Lockdowns and lockdown releases are not going to be ‘fair’

A common passtime during the lockdown, or during phases of its release was to point out some activity that has been permitted and compare it to another one that has not.  How ridiculous, we all laughed, demonically!  What incompetence the whole thing demonstrated!

There are many ways in which the government’s handling of the crisis has been catastrophically bad, but there being apparent instancies of unfairness and inconsistency in the lockdown is not one of them.

Lockdown law is not like normal law.  The point is to figure out what amount of activity the country can cope with in the sense of the test-trace-isolate capacity being there to counter the effects of the contacts and infections that whatever activity it is – going to pubs, playing cricket – generates.

It could be that as you release the lockdown, your test-trace capacity increases by x thousand contacts [that is contacts you can trace and follow secondary contacts, and isolate, with enough efficacy].  In which case the question for public policy is not what new consistent place can be found where we can redraw the boundary of permitted activities, but how can we ‘spend’ the budget of 1000 contacts.

The next re-drawing could take you to the point where you contemplate opening up pubs, but there are too many pubs to open all of them, so you ration how many, or who can go to them.

Rationing could be done by prioritizing the acticity for economic benefit;  or targeting the benefit at those in most need [perhaps those who were most affected by the lockdown in the first place].  So, playing cricket is low down the list.  Visiting isolated relatives is high up the list.

Fairness is not to be dismissed entirely, of course, because since we are socialized and perhaps even evolved to expect it, the likelihood that we comply with a regulation might well be a function of how fair it seems.  So it’s understandable that an actual lockdown policy would reflect some balance of fairness and rational public health contact allocation.

This is partly because states rely on consent to some extent to make sure that laws are sustained.  There are not enough resources to compel us to follow all or probably any laws.

Enforcement of the lockdown, in the teeth of an epidemic, will generate new trade-offs.

This involves making a public health decision analogous to the drawing of the on-paper lockdown regulations.  What regulations are actually going to prevail, after enforcement?  The authorities have a limited budget for enforcement, and they might find it is better spent [in the sense of preventing more potential infections] by targeting in ways that don’t reflect consistency or fairness [eg if no-one is allowed to party in groups, going after every potential group party].

So, when we try to take apart lockdown regulations, and how they are policed, ask not whether they are consistent or fair, but whether they represent a sensible way of prioritizing activities given that we can only afford to generate a certain number of contacts and convid19 infections.

[Added later]. I had some good comments after publishing this post.  One, from Dan Davies, noted that some activities that are perceived by some as virtuous and necessary – like going to church – are very ‘expensive’ in terms of consuming large amounts of the available capacity to suppress contacts.  [See, for example, the tale of the early outbreak in South Korea, traced to one particular church].  While others, deemed very low down on the hierarchy of needs – like young people hanging out in parks, drinking – are probably actually very ‘cheap’, in the sense of generating very few new infections.

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Periscope q and a’s for non economists Friday 10am

In case you don’t encounter my Twitter feed, I’ve experimentally started doing Periscope broadcasts of me answering questions.  Friday 10am.  Last Friday’s can be viewed here.  The sessions are targeted at non economists into economics;  econ students;  schoolkids doing econ;  schoolteachers teaching econ or related topics.

The production technology is hopelessly shonky, as you might expect.  And you will no doubt grasp why I am not a telly broadcaster when you see one of them.  The broadcasts are live and can be picked up from my Twitter feed @t0nyyates or directly from Periscope’s site.

Tweet questions at #tonyyateseconq so I can collect them.   If more questions arrive, I’ll keep doing them.  Feedback welcome.  Talking into camera feels even more like pouring material into the void than hammering on a keyboard, so it is helpful to know whether these things are useful.

Topics covered so far are things like:  how will covid19 be paid for?  Will inflation rise?  How redistributive is monetary policy?  Are we headed to having universal basic income?  Is Bank of England independence a thing of the past?…. and more.

