COVID policy choices should not amount to a crude trade-off between lost GDP and deaths, but be built on clear and transparent principles. Timothy Besley and Nicholas Stern (LSE) make the case for a coherent one-year strategy, whose core values will endure as policies adapt and change and that supports those bearing the brunt of lockdown.
We need a strategy that is robust enough to deal with future outbreaks
The second wave of the pandemic is now the focus of policy-making in both the UK and elsewhere. Much has been learned from the experience since March but there is still scope, arguably a need, to refine and improve policy responses and the overall strategic approach. And, as we move into the next phase, it is useful to take stock of the principles that can guide a strategy, and the policies within that strategy.
The government has announced a new one-month lockdown to replace the three tier system. It had been unclear when different parts of the country would enter and exit regional lockdowns, and what kinds of financial support would be needed to make it economically sustainable and acceptable. Even though this second lockdown is less severe than the previous one, it raises many of the same issues, particularly around how it fits into a wider strategy.
As we enter this phase of the pandemic, there needs to be an understanding that we must look beyond the short-term measures and consequences. Though a vaccine has proved promising in trials, it will take time to roll out and to assess its effectiveness. So a strategy that is robust enough to deal with future outbreaks is needed, and it should embody both our values and what we have learned.
We argue that this strategy should be based on articulated values, an understanding of the mechanisms by which the virus spreads or can be controlled, an identification of the feasible choices available and a recognition that policies will need to be revised as we learn and discover. This approach is different from narrow trade-offs or crude optimisation. We also discuss what economics can contribute to this type of strategic and policy discussion, bringing in political economy, social cohesion, trust and a wide range of human motivations.
Establishing the values that will inform our choices
The strategy for fighting COVID should emerge from an informed public discussion, embodying both values and some understanding of options and their consequences. The values that underpin this strategy are in large measure a statement of who we are and what we stand for as a society, including in our treatment of younger and older, richer and poorer, and different places or regions, together with an understanding of our mutual responsibility to one another.
The severity and profundity of the COVID crisis have forced public discussion and reflection on what those values are. We have recognised both threats to and fundamental responsibilities towards our young people and their education, mental health, and future employment. We have, we trust, recognised that we should refuse to see old people as disposable and that we must protect the vulnerable, particularly the older, weaker and poorer. Further, we have, we hope, recognised the importance to our well-being of a supportive and caring community, one that recognises common humanity. Within that, we have emphasised the role of key workers and the support they provide. Discussing, defining, protecting, reinforcing and applying these values are fundamental both to a shared sense of identity, and to an effective, coherent, and efficient response.
This approach is very different from one that tries to reduce the “values component” of policy to a narrowly conceived trade-off between output and lives (indeed, often explicitly attaching lower values to older lives), and then taking these “weights” into a narrow or crude maximisation process. And it is not helpful to think of this as basically a question of economics versus science, or of liberty versus risk, even though these elements are part of the story. It is vital to avoid posing the crucial decisions we face simply in terms of such crude dichotomies.
Unfortunately, we do see these simplistic portrayals seeping into the policy discussion. But artificial horse races are dangerously misleading. The rational, analytical approach is to identify the choices available to us and discuss how our values can help identify ways forward within those choices. Doing this transparently and well can also enable us to find cohesion, acceptance and feasibility. Simple and focused trade-offs are relevant and helpful for many micro decisions, but are far too narrow to be the dominant concepts to determine strategy in a major crisis.
Policies change, but the underlying strategy must be consistent
Each and every policy affects specific people: groups from different generations, geographies and personal circumstances. Looking at the economy through the lens of aggregate GDP, and especially quarter on quarter changes, is clearly problematic. The aggregate effects mask how losses are shared: some people have gained economically from the pandemic. Many of the big risks in terms of economic consequences fall on younger age cohorts, for whom there may be lasting effects. There is also a difference between high income groups whose incomes are better protected and who are on average saving more and experiencing much smaller falls in their incomes compared to lower income groups, whose incomes have been hit severely.
