Why most economists continue to back lockdowns

That’s the headline for my latest piece in The Conversation, with Richard Holden. It’s reprinted over the fold.

With the prospect of a lengthy lockdown looming over Sydney, the idea of “living with the virus” has resurfaced https://www.smh.com.au/national/the-great-lie-at-the-heart-of-australia-s-de-facto-covid-19-strategy-is-about-to-be-exposed-20210706-p58782.html

.  NSW Health minister Brad Hazzard has raised the prospect of abandoning the lockdown and accepting that “the virus has a life which will continue in the community”. https://www.abc.net.au/news/2021-07-07/nsw-delta-variant-may-never-be-controlled/100273956

As with pandemic policy in general https://www.smh.com.au/business/the-economy/health-versus-economy-trade-off-isn-t-a-solvable-equation-20200808-p55jvq.html, much of the discussion of the Sydney outbreak has framed the problem as one pitting health against the economy.  In this framing, epidemiologists and public health experts are seen as the advocates of saving lives, while economists are seen as the advocates of saving money.  

In reality, however, the great majority of Australian economists support policies of suppression or elimination; that is, policies which keep case numbers close to zero, and are ramped up whenever an outbreak threatens. As with epidemiologists, that broad agreement encompasses a range of views about the appropriate response in any particular case. Some economists, and some epidemiologists, supported the NSW government decision to delay a lockdown, while others wanted earlier action. But only a minority in either group support the idea of ending restrictions and waiting for herd immunity to protect us.

http://covid19openletter.net

Unfortunately, as we have already seen in the case of climate change, mass media thrive on conflict. It is more interesting to present a debate between a pro-lockdown public health expert and an anti-lockdown economist, than to present a nuanced discussion of the best way to suppress the virus, taking into account insights from a range of disciplines.  https://www.abc.net.au/qanda/2021-10-06/13376618  https://www.abc.net.au/news/2020-07-28/gigi-foster-accused-advocating-for-covid-19-deaths-q+a/12497442

Why have economists endorsed the policy of suppression with more enthusiasm than, for example, political and business leaders?  First, because economists understand the concept of exponential growth, concepts from epidemiology such as the reproduction number (R) are immediately comprehensible. Once you understand how rapidly exponential processes can grow, the idea that ‘we shouldn’t shut down the state in response to a handful of cases’ can be seen for the nonsense it is.

A clear majority of economists surveyed by The Conversation in May 2020 (after the end of the national lockdown) supported strong social distancing measures to keep R below 1.  Most of those who disagreed felt that alternative measures could hold R below 1 at lower costs. Only a handful supported a “let ‘er rip” strategy

Second, economists understand counterfactuals, that is, the need to specify what would have happened under an alternative policy. It is easy to make the point that lockdowns are both economically costly and psychologically traumatic. But the counterfactual is not a situation where the economy is unaffected and everyone is happy.  Living in fear of the virus, and watching family and friends suffer and die from it is psychologically traumatic. As regards the economic costs, the steps people take to reduce their exposure to risk are themselves costly, as is the need to allocate medical resources to treating the sick.

Third, and most importantly, economists understand two things about trade-offs. First, there are always trade-offs within the space of policy choices.  Should we lock down at the first sign of an outbreak, and risk unnecessary costs, or wait until later, and risk a longer and harsher lockdown? Should we incur the costs of purpose-built quarantine facilities, or accept the greater risk of leakage from hotel quarantine?

But economists also understand that not all choices involve trade-offs. Sometimes one policy is unequivocally worse than another, on all relevant dimensions. While there are always trade-offs somewhere in policy space, it’s often the case that, of the live options, one dominates the other in all important dimensions.

And, as the game theory of the Prisoners’ Dilemma has shown, sometimes our institutions foreclose the adoption of the better outcome. Actions that are individually rational may be collectively disastrous.

This was clearly evident at the beginning of the pandemic. It was evident to most economists, in Australia and elsewhere that allowing the virus to spread uncontrolled would do more economic damage than a temporary lockdown, as well as causing thousands of avoidable deaths and tens of thousands of severe, and possibly long-lasting, illness.  On the central question of suppression versus herd immunity, there was no trade-off, as countries like Sweden found out.

Moreover, new institutions, like National Cabinet, were needed if we were to avoid the kinds of chaos seen in the US.  At least initially, National Cabinet produced a coherent response, notably absent in some other countries.

