of the Japanese or South Korean level and those countries are in full panic mode. Once you go above the line people start to die just from not being able to access medical care – even the delay while they evict some 70 year old covid patient from intensive care so they can accept a car crash victim could well kill both patients rather than just the covid one.

    AFAIK right now we have weak evidence that re-infection is possible, but from what I have read they’re not sure whether that’s instead people catching two different strains of the one disease.

  12. “ Example: herd immunity. There is a genuine debate to be had about whether this strategy might work, the underlying premises and the risk”

    Why debate it? It’s just a brain fart from some deluded politician, the same one that promoted Brexit.

    Fortunately it has been shot down in flames.

    So stop wasting time promoting a “genuine debate” about a nonsensical notion.


  13. Let me preface by saying I am not an epidemiologist, or an expert on public health…but I am stuck inside, so here goes.

    The so-called herd immunity relies on sufficiently high a proportion of the population having immunity, so that infection rate is below replacement, and the disease can’t maintain a foothold. There are two ways of developing the immunity beyond the level of natural immunity present: either people get infected and then recover, or they are given a vaccine; a fraction cop real death, also (slightly) increasing the herd immunity. Since there isn’t a vaccine for the time being, immunity will only be coming from infection in the wild.

    Loosely put, if the transmissivity of the disease is about 2.6, i.e. one infectious case results in on average 2.6 more cases, then the (stabilised) proportion of recovered and immune needed is about 1 – 1/2.6, or around 61.5% of the population! Now, in good ol’ South Australia, just on age demographics alone, the proportion of the population in the moderate to high risk group for ICU and/or death is around 40% (where I’ve taken age 50 and above, give or take, as being in the moderate or high risk group), which implies that to get to the herd immunity proportion, you must commit to shaving several percent of the 40% (i.e. “culling” the herd). If you take comorbidity into account, the higher risk group is actually larger. With a population of around 1.7 million, a few percent of 40% is a sh*tload of pine caskets and cremations. This is no laughing matter.

    I seriously doubt the herd immunity should be treated as plan A. Eventually, once a vaccine is available, we can use *that* to increase immunity among the general population, without putting at high risk our mum and dad, grandpa and nana. Meanwhile, we wait in social isolation.

  14. I follow how retaining the right to close events well into the future is an option, but I don’t see how the closure of bars now is an option- though clearly a good thing to do.

  15. Moz

    Hugo, even the UK has backed away from the “let the weak die” plan you’re proposing.

    I didn’t say let the week die, I said isolate them. I also said slow things down at the right time. A two week lockdown NOW is close to pointless and will cause great hardship.

    The Guardian is reporting reinfection is unlikely.


  16. a friend showed me a pic of toilet roll earrings (not full sized rolls ( in case you are wondering))

    i reckon it was the first face to face example of “what-can-go-wrong” for our no recession-in-umpteen- years generations.
    you want woke? you got woke.

    another aspect was that
    the ones who did the grabbing showed
    who the “i’m-alright-jack jerks were.
    who the carers with many small children or others being nursed were.

    i’m not going to say anything at all about old fashioned dunny paper.

  17. Hugo,

    A consideration of the exponential infection rate of this virus and of the option value concept explained by J.Q. clearly indicates that widespread lock-downs right NOW of all NON-ESSENTIAL activities are precisely what we do need. That of course hinges on the definition of “non-essential”. All of the following are non-essential in the short to medium term;

    (a) Sporting events.
    (b) Restaurants, clubs and pubs.
    (c) Functions, Conferences and Gatherings.
    (d) Concerts.
    (e) General socializing.
    (f) International travel and all tourism foreign and domestic.
    (g) Public worship gatherings.
    (h) Anyone being in public spaces or on public transport unless going to work in essential occupations or for essential income, or shopping for essential items like food or seeking essential medical assistance or medicines.

    Other than that people should absolutely stay indoors or on their property or walk only in open spaces where they never need to come within 20 meters of another person.

    I fail to see any genuine hardships which would accrue from such restrictions except where people work in the non-essential industries and lose income. The government must find ways to assist these people. Up to 100,000 Australian lives could be saved by enacting a non-essentials lock-down and curfew right now.

