One of the (many) disillusioning aspects of the Covid response of the New Zealand government (politicians and public service) has been the apparent total absence of any use of cost-benefit analysis techniques to help inform thinking about policy responses. No cost-benefit analysis on any aspect of the policy response has ever been published (or hinted at), on the couple of occasions I’ve OIAed any such analysis (just to be sure) agencies have been quick to deny any such analysis exists, and when one independent agency (the Productivity Commission) did do a little exercise along these lines at one point last year it was shunned as almost “unclean”. And if there had been any slight excuse early last year about “no time” – not convincing even then – officials have had 22 months now to get toolkits in place. But they (and their political masters) seem to prefer seat-of-the-pants thinking, all with minimal transparency. (On that latter note, it is now three months since the current lockdowns began and not one piece of official advice, not one Cabinet paper has yet been released, despite the enormous economic and social costs of the choices the government has made.)

The point about cost-benefit analysis is not that using those techniques, or that way of thinking about the issue, will generate “the” right answer. On many of these things there is no “the” right answer. The merit lies in a combination of (a) forcing people to write down their assumptions, including which variables (even hard to estimate ones) should be relevant to a particular decision, and (b) then enabling users to get a sense of how much difference a different set of assumptions might make to the bottom line. Using the techniques facilitates disciplined thinking and transparency, the latter itself supporting scrutiny (especially important when such costly and often intrusive/restrictive decisions are involved.

Consultant economist and former Victoria University academic Martin Lally has been one of those attempting to apply a cost-benefit approach to thinking about Covid policy responses. I wrote here about one of his pieces from last year. I haven’t always agreed with his conclusions, but (as above) that isn’t the point. The value in such exercises is to prompt people to think harder about which assumptions they might disagree with, why, whether all the right variables are being taken into account, and what differences different assumptions might make.

On Saturday Lally sent out a short piece he had done, attempting to sketch how one might apply a cost-benefit type of approach to thinking about vaccine coercion (or – ugly Americanism – “mandates”). He has given me permission to reproduce it here, which I will then follow with my own thinking. It is a sketch outline, towards the sort of fuller cost-benefit analysis one might hope government agencies – with access to much more resource – would routinely be doing and revising.

Lally notes that he – like me – is fully vaccinated “without coercion”.

Vaccine mandates for the general population are proving to be extremely controversial.  Opponents point to the right to choose.  Proponents point to the costs that the unvaccinated impose upon the vaccinated, in particular the increased risk of death to some vaccinated people (because the vaccine is not perfect and the more so as the time since the vaccination increases) and the increased load on the health system from unvaccinated people leading to some (vaccinated) people receiving an inferior level of care for non-covid conditions than they otherwise would.

This is yet another example of the trade-offs we face in life, individually or socially, and is therefore capable of being illuminated (and possibly resolved) by cost-benefit analysis. 

To illustrate this, suppose that 400,000 New Zealanders will not be vaccinated unless coerced (10% of those above the age of 12).  This corresponds to the 10% of the over 12s who have not yet had a first dose, and therefore could reasonably be viewed as a lower bound on those for whom coercion will be required to achieve their vaccination.  Standard CBA for health issues involves discounts to QALYs [quality-adjusted life years] for imperfect health status.  For example, a person suffering from type 2 diabetes warrants a discount of about 20% per year of their remaining life.  The same principle applies to coercion, i.e., it reduces the quality of life of the coerced person.  These 400,000 objectors are likely to be of about average age and in good health, which implies about 40 years of remaining life.  Let W denote the annual discount on their quality of life arising from being coerced into vaccinating.  The QALY loss from the coercion is then 400,000 [people]*40 [individual years] *W = 16,000,000*W.

Now consider the costs that the unvaccinated impose on the rest, of the types mentioned above.  Let D be the estimated deaths from the existence of unvaccinated people, if coercion is not adopted compared to adoption of coercion.  The deaths here are of people likely to have low residual life expectancies and health problems that would lower their quality of life even if they didn’t die due to the existence of the unvaccinated.  Suppose the average residual life expectancy is ten years (generous as covid victims [fatalities] have an average of about five years), and the discount for health problems during this ten year period is 20%.

If coercion is adopted, the 400,000 people alive today who will suffer the coercion will experience a QALY loss of 16,000,000*W whilst the vaccinated avoid a QALY loss of D*10*0.8.  So, coercion is warranted if and only if D*10*0.8 exceeds 16,000,000*W. 

