Not Merely Wrong but 265 Times Wrong

Years ago, Paul Kelly noted the striking irrelevance of academic economists to Australia’s 1980s and ’90s reform era. Contributions like Monday’s “Open letter from 265 Australian economists: don’t sacrifice health for ‘the economy‘” show that nothing has changed. What insights do the authors believe are so important they must be urgently put to leaders dealing with multiple critical decisions every day? With its straw-man arguments and vagueness, the letter offers none.

The authors reject as “a false distinction” that there is “a trade‑off between the public health and economic aspects of the crisis”. This is so absurd that it is astonishing any serious economist (let alone 265 of them) could suggest it. If an extra $1 billion – let alone hundreds of billions – were spent on, say, the Pharmaceutical Benefits Scheme, some lives would undoubtedly be prolonged. Likewise for spending on highway “black spots”, homelessness, and hundreds of other programs. Trade‑offs between fiscal, economic and health effects (current and future) are properly endemic to all public policy issues.

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Moreover, the authors do not even mention that an ongoing lockdown inducing deep recession will itself have large negative health effects – damage that will be definite, not merely possible, in the event of a so-far unseen second-wave outbreak. These impacts will be felt by hundreds of thousands of additional long‑term unemployed, by thousands of small business owners whose firms are destroyed, and through lower future health spending as we repay massive additional public debt.

Carefully weighing these competing costs, and the distinction between definite and potential ones, is exactly where academic economists could contribute – rather than creating a false dichotomy between the current lockdown and “an unmitigated contagion”.

The authors are also dismayingly confident that the economic costs of sustained lockdown can simply be taken onto “the government’s balance sheet”. There is general agreement that these costs should, if possible, be shifted to taxpayers – since those losing their livelihoods are doing so through no fault of their own.

Only academics, however, could imagine it will be possible to spread the severe pain of a protracted lockdown evenly, as in economic models. Rather, such pain, while hitting academics lightly-if-at-all, will fall disproportionately on owners of small firms (some of whom will also lose their homes, used as collateral), and the many Australians thrown into long‑term unemployment.

Finally, while providing no detail on the current medical or economic situation, the authors declare we must “keep social‑distancing measures” until “the number of infections is very low”, and not “prematurely” loosen restrictions – but offer no guidance on what “very low” or “premature” mean.

Here are some statistics they could have noted.

# For the last fortnight, daily reported new cases for Australia have been 100 or less – among 26 million people. For the past week, daily new cases have averaged less than two per million!

# This is for a virus with a fatality rate much higher than a typical annual flu for vulnerable groups (the very elderly and those with serious co‑morbidities), but only comparable to it for everyone else. This bears on whether a more targeted approach than lockdown is appropriate.

# Compared with 70‑odd virus deaths in seven weeks (many contracted overseas or on cruise ships), Australia typically sees 50 flu deaths every week in winter.

# Large parts of Australia have much lower per capita infection and hospitalisation rates, and hence even less reason to be in lockdown.

# And there are sound reasons (relating to different conditions and appallingly botched public health responses) to believe that Australia has never faced the sorts of scenarios seen in, say, Italy and New York.

With these data, it is ridiculous that the current lockdown should remain fully in place for even one more day. That is not to call for instant removal of all measures taken to address current health risks. It is, however, to say that governments should immediately commence a phased, four-to-six week wind‑back of the lockdown instituted since March 23 (conditional on infection rates not spiking alarmingly again to, say, 300 per day).

This would involve schools reopening, and most businesses (including cafes, restaurants and bars) gradually re‑starting normal service with reduced numbers (but with large events involving crowds remaining closed for now). Strong guidance on enhanced personal hygiene and social distancing would be maintained, together with special measures for vulnerable populations (nursing‑home residents, etc.).

Robust debate around such specifics, rather than content-free moral preening, would be a better use of our academic economists’ time.

Andrew Stone was Chief Economist and senior policy adviser to Tony Abbott (as Opposition Leader and then as Prime Minister). His book, Restoring Hope: Practical Policies to Revitalise the Australian Economy, is available from Quadrant Books