The Bear’s Lair: The economics of plague

Boris Johnson’s decision to lock down England again until December 2, is economically and scientifically bizarre. It is based on advice from the faulty mathematicians at Imperial College, who proved to be hopelessly in error when the COVID-19 pandemic first arrived in March. It will damage the British economy, and probably kill more people than it saves. We seem to have completely lost the calm efficiency with which we faced plague outbreaks in 1665.

The Imperial College forecast of COVID-19 mortality in March, prepared by Neil Ferguson, who had a track record of erroneous forecasts, predicted COVID-19 would take 500,000 lives in Britain in 2020 –ten times the actual number – and resulted in a nationwide lockdown. An initial short lockdown was defensible; we did not know either the mortality or the transmittability of the new disease. However, after an achingly slow and partial reopening, another Imperial College forecast of 4,000 deaths per day has caused Boris Johnson to lock the country down again. This will do untold economic damage; it will also cost lives, as necessary medical tests will not be carried out and fragile personalities left in isolation will succumb.

In March, it was defensible to get the forecast wrong; it is not defensible now. At that time, we did not know the mortality rate from Covid-19; the World Health Organization, another bunch of bunglers, was claiming it to be around 4% and implying the case fatality rate (measuring known cases) in the early outbreak was equivalent to the infection fatality rate (measuring all cases). Now we do know the infection mortality rate, at least to a moderate degree of accuracy; it is between 0.4% and 0.6%, depending on what you assume about the medical treatment available to the patient. The very old suffer higher mortality, but in the cold mathematical calculation, they have fewer years of life to lose, and hence their premature death is less important than that of a younger person. (I speak as one of the vulnerable ones, being old, fat and diabetic.)

The central error in both the Imperial College forecast, apart from the mortality rate, is the mathematical curve that an epidemic follows. Contrary to popular delusions in the mass media, its spread is not exponential. Instead, as the Nobel prize winning Professor Michael Levitt of Stanford University School of Medicine explained, epidemics follow a Gompertz curve, a function identified by Benjamin Gompertz (1779-1865), under which the rate of spread falls exponentially with the current size of the infected population. Hence, instead of spiraling out of control and producing 4,000 deaths per day in Britain’s 70 million population, it naturally slows when the infected population is large, reducing the new infections rate and the death rate.

The most unpleasant feature of the epidemic, however, is that, after the spread has slowed and infections have declined for a few weeks, it can speed up again, because the number of people who are then infectious is much lower. This gives rise to the “waves” of infection seen in all countries since COVID-19 first appeared; while each new “wave” can produce more cases than the previous one (because testing is better), its mortality is less – partly because of improved medical knowledge and partly because the population as a whole has acquired a partial immunity to the infection.

“Experts” will always produce forecasts that require you to up-end the economy and devote your entire attention to their nonsense. In epidemiology as in global warming, they should be ignored, or preferably de-funded.

COVID-19 is not especially lethal, nowhere near as lethal as Ebola or even SARS, the Chinese coronavirus that spread earlier this century. However, it is especially infectious; it spreads more rapidly than most other known viruses and is infectious for up to two weeks before symptoms appear (if they ever do; there are many asymptomatic patients). Since it also appears not to bring its victims long-term immunity, it is likely to recur in large waves for the foreseeable future. Eventually, we will discover a vaccine that is fully effective against it, or effective enough to prevent it spreading rapidly through the populace. However, it appears likely that the first vaccines will not have a high level of efficacy, and hence while dampening the worst epidemics will not eliminate the disease from the population – any more than flu vaccines, even if universally administered, would completely eliminate flu from the population.

One problem that has caused Boris Johnson to lock down Britain is the inadequate capacity of the National Health Service. Since 1948, British health care has been run on a Soviet style central planning model, with market forces playing no role (not that U.S. health care is a perfect free market model, far from it). As a result, Britain has only 6.6 intensive care unit beds per 100,000 population, compared to 34.7 ICU beds per 100,000 in the U.S. and 29.2 per 1200,000 in Germany, a well-run hybrid system that has coped well with COVID-19. Naturally, as in all centrally planned economies, this has produced a severe shortage of beds when the healthcare system is put under the strain of a novel virus. The normal NHS approach, of lining all the patients up in a lengthy queue of several months and ignoring those who die before treatment can be received, works poorly in this case; too many patients die for lack of ICU facilities.

The system has had eight months to prepare for a recurrence of Covid-19. For a fraction of the cost of the idiotic economic bailouts that are now being brought again into action, additional temporary ICU facilities could have been prepared, as they were in New York in April under the magnificent leadership of President Trump (who the world is going to miss badly after January 20). In 1665, the British political system knew that flexibility was required, moving the entire seat of government to Oxford when plague struck. Under the socialist dead weight of the NHS, no such flexibility appears to be possible.

While the world has been spared a pandemic of this nature since 1918’s Spanish influenza, it should be prepared for future recurrences. There remain large parts of the world where living conditions are overcrowded and sanitary conditions poor, and in those areas, diseases can always mutate and spread themselves into the general population. One behavioral change that would mitigate this is a drastic reduction in international air travel – COVID 19 spread throughout the world within weeks because of the ubiquity of mindless international travelers, especially among the student population. While domestic quarantines can do little to limit the spread of a disease once it has entered the population, international ones can certainly slow its initial transmission. The fact that Italy, for example, was full of Chinese workers from Wuhan on temporary visas is a pathological side-effect of excessive globalization that we should prevent.

To meet those epidemics that get through, the Western world must embrace the resilience of our ancestors. The 1918 pandemic resulted in very little business closure, because the population was used to random illnesses striking. With no antibiotics and the relatively recent solution of the big-city hygiene problems that had led to regular cholera outbreaks, a sudden new illness was bad news, but not unexpected. The major cholera pandemics of the 19th Century were still within living memory, the last small cholera outbreak having hit New York as recently as 1911. Even though the mortality rate of the Spanish influenza was far higher than that of COVID-19 (inferior medical technology and the disruptions of a World War both being aggravating circumstances) there were few lockdowns, with precautions limited to the closure of cinemas and places of public entertainment.

There is a blessed Darwinian rule of thumb relating to naturally-generated pandemics: either their mortality rate is high, or their infection rate is high but not both. If the disease has a high mortality rate, it is unlikely to be especially infectious, or to have a latency period as long as COVID-19, because it would quickly create a local desert and run out of victims. Thus, lockdowns are almost always futile; a disease like COVID-19 can beat them, and the economic and medical damage done by the lockdown is far greater than its benefit.

As in many things, today’s generation could benefit by re-learning the wisdom of its forefathers – don’t inflate the money supply, don’t run incessant budget deficits etc. Learn to live with the plague, carrying out only those changes that are genuinely beneficial – more ICU units for the NHS – while avoiding lockdowns and mass handouts that wreck the economy.

Daniel Defoe, in his 1720 “Journal of the Plague Year” knew best.

(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)