For example, suppose W is 5%, i.e., coercion is equivalent to a quality of life discount of 5% per year.  The parameter D would then have to exceed 100,000 for coercion to be justified, i.e., there would have to be at least 100,000 additional deaths amongst those alive today and vaccinated resulting from catching covid from an unvaccinated person or from inferior hospital care resulting from hospital overload due to unvaccinated people requiring covid treatment.  This is not plausible.  Alternatively, if W is 1% (coercion is equivalent to a quality of life discount of 1% per year), then D would have to exceed 20,000 for coercion to be justified, i.e., there would have to be at least 20,000 additional premature deaths amongst those alive today and vaccinated resulting from catching covid from an unvaccinated person or from inferior hospital care resulting from hospital overload due to unvaccinated people requiring covid treatment.  This too is not plausible. 

It is implausible that W is less than 1%, and it is implausible that D would be more than 20,000.  It follows that coercing people into being vaccinated does not seem to be a good policy choice.

If you think I am wrong, I invite you to supply a CBA consistent with your view.  Simply saying that unvaccinated people inflict damage on the rest of us is not enough.

It is a reasonable challenge.

In my case, it isn’t that I think his policy conclusion is wrong. I don’t think either vaccine coercion or the associated (coming) pass laws can be justified by the scale of the threat Covid poses. But I think Lally’s initial exercise – while illuminating – may overstate the case, at least on cost-benefit grounds (there are some – few – things no price should be placed on, or which we should be very reluctant to do so in the face all but the gravest threats).

Perhaps my greatest unease is around time horizons. The approach seems to treat Covid as something that within a few years will settle down to be either non-threatening or chronic/endemic or something society will choose not to do anything much about. Why do I say that? Because otherwise we have no basis for reaching any judgements (plausible or not) for many lives coercion might save – over, say, 50 or 100 years – but also because if it was to be treated as a permanent issue one would have to include effects not just for the current population cohort but for those yet to be born.

It seems a reasonable approach to me for now – and this is a place where real options analysis is relevant, taking account of irreversibilities – but if so then how credible is it to suppose (assume) that those subject to coercion will experience the same reduction in their quality of life for their entire remaining life (40 years on Lally’s assumption)?

As Lally notes when we exchanged (brief) notes on this, there are two classes of people subject to coercion, those who give in to it, and those who don’t. Lally’s approach does not seem to incorporate the effect of or on the latter group at all. I’ll come back to them.

But what of those who do give in to the coercion and get vaccinated? It seems quite plausible that, at least initially, many will be quite resentful and experience the reduced quality of life Lally mentions (a few may be relieved as coercion gets them out of a corner they’d boxed themselves into). Quite how intense that loss is may depend a bit on what motivated each individual resister. But if Covid settles into being a chronic thing that no one pays that much attention to in a few years hence, how plausible is that those coerced now will be still experiencing a significant (same annual) loss of wellbeing 30 years from now? If we, arbitrarily, allowed for this loss of quality of life for just the next five years then that cost would be reduced to only 1/8th of the scenario Lally uses.

What about what the coercion saves? Lally’s initial approach looks at lives saved this way: “additional premature deaths amongst those alive today and vaccinated resulting from catching covid from an unvaccinated person or from inferior hospital care resulting from hospital overload due to unvaccinated people requiring covid treatment”.

Again, this points to an implicit assumption about the issue being medium-term but not long-term. The potential impact on the health system – and thus on mortality risks for non-Covid conditions – is a real one at present, but surely can’t be with (say) a 10 year horizon, since healthcare capability can be added in that sort of timeframe. But although Lally highlights the potential deaths avoided, he does not factor into this simple model the losses from either severe Covid cases among the vaccinated, or the loss of quality of life to those whose treatment for other conditions is delayed. On our current understanding, he is no doubt right to play down the mortality risks from Covid to the vaccinated (probably quite few in number, and most likely to be people with remaining life expectancy well less than 10 years), but I have less of a sense of how large those other numbers might be.

As I noted, Lally’s approach does not take account of those on whom coercion will not work. That number might be small, at least after a few months, but what if it isn’t? And even if most of the resisters eventually given in (a) they are probably the ones who will face the greatest and longest-lasting loss of wellbeing (people who resisted from conviction rather than just hesitation), and (b) we know that people who lose their jobs in recessions can experience lifetime losses of income, a result that could well translate to some of this group.

And although repressive enough pass laws can probably reduce the risk of these resisters (a) getting Covid, and (b) passing it on to other (vaccinated) people, that is going to be a reduced risk not an eliminated one. A full cost-benefit analysis would need to include an assumption as to how many lives the compulsion exerted over this group might save. I’m not in a position to offer a number myself.

The other factor that would need to be taken into account in a fuller cost-benefit assessment is the cost-benefit of alternative options. For example, what if instead of vaccine “mandates” and pass laws, the government mandated the use of rapid antigen tests in places where particularly vulnerable people were present (eg rest homes, hospitals), or – at times when there was much Covid in a community – at the entrance to any large indoor event? Antigen tests are, after all, focused on identifying infectiousness, presumably the main (health) concern. That testing would have costs – there are no cost-free options – but relative to the vaccine coercion options some real savings (re issues discussed above). The Ministry of Health still appears to have some mysterious aversion to antigen tests, but there is no sign their distaste has ever been properly costed.