  18. Hugo, we know it’s not possible to (further) isolate the weak without more of them dying than the UK already kills. The UK was already riding a line between cutting off their weakest members (they had regular deaths from isolation *before* the pandemic) and trying to care for them. This is mostly (in England especially) a council vs government thing, which is why the far right there are so focussed on cutting council funding. Blithely saying, as Bozo did, “vulnerable people need to further withdraw from society” is indistinguishable from “F off and die”.

    In Australia to make that work we would need to increase the amount of the various benefits to the point where (for example) a solo parent with three children could afford to rent a four bedroom house *and* get groceries etc delivered. I can’t tell you off the top of my head what sort of increase we’d need, but I doubt that merely doubling the benefit would be enough.

    Likewise, the international students who rent rooms from me are currently out delivering food for the 5 or 6 different companies who do that, driving for Uber and the other companies, and whatever other jobs they rely on the pay rent etc. The government would need to pay some of them not to do that, and ensure that the rest get paid enough to do their work safely. Right now three of them are out there, and all seem to resent me making them wash their hands thoroughly when they finish a shift… somehow I doubt they’re washing them during shifts, and I haven’t seen any of them in possession of a mask. The hand washing at home is probably a “when Moz is watching” thing.

    Meanwhile, the Australian government is focussed on making sure that large companies remain profitable. Giving those on benefits $750 is nice, but unless it’s the first 2-3 weeks worth of benefit doubling it’s not going to do much. An awful lot of recipients are going to use it to pay off debt (I expect some of them won’t get it at all, it will go to robodebts unless that’s been explicitly ruled out)

  19. Ikon,

    What about schools? Do you think they should be closed? If they aren’t closed, kids will bring coronavirus back home. If schools are closed, presumably lots of elderly relatives will have to look after, or alternatively, folk in health related occupations may have stay home to look after them.

    Your plan would put millions out of work, especially when u factor in non-essential public transport dependent workers. How will they have money for bills, food etc..??

    China has turned the coronvirus tap down to a trickle with draconian policy measures that may nor be accepted by Westerners. However, I’m wondering if they’ll end up back at square one if reset back to normal?

    A further point- Trump axed Obama’s Pandemic Response Team. It was part of there job to act as an Early Warning System for possible global pandemics from any source anywhere around the globe. That was a really dumb decision, especially given the “near misses” in the last 20 years- Ebola, SARS etc … That alone should see Trump kicked out of office with a steel capped boot!

  20. Hugo,

    Re-read my post. In particular;

    “(h) (Nobody permitted) in public spaces or on public transport UNLESS going to work in essential occupations OR for essential income OR shopping for essential items like food OR seeking essential medical assistance or medicines.

    … The government must find ways to assist … people (those rendered unemployed or without income).”

    Condition (h) would still allow quite a lot of movement and probably 90% of the economy to still run. If the epidemic still threatened to swamp all hospitals then the measures would have to become even more draconian. Mothers and fathers needing to care for children could receive full pay (if public servants) or receive full pay from private employers who would claim it back from the Federal Government. All it takes is a flourish of the appropriate Ministerial pen at federal level.

    I’ve heard that the Brisbane City Council has provisions for 20 days pandemic leave. I haven’t been able to independently verify that yet. Telstra has introduced a pandemic leave policy. Many staff in many businesses are already working remotely from home. There are many possible part solutions which would add up to a substantial solution to the whole “millions out of work” or “out of income” scenario. There will probably be even some benefits as pollution drops and many forms of wasteful and consumption drop.

  21. I see on twitter that many conservative white evangelical American pastors are encouraging the flock to gather in the Churches. I don’t see that ending well.

