It is 1984. A message from London.

People shuffling in the street, afraid to look others in the eye, get close, and be accused.

Fear as a silent ghost hovering above the city, watching us, like drones.

The panic in the eye of the mother as her little toddler cycles by an older woman on the street, too close.

The glee of the neighbourhood bully as she shouts at a couple embracing in the park, taking pictures with her phone.

The stern voice of the expert on the news who has discovered yet 5 more reason for why he was right last week.

The bombast of the politician who sheepishly looks through our screens, almost apologetic at introducing more restrictions and for what his experts are urging. Fines. GPS tracking. A gulag for the unwilling.

The desperation of the black teenager shouting abuse at himself on the street, echoing the words shouted at him at home where they are cooped up with 10 in a small apartment.

The shame in the eyes of the men who have no jobs and little savings.

The gratitude in the eye of the middle aged woman as someone returns her smile on the street, acknowledging she exists.

A beautiful day in which the first stirrings of spring can be seen: cherry blossoms.

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It’s an intimidating picture. But the weaker the freeze, the more people die in overburdened hospitals — and the longer it ultimately takes for the economy to restart.

Donald G. McNeil Jr in the NYT

Yes folks, I normally don’t go in for all that MALARKY WITH CAPITAL LETTERS IN A POST, BUT THIS TIME IT’S DIFFERENT.

The government didn’t take coronavirus seriously at first. As it’s amped up the seriousness of its response, it’s done so reluctantly and now it’s in no man’s land, with strong social-distancing measures that will cost the economy a bomb. But those measures are not strong enough to rid the country of the virus. So they’re with us until we gain herd immunity, which will take the best part of the year.

We’ve picked a scenario that is the second-worst for health (the worst being doing nothing) but it seems to me to be the worst possible option for the economy. (The best is probably to do nothing — but that was never an option — the people would rightly have rejected it.)

Right now, panic is the friend of anyone who doesn’t want to get this disease, which continues to surprise on the downside (i.e. the bad side). Thus in yesterday’s Fin:

China is not reporting any new cases in Hubei province, but the deaths continue, as patients who are healthier and younger lose their long battles with the virus. This has pushed China’s death rate from the 2.3 per cent cited in the study to 4 per cent today.

Those ratios are misleading because the denominator is people who have tested positive to coronavirus, not all people who actually had it. But they still show how important humility is in all this. There’s still much we don’t know, including the stability of immunity.

Extreme social distancing is effective, however, in massively reducing the rate of spread and getting the rate at which one person infects others (the “R0” we’ve all suddenly adopted to demonstrate our coronasavvy) from around 2.5 to below 1. And, as complexity scientist Yaneer Bar-Yam concluded on Joseph Walker’s excellent podcast two weeks ago now, once R0 falls below 1, exponential growth goes from being your enemy to being your friend. The virus runs out of business halving, then halving again, and so on to oblivion.

Then one rebuilds the world from ‘green zones’ (they’re probably called something else on that podcast but this is an emergency). Life as normal can resume and the only economic restriction remaining is strong restrictions on travel. However, even here this will be mitigated by a system of building travel links between other ‘green zone’ countries and various forms of certified safe travelling that would include placing all arrivals not able to certify their coronavirus-free status into self-funded quarantine for 14 days before release.

This would produce extreme disruption in the short term — but it’s hard to imagine it being more than (say) 50% worse than what we have now or will have by the end of the week. But we ought to be able to announce some relaxation of the more extreme measures within six weeks. By then, tracing and testing would be massively improved, so we might be able to return to normal relatively quickly. Rather than have this thing drag on for the rest of the year as the travel restrictions will have to — although our own and other countries doing the same will draw other countries into wanting to be in the green zone if they haven’t twigged already.

I’d also like the government to publicly commit to some timetable letting us know when it thinks it can meet certain milestones. They should also commit to releasing an independent report on the state of play each week, with expert recommendations on whether and when to relax measures and in what order. It would be clearly telegraphed where we were meeting and missing our targets (there’d likely be a mix of both).

But I think people would be impressed that their interests were being taken into account — as fairly and as efficiently as practically possible.

