Why we need economists on EXPERT committees.

We may lose sight of which day of the week it is, but we must never give up on logic.

Experts make lots of wrong decisions for what is perceived to be the right reason.

There are many obvious solutions which cannot be, or are not, quantified in case they may contradict a political decision. One example in education comes to mind. In the 1980`s government were keen to cut spending on state education. It was a time when State run comprehensive education was producing better outcomes, particularly at “A” level, than the Grammar Schools and Private Schools. To cut spending on education a political decision was made to increase class size in State schools which incidentally advantaged private education. Teachers know that there are optimum sizes for different types of class, however the experts made it clear that there was no evidence that smaller classes produced better outcomes. This statement was correct but it implied that there had been lots of research carried out whereas in fact there had been none and so a decision was assumed to be right that teachers knew was obviously wrong.

A current example of being bamboozled by experts is the use of increase/expansion as opposed to decrease/contraction terminology. When it is politically necessary we are told that a smaller increase in a total is actually a decrease or contraction. It is often used when explaining how a smaller increase in government overspending is actually a decrease or a contraction or austerity. How many people have been convinced that we have been through a decade of austerity? In fact a smaller increase in the total of spending and borrowing is just less profligate than last increase.

Let me now return to the title of this piece of writing and direct your attention to the expert SAGE committee. In the absence of quantitative evidence there are a number of terms that are useful and meaningful to the layperson, but frowned upon by the experts. They are miniscule, small, big, enormous and gargantuan and we will return to using them after two relevant economic concepts are explained.

The first piece of economics to understand is the difference between fixed and variable costs of production. Fixed costs are all those costs incurred by a firm even when they produce nothing; and variable costs are those costs only incurred when production takes place. During lockdown firms have become very aware of their fixed costs. Furloughing has gone some way to offset a variable cost but it is of no help in covering fixed costs and those firms and industries with high fixed costs are rapidly going out of business.

The second bit of economics is the importance of cost benefit analysis. It reminds us that all political decisions have both costs and benefits and that the best decisions are when benefits outweigh costs. These are often overlooked as they cannot be quantified precisely but terms like miniscule, small, big, enormous and gargantuan can convey an effective message. Selected SAGE advice is considered below:-

                                                   COSTS                              BENEFITS

Furlough                                   Enormous                         Big

14 day travel quarantine        Big                                   Miniscule

2 metre social distance           Gargantuan                     Big

I metre social distance           Big                                     Big

Face masks where I metre

cannot be observed                 Miniscule                         Big

Nothing looks very scientific, but what does it tell us?

The economist`s answer is that we should return to work, stop furlough, remove quarantine rules on travel, observe I metre social distance and wear face masks when it is not possible to observe the required social distance. All sensible rules of hygiene and health need to be observed with careful checks at airports and in the workplace.

The advice is clear and avoids political doublespeak like being told that when the R rate was high we need not wear masks or have travel quarantine but now the R rate is low we do need masks and travel quarantine.

A further word on the words used in the table:

The costs of furlough are enormous, do not cover fixed costs and can be removed immediately without the loss of big benefits as we all return to work and observe sensible rules.

The 14 day travel quarantine will do irreversible damage to the travel industry with hardly any quantifiable benefits.

Two metre social distancing is and will have gargantuan cost implications for travel, leisure and the workplace with miniscule benefits compared with one metre social distancing, and masks when this is not possible, which will have much lower costs and a significant increase in benefits.

In conclusion remove lockdown as soon as possible, encourage one metre social distancing and return the economy to the “old normal”

J B Hearn 7/6/ 2020