I don’t purport to know the appropriate parameter values for each of these variables. But it is the sort of exercise – done more fully – that officials should be presenting to ministers, and making available to outsiders for information and scrutiny.

Still on health matters, I’ve been intrigued for a while at what was happening to vaccination rates stratified by age. For all that politicians and the media burble on, emote even, about differences by ethnicity, the data on Covid itself seem crystal clear: by far the biggest demographic risk factor for getting seriously ill or dying of Covid (and thus of resulting in pressure on the health system) is age. The Hendy et al modelling used this data (from this 2020 paper).

I’ve seen people suggest these absolute numbers may be out of date, and epidemiologists can argue about that, but my point simply is that no one seems to dispute the significance of age. It isn’t just a linearly increasing risk: the risks for (say) the over-80s are far far higher than those for even people in their 50s.

The government of course recognised this initially in allowing old people to get vaccinated before (progressively) most of the rest of us. If you are my age, it is only about six weeks since one could get a first dose, and so many (like me) will be getting second doses only in the next few weeks. But the very elderly have had a lot of time to have had both doses of the vaccine. And, so you would think, people in that age range would generally have a strong personal incentive to get vaccinated – and their children to encourage them to do so. Public spirit might be necessary to help encourage the young, but for the very old death from Covid is a non-trivial risk (and thus the strict rules one hears rest homes have in place). The rest of us have a strong interest in these old people getting vaccinated because pressure on the health system is one of the key perceived constraints on opening up.

And so I’ve been a bit surprised that the vaccination rates among the elderly have not been higher. The Ministry has come and gone a bit on how much information it makes available, but for now it seems to have settled on promoting this chart.

None of the elderly age bands have yet got to a 90 per cent second dose vaccination rate, and only one (the 80-84 group) has got to 95 per cent for even a first dose. And these people have had months.

But the real situation seems to be even less good than the Ministry of Health portrays it. The denominator they use in all their charts and tables is not the population in that age group as estimated by our official statistics agency, SNZ, but something called the “Health Service User population” (HSU), which is defined thus

The Health Service User population estimate counts the number of people who received health services in a given year. Someone is counted in the population if their associated National Health Index (NHI) number received public health services; or was enrolled with a primary health organisation (PHO). 

I suppose they must have their reasons, but using this HSU measure seems to assume away part of the problem – people unknown to the health system seem, all else equal, less likely to be turning up (to the health system) for a vaccine. Of course, it is a hard count (administrative data) and the SNZ population numbers are only (informed) estimates. But some people just don’t go to the doctor very often (I know in my 20s I prided myself on not having been for a decade).

Anyway, here is the difference it makes

There are some anomalies. I’m not sure how there can be so many more 90+ health service users than SNZ think there are in the country (and they keep track of deaths, and there can’t be that much migration among the over 90s), and the 80-84 band is a bit of a surprise too, but the key point is that both for older ages (65+) and the the 12+ population as a whole, the HSU appears to undercount the population by 3.5 per cent. All else equal then, vaccination rates are a bit overstated.

Here is how the two measures look for first doses for the older age groups

Using the SNZ population numbers, not quite 90 per cent of the elderly have yet had a first dose. And yet we hear almost nothing about this from our government, our health bureaucrats (who seem to champion the messaging of politicians) or even – so far as I could see – in the perspectives provided by the opposition political parties.

Here is the same chart for second doses.

Not much more than 80 per cent of even the 75+ population have had two doses, many months into the programme. And this is the demographic most exposed to serious illness death, and the demographic that thus poses the greatest threat to the health system if/when Covid gets more established here.

Using the SNZ population estimates here are the vaccination rates for each age-band.

Can better be managed? Well, it would appear so from the experiences of other countries. At an aggregate level, for example, Portugal has about 85 per cent of the population with two doses (about 95 per cent of the 12+ population). I’ve been keeping an eye for some time on NHS data for England (and remember that a lot of people in England have already had the virus itself), and they appear to be showing close on 100 per cent of those 70-74 having had two doses (albeit rates tail off somewhat above that age band).

But when it comes to Covid, Australia still appears to be the country most similar to us, including in that they were slow to get their vaccination programme going. This is the latest set of charts

Of course, Australian states and territories have a quite diverse range of experiences with Covid (ACT, NSW, and Victoria with ongoing outbreaks) but their record in getting the elderly vaccinated seems to be consistently (NT aside perhaps) better than New Zealand’s, with particularly impressive numbers in ACT (where all but one age-band over 40 have 95 per cent first dose rates, and most second doses done).

Perhaps there are denominator issues in those other countries too, but even if so the bottom line remains one in which the New Zealand elderly vaccination rates are just not that good, given the risks (to their own health, and – indirectly – to the wider freedoms and opportunity of the community more generally).

