• rmacculloch

The economic cost of the coronavirus crisis to countries is mounting. In NZ's case, $100 billion is so far expected to be added onto our public debt, corresponding to around 30 percentage points of GDP. According to one of the biggest names in US economics, Professor John Cochrane at Stanford University, there maybe a way out. He writes:

"Yes, I'm repeating myself, but maybe if we just try over and over again we'll get through. We could stop this disease now with tests. Vaccines are just a tool to stop disease transmission. Widespread, cheap frequent tests are just as effective a tool to stop disease transmission".

He references an epidemiologist and expert in disease testing, Michal Mina, at the Harvard T.H. Chan School of Public Health, who is calling for a shift in strategy toward a cheap, daily, do-it-yourself test that he says can be as effective as a vaccine at interrupting coronavirus transmission. Mina reports that the paper-strip tests have already been developed and their shotgun approach to testing - cheap and widespread - currently provide the only viable option for a quick return to the workplace, classroom, and other venues.

He adds that the current test-and-trace strategy, which uses a high-accuracy, laboratory-processed test, is well-suited to detecting individual infections as a prelude to medical treatment. But its high cost and slow turnaround time make it ineffective for the broader goal of curbing transmission in the community. See:

  • rmacculloch

Auckland Mayor Phil Goff is urging businesses to stop price gouging and "act responsibly" as the city enters its fourth day in level 3 Covid-19 lockdown. Why do people hate price gougers in times of disaster and crisis? The Harvard economist, Julio Rotemberg, argued that the reason is "regret-based anger".

He gives an example of buying a snow shovel around the time of a blizzard. An individual doing so regrets not having bought a shovel earlier. This regret is accentuated if she learns that the price has been increased in response to the storm. Price-setters do not all respond in the same way to disasters. Some firms, like the ones that Mayor Goff is referring to, raise their prices. Others, by contrast, improve the terms that they offer buyers. This diversity of reactions suggests that suppliers vary in their altruism.

The extent to which some firms are genuinely altruistic whereas others are not, is revealed in times of disaster and crisis. As suggested by the title of a news story that ran in the Deseret Morning News in Utah in the United States, “Disasters reveal the stuff we’re truly made of”.



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Robert MacCulloch