THE TRAFFIC LIGHT ROUTE TO ENDING THE ECONOMIC LOCKDOWN - Paul Ormerod & Gerard Lyons
A lockdown is necessary to limit the spread of the virus and save lives, but it is not feasible or practical to prolong it for too long. A long lockdown will wipe out large swathes of the economy. There will be a negative impact both financially and mentally on too many people. Already the lockdown has seen a surge in domestic violence.
It is important to make plans now for when and why the lockdown will end. There are significant trade-offs in these key decisions. Here, we outline how to end the lockdown in a phased and gradual way.
Economists and social scientists have an important role to play in helping answer important questions such as when, why and how to end the lockdown and to bring the economy out of hibernation and back to life.
The mathematical models of epidemiology currently occupy centre-stage in policymaking. To be absolutely clear, these models have real scientific value and have had a positive impact on policy making.
These models have strengths but they also have limitations, and it is the latter that threatens the lockdown being prolonged too far. Assumptions have to be made about the key inputs – the parameters – of any particular model. In physics, for instance, the parameters of physical laws are both fixed and are known with certainty. The same is not true of epidemiological models.
If people revert very quickly to the patterns of behaviour of before the crisis, the epidemiological models are correct. There would be a second wave of infections. But behaviour will be different, either because of the lessons people have learned during this crisis, or because of the constraints placed upon them by rules and regulations. How many people will shake hands the day after the lockdown is lifted? We emphasise as strongly as possible that we are using the analytical framework of epidemiological models in our strategy for exit from lockdown. But it is essential to bring into them the key behavioural insight from economics.