  22. The outcomes under the mitigation (i.e. herd immunity) strategy are obscene, even in optimal circumstances:

    Click to access Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf

    “…Perhaps our most significant conclusion is that mitigation is unlikely to be feasible without emergency surge capacity limits of the UK and US healthcare systems being exceeded many times over. In the most effective mitigation strategy examined, which leads to a single, relatively short epidemic (case isolation, household quarantine and social distancing of the elderly), the surge limits for both general ward and ICU beds would be exceeded by at least 8-fold under the more optimistic scenario for critical care requirements that we examined. In addition, even if all patients were able to be treated, we predict there would still be in the order of 250,000 deaths in GB, and 1.1-1.2 million in the US.”

    “…We therefore conclude that epidemic suppression is the only viable strategy at the current time. The social and economic effects of the measures which are needed to achieve this policy goal will be profound. Many countries have adopted such measures already, but even those countries at an earlier stage of their epidemic (such as the UK) will need to do so imminently.”

    It seems pretty reasonable to try “kicking the can down the road”, and at least waiting to see what success countries which have suppressed spread of the virus in the short run have in maintaining control over the longer term, before deciding that a catastrophe is inevitable.

  23. Thr political response to the epidemic is plainly non-linear, not the application of a constant bias. Stage 1 is “it’s only a handful of cases, maybe it will just go away, let’s wait and see”. Stage 2 is “Omigod, this is serious, we must DO SOMETHING.” The tipping point seems to be a few thousand cases and a few dozen deaths. With the usual exceptions: Trump, Morrison, Bolsonaro at the Panglossian tail, the leaders of Taiwan and Singapore at the other.

    Anecdote from Taiwan. As part of their quite recent shift to a universal single-payer health system, they intriduced a centralised electronic health record. When the epidemic struck, they instantly added access to recent travel data. This cannot possibly have been improvised: the option must have been built in from the start. Big Brother? Sure. But in this case, necessary.

  24. I wouldn’t be too quick laud Xi policy. The early policy of Xi and the Chinese government was to deny the appearance of a new and deadly corona-virus in Wuhan. The Chinese doctor who raised the alarm about a potentially new and dangerous virus was silenced, detained and questioned. Although released he died later… from corona-virus or so it is stated. He was relatively young but might have been stressed, harassed and over-worked which might have contributed to his death. Or perhaps there was something more sinister about his death.

    At the early onset of the virus in Wuhan there was delay and denial by local officials and also by Xi and the Central Party. It is only later that the Chinese response became relatively exemplary, purely in terms of stopping the contagion spread, albeit it was done with extraordinary heavy-handedness. People were caught in nets and dragged away. Apartment doors were welded closed to enforce quarantine. Also, the tolerance of wet markets where wild animals are held and butchered for “bush meat” was central in enabling this zoonotic disease to jump from bats, pangolin or some other source to humans.

    In these ways, China both generated this disease and failed to contain it. China and the Chinese government bear significant responsibility for infecting the world with a deadly disease. The rest of the world, or at least the West, bear significant responsibility also for a number of things. These include failing to respond in time, leaving international travel absurdly open, placing business as usual above lives and having already degraded hospitals, medical capacity and anti-contagion bodies (like the CDC and others) by cost cuts and closures over decades; decades of neoliberal neglect.

    I don’t subscribe to conspiracy theories that this pathogen emerged from a Wuhan bio-lab. Nevertheless, China may have inadvertently stumbled upon and then carelessly (or deliberately) released this default asymmetric, geostrategic bio-weapon which might enable it to topple the West and assume full world leadership. At a stage where Chinese leaders knew the grave dangers of this pathogen from their own terrible experience, the Chinese government was still insisting that Australia (for example) should take back Chinese students this year. In our weakness, servility and greed we took them. The actions of governments on both sides of this equation are open to serious question.

    At a deeper level, this event is a watershed. We either become democratic socialist (not communist) or we collapse. Continuation of neoliberalism from this point forward is politically, economically and bio-physically impossible. We should note that as soon as a crisis of this proportion occurs in a relatively unfettered capitalist (neoliberal) system then there is an absolute necessity to swing to statist and socialist solutions. Governments suddenly find (as the MMT advocates, Chartalists and Classical Keynesians have consistently said) that there is no constraint on government spending or direction of fiat money other than the availability of real resources.

