Humans Are Fairly Competent Risk Assessors: And This Was One Of The Worst Policy Decisions I’ve Ever Seen

I see last week that Boris has deigned to allow socially distant wedding receptions to go ahead again after spending the previous 2 weeks spoiling people’s Big Day, and throwing the wedding, restaurant, flower and beauty industries into needless uncertainty. I have to say that, in terms of short-sighted stupidity, the initial decision to prevent wedding receptions with no notice was one of the worst small domestic policy decisions I’ve ever seen a government make. It was disgraceful that the government senselessly spoiled everyone's wedding plans for 14 days with Boris's ridiculous metaphor about squeezing the brake pedal.

Of course it's possibly sensible to show some caution to avoid another spike, and it's probably reasonable to squeeze that brake pedal when it comes to casinos, bowling alleys and skating rinks. But weddings are different for a number of reasons, and without writing a long missive expounding on what most of you surely also concluded, let's just say that this decision was a needless, callous, unsympathetic assault on thousands of people's special occasions - not to mention the detrimental effects on small businesses, on people's mental well-being, and on the ushering in of pointless uncertainty for future wedding dates. Weddings of up to 30 people, where properly conducted social distance measures are adhere to, are relatively low risk occasions - whereas the government-mandated short notice decimation of thousands of people's precious celebrations was guaranteed to cause much more unreasonable pain and disappointment than any politicians should have the power to cause.

I'm afraid that decision, like so many others is indicative of two principal things: that politicians have too much control over our lives, and that they are poor judges of the individual risk calculus under which humans operate. They are allowed to get away with it because for years the meagre bandwidth of political discourse on which this country has been fed has made us believe we are incapable of taking responsibility for our own lives.

Reality check

The world is risky, and society is complex as people try to negotiate numerous trade-offs every day of their lives. Should I park on a single yellow line for 10 minutes while I pop into the bank? Shall I go cycling tonight or write an essay? Should I order the Belgian chocolate cheesecake or go without for the sake of my waistline? Should I break the speed limit if I’m late for a friend's barbecue? People make these trade-offs every day; they trade-off the slight risk of a heart attack for a slice of cheesecake, and the slightly increased risk of a speeding fine to get to their friend’s barbecue. Moreover, as cars become better, people take more risks. The introduction of seatbelts meant drivers were prepared to drive less safely with seatbelts on for a faster ride*. The introduction of a more diverse range of tasty food meant people were prepared to increase their chances of atherosclerosis to enjoy a richer cuisine. The list is near-endless.

Many of those calculations take place within the subconscious, and don’t become a very active part of our active conscious negotiations. We are ultra-fast risk assessors, and generally pretty good at doing a better job than anyone else at optimising our own utility. Covid-19 has, of course, altered the landscape of our ordinary day to day risk calculus, where we now have to factor in questions like whether we should wear a mask, go on holiday, visit our relatives, and shop in the supermarket. And politicians now have to make more difficult policy decisions regarding whether to impose a lockdown, whether schools can open, and how to prioritise PPE provisions.

 

The problem politicians have (and ditto biologists, epidemiologist, and chemists) is that society is too complex and too locally bottom-up oriented for any authority figures to know the ratio of Covid to freedom and value that we’d prefer, or the optimal trade-off between more safety and fewer economic transactions. Imagine a lockdown policy that’s expected to save 20,000 British lives (let's say random lives for simplicity). How do we determine if that policy is worth adopting? As a percentage of the UK population, 20,000 lives is about 0.03% of the population. That means that, all things being equal, the policy has a 0.03% probability of saving your life (that's a 1 in 3350 chance of you dying). What are you personally willing to pay for a policy that has a 0.03% of saving your life? Let's say everyone in the UK would be willing to pay £1500 to avoid a 1 in 3350 chance of death, then a policy that cost each citizen £1500 would cost the UK over £100 billion. Consequently, such a policy would only be beneficial for the UK if it reduced the national income by less than £100 billion.

The trouble is, it's nigh-on impossible to know how much we'd pay to avoid a 1 in n chance of death, especially as everyone in the UK does not have an equal chance of dying. And this equation is made more difficult still, of course, by the fact that every individual has their own personal calculi regarding how they negotiate life's trade-offs. Some people are more risk-averse than others. Some are in a higher fatality risk category than others. Some people need more social interaction than others. Some are eager to get married in the next month, whereas others are more willing to wait until next year. Only we as individuals have the composite knowledge to evaluate our personal package of costs and benefits, and negotiate our own risk calculus to make decisions consistent with what we value.

A politician might protest that we are alright looking after ourselves, but others need protecting to ensure we don’t impose unwanted costs on them. But while that’s occasionally true, it’s mostly false. If everyone is allowed to make their own policy decisions, then the revealed preferences should start to play out in a fashion that best serves society as a whole. Some businesses will operate with more risk tolerance, some with more risk aversion; some prices will rise, some will fall; some people will change their behaviour a lot, some only a little; some will opt for a slightly smaller chance of Covid-19 for more social distance, and some will opt for a slightly greater chance of Covid-19 to save their business, or to stay in close contact with friends, or to pursue the burgeoning romance they had just begun. There isn’t much a government can do to make things more optimal than society’s collective can manage themselves.

Therefore, it's not self-evident that we shouldn't have just accepted that Covid-19 was going to be a problem we have to live alongside for a while, and that only elderly people and younger vulnerable people needed to shield, while the rest of the country carried on in a thriving economy as usual, and simply self-isolated if they showed Covid-19 symptoms (which is what most were doing anyway, whether they had symptoms or not). I'm not sure that's right, but I'm not sure it's wrong either. It’s almost impossible to measure how well everyone has done so far during this Covid-19 crisis, because we don’t know how much the Covid-19 policies have cost, how many present lives have been saved, how many future lives have been lost, how much future damage has been done, and what the near infinite alternative permutations might have yielded.

But just to get a sense of things - economists have fairly consensually measured on the basis of how we’ll behave probabilistically to avoid death that a human life is valued at approximately $10 million dollars. In other words, empirically people are willing to pay about $1 to avoid a one-in-ten-million chance of death. If we suppose the Covid policies have cost us at least half of this year's economic activity, that's the pound sterling equivalent of about $1.4 trillion, which at $10 million per life is about 140,000 lives. Only if the Covid-19 policies have saved at least that many UK lives, and there was no better alternative, can we say that they have been the right policies. And remember, when recording Covid-19 deaths, we must only record here those who wouldn't have died anyway during the same period, which makes the total number of Covid-19 deaths significantly lower than the 41,000 the ONS stats tell us

And that is the upshot of the past few months of Covid-19. Some people wanted the economy shut down and for everyone to keep an ultra-safe distance until Covid-19 diminished; some people wanted to protect the economy and live on through it until Covid-19 diminished and come out the other side stronger; some who initially demanded months of lockdown are now telling us how worried they are about the economy - and no one is probably ever going to know with certainty what the absolute optimum approach was.

 

* If you doubt this, you only need consider the statement when said this way - "If a driver has no seat belt he or she will drive more carefully" - a statement that is very obviously true, and one that no one has any issue with.  Saying "People drive less safely with seatbelts on" is just another way of saying "People drive more safely with seatbelts off". Both are equally true, they are just different words to say the same thing.