Wednesday, April 29, 2020

Morrison and the medicos must also avoid complacency

They say Australians always respond well to a crisis, and it seems it's true. Even in these days of disposable leaders, Kevin Rudd deftly stopped the global financial crisis from sucking us into the Great Recession, and now Scott Morrison has got on top of the corona crisis in a way few would have expected. His approval rating has soared. But I still wouldn't want to be in his shoes.

Why not? Because, as an old econocrat explained to me long ago, if you dispose of a crisis with too much ease – without a titanic struggle – you get precious little gratitude from the voters. If it was that easy to fix, it can't have been much of a crisis in the first place. Indeed, all that money you spent – well, most of it must have been a waste. That's the very way his political opponents have sought unceasingly to denigrate Rudd's unbelievably skilled performance in 2009.

And now Morrison faces the same risk. Everyone's saying he – along with the premier cats he's been herding – has done surprisingly well in controlling the outbreak. But that's not true. The unvarnished truth is that – if you'll forgive the expression – he hasn't just done well, he's killed it. He set out merely to "flatten the curve" but in fact has driven it down almost to zero. And done so with just 80 or so people losing their lives so far.

In the jargon of the epidemiologists, he and the premiers have succeeded in getting "R" – the average number of other people infected by someone who's contracted it - below 1, meaning it's dying out.

Utterly uncharacteristically for a politician of any stripe, Morrison has sought to play down this achievement. Why? Because the whole world has a year or years to go before the virus is tamed and, in the interim, some mishap on our part could cause the virus inside our borders to become undead.

That's why Morrison and his medico advisers live in fear that any loosening of the lockdown could lead us to become "complacent" and flip to the opposite extreme, stopping all social distancing.

But keeping us locked down as tight as possible for as long as possible offers no solution to Morrison's challenge as our leader. That's because, though we care deeply about saving lives, we also care about saving our livelihoods. Our success in getting on top of the virus has been bought at the cost of shutting down most of the economy, with hundreds of thousands of workers losing their jobs.

Morrison's problem is that, because it was so relatively painless, his remarkable success in driving out the virus will soon be forgotten, whereas the continued dysfunctional state of the economy – the way-high unemployment – will be upmost in people's minds come the election in 2022.

And, even now, his critics – mostly from his own side – are concluding that his measures to deal with the virus grossly overestimated the size of the problem and have decimated the economy for no good reason.

For instance, we were terribly worried about the risk of hospitals being overwhelmed by patients who couldn't get proper treatment to prevent them from dying. We had to delay the virus' spread while we more than doubled the existing number of 2200 intensive care beds. Fine. Last time I looked, there were 43 virus victims in ICU.

But such criticism is just being wise after the event. It forgets that we had to respond quickly and forcefully to a new virus, the characteristics of which we knew next to nothing about. The best we had to go on were numbers from China, which proved much worse than our own experience.

The medicos' original modelling assumed Wuhan's R – reproduction number – of 2.68, whereas their more recent modelling using Australian numbers shows we started with Rs above 1 only in Victoria and NSW, before falling below 1 in all states bar Tasmania.

Morrison's deeper problem is that the longer he keeps the economy locked down, the less there will be left to reopen. So avoiding complacency cuts both ways. You and I must not become complacent about hygiene and social distancing, but Morrison and his medicos must not be complacent about the enormous economic (and social) cost that our success in getting on top of the virus is inflicting on all of us.

The solution is to take advantage of our success in taming the virus by moving quickly to replace the sledgehammer measure of closing down most of the economy with the less economically damaging measures of much more testing, better tracing of people exposed to the virus, and jumping on any local outbreaks ASAP. The new app is a big part of this shift to less invasive cures for the disease.

These are the three things Morrison has been quietly saying we need to get organised before we consider easing the lockdown. But now he needs to move strongly in dismantling much of it while, naturally, retaining our closed borders.

Monday, April 13, 2020

How would Jesus treat people on the dole?

Since it’s Easter, let me tell you about something that’s long puzzled me: how can an out-and-proud Pentecostalist such as Prime Minister Scott Morrison be leading the most un-Christian government I can remember? Fortunately, however, the virus crisis seems to be bringing out his more caring side.

