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Insights 31: 21 August 2020
NZ Herald: Roger Partridge questions how we ended up with another outbreak
Podcast: Eric Crampton on National’s border policy ideas
Newsroom: "She'll be right" is just not good enough, says Eric Crampton

Bordering on policy
Oliver Hartwich | Executive Director |
The Prime Minister has declared this year’s election, now postponed until October, a “Covid election.”

That is an unfortunate framing. Though dealing with Covid is crucial for the country’s short- to mid-term future, there are plenty of other attention-deserving issues like education, housing and transport.

It is also somewhat ironic, then, that the most creative policy thinking on the Covid-19 issue comes from the opposition.

National’s border policy, launched this week, has the potential to push the debate forward. Though the plan is not without weaknesses, and though National at this stage looks unlikely to form the next Government, it injects creative policy ideas into New Zealand’s border debate.

As a starting point, National promises to establish a dedicated Border Protection Agency. This should be a no-brainer.

For months, it has been obvious the diversity of institutions in charge of the border are not up to the task. The Ministry of Health is a policy shop, not an operational agency. The Ministry of Housing is mainly involved because it has a decent Minister. The army has clear chains of command but no public system health expertise. The DHBs can operate a public health system but they are not sufficiently coordinated.

It makes sense to bring all border-related executive tasks together under one umbrella. It would also report to a single minister. That should stop the tiresome buck-passing we have seen in recent weeks.

Another point in National’s proposal is the extension of domestic testing. This includes boosting the tracing capacity by adding Bluetooth technology. Again, these measures are deployed in many East Asian countries as our researcher Leonard Hong has documented in his reports (and Leonard is duly credited in National’s policy document).

Perhaps National’s most controversial suggestion is to make it mandatory for all international travellers to get a Covid-19 test before boarding a plane to New Zealand.

Pre-departure tests have a couple of practical problems. It could be difficult to get the result quickly, and passengers may still contract the virus just after the test or while on the flight.

However, there is a partial solution for that. Instead of using the expensive, accurate but slow PCR tests, New Zealand could mandate simpler saliva tests at the airport. These tests cannot rule out that a passenger is infected, but they would flag if a passenger is infectious and therefore a risk to others on the flight.

It is good to see some policy thinking from the opposition. The Government should engage with these ideas and build on the proposals. It can only improve its border management.

Covid-19 costs and benefits – revisited
Dr Bryce Wilkinson | Senior Fellow |
For those who care about New Zealanders’ wellbeing, the central issue is if the benefits of any given level of lockdown plausibly exceed the costs.

About four months ago, I calculated it might be worth sacrificing 6.1% of one year of New Zealand’s GDP if doing so was sure to permanently avoid 33,600 Covid deaths. Alternatively, a cost of 3.7% of one year’s worth of GDP might be justifiable to avoid 12,600 Covid deaths.

The analysis was merely illustrative. After all, a one-off lockdown is not a permanent solution and GDP could fall a lot anyway. But more can be said about the costs and benefits now.

For example, some serious empirical research on the experiences of different states within the US was completed by Professor John Gibson at the University of Waikato. He found state lockdowns “do not reduce Covid-19 deaths.” Spontaneous behavioural responses do. (Elimination within a single US state is not really possible.)

Separately, David Heatley at the New Zealand Productivity Commission tentatively assessed the Government’s decision on 20 April to extend the Alert Level 4 lockdown for a further five days. He suggested the net cost to the community was the equivalent of reducing GDP by a whopping $741 million, or 22,453 quality-adjusted years of life.

What about the current lockdown situation? In May, the Reserve Bank warned lockdown levels 1, 2, 3 and 4 would reduce GDP by 3.8%, 8.8%, 19% and 37%, respectively. For some perspective, consider that Auckland accounts for 38% of GDP.

On this basis, two weeks at the current Alert Levels – compared to Level 1 – will vanish about $1 billion of national income. This is about 0.3% of one year’s GDP. That money, if spent on road safety, might have saved perhaps 200 lives. (In another example, the $50 million to be spent on the recovery at Pike River could have saved over 10 statistical lives if used elsewhere.)

To spend all that money on the current lockdown might be justifiable if it could be confidently expected to permanently avoid over 1000 Covid-19 deaths. But how plausible is that?

“Back-of-an-envelope” exercises like these show why policy-makers’ decisions need to be informed in advance by far more rigorous benefit-cost assessments ­– and these should be published for the public’s benefit.

The art of thinking
Nathan Smith | Chief Editor |
“They” say a conspiracy theorist is someone who is correct ten years too early. What’s funny is this is the same definition of an economic forecaster.

In fact, master Keynesian Paul Samuelson once joked that Wall Street has predicted nine of the last five recessions. An “economist” and “conspiracy theorist” are just names for groups of people. But if they are correct at the same rate on really big things, how are stupid people like me supposed to know what’s going on?

Unfortunately, the skills needed to do parse this are exactly the skills schools don’t teach anymore. The internet is full of information, but there’s very little learning going on.

Fighting online conspiracy theories is like playing whack-a-mole. Journalists could spend the rest of their careers bashing them down and achieve nothing. They are trying to tell people what to think, but the better approach is to teach them how to think.

Let’s use a non-Covid conspiracy theory: flat earth. Everybody agrees the earth is flat if they only use their eyes. The horizon is straight, duh.

But with a bit more data, like the angle of shadows at different locations, it appears the world is curved. Basic maths says if you follow that curve, you get a circle. And in the six axes of movement (roll, pitch, yaw, surge, heave, sway) that maths works out to be a sphere.

However, recent data shows the world isn’t a sphere. It’s actually an oblate spheroid, which is another way of saying the earth looks more like a pear than a ball. And even this shape changes over time as the oceans move and earthquakes disrupt the plates.

So, while the earth isn’t flat, it’s not round either. The key is that the scientific method expects to change as more data arrives and measurements improve. At no point was science proved wrong about the shape of the earth. The truth was refined.

What makes an economist or scientist different from a conspiracy theorist is that the former is comfortable saying: “given the data we have today, it appears the world is this way.” Whereas the conspiracy theorist says, “today’s data is correct, so the world must be this way.”

It’s a subtle difference, but the two positions are not the same. One looks at the data and decides what to think, while the other knows how to look at the data. Wouldn’t it be a better world if more were trained in the arts of thinking?
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