And there is no sign our politicians are taking this very seriously.

On a final note re age, the Hendy et al modelling released last week (and touted by the government) assumes the same vaccination rate for all eligible age bands. That seems somewhat unrealistic, even if at some point in the middle distance all age bands were to eventually converge to very similar vaccination rates. It seems unfortunate that model estimates using a range of different assumptions about the age pattern of vaccination rates have not been published. Superficially, it would seem that very high vaccination rates among the very old might be more valuable – in reducing death and serious illness, and facilitating opening up – than very high rates among some of the younger cohorts. In a brief exchange on Twitter last week with one of Hendy’s co-authors, he indicated that (a) they had done some such modelling, and (b) that sometimes one could get counter-intuitive results. Which is fine, but it would be helpful for the public to be able to see this sort of material, especially when the government itself if touting the modelling of these particular researchers. In its absence, it looks as though the government should be putting a lot more emphasis on getting elderly vaccination rates well up than is evident at present.

There have been a few stories in recent days about the potential implications for economic activity in the rest of the country of the temporary border between Auckland and the rest of the country. The articles seem to have focused on transition across the border, which is strange since (at least as I understand it) freight itself is largely unrestricted. The issues seem to be more about what activities (including production activities) are able to be undertaken in Auckland while it is still under the government’s Level 4 restrictions (which could be weeks yet). And, of course, the point of Level 4 is that not very much – at least that can’t be done sitting at a computer or producing/distributing food, power, water etc – is supposed to be able to be done. For good or ill (perhaps for ill last year, perhaps for good this year – given the intensified risks with Delta) New Zealand has taken a much more restrictive approach than most countries, and even than Australian states. And if a lot of New Zealand manufacturing is in Auckland that is going to have ramifications for what economic activity can be sustained in the rest of the country in Level 3 (or Level 2).

A reasonable guess – but it is a stab in the dark, since SNZ had real measurement challenges – is that the Level 4 lockdown last year coincided with a 25 per cent reduction in GDP while it lasted, and that probably remains a sensible (but perhaps lower bound) guess for the current situation. See this year’s Treasury assumptions here. For level 3, Treasury estimates that the economy as a whole would experience a reduction of GDP of 10-15 per cent for the duration of those restrictions, but there is less data to go on. Whatever the number, it is still large, perhaps $800 million per week (in GDP losses alone) if the whole country were in Level 3.

But, of course, it isn’t. And in the last year for which we have data, Auckland accounted for 38 per cent of national GDP. In a particular production process, the unavailability of even one component that happened to be manufactured in Auckland but used nationwide could quite quickly – depending on inventory levels held outside Auckland – begin to impair production in the rest of the country that could otherwise quite lawfully occur.

But it seems fairly unavoidable, at least for as long as elimination remains the goal (as no doubt it should for some months yet). The Auckland outbreak has been a serious one, has grown more quickly than those in either Victoria or New South Wales, and existing restrictions have not yet squashed it. It certainly can’t be time for freeing up more activities in Auckland, no matter the possible GDP gains there or elsewhere in the country.

But the other thing that has struck me in the last day or two is the stories about people moving across the border. Of course, freight means people (whether train drivers, truck drivers, pilots), but there are other people too. There have been those extraordinary stories of students flying out of Auckland and encountering no checks either when they purchased the ticket or when they boarded. Essential workers in Auckland who live outside the border have permission to come and go for work. (A few) politicians have been moving. And even hospital patients have been being transferred to other cities to relieve pressure on Auckland hospitals. Reports suggest some of the (few) planes out of Auckland are quite full.

And it appears that not one of those people is subject to frequent testing or any isolation restrictions. I heard on Morning Report that Ashley Bloomfield had mused aloud yesterday that some testing might be a good idea – prompting spluttering from the Managing Director of Mainfreight – to which one could only think “well, indeed, and if only there were senior officials and ministers able to bring it about, and not actively blocking it”. Eric Crampton had a nice piece on his blog yesterday highlighting the extraordinary delays of rolling out government saliva testing, and the prohibitions on the import and use (by firms, by anyone) of the rapid self-tests, which produce results in 15 minutes and could be used before each shift and/or border crossing.

Rapid antigen tests give results in about fifteen minutes. They are not likely to catch cases with low viral loads but are decent at high viral loads – the people who would wind up being infectious. Having workers run a self-test before starting shifts would add an additional layer of protection. But no rapid antigen test has been authorised for use in New Zealand. It is unclear whether MedSafe has even considered any – I have a request in with them for more information. 

This sort of thing is being done in much of the rest of the world, but not here. That is entirely on the government and their officials.

It all seems a part of the sort of issue I highlighted last week of not taking the risks sufficiently seriously (seemingly a bit indifferent to the significant economic losses, and draconian incursions of normal life/freedom, that lockdowns bring).

