Economics

Economics In The Age of COVID-19

An interview with Professor Joshua Gans on his latest book of the same title.
Economics In The Age of COVID-19

Christopher: Your latest book “Economics In The Age of COVID-19” was written in quick response to the outbreak of the virus, which you began writing in March and had published by April.  What prompted you to do this, and what were some of the challenges you faced in light of how quickly our knowledge of the virus and the virus itself were changing?

 

Professor Gans: The short answer of why I did it is that I went insane (chuckles). In reality, all I was doing at the beginning of the virus and then in the lockdown was looking at statistics and learning about this thing and seeing its economic consequences unfold. And it was very clear that that's all I was going to do for some period of time. So I thought, as you often should in this situation, what sort of things am I good at and how can I put that to use here? It seemed to me that explaining what was going on and trying to anticipate the issues that we were going to face was a good activity. And it seemed to me that there were so many issues that writing a book would be the most effective way to do it. 


One of the prevailing topics in the book is the trade-off between economic suffering and human suffering which you call “economy vs. health.” While many policy makers have framed the issue as a classic trade-off in the economic sense, where we can forgo one of the “goods” for more of the other, you claimed that this is an inappropriate mode of analysis. Could elaborate as to why we can’t fine tune that traditional economic trade off between these two “goods”?

The trade off between economic activity and health is something a lot of people find controversial. I refuse to entertain that there is a trade off at all. Having said that, many believe that we can trade off and that's the reason why we accept a lot of people getting ill because we've decided it's too costly one way or another to deal with it. Where exactly that trade off should lie is a matter beyond what an economist can tell you, but with regard to any pandemic, it's not a simple thing where you can say, “well, we'll have a little bit less public health and a little bit more economic activity or vice versa.”

The reason is because you either have a pandemic or you don't. You don't get to say, “Oh, we'll just have a small pandemic. That's what we want.”  We don't get that choice. Even a small boost in economic activity would lead you to a much larger pandemic and vice versa. And so it's really not “a little bit more of this” and “a little bit less of that.” The question is “are you going to deal with the pandemic or not?”  

In the book, you state that prioritizing the economy over health is a “one-way exit” and that countries should open their economies with caution. Once an economy is wide open, it is often too late to “regain” health in exchange for restricting the economy.

 

Yes. With a pandemic, you can’t try to see how much you like it. We can try economic activity to see how much we like it or restrict economic activity. But we can’t just say “Oh well, let's see how this pandemic goes. And if we don't like it, we'll tell it to go away.” You don't get that choice. 

While you warn of the dangers of opening the economy and going through this “one-way exit” where we can’t “regain” public health, you also say that shutting down society and social interactions too early forces you to forego information as to how the virus behaves. How do you find the balance between these two factors?

It's a very nasty problem. It's not unusual in this sort of situation, and we actually know how to solve it. What you do is you find an area somewhere that's self-contained and you let the virus rip in it and see what it's like, and it's too bad for all those people. That’s how you evil scientists solve it. But the problem is that we're not evil. Right? And so, in that situation, we can't do it, but it actually turns out the world is a little bit evil. The US for instance has let the virus run rampant in a whole lot of prisons. And I suspect, as clearly unethical it is, the other side of that is that it will end up telling us what sort of immunity humans can develop and things like that. But, that's not the way we do these things. It is a nasty problem with anything that is novel.

In the book, you discussed the social stigmas associated with carrying diseases, not the least of which being COVID-19. In the case of COVID, carrying the disease should theoretically encourage carriers to take the necessary measures such as self-quarantining. However, you also noted though that with AIDS in Africa, subjects tended to hide the symptoms and refused to be tested. Has the former or the latter been more prevalent, in your view, in Canada? Have social stigmas surrounding the virus dissuaded citizens from taking the necessary safety measures?

 

I think the social parts of this and the social norms  have proven important. Contracting AIDS is a signal of a whole lot of other things that people don't want to reveal. So, even if you go to have an AIDS test, that's telling the world something. So this is a stigma and it harms public health. With respect to COVID, we didn't quite have that. It’s true that right at the beginning, you could walk in the street and people believed you were the devil if you walked near them. I think that people got used to [these behaviours] and relaxed. It's obviously difficult to judge here in Canada, where if you get infected, you have free access to free healthcare. If you get infected, you can get sick leave and other things like that. But in other places in the world where that doesn't happen, you can imagine people might conceal their health status.