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Fiscal rules have been rightly blown out of the water by the covid19 crisis

This was a piece I wrote for the New Statesman.  I had to write it a few times.  It started life as a thing about the first post GE19 budget and how they were going to finesse the issue of sticking to rules in the manifesto, vs satisfying the new ‘Blue Wall’ of Tory seats in the North.  Then the pandemic rightly blew all of those discusssions out of the water.   At some point, when we have got to the point of beginning the end of the lockdown, and can estimate the likely impact of the support measures that were in place during it, the discussion about fiscal rules will start again.   Some paydown bargain will have to be struck between ourselves and future cohorts, many of whom are not around the table to express their opinions, weighing up our rights to spread the burden out into the future against their rights to preserve fiscal space to combat their own generational risks, like future pandemics, and climate change [something we dumped on them of course].

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New Statesman post on Mark Carney’s tenure

I laboured over this piece.  It was hard to cover all the ground, much of it technical, in a way that would interest anyone.  And I had to write it over and over to purge it of the sourness that can seep in from an ex central banker with no role other than to peer in and throw stones.  I probably did not get all the way to doing that.  Anyway, no-one cares any more about it, as the pandemic has swept such small details as ‘how should you communicate monetary policy’ and ‘what precisely are the subject bounds within which central bankers should confine their public oratory’ away as we focus on how to prevent the modern mixed economy and monetary system from collapsing entirely.  However, if you want to try to transport yourself away from the pandemic and back into that old mindset, and you are a non economist with a penchant for recent monetary history, this might be just the thing for you.

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‘Money printing’ is not yet a subordination of monetary policy, so keep your hair on

I wrote a thread a few days ago reacting to some of the Twitter commentary [and also to Martin Wolf’s FT piece which I don’t think struck the right tone], and this short post for The Independent covers the ground.   This should also be a counterpoint to Paul Mason’s recent New Statesman piece.  And it’s also worth reflecting back on the debates that were had as Corbyn was campaigning for the Labour leadership in 2015 and floating the idea of ‘People’s QE’.

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Nudging and banning

Here’s a Guardian piece I wrote about Government policy regarding the Coronavirus as it stood on Thursday. 

Less than 48 hours later, policy seems to have changed.  Initially eschewing enforced social distancing measures in the form of banning large sporting and other events, this is now going to happen.

On Thursday, the position on this was that 1) the science did not support a ban because this would not much to affect the spread [controversial] and 2) that there was nonetheless concern about such events placing unwanted burdens on emergency services at a time when they might later, but are not yet currently, under stress.

The science clearly has not changed in 48 hours.  And the case load has not risen to the point where the emergency services cannot cope with some people being punched at football matches.

What happened was that the Premier and other Leagues decided it was irresponsible to hold such events where the virus could spread, and decided presumably it would be very bad for their brands if they carreid on.  This then left the government looking like it was behind the curve and out of control.  To retake the initiative, it is embracing the bans of these very large events and readying itself to ban some more things, smaller but still large events.

The overall strategy seemed initially to be one of fatalism as regards the overall spread of the disease.  Initial gentle coaxing, followed by later enforced distancing, would be used to try to curtail the case load of those needing hospitalisation and particularly intensive care treatment to the point where current capacity could deal with it.  How it reached that judgement watching the experience of Lombardy in Northern Italy, and bearing in mind the difficulties the NHS has had in coping with winter peak demand in the last several years, and the surplus mortality caused by social care cuts re-routing the elderly into hospital care, I cannot fathom.  But that was the judgement.  Social distancing would be enacted later, when it was most needed, at the peak load of cases.  And later because there was fear of ‘fatigue’, that its effectiveness would diminish when it was most needed, as people tired of the regulations, or through financial necessity, and sought ways around them, or substitute ways of encountering eachother.

A medical strategy, the government are discovering, can’t be executed in a political vacuum.  Politcal factors seem to have pushed it to alter significiantly the timing of social distancing measures which it stressed was so important.

One can’t help wondering how much politics entered the first calculation.  Was it an inclination towards intervention as a last resort because of instinctive laissez-fairism?  Possible, but I doubt it.  Brexit did have its Global Free Trade Liberal Leavers in the coalition, but they seem to have been an impotent part of it and Brexit overall has been about decisive flouting of what free market economics would dictate.  And the budget showed the Government’s tilt towards fiscal interventionism.

Was it about British exceptionalism?  Deliberately doing the opposite of what the continent were doing?  I hope not, and also doubt that too.