Many people think being a Christian means being obsessed with sexual matters - abortion, homosexuality and same-sex marriage – plus, these days, their human right to discriminate against people who don’t share their sexual taboos.

But if you read the four gospels recording what Jesus did and said, one message you get is one rarely emphasised by his modern-day, generally better-off followers. Jesus was always on about the plight of the poor, and was surprisingly tough on the rich.

Jesus gave his followers a new commandment, that they love one another. “By this everyone will know that you are my disciples.” Asked who was the neighbour we should love as our self, he told the parable of a despised Samaritan, who rescued a man bleeding in a ditch while two upright church-goers “passed by on the other side”.

Jesus said he came to “proclaim the good news to the poor”. “Blessed are you who are poor, for yours is the kingdom of God. Blessed are you who hunger now, for you will be satisfied. . . But woe to you who are rich, for you have already received your comfort.”

To the rich he advised: “When you give a banquet, invite the poor, the crippled, the lame, the blind, and you will be blessed.”

Jesus blessed those who had been kind to others: “I was hungry and you gave me food, I was thirsty and you gave me something to drink, I was a stranger and you welcomed me, I was naked and you gave me clothing, I was sick and you took care of me, I was in prison and you visited me.”

When a young man asked Jesus what he must do to inherit eternal life, he said: “Go, sell what you own, and give the money to the poor, and you will have treasure in heaven; then come, follow me.” But the young man “was shocked, and went away grieving, for he had many possessions”.

All this compares badly with the actions of the Coalition government, in which Morrison has always played a senior role. As minister for immigration, he was more ruthless than Labor in turning away strangers who came by boat seeking asylum. Those who did make it were treated harshly, to ensure any further strangers got the message about how unwelcome they’d be.

A lot of people like to divide the poor between the deserving and the undeserving. Like Labor before it, the Coalition has pandered to this un-Christian attitude. It favours “lifters” over “leaners”. Morrison himself introduced the ethical code that only those judged to have “had a go” will “get a go”.

The deserving poor are people on the age pension; the undeserving are the unemployed, single parents and probably most of those claiming the disability support pension. I went out and found a job; what’s stopping them doing the same except their own laziness?

Labor always pandered to the widespread “downward envy” of the jobless, but the Coalition has doubled down, reintroducing work for the dole despite all the reports saying it does nothing to improve people’s employability, making people run down their savings and wait longer to be eligible for the dole, making people prove they’ve approached an unreasonable number of employers each fortnight and suspending their payment if they fail, or miss an appointment for any reason. Not to mention the "robo-debt" scandal.

The Coalition wants to control how people spend the dole by paying them by card rather than cash. It wants regular drug testing of those on the dole. And it has steadfastly resisted widespread public pressure to increase the paltry amount of the dole, even though Labor has finally been shamed into abandoning its own longstanding hardheartedness.

But now, however, having adopted the slogan “we’re all in this together” – one beloved of my co-religionists in the Salvos - in his battle against the virus, Morrison seems to have had a change of heart. Whereas Kevin Rudd studiously avoided including the unemployed in his two cash splashes, Morrison has included them with other welfare recipients in his two $750 payments.

His temporary “coronavirus supplement” effectively doubles the rate of unemployment benefits to about $550 a week. He must know that returning the dole to $40 a day after six months won’t be politically possible. Meanwhile, his temporary JobKeeper payment of a flat $750 a week undercompensates higher wage earners while overcompensating lower wage earners, including many casuals.

In all, a Christlike turn for the good.

Saturday, April 11, 2020

Some major contagions have nothing to do with you-know-what

It’s a long weekend so, though we’re barred from enjoying it in the usual way, let’s at least forget the V-word. How about a quiz?

Let’s say the government is preparing for the outbreak of an unusual disease (no, not that kind of disease) that, should we take no action, is expected to kill 600 people. The government could act to combat the disease in either of two ways.