Postscript: Since writing the words above, it seems New Zealand has adopted the strategy I’ve suggested — right down to the specification of targets by which it is hoped to have the virus under control and safely heading towards zero — perhaps with the odd breakout which is rapidly tracked down.

I’ve also watched tonight’s episode of Q&A on which the Deputy CMO repeated the idea that this will inevitably go on for six months or so. That’s doesn’t seem to be what Jacinta Ardern has been advised and I can’t see why it makes sense. However though Norman Swan didn’t directly challenge the Deputy CMO on the point he did say that we’re about to observe the results of the first easing up of restrictions in China — although at least at the epicentre, it will be from a much more heavily infected area than anywhere in Australia is — at this stage.

Posted in Death and taxes, Economics and public policy, Health | 6 Comments

A lament for the corona panic victims.

Spare a tear for millions of poor people around the world. They will no longer have good jobs, good health, or long life.

Weep for the poor, the sick, and the old in our own societies. Their hopes, dignity, and pensions are gone.

Light a candle for the workers in hotels, bars, tourist resorts, airlines, and elsewhere. Their jobs are gone.

Cry for the lonely whom we have just created and abandoned. They now face fines and ridicule for seeking human connection.

Feel one with the athletes and their helpers. Their dreams are destroyed.

Say sorry to the billions we didn’t have the courage to protect from our fears.

Ask forgiveness of freedom, privacy, and joy. We orphaned them.

Forgive the doom-sayers, the bullies, and the health advisers. They know not what they have done.

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Targetting and the stimulus: who should pay the rent?

I ran into Ken Henry at a function – I think it was the terrific PM’s Science Prizes in late 2008 but someone may be able to look things up and falsify this claim. In any event, I squatted at his table and had a quick chat to him about the recently announced or soon to be announced stimulus. He said that, he’d been saying to his colleagues and to cabinet, his plan was to “go early, go hard, go households”. I said “can?I quote?you on that” and he had a think and said something like “Yes, why not?” So?I did and it caught on.

Economics is a simple discipline with just a few basic ideas in it. One is targeting. Continue reading

Posted in Death and taxes, Economics and public policy | 10 Comments

The Corona Dilemma.

Consider the shown picture where you are the decision maker who can pull the lever of the train tracks to avoid the coming train from going straight. If you do not divert the train, one person, John, will get run over. He is elderly and suffering from many diseases. You know him personally and all his friends and family are watching you. They are all shouting at you to divert the train, claiming it is the moral and safe thing to do. You know that if you do not pull the lever, your life in the society you live in is over.

If you pull the lever, the diverted train will run over 50 random people from all over the world as the train drives through them, including people in your own country. Yet these people and their friends won’t know where the train came from that hit them.

What do you do?

And more importantly, because it is obvious what anyone with a modicum of self-preservation would do, what institutions can you think of that would lead to a different choice?

Over the fold I enumerate why I think this is roughly the tradeoff that has faced humanity over the coronavirus, where the options represent letting the virus rage unchecked (the train drives streight) or put whole countries into isolation, destroying many international industries and thus affecting the livelihoods of billions, which through reduced government services and general prosperity will cost tens of millions of lives (the diverted train).

If you don’t like my back-of-the-envelope numbers please provide an honest alternative numerical assessment: anyone can quibble with numbers of others but it only becomes a discussion if you give a reasonable counter-estimate.

Continue reading

Posted in Death and taxes, Democracy, Economics and public policy, Employment, Health, History, Libertarian Musings, Life, Philosophy, Politics - international, Public and Private Goods, Science, Society | 38 Comments

Keeping a cool head – thinking about the covid-19 crisis: a guest post from Toby Phillips

This post is a direct response and rebuttal to the recent ‘Has the coronavirus panic cost us at least 10 million lives already? by Paul Fritjers. Paul’s post takes the current covid-19 crisis, and uses some haphazard multiplication to create an alarming narrative, muddying the policy waters on a critical issue.