A matter of weeks ago we had no community Covid in New Zealand but they had community outbreaks in Australia (and Fiji and other places). The focus here was, supposedly, on keeping it out. Arrivals from some places were largely barred altogether, quarantine-free travel from Australia was suspended (so that any future arrivals had to go through MIQ), there was even the charade of a pre-departure testing requirement (a charade because (a) it didn’t apply to NSW, (b) it still allowed up to three days between testing and departure for someone to become infected, and (c) for quite a while the government wasn’t even checking that most arrivals had had tests. And fairly tight protocols were in place around crew on cargo ships docking at our ports.

Now we have a significant community outbreak in Auckland (in per capita terms still worse than that in Victoria), and none of those sorts of protections on the internal borders. The government has restricted the number of people who can cross – essential to the regime of course – but does nothing systematic or rigorous to reduce to an absolute minimum the risks associated with those who do come out of Auckland (in some cases, coming and going every day). It seems unserious and not commensurate with the magnitude of the risks (remember the costs of renewed Level 4 lockdowns). Sure there are Level 4 restrictions in place in Auckland, governing everyone while there, but….there is still community transmission occurring. And once people are out of Auckland the restrictions are much less onerous, especially if much of the rest of the country was to shift to Level 2.

My suspicion is that this is another of those things/risks that just wasn’t properly planned for – despite the government having had months of notice. If it were otherwise, how could they possibly be so cavalier about the risks of cross- (internal) border transmission?

There don’t seem to be public figures on how many people are crossing the border each day*, or how far they are ranging, but it seems certain that the numbers are more than those crossing the external border each day (averaging just over 300 a day even over the last week), and we know that MIQ isn’t foolproof (how Delta got here in the first place), and is potentially becoming less secure than it was, with the vaccination/Delta combination. As yesterday’s events showed, isolation/quarantine hotels aren’t either. And there are no testing/isolation requirements on any of these people moving each day into Covid-free rest of New Zealand.

[*UPDATE: A Stuff story says 2000 trucks a day across the southern border, plus however many – presumably a much smaller number – across the northern border from today.

FURTHER UPDATE: A Herald story states that “of the first 3059 vehicles Police stopped at five checkpoints [on the southern border] just 114 were turned away]

It seems extraordinarily negligent, and inconsistent with the stated goal of elimination for the time being, at least while keeping to an absolute minimum the risk of new draconian lockdowns in the rest of the country. We have managed the risks around goods flow through the ports over the last 18 months, but barely even seem to be trying with internal movement now – when the threat (from Delta) is much greater. It all has the feel of a race between squashing the outbreak in Auckland and the likelihood that on current policies and practices it will get through again to the rest of the country. I’m sure we all cheer for and hope for the former, but it seems quite reckless of the government simply to gamble rather than act.

Which brings me back to Eric Crampton, this time from his Newsroom column quoted in the post

The government could, today, order a couple million rapid antigen tests. They are broadly available. It could distribute those test kits to every essential workplace in Auckland and require that every essential worker be tested every day before starting work.

It could be a condition of a Level 4 modified to suit Delta.

Within about fifteen minutes, each worker’s result would be available. Infectious workers could be sent to government testing stations for confirmation. And workplace transmission would be sharply reduced.

But not just essential workers in Auckland, but everyone crossing the internal border out of Auckland. If they won’t do something like that it is hard to take their words seriously. They are again exposing us to new lockdowns, and recall that the best estimate of a Level 4 lockdown is that lost GDP alone (never recovered) is $1600 million a week, and all that disruption to the rituals of life, including in its toughest and darkest times.

Any sort of serious cost-benefit analysis undertaken by officials to advise ministers and inform the public has been notably absent over the 19 months now since Covid has been an issue for New Zealand. You may hazily recall last year that neither Treasury nor the Ministry of Health ever attempted any such disciplined analysis – presumably in the spirit of the senior minister in the previous government who responded to a question I once asked about some expensive initiative he was implementing observing that a cost-benefit analysis wasn’t needed because he already knew the correct answer. There were, of course, a few outsiders who made the effort – from the sceptical side consultant and former academic Martin Lally, and also an analyst at the Productivity Commission (whose efforts seemed to rile up those who already knew the right answer). Earlier in the year when the government extended its regulatory Covid reach, I OIA’ed the Ministry of Health for any cost-benefit analysis undertaken in conjunction with this new restriction. I was quite surprised to get a very prompt response, making it clear that none had been undertaken. Only later did it become clear that the Ministry of Health itself had opposed the initiative.

