Suppress, trace, test, repeat

John Quiggin27 Comments

When the Covid-19 pandemic started, it was generally assumed that the only serious policy option was to “flatten the curve”: that is, keep the spread slow enough that the hospital system was not overwhelmed, until either a vaccine was developed and generally available or most of the population had caught the disease giving rise to herd immunity. Both approaches looked likely to take at least a couple of years to work.

In retrospect, this assumption was surprising. China suppressed the initial outbreak in Wuhan, as well as the spread to other provinces, and held case numbers close to zero thereafter. But for a variety of reasons, good and bad, people either distrusted Chinese numbers or thought that the lockdown measures used there couldn’t be applied elsewhere.

It’s now clear, however, that these assumptions were false. Most* developed* countries have applied measures sufficient to reduce Covid-19 from an epidemic to a set of localised clusters. At this point, a full lockdown is no longer needed. Social distancing can keep R below 1 for the general population, so that local clusters don’t grow exponentially. And, as long as the numbers are small enough, contact tracing, testing and localised lockdowns can keep the disease under control.

That’s been the experience in East Asia, Australia and New Zealand and now, it appears in most of Europe. Progress hasn’t been uniform, but no country that’s managed suppression has gone back to uncontrolled spread.

The next step, evidently is reopening borders between jurisdictions where the virus has been suppressed. The most limited form, but still a significant step would be allowing entry subject to 14 day quarantine. That could be relaxed, conditional on returning a negative test. Finally, there’s the ‘bubble’, reopening borders without quarantine or specific testing.

There’s nothing particularly novel in what I’ve written above, but I don’t think the implications have fully sunk in. Indeed, I haven’t thought them through in detail myself. To give just one example, what if the US remains isolated from the rest of the world while travel to and from China is reopened?

  • Sweden didn’t attempt this, the US started but couldn’t persist long enough, and is now completely distracted by the collapse of the Trump Administration.
  • It’s still unclear what’s happening in middle-income and poor countries, where lockdown doesn’t seem feasible. There’s some hope that the disease will be less severe in the tropics where most of these countries are found. Younger populations means less vulnerability. And sadly, there is already such a large toll from endemic diseases and poverty that Covid looks less exceptional.

Would freezing minimum wages help recovery ?

John Quiggin2 Comments

I’ve just responded to a poll of economists, run by The Conversation and The Economic Society of Australia on this question. Here’s my response

No There has been extensive debate on the effects of minimum wages on labor demand. Over the last 25 years, the general conclusion has been that these effects are relatively small.

However, these questions are irrelevant in the current context. The pace of economic recovery will be determined entirely by macroeconomic conditions, including fiscal and monetary policy, continued success in suppressing the pandemic, developments overseas and consumer confidence. In this context, an increase in minimum wages will have a modest positive effect in bolstering demand.

In the longer term, the costs of the pandemic will have to be shared across the community. The crisis has shown that the work of lower-paid people is vital and undervalued, while much (not all) highly recompensed activity turns out to be of marginal importance in a crisis. Those on higher incomes should bear all or most of the cost of recovery.

Results of the poll should be out next week, I think

Sandpit

John Quiggin31 Comments

A new sandpit for long side discussions, conspiracy theories, idees fixes and so on.

To be clear, the sandpit is for regular commenters to pursue points that distract from regular discussion, including conspiracy-theoretic takes on the issues at hand. It’s not meant as a forum for visiting conspiracy theorists, or trolls posing as such.

UQ and China

John Quiggin23 Comments

A colleague wrote to me today asking about the case of Drew Pavlou, a student suspended by the University of Queensland for two years as a result of actions in the course of protests against the policies of the Chinese government in Hong Kong. Here’s my reply

I don’t know any more about it than what I read in the papers, but it certainly looks bad for UQ. To the extent that anything has come out about the reasons for suspending the student, they seem to be political stunts that are fairly typical of student activists. A sensible university management would ignore this kind of thing, not make a martyr of the student.
As you say, the more the Chinese regime deteriorates into a personal dictatorship, the more problematic it is to bend (or be seen to bend) to pressure in matters of this kind.

Can we beat influenza

John Quiggin26 Comments

Following my post on pandemic whataboutery, James Joyner had some interesting thoughts, noting that

Interestingly, Quiggin doesn’t circle back to the third example from his introduction: influenza. Will Americans, having been conditioned to lockdowns during this pandemic, be more likely to implement them again for lesser ones? Or will this be a Never Again moment?

I was thinking over a post on this topic when I read that New Zealand is planning to use the testing contact tracing system set up for the coronavirus to stamp out sexually transmitted infections. So, the idea is obviously in the air.

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MWW on MMT (from Twitter via Spooler)

John Quiggin25 Comments

Mitchell, Wray and Watts Macroeconomics p 323, give a the correct version of the #MMT position on budget aggregates .

Taxes create real resource space in which the government can fulfil its socio-economic mandate. Taxes reduce the non-government sector’s purchasing power and hence its ability to command real resources for the government to command with its spending.

Take a situation where the national government is spending around 30 per cent of GDP, while its tax revenue is somewhat less, say 27 per cent. The net injection of spending coming from the national government is thus about 3 per cent of GDP. If we eliminated taxes (and held all else constant) the net injection rises towards 30 per cent of GDP. That is a huge increase in aggregate demand and could cause inflation.

(I’d say would rather than could, but otherwise spot-on)

Ideally it is best if tax revenue moves countercyclically, increasing in an expansion and declining in a recession.

(This exactly matches Keynes’ position “the boom, not the slump is the time for austerity at the Treasury”)

3 per cent average deficit over the cycle is consistent with debt averaging 60 per cent, nominal growth g and nominal bond rate r averaging 5 per cent. In this case, primary deficit is zero on average.


But if r<g (desirable), can run a primary deficit as well as a total deficit.

A pre-pandemic energy policy

John Quiggin8 Comments

The government has released a report on energy policy it commissioned from former Origin Energy boss Grant King. I prepared a brief response for the Australian media science centre

The government’s thinking remains five to ten years behind the times.  Although the idea of new coal-fired power stations seems finally to have been abandoned, the report focuses heavily on technology options that seemed promising in the past but have now been abandoned everywhere in the developed world, such as nuclear power and carbon capture and sequestration. More important is the failure to recognise that gas-fired electricity generation is increasingly being supplanted by the combination of renewables and battery storage. The policy remains fixated on extractible resources such as coal and gas, ignoring our massive endowment of solar and wind resources.

The more fundamental problem is that the approach to climate policy that underlies all of this is the same as the denialist approach to the pandemic, exemplified by Trump – since dealing with impending disaster will be inconvenient, let’s just keep ignoring it. After all, it might never happen.