Variance

Living with Covid as endemic means acknowledging variance

Welcome to Plugging the Gap (my email newsletter about Covid-19 and its economics). In case you don’t know me, I’m an economist and professor at the University of Toronto. I have written lots of books including, most recently, on Covid-19. You can follow me on Twitter (@joshgans) or subscribe to this email newsletter here. (I am also part of the CDL Rapid Screening Consortium. The views expressed here are my own and should not be taken as representing organisations I work for.)


What is the next year going to look like in countries where the majority of the population have been vaccinated? If we look at the US, the pandemic has been pretty much declared over. The message is that if you are vaccinated you can go back to life as normal. But regular readers know that the forecasts even for vaccinated countries indicate likely severe outbreaks in the near future, possibly early Fall with the worst still to come in Winter 2021-2022. Vaccination may well prevent hospitals from being overwhelmed in those outbreaks but it is far from clear whether that will be all that keeps people from cutting back on social activities. Thus, even if you believe that the public health crisis may not be significant, there is every chance the economic disruption may continue.

We are seeing evidence of this already. In Israel, an outbreak means it is likely that prevalence will exceed US rates in a matter of week and Covid measures are quickly coming back. In the UK, the reopening is being reversed in the wake of an outbreak based on Delta. And in Australia, which barely shows up still in the Covid case statistics, the country is gripped by a chase to hunt down hundreds of cases of Delta with much the country likely to experience a full lockdown within the month.

The economic disruption from all of this is partly a result of mandated actions but, if our experience is anything to go by, will mostly be as a result of choices by individuals. What is worse is that it will ebb and flow. Ontario is just about to come out of one of the longest lockdowns of any place in the world. But I compare the mental state of those here to those currently in Australia, and the worlds are very different. In Australia, there is anxiety over trips, concerts and holiday plans. In Ontario, there is a discussion of getting haircuts and some stuff done with a relaxed discussion of how many will return to work. While on the basis of levels of problems, there is no comparison between the situations, for some reason, in terms of uncertainty and anxiety it is reversed.

This sheds light on a real problem. There was something certain about the last 15 months of continued restriction. Planning wasn’t possible because it was unclear how long this would last. That means plans could not be curtailed which is actually stress-reducing.

But people will be thinking about making plans again. The problem is that activity is fraught over the next year precisely because we know with certainty that there will be continued outbreaks that will disrupt those plans.

There are two economic consequences of this. The first is that there will be continued disruption to economic activity because of the viruses movements. The second is that people will eventually understand that and will delay making plans. Both of these are reasons why many industries are finding themselves supply-constrained and so we are going to have some inflation in the near future. But this will also cause a drag on the economic recovery and no amount of fiscal or monetary stimulus is going to help there.

Of course, this is all the more reason to accelerate vaccinations and overcome vaccine hesitancy. By the way, outbreaks themselves are a good way to get people to get vaccinated so there is a kind of silver lining there.

But now more than ever we need to invest in systems that will keep disruption to a minimum. People curtail social activity because they are worried about other people being infectious. As I have said for the entire course of this pandemic, this is a solvable information problem. We need to have systems in place whereby places can rapidly screen people in a “don’t even think about it way” so that people can feel confident in places, chains of transmission can be quickly broken, and disruptions can be kept to a minimum.

The problem is that adopting this system is not trivial even if it is simple to use after it is adopted. It must be done prior to serious outbreaks and not during them. It is an upfront investment in minimising disruption.

If you run a business, then I urge you to adopt the CDL Rapid Screening Consortium process and institute rapid screening. Do it in Canada and register and the government will provide the screens for free (sign up here). For everywhere else, how to do this in your workplace is explained here. It is the best way to reduce variance in your own neck of the woods.