Moreover, although income captures one important dimension, it can be a poor guide to impacts on well-being during the pandemic. Restrictions on social life outside the home or being forced to work from home may have more severe consequences for those whose home environment is difficult. Closing down or limiting social or family life can have big effects on the lives of both the young and the older, although often in different ways.
The key question is whether there are policies that can help to mitigate some of the effects of the unavoidable restrictions, in ways that are targeted to the specific kinds of hardship that are empirically significant and central to our values. This can be difficult, and the responses can involve major demands on resources. The crisis has exposed deficiencies in the existing safety net. And the furlough programme in any of its forms, including the follow-on wage subsidy programme, does not provide universal protection.
This is important because in asking people to make sacrifices to protect others, how the burdens are shared is critical. If some individuals perceive that they are victims whose interests and worth have been neglected, it risks fuelling resentment and undermining compliance. Economic policy that supports those who are bearing more of the economic costs means that we can go further and faster in fighting the disease. In contrast, a perception that risks and costs within society are being incurred unfairly or arbitrarily, or in the interests of certain power groups, or in ways which are implicitly or explicitly dismissive of peoples’ lives and occupations is both damaging in itself and undermines the effectiveness of policy.
Persuading people to curb narrow self-interest for the greater good is a critical weapon in the fight against COVID. The social science in this area emphasises the importance of trust among citizens and confidence in government. There are limits to the effectiveness of sanctions and scare tactics in inducing compliance, and effective intervention will often create a positive “social multiplier” when there is a widespread belief in collective compliance. This has long been understood by those who have studied such things as obeying the law, paying taxes or volunteering for military service. Emerging from this crisis with a renewed sense of common humanity and solidarity is a key consequence or “output” in itself. The renewal of community that emerged in the UK during and following the second world war was of real and recognised value. So too were the institutions and policies it fostered.
An articulated strategy, which expresses the values driving policy, will help to indicate at the outset what the principles and criteria are as we refine, revise and move out of lockdown. Action must be flexible as we learn more about the virus and the effects of different policies, but it is the policies, not the strategy that should adjust – and it should be made clear that those adjustments are underpinned by underlying values and principles. It is also important in considering that an analysis of the dynamics takes into account that timely action can substantially reduce risks and costs in the future.
This overall strategic approach to questions of great risk applies in other areas too, including climate change. In each case we are trying to manage a dynamic process of change, where urgency and scale are crucial and which integrates economic and societal benefits and has deep and broad impacts which are potentially existential for many people.
How economics can point to better policies
A careful and focused examination of risks and realities will identify the key choices we have to make. This is where economics, social science and science must come together to set out the options and choices in ways that allow the values to be brought to decisions in a clear and transparent way. We have been fortunate to have been part of the DELVE process led by the Royal Society that has brought scholars and practitioners together from different disciplines (and we ourselves, although academics, have spent long periods in the kitchens of economic policy). Within the overall strategic choices there will be important trade-offs and decisions over allocations of resources, including priorities for scarce testing and vaccines, supporting different kinds of activities under economic threat, and supporting different groups of people.
Economics, with its focus on, and experiences of, various forms of market failure and inefficiencies should be able to point to ways forward which overcome inefficiencies and thus avoid or mitigate some of the trade-offs. For example, it will surely be much better to test students before they go home for Christmas, rather than shutting down classroom contacts and closeting them in halls of residence for the last couple of weeks of term (an option which, somewhat surprisingly, seems to have been discussed within government).
What should this strategy look like?
Based on this approach, what should be the key elements of a strategy? First, it should be a strategy for a year or thereabouts, since we know the virus will be with us and that it will take at least that length of time to develop vaccines and disseminate them at scale, to improve treatments, to strengthen testing to very frequent levels, and take tracing to the levels needed.
Second, the criteria for revising policy within the strategy should be clear and transparent. There will be learning, and there will be setbacks, and the criteria for response should be transparent and acceptable. Central to these criteria would be the rate of infection, and the rate of change in infections, which would be core targets for any strategy. Setting these targets is a fundamental choice, based on an assessment of risks, the options for (and costs of) action.