    Socialists must not waste this crisis. The neoliberals have never been shy of using shock doctrine, disaster capitalism and crises to impoverish marginal and powerless people and to enrich the elites. Socialists must not be shy of fully politicizing and exploiting this crisis at the correct juncture. That juncture will likely be just as the crisis subsides and while a whole raft of essentially socialist measures still remain in place. We must act to permanently change our political economy such that the return unregulated capitalism and all its zombie ideas after the corona-virus crisis eases becomes inconceivable to the great majority of people. There will be many more equally dire crises to face especially from climate change.

  25. Wow, business is so quick to ask for socialism when THEY need it. Actually they got a lot even before this crisis. Socialsm for big business is the standard modus operandi for neoliberalism. But socialism for the workers and the poor during all those years when the precariat were struggling? No way, they never got it, at least not nearly enough. Typical hypocrisy from the business and monied class.

    We also see from the Morrison government’s statements that they have no idea of the option value concept. They are not going into full lock-down because they think that will damage the future economy. In fact, not going into full lock-down right now will create a much greater disaster in Australia very soon and with far greater long-term ramifications in loss of life and loss of economic activity than any pre-emptive lock-down.

    Annastacia Palaszczuk has already admitted Queensland’s hospitals will not cope. Well, we already knew that because we have ambulance ramping in normal times. Ambulance ramping refers to the situation where patients transported to an Emergency Department (ED) by ambulance experience delays in offload from the ambulance trolley to an ED treatment area.If we are ramping in normal times then what will happen in this crisis does not bear thinking about.

    The authorities are saying don’t hoard food and necessities. In that case, if or rather when, there is a full lock-down is Australia geared to deliver food to the front doors of tens of thousands or hundreds of thousands of households? That answer clearly is “no”.

    A religious gathering at a mosque in the Malaysian capital Kuala Lumpur is at the center of a cluster of coronavirus cases in Southeast Asia.

    “From February 27 to March 1, about 16,000 people attended a four-day “Ijtima Tabligh”, or religious gathering at the city’s Seri Petaling Mosque, according to Malaysia’s health ministry. About 1,500 of those attendees were foreigners, with many traveling from around the region.”

    On 29 February 2020, 20,000 fans attended an Elton John Concert at North Queensland Stadium, Townsville. On 13th of March we see that 22,459 football fans attended a Broncos – Cowboys match at the same stadium. If the Malaysian / South Asia experience is any indicator we can expect a big surge in North Qld. of corona virus.

    Our political class continue to make stupid decisions and idiotic statements. They do not understand this crisis. They do not understand epidemiology or economics. They do not care about the ordinary people. I’m mad as hell. If I am still alive after this crisis, I’m not going take it anymore.

  26. CSIRO, among other research groups, study epidemics for a living. I wouldn’t be surprised if total lockdown hadn’t been considered as part of threat assessment and mitigation for worst case contagion scenarios. Assuming this to be so, it also wouldn’t surprise me if some brainiacs had thought of basic strategies for dealing with lengthy social isolation that would result.

    Clearly a pandemic creates additional economic stress points to an epidemic; for example, supply side issues, given the factory closures around the world, reduced shipping and transport, etc. Addressing supply side issues is a role that only federal government can play, and that time is here and now, I would have thought.

    Why haven’t we brought in ration coupons, or a process of contacting *every* household to see they have the necessities, including prescription medications, to endure? That way, we reduce dangerous grocery runs, and avoid panic buying, since you can only get what your coupon allows, and if the coupon is tied to a person’s identity, they can’t be used in a black market, or as a proxy for cash. In this day and age of the internet, it shouldn’t be difficult to implement such a scheme, and heck, the economic cost of a lockdown is going to dwarf the cost of setting up and running a ration system.

    Perhaps there are other measures that also address the above issues, but there is remarkably little public discussion of it, at the political level, that is. is sleepwalking into disaster the new political normal?

  27. +1 Ikonoclast – “Wow, business is so quick to ask for socialism when THEY need it”.

    Command (as we like) economy!

    Can’t see whynwe just don’t buy back Qantas for example. The tax write off they will amass, I assume, will allow them not to pay tax – until say in the year 2525. Liked your beatles link. I had revolver.

