Turning a blind eye: Have economists been ignored during the pandemic?
23 December 2020
SUGGESTED
Labour Market
Housing and Planning
Tax and Fiscal Policy
19 November 2024
https://iea.org.uk/wp-content/uploads/2020/12/TURNING-A-BLIND-EYE.pdf
Summary
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- Throughout the Covid-19 crisis, governments have relied heavily on the advice of epidemiologists and health professionals.
- Unusually, the economics profession has been conspicuous by its low profile in the policy making process. In an IEA paper published in May 2020, I argued that economic advice was an absolutely essential input into successful policy making when dealing with Covid-19.
- This paper looks back and illustrates ways in which the insights of economics could have helped and would be essential in any future pandemic.
- The focus is on micro-economics, the behaviour of individuals. It is not about Covid-19 and the macro-economy, either in an assessment of the quantitative impact of the pandemic, or in terms of the appropriate macro policy response to it.
- The central insight of economics is that when the set of incentives which someone faces changes, the individual is likely to change his or her behaviour.
- There has been a conspicuous failure by governments to appreciate the importance of incentives throughout the pandemic.
- For example, test and trace has failed for many reasons. But a key one has been a lack of understanding of the incentives in a system involving self-isolating. This is particularly true for the lower paid. Further, in order to maximise the uptake of the vaccines, the government could simply pay everyone who gets vaccinated.
- Governments have also relied far too heavily on opinion polls on lockdown. These have consistently shown strong support for restrictions. But economists prefer to rely on preferences revealed by actions, not on preferences stated in surveys. These suggest less enthusiasm for lockdown, with regulations being widely evaded in practice.
- A key part of the economists’ policy tool kit is cost-benefit analysis. Studies published using this, by distinguished economists, uniformly suggest that the costs of lockdown exceed the benefits.
- Throughout the crisis, public sector workers and bureaucrats have been portrayed in the media as working in a seemingly selfless way for the public interest. Some definitely have done so. Others – such as the teaching unions – illustrate the practical importance of what economists call ‘public choice theory’. They have frequently acted in their own self-interest.
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