Friday, July 23, 2021

Our Brave New World

Freedom is a fragile thing and is never more than one generation away from extinction. It is not ours by inheritance; it must be fought for and defended constantly by each generation, for it comes only once to a people. ~ Ronald Reagan
Several years ago my daughter was studying Brave New World in her secondary school English class and she told me about an exercise that the teacher conducted with the class. For those of you who may not be familiar with the Aldous Huxley novel, it imagines a future in which people are ostensibly free, but where babies are selectively bred to be in one of five classes, from the Alphas - the ruling elite - to the Epsilons - the worker drones. Parenthood has been abolished and children are incubated and raised by the state, and sex is seen as a transaction - a source only of mindless relief, along with Soma, the state-sanctioned narcotic that everyone is encouraged to consume.

The exercise that my daughter's teacher gave the class was to write about which of the classes you would want to be in - the Alphas, who have the greatest abilities but also the greatest responsibility, or one of the lower classes. My daughter, I am proud to say, wanted to be an Alpha. What surprised her and me was that the vast majority of her fellow pupils wanted to be in one of the lower classes, living in (what they imagined to be) blissful ignorance. And this wasn't some lower-decile school where the children came from working-class families, this was a private school comprising the offspring of some of the country's intellectual and social elite (but perhaps that is not surprising).

I didn't think much of it at the time, but in the present world of Covid lockdowns and the reintroduction of discrimination by inherent characteristics such as race in name of "equity", the lemming-like preferences of my daughter's classmates don't seem so bizarre. We are turning into a society where people prefer to be locked up in their houses and subject to all manner of social restrictions than to be free to determine their own actions and to take responsibility for their choices. And if you think that the selective breeding in Brave New World is a little too fanciful, bear in mind that studies in America show that assortative mating (i.e. selecting a long-term partner from within your own social class) is increasing and may be a contributor to increasing economic inequality.

The other great dystopian novels of the 20th Century, 1984 and Fahrenheit-451 are coming true in their own ways too. Monopolistic, state-sanctioned control of the electronic media that pervades our lives, the labelling of dissenting opinion as "fake news", and the creation of a whole category of oxymoronic expressions such as "free speech doesn't include hate speech", are surely blatant examples of 1984's Telescreens, Thoughtcrime and Newspeak. The censorship and withdrawal of books because their authors have said something that doesn't accord with the political orthodoxy makes the book-burning world of Fahrenheit-451 look remarkably prescient.

Eighteen months ago no one predicted that we would respond to a pandemic by locking down healthy people in their homes. It had never been done in history - not for the Black Death, the 1918 influenza pandemic, the repeated polio epidemics of the early 20th Century, or SARS-1. We looked aghast at China locking up entire cities in early 2020 and said such an authoritarian response would never fly in Western countries. And yet here we are.

I hear you say that this is all just a temporary blip on the trajectory of ever-increasing liberty and prosperity. We had to give up a little freedom for Covid, and if the mainstream media is complicit in controlling opinions that are not conducive to "social cohesion" (to use an expression that has been used to justify the Ardern Government's proposed hate speech laws), well, that is not a bad thing. Besides, everything will all be back to normal once Covid is conquered, won't it?

If you think that, you haven't been listening. Just this week there have been stories about how we won't be returning to normal anytime soon, perhaps not ever. Public health experts here in New Zealand are already saying we need to treat influenza just the same as Covid - with continuation of lockdowns, border restrictions and masks in public. New Zealanders overwhelmingly support this, according to research released by the prime minister's office, with 91% saying they do not see things returning to normal even after most of the population has been vaccinated against Covid. Isn't this starting to look a little bit like Brave New World?

For those of us who love freedom, it is hard to know how to respond to this mass Stockholm Syndrome. I am by nature an optimist and console myself with the positivity of The Rational Optimist and Human Progress, but I am also a keen student of history and I see many parallels between our present time and the late 1920s/early 1930s with its cultural decadence, the resurgence of authoritarian regimes to challenge the liberal world order, and the acceptance of extremist violence as a normal part of Western political discourse. In the last four decades we have enjoyed the greatest period of freedom, (relative) peace and prosperity in human history, but I fear that we are about to discover that those words by Ronald Reagan that appear at the top of this post are true.