Initially, I took issue with the back-of-the-envelope way Paul’s post calculates the human cost of an economic downturn. Of course, if you’re willing to make up numbers, you can win any argument, but that doesn’t make it true. To pick one example, the post says that a 25% drop in global share prices means an erasure of 25% of wealth for all humans, effectively costing “1.2 billion Indians a quarter of their wealth”. Except that most Indians would have almost no savings (wealth), fewer still would be exposed to global equity markets, and as for income, over 80% of Indians work in the informal sector. Another example: Paul’s post estimates that covid-19 will cost the global economy $50 trillion, based on simply extrapolating a drop in (previously bullish) equity markets. But stock valuations are not the same as output!

I can make up my own numbers too. Let’s say that if left to run, covid-19 infects half the world’s population (an underestimate, by all accounts) and has a mortality rate of 1% (also an underestimate based on existing countries). That’s 38.5 million deaths. Add to my model the fact that, actually, 5% of people will die if they aren’t hospitalised (according to the WHO) and there aren’t enough hospital beds. That’s almost 200 million deaths now (worse than Paul’s 10 million, for sure). Indeed, Australia will run out of hospital beds after only 0.2% of the population is infected with covid-19.

Paul’s post doesn’t argue that we should head straight for the pandemic cliff edge, but it presents sketchy figures without engaging in the complex trade-offs facing individuals and policymakers. It read like an elaborately constructed gotcha. A galaxy brain take searching for maximum provocativeness. And we need better than gotchas at the moment. Continue reading

Posted in Best From Elsewhere, Death and taxes, Democracy, Economics and public policy, Employment, Ethics, Politics - international, Politics - national | 5 Comments

Hierarchy and generative orders: some introductory thoughts

This is now the whole article. Comments have been closed on the previous post.

Part One

To command nature, we must obey it

Francis Bacon, 1624

Hierarchies and Generative orders

A great theme running through economic and political theory is the distinction between hierarchies and markets as means of cooperation. This is at the centre of Hayek and of Coase. Here?I’ll sketch some ideas that paint all this on?an even larger canvas.? So as not to get too bogged down?I’ll sketch some of?these ideas in dot point form. Take this as notes to myself.

    • Language and culture are both generative orders, though they co-evolved and we can also think of them as parts of a single order.
    • They?make us human by creating an inter-subjective human world. This functions as an order within the natural world.?Like the order of the natural world, we inhabit?a generative order. We inhabit our language and our culture. It has an objective existence outside ourselves.1
    • The market is the next great generative order that emerged in human history (or prehistory).
    • At this point, we encounter?certain important facts. Generative orders are built on one another?– each successive generative order uses the previous generative orders as part of its operating system. Further, generative orders tend to be less fundamental than the generative orders from which they’re?built.
      • This is true by definition historically, but it’s also true in terms of contemporary significance. Thus markets create an order that people can inhabit, but?they move in and out of markets whereas language and culture create an order so ubiquitous that our whole lives are lived within it (even to a substantial extent when we’re dreaming).
    • As this process continues a range of quite specialised generative orders come into existence. To give a contemporary example, lawyers are trained by teaching them ‘the practice of law’ which can be regarded as a generative order. It is a set of values and practices that have a significance that is independent of any individual lawyer. Accordingly, I’m going to use the terms ‘specialised’ and ‘general’ generative order to specify the level of generality of a generative order.
    • Placing ideas like?those?I’ve discussed at the heart of his thought, Hayek used the terms ‘cosmos’?and ‘taxis’?to distinguish between an evolved order and one?that was built deliberately by?those with sufficient power and insight to do it?– as formal institutions are built. (I also think Hayek overdoes the ‘spontaneous’ part of spontaneous order. Even?though?they come to operate in a decentralised way, some of?these orders are often subject to heavy shaping by power and may continue to rely on it).2 Continue reading
  1. Wittgenstein sought to defend this proposition with his private language argument which held that the idea of a private language was a contradiction. Language is a social inter-subjective reality, not a mere private mapping of external things or concepts to internal signs.
  2. Karl Polanyi argued this regarding the way markets were shaped by the powerful. As Fukuyama points out in his Origins of Political Order. “Hayek was simply wrong about certain of his historical facts” (p. 254). “The later evolution of the Common Law might have been a spontaneous process, but its existence as a framework for legal decision-making required centralized political power to bring it into being” (p. 258).
Posted in Cultural Critique, Democracy, Economics and public policy, History, Science, Sortition and citizens’ juries | 4 Comments