Finally, economists understand the complexities of risk and uncertainty. One implication is the benefit of diversification by “backing every horse in the race,” as opposed to “putting all your eggs in one basket” (pro tip: two baskets are not much better than one). The government’s vaccine policy relied heavily on a limited range of options (AstraZeneca, Moderna and UQ) all of which ran into problems.  If we had followed the logic of diversification, we would have had access to the Pfizer and Johnson & Johnson vaccines by now.

Another central finding is that risks can be misperceived. By focusing on the minuscule risk of blood clots from the AstraZeneca vaccine, rather than the much larger risk of an uncontrolled outbreak, the government and its advisors have left Australians vulnerable. The current lockdowns will do a lot to reduce vaccine hesitancy, but the government could, and should have done much more.

Economists don’t have all the answers. Dealing with the pandemic requires insights from a range of disciplines. But lazy stereotypes, pitting one profession against another, don’t help.

Richard Holden and John Quiggin are professors of economics at UNSW Sydney and the University of Queensland, respectively.

16 thoughts on “Why most economists continue to back lockdowns

  1. “By focusing on the minuscule risk of blood clots from the AZ vaccine, rather than the much larger risk of an uncontrolled outbreak, the government and its advisors have left Australians vulnerable. ”

    Of course this misperception had nothing to do with Jeanette Young and the Labor Premiers! The Queensland Premier lied about the use of AZ in the UK and Jeanette Young said she didn’t want young Queenslanders dead!

    In fact, two weeks ago the Prime Minister said all Australians could get the AZ vaccine if they consulted their GP and encouraged GPs to do this by removing any liability issues they might face.

  2. ¨´Pro tip: two baskets are not much better than one¨. I don´t get this. Suppose there are ten horses in the race and you know nothing useful about them. Pick one, and you have a 10% chance of winning, two, 20% etc. The absolute increase in your winning chance is the same, but proportionately it goes down with each additional horse: +100%. +33%, +25%. etc. Now change the assumptions to include limited information about the horses, of the kind real bettors have. The slope gets steeper. Partial diversification is a good idea – but not as good as strong.

  3. Agree with your criticism Harry, but Morrison screwed this up consistently. He made the suggestion straight after a National Cabinet meeting where the issue wasn’t raised, and without getting ATAGI to review its position.
    James, take it the other way. Going from a 90 per cent chance of losing to 80 per cent isn’t that great.

  4. Thanks to the very handy ads, we now know that if we all get vaccinated, she’ll be right. Perhaps they should have run an ad that went, “Vaccines. So, where the bloody hell are ya?”^fn1 Lara Bingle could show us her unvaccinated arm, waiting patiently for the jab that never comes.

    On the economists and lock downs, two points. Shane Oliver has come out and said that the thing with lock downs is to do it straight off the bat, and do it 100%, basically; the idea is that minimises the duration of the lock down, by immediately stopping non-essential movement and contact, and this in turn minimises the overall economic shock of the lock down. Secondly, if a lock down has to happen, casual workers, self-employed individuals, etc. need immediate financial assistance, so they aren’t tempted to continue working when they really shouldn’t . Leaving them at the mercy of their own bank balances isn’t particularly fair or constructive.

    Finally, the government’s malign neglect of the University Sector left thousands of casual/part-time tutors and lecturers out in the cold. I still don’t have a clear idea why the government didn’t pitch in to help the sector, when clearly the full fee paying overseas student market was felled by the border closures. Worth pointing out that those full fee paying o/s students would normally be spending money in the Australian economy for as long as they were here. The money doesn’t just go to unis, it gets spread about.

    fn1: See Tourism Australia advert, 2006–2008.

  5. fair and constructive is not policy.
    supporting higher education is not policy.
    (Humanities, that is critical thinking supported by reading widely,
    seem to be viewed as a nuisance/threat to true god given belief)
    supporting corporate profit is policy.

    i tend to think of them as the “coalition of the incompetent”
    but i’m not sure that’s correct—– they know exactly what they are doing

  6. Brilliant article J.Q.! I would like to make a considered post. Unfortunately I am now on my 2nd emergency eye surgery recovery phase. I can certainly relate to the concept of chances for a good outcome dropping from 90% to 80%.

    When you wrote “sometimes our institutions” in this blog post did you mean “sometimes our intuitions”?

    I will write more when I can. Your post deserves a well thought-out reply when I can sit upright longer than 15 minutes.

  7. 1. I am “Anonymous”. Sorry, forgot to enter my details.

