Economic principles apply to pandemic

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TWO weeks before Christmas, as a gift I needed to wrap and send a wooden kit for my nephew. Of course, the kit did not include the required glue … that was customer-supplied. No worries, I thought, I would just pick some up at the supermarket on my next grocery run; after all, it had a small home-improvement section and I recalled seeing glue there.

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Opinion

Hey there, time traveller!
This article was published 06/01/2021 (586 days ago), so information in it may no longer be current.

TWO weeks before Christmas, as a gift I needed to wrap and send a wooden kit for my nephew. Of course, the kit did not include the required glue … that was customer-supplied. No worries, I thought, I would just pick some up at the supermarket on my next grocery run; after all, it had a small home-improvement section and I recalled seeing glue there.

Well, my grocery store was undergoing renovations and it had removed that section.

No worries, I thought, I will just slip next door to the pharmacy where I recalled the stationary section had an assortment of glues. Eureka! It had exactly what I needed, but a yellow band of tape prevented the sale. By order of the government in the pandemic lockdown, this was not an essential item and this was unavailable for sale. Many similar rules are real head-scratchers.

Rather than travelling to a big-box home-improvement store or going online, I decided my nephew — or, more accurately, his parents — could forage for glue.

My irritation at this illogical restriction gave way to reflection on why public-health communication has become so complicated and apparently self-contradictory during COVID-19. Behavioural economics offers important insights, not just on past missteps in communication but also for the crucial vaccination phase, without which progress toward herd immunity will likely be slow and cost many lives.

Behavioural economics recognizes that human decision-making does not conform to the neat economic models I teach to undergraduates. Some believe we need to jettison orthodox economics, but in the world of hindsight, standard textbook economic models do work.

Regret recognizes that our current situation would be better if we had made a different decision. We see the better, more rational path after the fact. Behavioural economics identifies important biases that sabotage our ability to make effective choices in the first place.

Moral hazard is a core idea in behavioural economics and is related to our inability to assess risk. The relaxation of social distancing while masked is a perfect example. I wear a mask, assess that my risk has become lower, and adjust my behaviour by not washing my hands and taking less care with social distancing — much like buying snow tires and then speeding. My behaviour negates the new safety protocol.

Present bias reflects choices favouring immediate gratification (going to a bar) versus a future and unquantifiable risk (the chance of contracting COVID-19). Often, few options exist, such as for small businesses that struggle to stay open. Therefore, business-support programs are vital, not just as an economic policy but as part of the effort to manage public health.

Framing effect shapes our choices. Research shows that people will respond more to a positive health directive framed as “Wearing a mask increases your chances of remaining healthy to 90 per cent,” compared to negative messaging such as “Not wearing a mask means you have a 10 per cent chance of falling ill.”

Optimism bias reflects the belief that many of us seem to view ourselves as being in a dystopian novel. We are part of a small group of survivors; everyone else succumbs to the zombie apocalypse and we are the stars in our own reality show. Young people routinely underestimate the risks of disease.

It’s hard to believe, but I was once young and convinced of my own invincibility. Media focus on the truly awful impact of the disease in long-term care homes tends to overload the messaging that the young cannot succumb and, more importantly, have little role in controlling the disease and the deterioration of the health-care care system that affects us all.

Status quo bias, or inertia, means habits are hard to change. Behavioural economics has created the concept of a “nudge” to prompt changes. For example, in the early stages of COVID-19, I kept hand sanitizer in my glove compartment and scrubbed like a crazed weasel. Then I got slack. So I created a nudge for myself by placing the hand sanitizer in the coffee holder just behind the shifter on the console. Now that the sanitizer is in full view, I am back to diligent cleansing.

In sum, research in behavioural economics finds that changing habits and beliefs requires positive messages and credible role models.

With vaccines rolling out, we are entering a dangerous phase of the pandemic. One view says getting 70 per cent vaccinated in Canada will take most of the year. With the new mutation that apparently has created a more infectious strain, we may need a 90 per cent vaccination rate to reach herd immunity.

Another more optimistic view suggests once 30 per cent of the most vulnerable, namely those over 60 and those in critical occupations, have received vaccinations, hospitalizations will plummet along with deaths. COVID-19 will recede from the news, and pressure will intensify on politicians to restore “normal” life. COVID-19 will remain a severe “flu,” but we will normalize it as an endemic disease we learn to live with.

In either scenario, public-health officials and politicians will face challenges to encourage a high percentage of the population to become vaccinated. The last several weeks have seen a halting rollout; most recently we have seen clowns masquerading as leaders flaunting public-health orders by travelling despite directives to stay home.

The irritation we all feel at this behaviour — and we can only hope they receive punishment at the polls — is minor compared to the damage done to the credibility of public-health messaging.

Gregory Mason is an associate professor of economics at the University of Manitoba.

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