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A mountaineer’s guide to policy headroom

Principal Advisor, Productivity Commission
23 April 2020

Over the last few weeks’, you might have felt like the country was making its way along a ridge between two abysses: spiralling COVID‑19 deaths on the left side and economic ruin on the right. And a very narrow path between. Progress is possible but expect to have to hang on by your fingernails!

In this picture, someone fearing overloaded hospitals might err to the right, dicing with economic ruin. Similarly, one fearing longer-term impoverishment might err to the left, dicing with uncontrolled spread. Opinions will understandably polarise, as even a small move left or right could be perilous.

It should come as some relief that the recent experience of New Zealand and many other countries means that this is no longer an accurate picture of the situation we collectively face.

Yesterday I introduced my COVID-19 tracker which provides a “quick & dirty” daily estimate of the effective reproduction number for a selection of countries. The effective reproduction number is the average number of secondary infections per primary infection in an actual population – given the policy measures in place at that time and the behavioural responses of that population. An effective reproduction number sustained below 1 means the pool of infected individuals is shrinking and COVID‑19 spread is under control. Frequently updated, the effective reproduction number can be used to track the effects of changing policies – such as social distancing requirements, and improvements in testing, tracing and isolation.

Here’s today’s graph:

RQD (estimated effective reproduction number), selected countries, 28 March - 23 April 2020COVID-19 tracker

My quick and dirty estimate of the COVID-19 effective reproduction number in New Zealand on 23 April is 0.06. Control was achieved two weeks ago.1

The graph shows that COVID-19 spread is currently well under control in New Zealand. It is also now under control in most of the other countries shown.2 The mixes of policy measures used to successfully bring COVID-19 under control vary significantly across countries, supporting the idea that there is more than one “right” way to achieve control.

My take outs:

  • What seemed at the time to be out-of-control spread can be brought back under control. This provides a level of comfort. Even if future policies start to fail, New Zealand can recover the situation.
  • There is more than one “right” way to achieve and maintain control. Countries can learn from one another; and mix and match measures to suit their circumstances.
  • Tracking tools like this are less accurate than sophisticated models, but they are useful for the dynamic management of the ongoing COVID-19 situation because they can be readily updated.
  • There is plenty of room for New Zealand to relax or modify current COVID-19 policy measures while staying under control.

Rather than the picture above – hanging by our fingernails over a COVID-19 abyss – we face a picture more one like the one below. Yes, we might be travelling along a ridge with a drop on either side, but there is plenty of room to move. We do not need to dice with economic ruin to avoid the COVID abyss, nor must we dice with uncontrolled virus spread to avoid an economic abyss. 

On top of a mountain with room to move


Notes
1. Acknowledging the imprecision of my quick and dirty method of calculation, I use a threshold of 0.8 rather than 1.
2. It is also under control in many other countries, including Spain (estimated effective reproduction number 0.35, Italy (0.17) and Iran (0.16).

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Comments

  • Gravatar for A Citizen

    A Citizen 2 May 2020, 07:17 (26 days ago)

    Widespread infection in NZ from this pandemic seems to have been avoided, and we know that restrictions on activity, movement and proximity to other humans have contributed to that. What will we do when the next pandemic comes, and will we also take drastic action to achieve greenhouse gas emission reductions and protect marine and freshwater environments and biodiversity? The public health advice has been respected, but there is still a tendency to ignore the advice of environmental scientists who also predict devastation. Do we need to restrict activity more severely to ensure the health of today’s children and young adults? If we wait much longer it will be too late. Stopping unnecessary trips seems more straightforward than carbon credit accounting - and is clearly more effective.

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    • Gravatar for Dave Heatley

      Dave Heatley 4 May 2020, 09:59 (24 days ago)

      You raise some interesting and complex questions. A lot of people are hopeful that the cooperative nature of the COVID-19 response (between and within countries) could be extended to other global problems such as reducing greenhouse gas emissions. While I would welcome that as an environmentalist, I'm not so hopeful as an economist. My reasoning is that while incentives encourage cooperation in an pandemic, they discourage cooperation in reducing greenhouse emissions. I hope to explain further in a future post.

  • Gravatar for Amy

    Amy 23 Apr 2020, 18:24 (35 days ago)

    Thanks Dave, this is a good read. I read a tweetstorm linked to from Marginal Revolution using a similar analogy to explain COVID spread (a ball rolling along a ridgeline) but I cannot for the life of me find it again. But its diagrams were not a patch on your photos.

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