Of course, for any remotely-complex issue the best cost-benefit analysis in the world won’t produce a single definitive answer that everyone agrees on. But it forces proponents of a course of action (or inaction) to identify and write down their assumptions, think in a disciplined way about how people are likely to behave, think about a wide range of costs, and so on. It should sharpen the thinking of decisionmakers and those advising them, and aid the public scrutiny of ministers and officials,

The thinking that results in this post was initially sparked by seeing a comment in an interview earlier in the week by the Reserve Bank’s deputy chief executive responsible for economics and monetary policy where he claimed that

“Lockdowns have been about delaying the timing of spending rather than taking away spending in total”

and then yesterday I noticed the government’s adviser, and eminent epidemiologist, David Skegg suggest that we might as well push on with the elimination strategy as (words to the effect of) there was no real cost to doing so.

I don’t suppose the Reserve Bank has any real input into Covid policy – and his comment was mostly in the context of output gaps and inflation outlooks perhaps a year out – but Hawkesby is a smart guy, and it was a weird comment, tending to minimise the costs of restrictions.

This chart is an illustration of what I have in mind.

Quite clearly what happened was that spending/production returned to more or less normal levels relatively quickly, but “the hole” was never filled in. Real GDP per capita was about 12 per cent lower than otherwise in the June quarter of last year, and 2 per cent lower than normal in March quarter. GDP just prior to Covid had been about $80 billion a quarter, so almost $12 billion of GDP (value-added) we would normally have expected to have occurred in the first half of last year never happened. And there is no sign it was ever made up for later (not surprisingly, since few of the people who couldn’t work at all in April would have gone on to work twice the hours in June). These are really big losses – rather swamping the most recent derided example of planned government waste, the proposed walking/cycling bridge across Waitemata harbour. And those GDP outcomes were held up – to an extent not yet clear – by really huge fiscal outlays, which represents a future burden on New Zealand taxpayers.

Note that I am not citing these numbers to get into a debate about last year’s lockdown, and in thinking about the regulatory restrictions in that period it is vital to recall that many of those losses would have happened anyway (at least given the rest of policy up to mid-March), as individuals were already beginning to take their own precautions. But that was then when – if one wanted to be charitable – one could note that the government and officials were to some extent flying blind.

My concern is more about this year. Ministers and officials now had a good basis for knowing that lockdowns (of the draconian New Zealand sort) did not come cheap. There are all sorts of costs other than the ones captured in GDP – read the heartrending example in Matthew Hooton’s column this morning – but the GDP ones are real enough. I’ve seen mentions that The Treasury is working on an assumption of 25 per cent of GDP lost under “Level 4”, so we’ll use that assumption. Applied to last quarter’s GDP that represents a loss – unlikely ever to be recovered (see above) – of $1.6 billion dollars a week. After 10 days of nationwide level 4 that is already about $2.3 billion – and on a best-case scenario there is probably the best part of another couple of billion to come. $4bn might do as a rough estimate (five cycling bridges) in economic costs alone (and preservation of basic freedoms should itself be valued highly).

Again, I cite these numbers not to question the current lockdown (callously and deliberately cruel and inhumane as parts of it are), but to highlight that officials and ministers have known the cost of this sort of scenario all year. So you’d have supposed they’d have done absolutely everything possible, including spending lots of money if necessary, to make sure it didn’t happen. After all, Parliament had appropriated lots of money in the Covid fund.

Now people might push back and say that it was only in the last few months that the enhanced threat of the Delta variant became apparent, and no doubt that is true. But our politicians and officials are entrusted – paid – with the responsibility to prepare against a wide range of contingencies (just as, say, in a defence and foreign policy context). Similarly, we heard for months public health people bemoaning the alleged “complacency” of the public, but the public aren’t charged with preparing against all such contingencies and the government (politicians and officials) is. And the idea that a more troublesome variant might arise was hardly a new one no one had ever contemplated before Delta.

The only reasonable conclusion is that this draconian lockdown – and the extreme intrusions/restrictions should be priced quite highly – was preventable and the government objectively chose not to prevent it. I don’t suppose they wished it, but – having decided firmly on elimination (and quite probably sensibly so) – with all the resources of the public sector – and the wider base of expertise beyond it – they chose not to do the things that would have made it unnecessary (whether by preventing Delta arriving in the first place, or having the population and systems in a position where much less onerous and costly restrictions might have been appropriate). And I don’t suppose anyone anywhere in the public sector stopped and did some serious cost-benefit type of thinking. Frittering away the Covid fund on wider Labour political preferences must have been so much easier and more fun for the politicians. And as for the officials, who can say, but presumably the quiet and comfortable life suited them. It wasn’t as if they did nothing ever, but that is hardly the test when faced with such a threat.

What might the government have done (and been reasonably expected to have done, not just with the benefit of hindsight)?

