Clear Objectives

The fact that a government policy has achieved its objective does not mean that it was the best policy for the situation. Other less costly options may have achieved the same result.

If I am annoyed by a fly sitting on my muffin on our coffee table, I could get a shotgun and blast two shots at it. The fly would be killed, achieving my objective. However, I will have wrecked the coffee table, smashed my coffee cup, allowing the coffee to drip down and stain the shot blasted-carpet.

The best policy is the one that achieves the objective, at the lowest cost.

Looking back, four actions would have significantly reduced the spread of the coronavirus in New Zealand.

• The only way people can enter out island nation is by air travel. Screening, testing and isolating all people coming across the border from places where they might have been in contact with the virus is really important. This policy includes checking that people all stay in isolation as they promised. This policy could have been implemented much earlier in New Zealand.

• Shutting down all large meetings of people is essential as they allow the virus to spread quicker. The virus was spread at a wedding, a stag party, a conference, and a St Patricks Day party.

• Putting all people over 70 in isolation is really important, as they are most vulnerable to the virus. Doing the same for people who are immuno-impaired is equally important. Statistics from New York show that 72% of people dying were aged over 65. Of the people aged between 45 and 64 who died, 85 percent had underlying conditions. So keeping the elderly and immuno-impaired safe was really important. Because most of these people do not need to go out to work, the cheapest way for them to keep safe is to isolate themselves at home, rather than shutting down the whole of society at huge cost.

• Half of the deaths in New York were aged over 75. In New Zealand, many people in this age group will live in rest homes, so ensuring that all aged-care facilities had good policies for ensuring that people with potential cases of the virus did not come in was essential. The government stopped all visitors quite early, but efforts to ensure that staff had not been in contact with the virus seem to have been inadequate in a number of rest homes.

If these actions had been taken earlier, the spread of the virus would have been minimised, and the shotgun blast of a total lockdown might not have been needed. These actions would have been sufficient to flatten the curve and protect the health system, if that was the objective. They are obvious things to do in hindsight, but they are not complicated, so they should have been obvious to public health experts right from the beginning.

I presume that the hard shutdown became necessary when the inadequacy of border screening and quarantine processes and the inadequacy of tracing procedures for the contacts of infected people became clear. These failures made a full lockdown unavoidable, but not the best policy choice.

For a policy decision to be assessed accurately, the objective of the policy needs to be stated clearly and precisely. If my objective was to get rid of the coffee table that I received as a gift, but did not like, using the shotgun blast to kill a fly might be an appropriate action. Objectives must be formulated clearly.

Of course, politicians and government departments quite like vague objectives, because if they fail to achieve their objective, they can fall back to claiming success for an easier one they did meet. Politicians prefer success stories they can tell over clear objectives that might expose their failure.

Apart from the economic cost, a big problem with the lockdown policy was that the objective was unclear from the beginning. When the lockdown was first imposed the emphasis was on flattening the curve. That makes sense, if the objective is to prevent the health care system from being overwhelmed, as has happened in Italy. However, once the lockdown was underway, the rhetoric shifted to eradicating the virus, a much more challenging, and perhaps impossible goal. Yesterday the objective seemed to shift from zero infections to "zero tolerance", but I suspect that was a rhetorical flourish.

This confusion of objectives makes an assessment of the effectiveness of the policy difficult. If the objective was to prevent the health system from being overwhelmed it has been successful, but possibly overkill, because most public hospitals have not had more than one Covid19 patient at a time. On the other hand, if the objective was complete eradication, an outcome that might not even be possible, then it is too soon to assess the success of the lockdown.

Political Decisions

The City Council has decided to close the Edgeware Swimming Pool. They claim that the pool is not well used and the costs of operation are increasing. The people of Edgeware are out protesting. A group is standing beside a busy road with banners calling for passing cars to honk their horns in support. Others have signs on their fences. This illustrates the problems that arise when economic decisions are turned into political ones.

Think about some examples. There is a video shop in Edgeware. This shop remains open, because the revenue received from renting videos exceeds the cost of running the shop. If people stopped using the shop and revenue declined dramatically, the owners would have to close the shop. The criteria for this decision are simple. If the people of Edgeware are willing to spend enough to cover the costs of running the shop, it will stay open. If they start spending there money somewhere else, it will close.

Consider a business thinking of opening a gymnasium in Edgeware. If the gymnasium can get enough paying customers to cover the costs of running the gymnasium, it will proceed. If the is insufficient people willing to pay the fee that the gymnasium charges, it will have to close.

When the city council provides services, economics is irrelevant. The politicians have no sensible criteria for deciding whether the pool should stay open, because the entry fees to the pool are totally unrelated to the cost of operating the pool (including the cost of capital). Politicians can only respond to political noise, but they never know how many people are making it. If the noise is loud enough, they have no choice but to keep the pool open, because their main objective is to not lose their seats at the next election.

The only way to find out how much the people of Edgeware value their pool is to look at how much money they are willing to pay to use it. Honking of horns tells us nothing, because honking a horn costs nothing. If people are spending their money on other things, they must value them more. From appearances, it seems that most place a higher value on videos than swimming.

Political decisions are totally detached from economic reality. They tend to be bad decisions, because they are based solely on political noise which is cheap.

City Councils should not be making decision about services like swimming pools. If there is sufficient demand for a swimming pool in Edgeware, I would expect an entrepreneurial person to provide one. If there are insufficient people in Edgeware willing to pay an entry fee that covers the full cost of operation, then they do not want a pool that badly.

No doubt someone will raise the issue of the poor with no place to swim. The answer is obvious. I doubt that the City Council has responsibility or authority to care for the poor, but even if it does, there are better ways of assisting the poor than providing a swimming pool at Edgeware. I suspect that the poor people in the area get more pleasure from the video shop down the street from the pool.