    2. “By focusing on the minuscule risk of blood clots from the AZ vaccine, rather than the much larger risk of an uncontrolled outbreak, the government and its advisors have left Australians vulnerable.”

    This is the point where ‘public health’ objectives (and risk assessment) may clash with an individual’s personal risk assessment. Both are affected by the actual and expected dynamic of the outbreak. Individuals’ circumstances regarding their living conditions and wealth differ, which presumably will enter their individual risk assessment.

    IMHO, the impact of the quoted sentences rests on the words ‘uncontrolled outbreak’ – which to this day is a hypothetical condition in Australia.

    My comment in 2. does not in any way suggest to qualify my post referenced in 1.

  8. Most economists continue to back lock-downs. Most business people have continued to back opening up. Most politicians have continued to back up most business people. This is true around the world, except perhaps for China and New Zealand. This means essentially that government listens to the (big) business lobby, not to economists. Economists has no power. Nobody with power listens to them. Welcome to the club. Nobody with power listens to the general public either.

    Even in Australia, the Federal Govt has really been all for opening up and only restrained by the State governments. Our State governments in turn have been rather imperfect in their application of lock-downs. Right now, Sydney’s lock-down is soft. at best. when it should be hard. The definition of essential worker is far too broad and the state refuses to clarify it. Here in Qld., our Premier is keeping the state open to all Non-Sydney regions until after the State of Origin match and after all the NRL teams come north to re-base. She is letting the QRL and NRL dictate her border policy. After the SOI match is over and the teams are here, I predict an almost immediate border closure against all NSW. The border should have been closed by now and the third useless rubber of SOI cancelled. Indeed, all professional sports are useless and worthless compared to this catastrophic global pandemic crisis. Professional sports represent a huge opportunity cost, a huge waste of resources and a huge risk to fans (who are all foolish) and a risk to non-fans who stand the be harmed by this mass-gathering foolishness during a global pandemic crisis.

  9. iko: Best wishes for your recovery from eye surgery. I am not looking forward to the same thing his autumn. An excellent book on the under-appreciated experience of convalescence is Oliver Sacks’ “A Leg to Stand On”.

  10. ‘Please avoid non-essential shopping. Pretty please.’
    But all the shops are still allowed to open, except a very short black list. So 2,000 people became contacts in one day doing ‘essential shopping’ at IKEA.
    The inconsistent messaging is completely insane

  11. I suspect that one of the key points is just not understanding exponential growth. the ‘let’s live with the virus’ folk probably have a mental picture in which new cases would then just bump along at 100 a day indefinitely.

  12. James,

    Thank you. Best wishes for you upcoming procedure too. I realize now that I have over-shared on this forum re my eye surgery and I apologize to all. I’ve realized after two surgeries that for 24 hours or so after anesthesia it is obvious that I am still affected by the drugs, strangely euphoric, thinking my surgery is an amusing joke, and everyone wants to hear about it. My bad. Mind you, it’s a kind “Day of the Triffids” feeling to have eye surgery and serious sight problems during a burgeoning global crisis. A little surreal. Feels like I am living in a dystopian novel.

    I’ll get back on topic soon. Australia’s new COVID-19 outbreak is looking worse by the hour at the moment. This delta variant could send us right over the cliff. Let’s hope not but I for one have deep concerns.

  13. Now a NSW problem has become Victorias problem. Looks like we are headed for a lockdown. The lying and uncooperative furniture truck drivers that took the virus from Sydney to Vic did so after the situation would have been over if NSW had followed best practice. Victoria will probably lock down soon and have the outbreak under control before NSW does .People who point out NSW bungling hubris and politicisation of the process are now accused of politicising the process.

  14. sunshine,

    Correct. I blame the Morrison government for permitting far too much international movement in and out of Australia, for failing to build proper quarantine centers early enough and for bungling the vaccine rollout. This crisis is squarely of their making and of those selfish and foolish people who will not obey legal and necessary health orders. I also blame the arrogant NSW government for all the reasons you mention. This level of shambolic idiocy 18 months into the crisis is unforgivable. Clearly, those blinded by neoliberal ideology (unfettered capitalism and let everything rip) are utterly incapable of ever learning one new thing. Once their minds are infected with neoliberalism they are essentially anti-social and anti-economic zombies.

  15. Unfortunately, the uncontrolled spread of the virus causes greater economic damage, and this is the reality of the past year for any country in the world …

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