Third, the criteria for differentiation across localities and groups of people should be clear and measurable (including infection rates) and support for those places and people suffering particular restrictions should be equitable and not subject to apparent arbitrariness, special pleading or particular political influence.
Simplistic strategies like the pursuit of herd immunity do not pass muster when one tests assumptions and looks at possible consequences – in this case, the high probability of very large numbers of deaths and physical impairments. A more fruitful approach to strategy and policy embodies combinations of policies, including those which reduce interactions, whilst allowing economic and social activities with appropriate safety measures to continue to operate, and which protect the vulnerable (defined both in terms of their health and economic circumstances).
Business is an ally in this, and has shown itself to be responsive in terms of embracing Test, Trace and Isolate systems, allowing flexible work patterns, and installing safety measures for workers and customers. In this way they can and do make a crucial contribution to allowing the economy to function while offering protection against the disease. Even if this is motivated by the pursuit of profit, the operation of private businesses is the way that the taxes are paid to support public services and people are enabled to make a living. But much of the contribution of business to managing the pandemic is also motivated by businesses recognising that they should protect their employees’ health, as well as offering them employment. And many see themselves as part of a community with a role and responsibility within the community.
Businesses will continue to invest if the policy strategy is clearly articulated and there is support in cases where governments determine that it is no longer viable for a business to stay open in the shorter term. It is also important to pay attention to cases where business cannot continue to operate in a viable way in the longer term. This will require a process of structural adjustment away from some kinds of employment, but can be supported by appropriate policy. The transition to a greener economy will, for example, provide many job opportunities and is widely supported by many local and regional authorities, as well as by central government.
We suggest the key economic elements of a strategy based on these principles could be these. This is intended as an illustration of what could follow from the approach we are describing rather than a formal and complete proposal. It has four broad blocks: a timescale and key targets; commitments to different groups; ways of collaborating with different players and stakeholders; and principles for revision.
• Make the strategy for one year.
• Have clearly articulated targets to keep infection rates below key levels backed up by careful measurements.
• Put in place procedures for anticipating when rates will approach those levels, thus examining the speed of change, and acting in a timely way.
• Commit to keeping schools and universities open.
• Commit to providing employment or training for people out of work for longer than 6 months (say) with particular facilities and opportunities for young people.
• Commit to support for activities for which skills are of great importance, which have a medium and long term future, and which are vital to the welfare of the nation, including transport and performing arts.
• Commit to the even-handed application of policies and support across geographies.
• Commit to keeping as many people as possible at work, including facilities for working at home and travelling safely to work.
• Work closely and responsively with private business to utilise their skills and knowledge of their workplace.
• Work closely and responsively with local authorities, regions and nations of the UK so that their local knowledge and creativity can realise its potential.
• Work closely and responsively with civil society and community, including in their ability to identify and support vulnerable people.
• Work closely with the scientific community to anticipate change, establish what works, and invest strongly in testing treatments and vaccines.
• Be very clear that policies will have to be revised as we learn and as investments in science produce results. But the strategy will be steady, and embody and set out clearly the criteria for policy revision.
We stress the importance of investing in the science, building in learning processes, and applying what we learn. This means
• Pursuit of vaccines and treatments.
• Protection of the old and vulnerable, particularly in care homes.
• Expansion of testing and tracing.
While our focus has been on the economic issues, good public policy will be founded in analyses that bring economics, social sciences, humanities and the sciences together.
A strategy built on firm principles
We are not arguing that the building of strategy needs more or less economics, but the right kind of economics – one that is built on firm principles and that embodies the range of issues around behaviour, political economy and values that are necessary, plus the function and dynamics of the markets and the relevant phenomena. Although it is a useful metric of some aspects of economic development, there has never been a respectable case for navigating policy using the time path of GDP as the central criterion. It is an imperfect indicator of income, which itself is just one dimension of national well-being. Who gains and loses beneath the surface is critical. The time horizon is also key; weighing up short and long-term consequences which can also affect groups differently. The same goes for lives saved. Here it is essential to look beyond short-term projections and to consider who is being protected, not just the aggregates.