  28. “it also wouldn’t surprise me if some brainiacs had thought of basic strategies for dealing with lengthy social isolation that would result.”

    – Surely our fine babyburner and copper elites have extensively gamed this presenting as an outcome following various scenarios over time and have several plan options from which to choose already sitting on a shelf?

  29. Ikon:

    The Chinese doctor who raised the alarm about a potentially new and dangerous virus was silenced, detained and questioned. Although released he died later… from corona-virus or so it is stated. He was relatively young but might have been stressed, harassed and over-worked which might have contributed to his death. Or perhaps there was something more sinister about his death.

    I think Li Wenliang became too popular for his own good. He was just 33 when he died.

  30. The PM Smoco has declared it “un-Australian” to go panic buying—like, you know, food and stuff—from supermarkets.

    While declaring a national human biosecurity emergency under the Biosecurity Act on Tuesday morning, Morrison ruled out an Italian-style national lockdown and urged calm, taking aim at those panic buying, saying it was “un-Australian” and unnecessary.
    “Stop hoarding,” he said. “I can’t be more blunt about it. Stop it. It is not sensible, it is not helpful and it has been one of the most disappointing things I have seen in Australian behaviour in response to this crisis.
    “That is not who we are as a people. It is not necessary. It is not something that people should be doing.”

    Let’s unpack that: if we see, as we do NOW, the extreme measures that numerous countries are not merely considering but actually taking, and in the absence of any Australian government strategy for ensuring continuing supply of essentials, the *rational* behaviour is to stock up in anticipation of being put under a lockdown, or because we know we need to be isolated for a significant period.

    The SA premier posed the question of what would be the point of locking schools for two weeks as well what do we do at the end of that, given the long term nature of this threat? To take his point, the *long term nature* of this threat is more than impressed upon many people’s minds, and that goes right back to the need to have adequate supply of necessities to get through it. Shelves are empty *because* fresh supplies aren’t arriving. *If* it were possible to obtain fresh supplies, wouldn’t it be the case that supermarkets would be restocking their shelves as fast as they can? The fact that shelves remain empty suggests that supply side disruption is a real thing, going beyond the demand spike.

    So, calling it un-Australian is outrageous, *if* the government is failing to provide an alternative solution to stocking up on necessities. Mere jaw-boning is not a solution. In uncertain times, hard choices get made, if not by government, then by individuals. If governments dilly-dally on making decisions and acting on them, then individuals naturally optimize for their own circumstance and that of their immediate family; blaming them for filling the decision hole left by the government is lazy and bone-headed. Sadly, I see that the WA premier has taken a similar tone.

  31. Qld gov has announced changing state laws not allowing supermarket restocking truck deliveries outside opening hours. They say there is no stock shortages just the above choke point. They better hurry up.

    BTW – What is the difference between plebs hoarding groceries and the Ponzi Straya national behaviour of amassing and hoarding real estate so supported by all governments? Rentiers good, renters bad perhaps?

    “That is not who we are as a people.” Rubbish. What then is a Big Australia multi-collection of ghettos all here chasing the Straya consumerist dream?

  32. Just today I spoke to the father of someone who works at an IGA supermarket. In their particular instance, they’re not having troubles getting supplies, it’s more the manpower to refill the shelves is the issue. Again, that’s only one particular anecdote – probably not reflective of the general issues.
    But Morrison is correct it calling it out (“unaustralian” stigmatisation aside), some people are hording ridiculous levels of some supplies. Buses are takings groups from metropolitan centres to rural supermarkets to effectively empty them out. So much for locals of aged, disabled, disavadvantaged etc who rely on those local supermarkets for their essentials. It stinks.

  33. Iko: Saez and Zucman are very far from hired guns for big business. They are the leading American followers of Piketty and experts on, and against, inequality.

  34. If you live in the suburbs you have many options. This is provided you have some education, money and resources.

    1. It was possible to see this coming. Those who followed the Wuhan story and understood even a little bit about pathogens and epidemics would have started stocking up a little bit at a time from at least 1st February. That sort of stocking is planned not panicky and does not cause shortages. It gives the supply chain time to respond. It allows you to avoid the panic buying period altogether.