If program A is adopted, 200 people will be saved. If program B is adopted, there’s a one-third chance that 600 people will be saved, and a two-thirds chance that no one will be saved. Which one would you choose?

If you chose A, congradulations. You’re in good company. When this psychology experiment is run, about 72 per cent of subjects favour A and only 28 per cent favour B.

But then the government consults the epidemiologists. Their advice is: forget A and B, and consider program C or program D. If C is adopted, 400 people will die. If program D is adopted, there’s a one-third chance no one will die and a two-thirds chance that 600 will die. Which one would you choose?

If you chose D, more applause. In laboratory experiments, that’s what 78 per cent of subjects choose, leaving only 22 per cent choosing C.

But if you look at the four options again you find that program A and program C are the same. Under A, 200 out of 600 are saved; under C, 400 out of 600 die. It’s just that A highlights the positive, whereas C highlights the negative.

That 72 per cent of subjects favoured A, but only 22 per cent favoured C tells that most of us instinctively favour the safer, more certain outcome. Program B, remember, contained a two-thirds chance that no one would be saved. This instinctive preference confirms economists’ conventional assumption that most people are “risk-averse”.

But a closer look also reveals that program B and program D are the same. Program B offers a one-third chance that 600 people will be saved and a two-thirds chance that no one will be saved, whereas program D offers a one-third chance no one will die and a two-thirds chance that 600 will die.

(If you can’t see that, remember that, in probability theory, the expected outcome is the possible outcome multiplied by the probability of it happening. So B is ⅓(600) + ⅔(0) = 200. And D is ⅓(600) + ⅔(0) = 200.)

But if options B and D are the same thing expressed in different ways, how come the experiments show only 28 per cent of subjects choosing B, but 78 per cent choosing D? It’s because, relative to option C, which offered only the certainty that 400 people would die, option D offered a one-third chance that no one would die, and most subjects thought that was a risk worth taking.

This shows that, while it’s generally true that most people are risk-averse, as conventional economics assumes, a more powerful human characteristic – which conventional economics ignores – is that most of us are “loss-averse”.

A key insight of behavioural economics is that we hate losing something much more than we love gaining something of the same value. So much so that, surprisingly, we’re willing to run risks to avoid any loss.

If you hadn’t noticed, when you look closely you see that all four options offered the same “expected value”: 200 people saved, 400 lost. If everyone had realised this at the time, they should have been equally divided between the options.

Why were we so sure that A and C were much more attractive that B and D? Well, one possibility is that most of us aren’t much good at maths. But the more important explanation is that we are heavily influenced by the way a proposition is presented to us – by the way it’s “framed”, as psychologists say. The same proposition can be packaged in a way we find attractive or repellent.

This, too, is a truth that conventional economics knows nothing of, but behavioural economics – the school of economic thought that uses psychology to throw light on economic issues – has brought to economists’ attention.

Putting it differently, the choices we make are heavily influenced by the context in which we make them. This is one of the key arguments advanced by Robert Frank, an economics professor at Cornell University, is his new book, Under the Influence.

Frank notes that standard economic theory says the spending decisions we make depend only on our incomes and relative prices. People’s assessments of their needs and wants are assumed to be completely independent of the spending decisions of others around them.

But this too is where the assumptions of standard theory are unrealistic. In real life, the things we buy and do are often heavily influenced by the “context” of what our friends are buying and doing.

We wear the clothes we think are fashionable, and we judge what’s fashionable by what our friends are wearing. The best way to predict whether a young person will take up smoking is whether their friends smoke.

We have an impulse to conform – which is stronger than we often realise. That’s why we can’t resist buying toilet paper when others are grabbing it, or selling our shares when others are quitting the market.

Psychologists call this phenomenon “behavioural contagion” – our tendency to mimic the behaviour of others. When some things start to become popular, they often become very popular. Same if they start becoming unpopular.

Frank notes that our tendency to copy what others are doing can have positive consequences (as when people exercise more because their friends are doing it) or negative consequences (as when we drink heavily because the people we live with are).

He argues that economists ought to be more conscious of behavioural contagion because of the opportunities they present for governments to use taxation to encourage us to make better choices.