There is nothing in economics that says we should navigate by adding gains and losses to reach an aggregate, whether it be in terms of incomes or lives; such aggregation would be a value judgement that has to be argued for, and one that many in economics who have considered these issues have argued against. We live in plural societies, with many conflicting and sometimes incommensurable values. That is something that an economic approach can and must encompass. An approach based on well-specified intermediate targets or policy objectives is more consistent with this plural approach, as well as being more effective in galvanising public action and public policy. For example, framing policy as seeking the least costly way of keeping the infection rates and reproduction number, R0, below acceptable thresholds in an area is a powerful way of thinking in relation to this pandemic.
Learning from mistakes
Countries have approached the pandemic differently. We can and must learn from this. But crude comparisons of lives and GDP lost cannot be the sole basis for having this debate. Public action and public policy works within a nexus of values. Governments not only design policies but also foster trust and cohesion, with long-run consequences. The responsibility of policy makers is to foster an evidence-led debate that looks at a range of dimensions by which to navigate the pandemic and to be open and honest about policy successes and failures. This more disaggregated approach should look at different aspects of our economic and social lives.
It is not yet clear whether Eat Out to Help Out and a feeling that we could now relax contributed to the new wave of infections. But such policies have to be evaluated as part of the process of learning. And if needs be, policy errors of the past have to be recognised, not covered up. This means a pluralistic approach where epidemiologists, scientists (including data scientists), economists and the social sciences more broadly, can work together to develop this evidence base. Trials of policies with proper evaluation built into them would be a huge step forward. And there needs to be much more rapid efforts to bring data into use.
Trust and cohesion
Even though they are not always part of standard economic analyses, political economy issues are important. And this includes judging policies in part on how they build trust and cohesion. Policies whose rationale is clearly stated, whose consequences are analysed on the basis of clearly laid out criteria and whose distributional implications are acknowledged have the best chance of building trust among citizens who are being asked to comply. Applying policy consistently is also key; arbitrary exceptions by politicians or public officials, without sanction, set dangerous precedents. These criteria and approaches are not easily measured but the fallacy that only those things that can be quantified are important must be avoided.
In the long term, the risk that the pandemic impairs the social contract which underpins trust and compliance is something that must be understood, and recognised as potentially very damaging. Public discussion of values and an informed discussion of evidence will not only play a crucial role in the formation and effectiveness of strategy and policy, but is also of real value in itself and to our future as a society.
Economic approaches are sometimes criticised for being overly focused on material incentives. For sure, regulations that fine people for behaving in certain ways or offer subsidies to businesses to avoid them laying off workers are part of the policy package. However, economists no longer confine themselves to only narrow views of motivation. Increasingly we emphasise intrinsic and pro-social motivations, as well as following norms and a sense of fairness. We recognise that these are less well-understood and more contingent than conventional material motivations, but this does not mean they can be dismissed. Indeed, the public action that the pandemic response requires makes them more important than ever.
Many economists express their thinking about policy in terms of a trade-off between equity and efficiency. But this may need rethinking during the pandemic. Policies that protect vulnerable groups who are asked to self-isolate can have efficiency benefits in the form of a slower progression of the disease, thus being positive for both equity and efficiency. Similarly, policies that recognise the need to preserve investments in human capital by the young are crucial to avoid a left-behind generation, again with benefits in both equity and efficiency terms. Being able to justify policies in these terms is particularly powerful, and could play a role in encouraging wider compliance with any policy strategy.
This is a critical period for societies and economies across the world, including our own. It is a deep crisis and our strategy and policy response is of fundamental importance. So too, is the way we think about, approach and discuss the choices we have to make and the strategies we have to set. That analysis and discussion will itself have lasting impact. It is a testing time for economics, as well as the world as a whole.
This post represents the views of the authors and not those of the COVID-19 blog, nor LSE.