    2, Failing that you can usually find quieter stores around the suburbs. Use these. Don’t be fixated on the supermarket duopoly. Many greengrocers, fruit shops, corner stores etc. carry carry milk and some groceries as well and some other basics. Many deliver. Use the phone or internet to find these outlets and order home delivery or even pick-up. It might cost a bit more but hey it’s a crisis. You still need to eat.

    Yes, the very elderly and the poor have more problems. We must demand that government assist everyone in this crisis not just their mates in business.

  35. James W.,

    We should assist people not businesses. Going broke is a risk people take when they go into business. If they don’t want to take this risk, including black swan risk, then they should never enter business. They merit only the same individual social safety net as anyone else. A special and extra safety net for businesses, small and large, is a moral hazard. Where a big business is strategic or “too big to fail” then the government should save it but on the imposed condition of nationalizing or part nationalizing it.

  36. At times like this I am glad Australia is one of the few countries in the world that reliably produces a food surplus. That is something that I have always considered essential and absolutely non-negotiable.

  37. J.Q. I take it that the option value examples you have used simply demonstrate the principle of opportunity cost at work?

  38. Hugo says: at 3:28 pm
    As akarog says your attitude is a bit grrr inducing.

    Please read.link below and come back and tell us if you have changed you mind. Lives depend on it.

    As others have pointed out Hugo herd immunity strategy now will kill off my aged family. And you Trump or Xi – bad choice I know but this is where we are.

    De Long is wrong on coronavirus

    If you are going to quarantine, do it soon.

    It’s not often one gets the chance and obligation to say this. Brad DeLong :

    “”Note to Self: Is there anything wrong with this analysis? With 14 deaths in the U.S., a 1% death rate, and 4 weeks between infection and death, that means that as of Feb 8 there were 1400 coronavirus cases in the United States. If it is doubling every seven days, then now about 22,000 people have and in the next week about 44,000 people in the U.S. will catch coronavirus. These numbers could be five times too big. These numbers could be five times too small. But with only 1 in 10,000 currently affected, it seems 4 or 5 weeks early to start imposing serious geographical quarantines …

    No, no, no. R is not a function of the number of cases. It is only a function of herd immunity and the individual chance of transmission.

    The condition for the decline and fall of the epidemic is lowering R below 1. There are two paths to this. Call them the Trump policy and the Xi policy.

    Under the Trump policy of malign neglect, the virus spreads until most of the potential transmittees of the virus have recovered from it and are immune. Meanwhile, the cemeteries have filled up with those who didn’t recover. 200,000? 480,000? 1.7 million, if the hospitals collapse and the treatment is back to Black Death standards? The epidemic expires from satiety.

    Under the Xi policy (also now the Moon, Conte, Sanchez, and Merkel policy), the state cuts the opportunities for transmission, including quarantines as well as contact tracing and mass preventive screening. The cost of this, direct and indirect, is fixed and independent of the number of cases. Imagine a perfect lockdown in which everybody stays in their house or flat, living out of tins by candlelight, for a fortnight: end of epidemic. This can’t be done perfectly of course, so real outcomes are a risk distribution, but you can get pretty close, as Singapore and Taiwan have shown. The death toll is still 1% or 1.6% or whatever of those infected.

    It is lower the earlier you start the policy. “…


  39. Tangentially on topic, but this seems a better place for a virus comment. I have calculated that the daily growth rates of reported virus infections over the last 7 days where I live are:
    Spain 42.5%
    Andalucia 25.6%.
    Spain has a pretty uniform heath care system, so I doubt if the gap is a reporting artefact. The one explanation I can think of is that Andalucia is warmer and drier than most of Spain. If that’s so, it might be good news for Australians.

    A slower growth rate has two benefits. If containment works, you end up with lower ultimate infection and death totals (but lower herd immunity for a rerun). If it fails, you have flattened the curve and lowered the risk of overwhelmed hospitals and triage for respirators etc.

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