There is a pretty standard list by now of things that could have been put in place over months, some of which would have made a difference with certainty, some just probabilistically (but this is a game of probabilities):

• the astonishing lack of urgency the government displayed in securing vaccines (whether that is about when orders were placed, whether anything could have accelerated Pfizer deliveries, or the choice  – pure choice – to put themselves in the hands of a single supplier),
•  the neglect of saliva-test options (now widely used abroad, and cheap –  to individuals and governments),
• the now-apparent failure to put in place systems to prioritise testing (and processing of test of) close contacts),
• the clear failure to have stress-tested and war-gamed the contact tracing system to ensure that it could really cope with what was being promised.

There were, of course, small things even last week.   Knowing by then, with utter confidence, of how threatening Delta was, when a community case was discovered in Auckland first the Prime Minister and her Covid minister hightailed it out of Auckland (how could they then know whether or not they had been contacts?) but more generally people were allowed to leave Auckland –  with no isolation requirements at all –  for almost 2.5 days after the first Auckland community case was known about.  Now, sure, there would have been contacts outside Auckland anyway, but the government’s choice knowingly added to the problem (some of the Wellington cases were people who left after the initial case was known) –  the numbers, the testing, the processing, the risks (that lockdowns are now designed to contain).

And then there is the border.  They knew the border was not totally secure –  after all, there had been several breaches here over the months.   And it probably could not be made 100 per cent secure –  for every person arriving (by air, or as crew on ships) there was some chance, however individually small, of a breach.  If it wasn’t obvious to them, the Skegg report was telling them a breach was inevitable at some point.   

And yet the government did nothing to reduce to an absolute minimum the number of people arriving.  If anything, it seemed to be constantly giving in to pressures to allow more in (not even compassionate cases, but discretionary sports, business and entertainment priorities of the government).  Just a few days before this lockdown there was the extraordinary proposal to allow home isolation for some (big end of town) vaccinated people, even as the government quite openly told us that any Delta breach would be likely to have an immediate Level 4 lockdown (with attendant cost).  Perhaps there was a case at the time for allowing quarantine-free travel from Australia, but even there they were astonishingly slow –  given what they knew of the cost of lockdowns –  to close down that travel when community cases arose in one or other of the Australian states (they seemed to rely on advice from Australian officials rather than taking the pro-active precautionary approach), and then kept allowing New Zealanders to leave Australia for a time even when the QFT was finally suspended altogether (sure, there was pre-departure testing, but that was more theatre than anything, given that the test could be taken up to three days prior to departure –  and many of them weren’t checked anyway).

(Of course, in any cost-benefit analysis you would want to include the costs to the individuals left unable to travel by a tighter approach at the border at the margin. It is likely to be a small number, relative to the costs imposed on five million of us.)

Given the commitment to elimination (which I am not questioning), it is simply inexcusable that ministers and officials were not doing this sort of cost-benefit calculation/analysis, and routinely updating it in the light of new information (including about Delta). One might not a year ago have put a 100 per cent chance of a new Level 4 lockdown a year ago, but perhaps it would have been prudent even then to have planned for a 30 per cent chance, with that probability clearly rise (to near inevitable in the Skegg report) as the year went on, and planned and prepared accordingly. Perhaps by mid this year it really was too late to do anything much to fix the vaccine problem, but – knowing the likely extreme costs of a lockdown (output never recovered, really high non-economic costs too – it should have led to even more of a focused drive to do everything to stop Delta getting in, and having foolproof, tested and robust, plans to immediately contain the spread (including beyond whatever area the first case was found in), Instead, it is if the lives, fortunes and freedoms of New Zealanders are just playthings for the government and officials – “it doesn’t really matter if we didn’t do our job well, after all, we can simply keep everyone shut up for days longer”. Hundreds of millions of dollars (and equivalent) lost/wasted? Never mind, we are well practised at that. After all, look at where the Covid fund went.

None of this bears on what choices Cabinet should make today, but it has real implications for the path ahead. If the government is committed to elimination for the time being, and holds over us constantly the Damoclean sword of Level 4 lockdowns, they need to take much more seriously minimising to the utmost the risks of future breaches.

$4 billion really is a lot of money – $800 per man, woman, and child – simply gone, and that on relatively optimistic estimates (and many of the costs not dollar-valued at all).

UPDATE 28/8: This Matt Nippert piece from today’s Herald, on the dawning awareness of the Delta variant, despite drawing on authorised officials in the Prime Minister’s own office presumably keen to provide cover for the government/officialdom, really makes my point. Even though the variant (then known as the Indian variant) was first identified late last year, was ravaging India in February, there is no hint in the article that ministers or officials were planning for really bad scenarios, and taking aggressive steps to prevent them being realised, until very late in the piece. It is one thing to hope for the best, but in officials/ministers charged with crisis management – and having themselves deliberately and consciously adopted the elimination strategy – it is no basis for planning. One wonders if there is any dedicated group anywhere in the official system charged with championing alternative (bad) scenarios, with a direct line to ministers.

