Over many years of writing columns, I always have a list of issues to be covered in the future, for which I gather relevant material and speak to those with specialist knowledge.
This modus operandi is suddenly redundant.
Who cares what I think about the wash-up of the banking royal commission? Who cares about the economic consequences of the recent deluge of class-action claims? Who cares about the economic impact of temporary migration, especially given there is unlikely to be any temporary migration for some time?
But do economists have a role to play as the government grapples with the economic devastation caused by the response to COVID-19?
I should first plead for humility on the part of my profession. We are not public health experts, or epidemiologists, or virologists.
The medical experts must first decide what is needed to deal with and contain the virus. Economists can help in dealing with the economic consequences of quarantine, travel restrictions, social distancing and the like.
Not that pandemic management is entirely a medical issue. Not only are there some industries and activities that need to continue, there are also social issues arising from prolonged isolation. The decision that kept schools and childcare centres going was partly based on non-medical considerations.
But economists have not shown themselves in a very good light.
With many committed to a small public sector and governments getting out of the way of citizens, the various public health-motivated constraints that governments have imposed thus far — and there’s more to come — have been met with aggressive opposition.
Their key proposition is that the costs of these restrictions are greater than the costs of the virus. In their world, it would be better to let the virus rip and hope that herd immunity ultimately might attenuate the health costs.
On one economics blog was the suggestion that taxpayers should pay people to get the virus — seriously.
Economists don’t have any knowledge about the medical aspects of pandemics and the power of herd immunity is just being assumed. Economists are good at making assumptions.
Indeed, some have gone to the (offensive) lengths of trotting out studies on the cost of lives and comparing the aggregate loss of premature deaths with the economic costs of restricting activities designed to halt the spread of the virus.
Their conclusion is that if some older people die sooner than they otherwise would, so be it. An assumption here is that younger people won’t be much affected, even though the data suggests that in France, for instance, half of those in intensive care units with COVID-19 are younger than 60.
These types of studies might have had a role in assessing whether measures to keep a 90-year-old going for another year are worth it in terms of devoting additional taxpayer resources. Even the idea of quality-adjusted years of life is not unreasonable.
But these sorts of studies have no role today — we are dealing with an entirely different threat and the course of the virus and its health effects are unclear.
There have been equally offensive comparisons made with deaths from cancer, seasonal flu, chronic conditions such as diabetes, heart disease — even the road toll and drug overdoses. On this basis, deaths (and future health impairments) from COVID-19 are seen as no big deal.
Fortunately, this point has been slapped down by medical experts. For a start, the pressure this pandemic will place on the health system means those seeking treatment for other disorders may miss out.
For governments, it’s a case of decision-making under conditions of extreme uncertainty. Most citizens, although not all, expect our politicians to err greatly on the side of caution.
This is not some intriguing policy experiment for wonks. We cannot conduct pilot trials and, if they fail, walk back. If the virus is allowed to spread and the strategy doesn’t work out in terms of bringing a rapid end to the pandemic, there can be no backtracking.
An economist making a constructive contribution is Tyler Cowen of George Mason University in the US. (His blog, marginalrevolution.com, is worth following.) In terms of devising a fiscal rescue package — the use of the term fiscal stimulus is now completely inappropriate — he has divided economic activities into three groups.
First, those that must be sustained during the pandemic: health and related activities, such as pharmacies, food production, distribution and retailing, telecommunications and postal services, waste management, power and water.
These firms and organisations must be supported and their employees provided with the necessary incentives and compensation to keep working.
The second group covers the activities that we want to rebound when the impact of the virus lessens. To achieve this, businesses will need to receive subsidies, in part to retain at least some of their workers. Displaced workers will need to be provided with income replacement — at less than 100 per cent but still substantial — while the pandemic continues.
Finally, Cowen identifies activities not worth saving. His favourite is the cruise line industry — a subjective viewpoint. My guess is that cruising will shrink worldwide whatever governments do. I would be disinclined for our government to rule out assistance to firms because there is a view that the industry doesn’t have a long-term future.
There are economists who believe these firms should just be allowed to shut down, with the workers heading to the dole queue. Yet what is happening to them has nothing to do with market forces but, rather, public health-motivated constraints. They have had their property rights removed by fiat and they deserve compensation.
Not too many economists are now predicting a V-shaped recovery — a U shape is as good as it’s likely to get.
We need to ditch our old ways of thinking, refrain from speculating too much on what it’s going to look like on the other side and engage constructively in what is an extremely difficult policy environment for politicians.
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