Ryan Bourne holds the R Evan Scharf Chair in Public Understanding of Economics at the Cato Institute.
Boris Johnson now demands we must “Stay Alert” to the threat of Covid-19, rather than simply “Stay Home” to avoid spreading it. Perhaps it’s time we commentators “stayed alert” to new evidence regarding the Coronavirus too, rather than doubling down on our entrenched views.
Even after the Prime Minister’s statement, the UK remains gripped in an inane pro- v anti-lockdown debate – the former camp convinced relaxation risks a huge additional death toll, the latter convinced lockdowns themselves cause economic destruction.
This dialogue of the deaf is fast becoming a dialogue of the blind. For global evidence suggests that lockdowns have had a very small additional impact on economic activity relative to the voluntary social distancing we’d see anyway. Not only were our behaviours changing radically before government orders, but places that didn’t lockdown are seeing similar economic devastation.
Take the United States. Data from Raj Chetty’s “Opportunity Insights” produces incontrovertible evidence that “social spending,” time spent away from home, and travel plunged following the national emergency declaration on March 13.
This was well before state governors ordered business closures and mandated that residents stay home. The five U.S. states that did not issue stay-at-home orders likewise saw near-identical economic and mobility trends to those that did. These results have been confirmed by two academic studies. Major retail brands, from Nike to Apple, were closing stores well before state lockdowns too.
Sweden, which didn’t lockdown to the same extent, similarly suggests voluntary distancing has been the key driver of downturns. Data from Citymapper shows that transport mobility in Stockholm fell 70 percent by the start of March. Travel to the holiday island of Gotland was down 96 percent compared with Easter last year, despite no government orders banning it.
Last week, projections from the Swedish central bank suggested the country will see a GDP contraction similar to other locked down Scandinavian economies, despite Sweden’s liberal approach to business openings. Just because people are free to engage in economic activities or open their businesses, does not mean workers or businesses will do so.
Here, OpenTable data shows that UK restaurant bookings fell 82 percent by March 17th against last year, a full three days before Boris Johnson closed restaurants. City Mapper shows mobility in London had fallen 75 per cent the day before full lockdown was announced, with Manchester and Birmingham exhibiting similar patterns.
True, it then fell by another 10 percentage points after lockdown, but the degree of behavioral change would have made it very difficult for much activity to remain open anyway.
Despite extensive media focus worldwide on bars still open, people having picnics or bathing on beaches, the data shows voluntary social distancing came well before government mandates. We acted on information from governments, of course, but not their orders. Some companies even wanted governments to lockdown to be eligible for business interruption insurance or relief. The economic carnage is therefore primarily from the virus, not the lockdown. And other data on the famous R, from countries such as Switzerland to the U.S. states, suggests the virus transmission was subsequently falling firmly before lockdowns were introduced.
My point here is not to imply that lockdowns are economically harmless. Crude bans catch high-risk and low-risk activity alike. They prevent businesses from adapting to this new environment with safety protocols too, and second-guess what is best for many families in very different situations. We can all think of examples of companies that could open safely and viably with social distancing (the government ultimately agreed on garden centres).
Likewise, we know wellbeing has fallen dramatically for many and that lockdowns contribute to that by banning some activities that could bring us great pleasure. Sweden is also strongly dependent on foreign trade, so in part is being dragged down by policy elsewhere.
But these impacts on the margin shouldn’t be used to mask the big picture: whether in expectation of lockdowns, plain old fear, or observation of policies elsewhere, private activity mimicked lockdowns before they happened.
The libertarian in me wants to blame bad government policies for economic harm. And the longer lockdowns go on, and adaptation is denied, the more true this becomes. Yet one cannot look honestly at the data and conclude anything other than the virus, not the lockdowns, have caused our economic woes so far.
So what are the implications? Pro-lockdown commentators could say this proves there is no health vs. economic trade-off and so little upside to relaxing restrictions. Anti-lockdown folk could say that it shows people are better placed to manage risks than governments imply.
Our starting assumption though should surely be that much economic pain will endure until the public feels confident infection risks have been reduced. Lockdowns prevent business innovation towards this. But they might help deter some people taking the wrong message that relaxation means “anything goes.” Johnson is evidently pained by these considerations, hence phasing in other loosening, while being terrified about how it’s perceived.
His strategy now is to continually adjust activity restrictions to suppress the virus while using staged the relaxation to judge what the big risk factors are. With so much uncertainty, none of us know yet whether this is the right approach. Retrospective analyses will say suppression was the correct call if a vaccine comes quickly and so lockdowns actually prevent deaths rather than delaying them, or if the time results in better treatments, or safety protocols that inspire more confidence. The unknowns are legion.
Boris has to make a judgment now and is clearly hedging his bets. He wants to do more than “flattening the curve,” and to build test-and-trace infrastructure to live with the virus once infections have fallen dramatically, shifting to more like South Korea’s approach. Where he is silent is what evidence it would take for that that strategy to be abandoned. At what stage do we, societally, conclude the costs of suppression or waiting for a vaccine to “go back to normal” are too high.
To put it another way: there remain only three ways this full episode ends for the UK – a vaccine delivering sustained immunity, near-eradication and then ongoing firefighting indefinitely, or various paths towards “herd immunity.”
Johnson was perfectly clear on the staged removal of lockdown. He was less clear on what might cause him to change his view on which end state he was working towards – indeed, if a vaccine wasn’t forthcoming, he simply said we would all be in it for the “long haul.”
The virus has been the cause of our economic pain to date. But whether suppressing it is optimal largely depends on factors beyond political control. What would have to happen for this new alert system for ongoing suppression to be deemed undesirable? That’s the hole in this pandemic plan.