 

Another topic that you talked about was that, in Canada policy and elsewhere, governments have taken a targeted policy approach where the more vulnerable groups are protected while the less vulnerable groups continue to work within reasonable bounds so that the economy can continue to churn.You took a relatively one-sided stance on this issue, and I'm wondering what your thoughts are on why it gets so difficult to take these targeted policies.

 

As a theoretical measure, it makes sense. If there are groups of people who are far more vulnerable to the adverse effects of [COVID], we should think about that in the design of our policy. If you found that a part of the population was completely immune, no one says you should isolate those people. But is it feasible to lock down part of the population and keep them safe rather than not? Sadly, what we saw was that countries  all around the world failed when trying to do this. What happened to the elderly, particularly in long term aged care facilities, was that they weren't protected and it was particularly devastating to them. And one of the reasons why death rates have fallen now is because we have become more sensible about that. More precautions were taken. It turned out to be very hard to lock down facilities. For example, there were some States in the U.S. where people worked in one facility and only that facility, and there were other States where people would have multiple jobs and would move from one facility to the other. It turns out that that was a disaster which just caused this all to spread. So what we didn't have information on, but surely we needed, was much better information about where people go. You can't do this targeted lockdown policy just based on demographics. You have to have great information about where people are going and you need that information before we lock down. Once everyone locks down, you don't know what's going on. So to answer your question, I don't think we've changed our policy on that.

 

 In your interview with the MIT Press, you mentioned how the newer edition of your book is set to be published in November. In it, one of the topics you discuss is contact tracing and how this information can improve governmental response to pandemics. Could you give us a sneak peek as to what this section will entail? 

Sure!  So there are a couple of issues with contact tracing. The reason you want contact tracing is because fundamentally, your best way of managing a pandemic is by finding infected people and isolating them quickly. One of the issues we face is that we often find infected people quite late which is not great, but they give us a clue as to who else might be infected since you don't get infected. So if you can take an infected person and ask them who they've had contacts with, you can then go find those contacts, isolate them, test them, and you can stay one step ahead of the virus that way. The countries that have been successful in keeping the virus at bay have invariably had very good contact tracing regimes, mostly conducted by people. But in some cases [these countries] have also been assisted by apps and things like that. But the flip side of all this is that contact information can be quite personal. It comes up against privacy laws and in Canada, these laws are very strong. So, the book  talks about that trade off more explicitly this time around. Although, the issue of contact tracing is it's really an effective measure when the virus is not too widespread.  


So then it comes as no surprise that countries, particularly in the East, have had much stronger responses than countries in North America. In the absence of this intense contact tracing that countries like Taiwan have been able to do, which allowed them to host a 10,000-person concert last week, can Canada get to this level of free movement and contact before a vaccine arrives?

I actually think we are already getting the benefits of that right now. Since there aren’t that many cases at the moment, these cases can be traced to some degree. We can identify as they did in Ottawa a few weeks ago at a soup event and find everybody involved in that to clamp it down. But I don’t think this gets us back to normality. We’re still social-distancing, wearing masks, and you're not going to see the inside of a classroom for a long time. But one of the hopes that we're trying to push at the creative destruction lab is to find a way of testing for whether someone is infected, or rather infectious, very rapidly and quickly. [The test] is very simple: You spit onto a strip of paper or a swab, put it in a little bottle and shake it. If it turns purple, you're infectious. If not, you’re not infectious. These tests would be really cheap, maybe a dollar each if we had enough of them, and people could use them once every day or two to monitor the things that way. And that way, if anybody has the virus, we learn about it quickly. We're effectively looking for a needle in a haystack by searching the entire haystack all the time. And that would allow us to go about our lives “normally.” How to get to a position of [testing] fairly quickly is a real challenge. It would have been better had we been pushing for that many months ago, and we were pushing for that - I wrote a whole chapter about that - but I feel it's been very, very slow. I think in reality, this vaccine is still a long way off, and I think that widespread testing would be the better option. And in fact, what I would like to see is [widespread testing] made available, and then we can engage in a worldwide surge and say, “we're all going to do this for a month, get all the infected people and isolate them.” Then I think we're done! It would be a rather intense month, but a lot of countries have COVID under control, so they [aren’t the issue]. It really has to be the United States. The problem is that The United States is not actually trying to stop this. We could have that kind of surge and really be done with it, but at the moment, I fear that once we get the colder weather back in we might get spreading again and that's going to be difficult.

