QED

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.

Order Andrew Stone’s Restoring Hope here

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

15 comments
  • Andrew Griffiths

    265 economists, can they be lumped in with 97% of Climate Scientists,how many economists are there in Australia anyway?We need some answers.

  • ianl

    I also despair of the blocks of concrete between the ears of our MSM pundits, who are now scratching their heads, then removing the wood splinters, because of the speculation that Australians are “hoarding” (ie. saving) $100 notes in safe deposit boxes.
    Why, oh why … they just can’t grasp why.
    The Cyprus theft of bank deposit/super savings a few years ago by a Govt looking for cash in desperate times comes to mind.
    Borrowing about a trillion dollars by a desperate Aus Govt may provoke comparisons for some people. I can easily understand that mistrust.

  • Tony Tea

    These bulltish group letters are used mainly to smoke out faculty members who are not fellow travellers.

  • Stephen Due

    Amusing to see this pompous letter signed by 265 economists. It’s so ’60s. They are still back there with The Beatles and Mao’s Little Red Book. The world has long since passed them by. Nobody’s interested any more in what they say or how many letters they sign. After all, we have the Internet too.

  • Peter Smith

    I am sorry that Andrew Stone has thought fit to write about this letter from 265 economic dunderheads. I guess they are all unreformed lefties and therefore economists in name only. I also guess they still have well-paid jobs unlike those thrown out of work. I had hoped to let their tawdry exercise go through to the keeper. What they fail to take into account, as pointed out, is not the economic cost in dollar terms but the cost in terms of the livelihoods and lives and ultimately the physical and mental wellbeing of millions of Australians. No cost benefit exercise has been done. But that aside, to continue the shutdown when infections, serious cases and deaths are so low is sheer madness. Breakouts, if they ocurred, could be contained. My only difference with Andrew is a matter of degree. I think that the economy should be fully opened up rather more quickly than he proposes, with businesses given the responsibility – with guidance – to institute sensible precautions. At the same time, efforts should continue to protect the vulnerable.

  • padraic

    50 flu deaths per week in winter in Oz without shutdown plus vaccine available – just under a 1000 deaths each day in European countries with lockdown and no vaccine – no problem.

  • Warty

    Can you imagine the ABC publishing Andrew Stone’s infection rate figures (above)? It is more newsworthy keeping to the original modelling back in March, which was actually after Trump was accused of racism for banning flights from China a month or so earlier, and against the advice of WHO.
    So yes, those on the Left were initially dismissive of potential virulence of the outbreak, but finding an opportunity for political mileage, used the inflated modelling figures to accuse conservatives of not acting quickly enough, not being sufficiently prepared and being prepared to sacrifice grannies and grandpas in order to maintain a fully functioning economy. Little wonder Morrisons, Johnsons and Trumps were just a little spooked. Andrew Griffith quite rightly reminds us of those 97% of global warming scientists who ensured that their science was ‘settled’. They ought to have nudged our political masters towards caution, but I suspect nobody studies history anymore.
    The irony (actually, thinking back to the days of Stalin, perhaps not) is that those on the Left have proved the most totalitarian, sparking conspiracy theories amongst the ‘far right’ about darker interests being behind the global shutdowns. Incidentally, what is a conspiracy theory? Is it simply one that differs (a bit/strongly/violently) from the norm? And ‘far right’, isn’t that someone to the right of a Malcolm Turnbull or a Christopher Pyne?

  • Peter OBrien

    A particularly pernicious technique used by the government to justify prolonging the crisis is to conflate social,distancing and commercial activity. When asked why the economy can’t start to be re-opened, they say ‘it’s too early to lift social distancing measures’, as if the two were mutually exclusive.

  • T B LYNCH

    30% of New Yorkers caught Wuflu.
    Mortality was 1 in 200.
    Mortality of chronicly ill was 1 in 10.
    Mortality of healthy workers was 1 in 1000.
    Diseased folk need to self isolate.
    Government should get out of the way.

  • rod.stuart

    Andrew Griffith and Warty: Please bear in mind that the fictitious “97% of scientists” was always complete and utter BS concocted only in the childish minds of the cartoonist John Cook and his mentally challenged partner in crime Stephen Lewandowski.

  • Tezza

    Well said, Andrew.
    However the letter does serve its purposes. As Tony Tea notes, it flushes out the sound thinkers in degenerate faculties who didn’t sign. It’s a badge of honour not to have your name among the 265.
    What’s more, it alerted me to a handful among the signatory senior economists of the left, right and centre who I once considered smart and worth reading, even if they were sometimes (or even often) wrong. We now know they have become unmoored from reality and from a core notion in the history of economic thought, opportunity cost. Henceforth, I can safely ignore them.
    I’m thinking Jeff Borland, John Freebairn, Joshua Gans, Ian Harper, John Quiggan, Justin Wolfers, Warwick McKibben and Peter Lloyd.
    It’s sad. What were they thinking?! But at least I don’t have to waste my time on them anymore.

  • aftermath

    For those of us with longer memories, I am quoting from a Cato Institute analysis about Margaret Thatcher and her battle with the 364 Keynesians:
    In 1981, Prime Minister Thatcher made a dash for confidence and growth via a fiscal squeeze. To restart the economy, Mrs. Thatcher instituted a fierce attack on the British fiscal deficit, coupled with an expansionary monetary policy. Her moves were immediately condemned by 364 distinguished economists. In a letter to The Times, they wrote a knee-jerk Keynesian response: “Present policies will deepen the depression, erode the industrial base of our economy and threaten its social and political stability.”
    Mrs. Thatcher was quickly vindicated. No sooner had the 364 affixed their signatures to that letter than the economy boomed. Confidence in the British economy was restored, and Mrs. Thatcher was able to introduce a long series of deep, free-market reforms.
    As for the 364 economists (who included seventy-six present or past professors, a majority of the Chief Economic Advisors to the Government in the post-WWII period, and the president, as well as nine present or past vice-presidents, and the secretary general of the Royal Economic Society), they were not only wrong, but also came to look ridiculous.

  • talldad

    How many economists would it take to change a light globe?

    Even 265 would be useless. They would have to call in one handyman with a ladder.

  • terence.dwyer

    Even in health terms there is a trade off. How many people are not visiting the doctor when they should?

  • joemiller252

    Well, bugger me, they’re all academics.

    Joe Miller

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