I noticed over the weekend that the highly-regarded Pew Research Center had released the results of public opinion surveys undertaken in a range of advanced countries on various questions around Covid and Covid policy, and that New Zealand was included among the countries surveyed. Some of the results were totally unsurprising, some interesting even if unsurprising, and for a couple of questions I wasn’t quite sure what to make of the questions or answers.

This was the first set of results reported

New Zealand (closely followed by Taiwan) was the country in which the largest share of respondents reckoned that over the full course of the coronavirus outbreak the level of restrictions on public activity were “about right”. Of the remainder of the New Zealand respondents, opinion was fairly evenly split between those who say they’d have favoured fewer restrictions and those who claimed they’d have favoured more. That split was pretty even in Australia too. But I found a few things interesting: first that for all that one’s eye is first taken to the US results – the 26 per cent favouring fewer restrictions – and one thinks of the political polarisation in the US, actually the percentage favouring fewer restrictions was very similar not just in much of continental Europe but in Singapore. I don’t know anything about Greece, but Greek respondents are the only ones where a net balance favoured fewer restrictions over the course of the outbreak.

New Zealand wasn’t in previous surveys, but Pew also reports results for 10 countries where respondents rate their own country’s handling of Covid. The public has become less satisfied, but only in Japan, Spain and (by a narrow margin) France do more people now rate the handling “bad” than “good”. For what it is worth, in the current survey New Zealand respondents give a higher “good” rating to the New Zealand government’s handling than those in other countries, except Singapore.

The next question was about national unity/division

Of course, other things have happened in the last 17 months, and the greater division reported in the US is unlikely to be mostly about Covid itself. More generally I found the range of responses across countries quite surprising, and the New Zealand specific ones surprised me too. It is easy to see that the results are loosely correlated with how bad the Covid experience has been, and perhaps there is nothing more to it than that. But had I been one of those surveyed I’d either have said “not much difference” (it is astonishing how small those numbers are almost everywhere – Japan and Taiwan are exceptions to some extent) or “more divided” (there have been lots of conflicting interests, governments have spent billions and billions of public money, restrictions (still in place) affect some not others, and so on).

As it happens, there is quite a correlation between those who think their country is more divided and those who think the economy is in a bad way (and that gap is quite wide in New Zealand too).

And what of underlying political ideology (not sure whether this is self-identified or derived from answers to other questions)?

In quite a few countries there is no statistically significant difference, but (with Greece and the US as outliers) the responses for New Zealand seem fairly consistent with those for a range of other countries (and not just an anti-government reaction because there is a mix of left and right wing governments in the countries shown).

This was the question that really puzzled me. I simply can’t work out what I’d have answered.

Our economy is doing relatively well at present, but I don’t see that as reflecting anything about the strengths of our “economic system” – more a reflection of the elimination strategy (which caused deep initial losses, and then a bounceback) and of huge and continuing macro policy support, and that is a discretionary policy intervention not a feature of our economic system. And, of course, as you know I’m deeply negative on our economic policy and performance more broadly. That said, it was somewhat interesting that Australians were a bit more optimistic on this question than New Zealanders – and that the Japanese were quite so bleak on their responses.

At least in New Zealand’s case, there is probably some hint of what is going on in these responses. Those who think there should have been fewer restrictions are a lot more likely to answer negatively on the economic recovery, suggesting that those people may be emphasising ongoing border restrictions.

And how do respondents in the various countries say their life has changed as a result of Covid?

New Zealand respondents are mostly likely to say “not too much/not at all” – although a third still answer the other way (presumably some mix of people who would have travelled, people in directly affected industries, those who had hoped to buy a house, and harried public servants in places like the Ministry of Health and DPMC). On days when New World refuses to pack my groceries I might be tempted towards answering that way too. Even in New Zealand and Australia, the young are most likely to say that there has been quite an effect on their lives.

In some countries – but not New Zealand – those who are more pessimistic on the economy are more likely to say their lives have changed.

This was the final chart in the summary report. The New Zealand responses had me spluttering with incomprehension and astonishment.

As it happens, the New Zealand results do not stand out in response to this question, but these answers – globally and for New Zealand – seem like an extreme example of recency biases. Because – with extreme interventions and restrictions – health care systems in advanced countries did not get totally overrun this time, the public is confident that responses to any future pandemic – potentially with quite different characteristics – would also be just fine.

In the New Zealand case, for example, we went into the pandemic with a small number of ICU beds (per capita). It isn’t obvious that much has changed on that front. I’d have had no hesitation in answering “no confidence” on this question, whether for New Zealand or any other advanced country I’ve read about.

Anyway, it was an interesting set of results and nice to have New Zealand included in a consistently-compiled survey. And – as was my goal – I got through the post without offering any hint of my views on what New Zealand governments should be (or have been) doing this year or this week.