Although whatever the imperative, the UK has clearly decided that they don’t care about the difference in policies in the two political halves of the island of Ireland.  South of the border, Ireland have closed schools and had already ratcheted up social distancing.  North of the border follows UK policy.  But the effectiveness of social distancing south of the border will be greatly affected by it not happening North of the border.  If you want a demonstration of the costs that chopping up territories into selfish nation states imposes on its citizens, as one government fails to internalize the externality it has on another, you have a good example right there.

It’s to be expected that politics is gong to continue to have an affect as the strategy and the virus’ progress evolves.  One follower of mine on Twitter mused that just letting the virus do its thing and kill a lot of people might just prove politically untenable, and it would be forced into introducing lock-downs in due course.

 

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New Statesman post on monetary policy and the virus

Posting here a New Statesman piece by me.  For those of you who don’t follow me on Twitter, or read anything else except blogs and therefore do not interact with major media outlets.

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New Statesman Post on that Cummings Job Ad

I didn’t post this here before, so if you didn’t see it at the time, and felt somehow that you had not had enough Cummings journalism, here is a New Statesman post about his infamous job advert.  The one that culminated in him hiring Andrew Sabisky, the ‘Superforecaster’ who subsequently resigned after views that he had expressed on eugenics and women had been unearthed from his past writings.

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Guardian article on Cornonavirus

A fair portion of those who read the blog don’t follow Twitter, so posting this Guardian piece by me here in case you have not seen it.  The headline of the article doesn’t really match the content.  My main point is about the many networks – travelling, supply chain, finance and social media – in the globalized world that are infecting us all with the virus and its economic harm.

Central banks do have a role to play;  maximizing monetary stimulus with rate cuts and QE;  perhaps restarting funding for lending;  contemplating private asset purchases in the restarted QE program.  But because they are still dealing with the legacy of the financial crisis, the main burden will fall on the fiscal authorities.  That is, unless drastic measures like helicopter money are contemplated.

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EU trade talks chart crime

Consternation today on the internet about a chart crime committed by the EU Commission.

The EU is peturbed that the UK appears ready to renege on a commitment to negotiate a ‘level playing field’ [for example to restrict state aid] as part of a Free Trade Agreement.  To explain why it continues to want this [and hasn’t, as No 10 disingenuously suggested in a tweet using almost Russian Embassy style tactics, ‘moved the goalposts’] it dug out a slide showing data on countries with which it has reached trade deals.

Here is an image of the slide and an enumeration of other crimes by Stefan Loesch, who writes under the handle OscarDTorson.

The chart crime people are focusing on is the the fact that the size of the trade contributions to total EU trade is matched to the diameter of the circles, not the area of the circles, which is implied.  So the chart overstates the difference between trading partners.

The message the EU want to convey with the chart is this.

Given how close the UK is to the EU, and how large, we know from trade across the world and history that the likelihood that trade with the UK could supplant domestic EU activity is quite high.

For this reason, a relatively small shift in the terms of trade induced by unfair state subsidies, or a loosening of regulations [say governing health and safety at work] could be enough to change some activity from non-traded to traded.  For this reason, we want level playing field rules to rule out or at least constrain this kind of trade-predation by the UK.

For trade blocs a long way away, or that are small, it would take a much larger shift in state subsidies or regulations to tilt many activities from non traded to traded, and these either won’t be politically feasible in the 3rd country, or they can be constrained by much looser provisions in an FTA.

A slight complication is that the trade patterns are the product of current and past agreements establishing administrative trade frictions between the blocs.  The UK trades so much, currently, with the EU, because of its past membership of the single market.

Once rules of origin checks are required, or if there is regulatory divergence in the UK that forces firms in either bloc to produce to multiple standards, trade would shrink.  The effort required at that point for one jurisdiction to predate on the other using subsidies or regulatory undercutting would be larger.

By how much?  Not enough to make the UK look as unimportant as Canada, which is the most relevant comparison:  the UK have been trying to claim that a ‘Canada’ style deal, which absents from the same stringent level playing field provisions, has been ‘taken off the table’.

The EU threat is, without those level playing field provisions, to offer nothing more than a minimal trading relationship provided for by WTO rules.  Beyond the threat to cut off your own nose to spite your face, there is some logic to it.  With such a minimalist deal it would take much more aggressive, and therefore less likely, state trade-predation to tilt new activities in the EU from non-traded to being traded with the UK, a kind of crude [and expensive] security to prevent it from happening.

 

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