Poor COVID-19 Planning Sounds Economic Climate Alert: Don Pittis

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Now that the COVID-19 threat is upon us, scientists and innovators let’s pull the stops to find ways to cope. This rush for invention is no surprise to historians – not just of science, but also of economics.

In the 1620s, living through the plague inspired economist and polymath William Petty to design a system to account for the cost of future calamities.

Part of the “political arithmetic” he invented includes concepts that we use today to try to imagine how much it is worth spending now to prevent something worse from happening many years later. said Canadian economist Aidan Vining.

Unfortunately, our inability to prepare for an epidemic that epidemiologists have repeatedly warned was coming is a reminder that humans are not very good at thinking about the future.

The climate lesson

The economists I spoke to said that society’s blind approach to future risk of disease provides a lesson for our failure to cope with the potentially catastrophic effects of climate change. In fact, history shows that people who think ahead are often ridiculed.

Vining said that in the 1840s, a follower of Petty’s cost-benefit analysis, Edwin Chadwick, was known as ” the most hated man in EnglandFor encouraging public health spending which, according to Chadwick, would save lives and improve the living conditions of millions of people.

” Why? Because he wanted to build sewer systems, and the elite were so opposed because of public spending it would mean, “said Vining, professor emeritus at Simon Fraser University.

Biohazard warning signs are placed on the coffins of the deceased from COVID-19 in a morgue near the city of Charleroi, Belgium, on April 7. (Yves Herman / Reuters)

It turns out that Chadwick lived to see his plans put in place, helping to pave the way for a global public health movement that ultimately saved many lives and money.

But apart from people like Chadwick, behavioral economists have shown that even when we know we would benefit to worry a little more about our long-term future, humans are wired for short-term thinking.

Brain analysis shows how deeply rooted short-termism is, showing that when we think of ourselves in the more distant future, our sense of self fades. There are different theories as to why, including the idea that as we evolve, immediate survival has become the priority.

The price of preparation

Long before the brain tests, economists noted our preference to have something now rather than later, which is one of the justifications for interest rates. You can have this car or house today, but it will cost you – in large monthly interest payments.

In economics, a calculation of what is called the social discount rate, a consequence of Petty’s political arithmetic, is an attempt to apply interest rates to show how much it is worth spending today. today to prevent something horrible from happening in the future.

Currently self-sufficient in his home in Huntsville, Ontario, economist David Burgess said it was pretty clear that no government in the world had invested enough in preparations for the current pandemic.

Despite the lessons of SARS, we did not have stocks of essential equipment. Many governments have made tax cuts to medical services and the United States was already planning spending cuts at Center for Disease Control and Prevention.

“Big bag of uncertainty”

Burgess said that while social discount rate analysis works to decide how much governments should spend on things like roads or bridges, it may not be appropriate for issues like epidemics and climate change. Indeed, future costs are so difficult to measure in dollars.

“It’s just a big bag of uncertainty,” said Burgess.

This has not stopped some economists from trying – in the case of climate change – to estimate various amounts for how much it is worth spending now to avoid future economic benefits.

Abandoned fishing boats on a dry lake bed in Bolivia are a warning about how climate change will lead to mass migration and a devastating loss of food production. (David Mercado / Reuters)

One point of contention – including between Burgess and Vining – is the interest rate at which governments should calculate this spending.

But according to economist Carolyn Fischer, who between many other things works with the Smart Prosperity Institute at the University of Ottawa, another difficulty is to calculate the present value of what the World Economic Forum called the risk of planetary devastation.

In what you might call the asteroid strike argument, if a potential future scourge could lead to complete societal and economic disruption similar to what happened during the Black Death, it is worth spending a lot for prevent this from happening, although we cannot be sure if or when it will happen.

Avoid a “tipping point”

Fischer said the same thing applies to climate change, where temperatures we have never experienced before would cause massive human migration that could overwhelm existing economies. Climate change could also lead to a loss of food production capacity.

“Many people are concerned that we are reaching a tipping point,” said Fischer.

Whether it’s a pandemic disease or climate change, if science tells us that economic ruin is the end result, it may be up to governments to compensate for our natural tendency to worry about the short term and ignore the future.

“I don’t want to lose the message that, yes, we have a crisis now, but another crisis is looming on the horizon,” said Fischer.

“Maybe we can learn a few lessons from it about what happens when you react too late. “

Follow Don on Twitter @don_pittis



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