On the topic of vaccines, what I find interesting and unusual about the COVID-19 pandemic is that it is the first time we’re trying to solve the issue with a vaccine. With other pandemics, we have rid whole populations of a disease without finding a cure for it.

That’s right. We did that with SARS (Severe Acute Respiratory Syndrome), we did it with MERS (Middle East Respiratory Syndrome and we did it with Ebola as well.

 

While a unified global response would be ideal, the world has had troubles coordinating and so it looks like we might have to wait for a vaccine. You talk about the triaging of the COVID vaccine and how it is going to be a controversial process as governments will have to prioritize certain groups over others. Do you believe that we have to take a “wartime mindset” where we attempt to maximize the overall utility for society or do we opt for a more equitable route given that certain demographics have suffered disproportionately more than others? 

There's a difference between what we ought to do with the vaccine and what we're going to end up doing with it. To me, this is the most politically awful problem that exists. In reality, what we should do is we should identify the most vulnerable sectors of the population, and give them the vaccine first (essential workers, et cetera, et cetera) and then hold a lottery. If your number is low, you just wait a long time. The problem with that is that there are very different equality issues. We would have a whole lot of richer people who would be willing to pay for a lottery ticket that's higher up on the list, and we would have poor people who would be happy to sit around for a few months by selling their lottery ticket to someone else. So I like the idea and talk about this in the new version of the book to which I’ve dedicated an entire chapter. I like the idea where we have a lottery system, but we allow people to sell their ticket.

It's effectively a cap and trade scheme for lottery tickets then.

 

Yes, exactly. And that’s where we get the equity, because the lottery gives you the baseline to be equitable. But you also get the allocative efficiency because people who have a need, or feel they're willing to pay, will find what they want in some sort of market. Now, one of the problems is you have to start thinking about that right now. If your solution is a vaccine, you have to be thinking, “what do you do about these issues right now?” There's no vaccine that's going to appear magically in the number of doses [that we need], and it's not even clear if we can produce that much of a vaccine depending on how we do it. You either have to grow these [vaccines] in chicken eggs which means you need more chickens. Or, you need to use things like shark oil, which means you need more sharks. People tend to think of vaccines as, “Oh, I just mixed few chemicals together and we got it,” but that’s not the case. Other questions that come up are where we produce them, where we ship them, how do we store them et cetera. And that's only once we've got to the situation that we know [the vaccine] is safe, but the point is we've never solved a pandemic before with a vaccine.  There's good reasons why not. And the amount of weight that has been put on that as the exit solution, is completely at odds with any sort of sensible risk assessment.

 

In the book, you draw a lot of comparisons between the wartime effort and the response to the pandemic. But one thing you noted was how, at the end of the Second World War, the Allies came together to ensure a stable economic and political relations moving forward, and created organizations such as the IMF at Bretton Woods. Given that there are many similarities in terms of the both economic and human destruction that the pandemic has caused, do you see that we'll have that kind of unity at the end of all this?

I mean, my hope is we would. We have an organization that was partly that way in the WHO, but it had no power. So I think personally, the extent of this is so great that we have to think, like the United Nations or the IMF, about actions we can take that are above national authority. Even with those institutions, we never quite got there. [Their actions] applied to some countries, but not others. Having said that, this is a start to some degree. So one would hope that [unity] would occur, but frankly, right at the moment, with the leadership in the United States encouraging others around the world to also behave non-cooperatively we haven't got that basis. It doesn't take the most visionary leadership in the world to see this through, but it takes some.





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