Market Thinking

making sense of the narrative

Let’s just copy the other guy

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The economics of shutdown will undoubtedly go into the history books, but so will the psychology and the politics, as well as the psychology of the politics. Right now, the logical gymnastics being performed to not only justify previous policies but also to explain the rationale behind new ones are making for great theatre. In the UK the original justification for placing the entire country under house arrest was ‘to save the NHS’,  as dramatic pictures from Italy together with extreme predictions from the team at Imperial College caused an understandable panic. We noted this at the time as the Venkman Protocol , but the idea was not to stop the infections, but to smooth them out, to prevent the NHS from being overwhelmed. This is no longer a threat, but policy has now evolved to be one of somehow avoiding ‘a second wave’ of infection ‘until we get a vaccine’, with a focus on a single, almost impossible to measure, number of the re-infection rate, R. The UK has just announced a lockdown/quarantine of all arrivals into the UK for two weeks, copying other countries who did it months ago, but in doing so contradicting their own decision in March that since the virus was already at large in the country, new people bringing it in would not make a difference. They still won’t.

Having performed that inversion of their own previous logic, the UK government have announced that people from the Republic of Ireland and lorry drivers will be exempt, but if they are to be exempt why not anyone else? Can lorry drivers also visit care homes now, or go to pubs?

The problem is partially that politicians are desperate to avoid being blamed for any deaths (Andrew Marr on TV on Sunday was ridiculously trying to get Michael Gove to ‘guarantee’ that no teacher would catch Covid if schools opened) as if we could somehow remove all risk in society. Indeed as if we could guarantee immortality. The other part of the problem is that politicians are behaving like bad corporate management who’s business plan consists of seeing what the competition is doing and copying it, irrespective of whether it is appropriate.

Thus we see that Asia has ‘had a better crisis’ than the west and assume/are told that it is down to a variety of factors, each promoted by those with a particular axe to grind. Asians locked down early and hard, we are told, so we should do that. They generally do what they are told, so it’s the British public’s fault that this lockdown isn’t working as it should. Thus we need to increase fines for dis-obeying say the authoratarians. The Asians wear masks as a matter of course, so we should do that too say the PPE providers. They also have sophisticated test, track and trace systems, so we need those, say the tech consultants. The healthcare in South Korea, Japan, Singapore is superior, say the healthcare companies. And so on, like bad middle managers at an offsite trying to come up with ‘new’ ideas that are basically just reheated groupthink. It’s a variation of the old joke that we can’t get rid of the red phone boxes in Surry as they are keeping the Elephants off the golf courses. “But there are no Elephants in Surrey” “Exactly”!

But for every piece of apparent supporting evidence there is a contradiction. Vietnam, Philippines and Indonesia don’t have sophisticated health systems or high tech track and trace, moreover they have high population densities so that ‘excuse’ for western cities doesn’t work either. In the same way that while the Vietnamese population are young (and thus less susceptible), the Japanese (and Chinese) are older. We then fall back on the pre-conditions, Asians are less prone to health issues such as diabetes or obesity than the west we are told, so we need to get fitter. This is not a bad idea in itself, but how then do we explain low rates of infection and death in Australia and New Zealand? This we are told (somewhat smugly) by their politicians is because they locked down early which takes us back to the start and this latest argument is, we suspect, behind the UK’s decision to copy the idea – albeit three months later.

However, we then encounter a different issue and another awkward question. Why are Australia and New Zealand faring so much better than Canada, which also locked down early and hard and has a very similar mix of demographics, ethnicity, health, wealth and other factors? The simple answer is that it has been summer in the southern hemisphere and flu season is a winter thing – albeit remembering this is not a flu. The only slightly less simple answer is Vitamin D.

In markets, we are used to looking at lots of data and trying to draw inferences. Company analysts and accountants are our equivalent of the medics in this situation, while data analysts fit the role of quants. From our perspective, we like to look at factor analysis to help in our understanding and thus if we were to look for correlations anywhere by data-mining, probably the strongest we would find anywhere in looking at this virus is between infection rates, excess deaths and latitude. We don’t produce Vitamin D, which is an important part of the immune response system without sunlight. Interestingly this also helps explain the puzzle of why Black Asian and Middle East (BAME) ethnicity appears to have a higher mortality rate, but only at high latitudes, a combination we know to be associated with low vitamin D. To continue the theme, Florida has fared better than New York, despite having an elderly population. Louisiana has done better than Illinois. At risk people in care homes, or housebound and or obese people are also known to often have vitamin D deficiency.

So is this the magic bullet? It certainly isn’t scientifically proven, as the linked article admits, but then neither are masks, social distancing or lockdown. Indeed, forcing otherwise healthy people to stay inside and away from sunny parks may well have been even more of a stupid idea in hindsight than it appeared even at the time.

Update

No sooner had I posted about Vitamin D than I saw this in the Spectator from the excellent (and ever sensible) Matt Ridley

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