Friday, July 16, 2021

The wishful thinking driving NZ's energy policy

This week the media and political classes were aghast at the revelation that New Zealand was importing record quantities of coal to fuel the Huntly Power Station. More than half of New Zealand's electricity is generated by hydro stations and recently the country has experienced less rainfall resulting in lower storage lake levels. Huntly is New Zealand's only large coal-fired power station and as such provides the perfect backup generating capacity, being able to be cranked up at short notice when other sources fail to meet demand. But instead of thanking the foresight of earlier energy planners for building a power station that could be used as a giant backup generator - providing the electricity that literally keeps people alive in the middle of a very cold winter - we have the usual whingers treating this blessing as a curse.

New Zealand is being set up for a serious fall in its energy policy. The Ardern Government has banned offshore oil and gas exploration, eliminating the best prospect for an independent energy future, and at the same time is pursuing a policy of being "Net Carbon Zero" by 2050. The radical Climate Change Commission, appointed by the Ardern Government, wants to go one better and eliminate the use of fossil fuels in all transport, manufacturing and other important economic sectors by 2035. The Government has already started to implement the Commission's recommendations by announcing special taxes on fossil-fuelled vehicles and subsidies on electric cars.

This is all delusional. The increased use of the Huntly Power Station shows that we do not have sufficient so-called renewable sources of electricity generation to meet current demand, let alone adding everything that presently drives our economy using fossil-fuels. Factories, farms, schools, hospitals and transportation all run mostly on petrol, diesel, natural gas and coal.

A modern internal combustion engine car can fill up with 50 litres of gasoline in a couple of minutes, and drive all the way from Auckland to Wellington, a distance of 650km, without stopping. The best electric cars today take up to 12 hours to fully charge and even if you believe the manufacturers' most optimistic claims about range, they will need to charged at least once more during the journey. The batteries add about half a tonne to the weight of the vehicle (compared to 40kg for that tank of gasoline), so you are using a considerable amount of the energy consumed just to carry the battery with you. And all that electrical power has to be generated somehow. Currently in New Zealand, as we have seen, the additional generating capacity can only come from imported coal.

There is a reason the world is powered mostly by fossil fuels and that is their incredible energy density. Petrol contains more kinetic energy than the equivalent weight of TNT, and a litre of petrol has more than a litre of hydrogen. That can of gasoline you fill up to power your lawnmower is still the most practical, portable source of energy ever developed. The best battery technology is at least two orders of magnitude worse in terms of energy storage. The only superior energy source in this respect is nuclear.

The Energy Minister, Megan Woods, talked about something called the New Zealand Battery Project, as if it would be the solution to all our future energy needs. This isn't actually an engineering project, as the name suggests, but a committee of eight people that "will evaluate the viability of pumped hydro schemes of various sizes". The committee comprises one electricity industry and one construction industry expert, with the remaining members being academics, environmental activists, local government bureaucrats and the requisite representative from a Maori tribe. Their only consideration of anything real is a speculative idea to build a pumped hydro storage scheme at Lake Onslow in the South Island, this in a country that hasn't built a large hydro power station since the Clyde Dam was commissioned in 1993.

If this Government is serious about becoming Carbon Zero, we need to start building power stations at rate never seen before in this country. We need dozens of new generation plants, not just a pie-in-the-sky hydro storage scheme. Ideally, these new plants would be nuclear-powered. The Chinese and Russians are the leaders in modular, safe, latest-generation nuclear power generation and we should be looking to invest billions of dollars in their technology. This is what the Government would do if it was serious about New Zealand being Net Carbon Zero. But the Ardern Government is no more serious about this that than they were about building 100,000 new houses.

Friday, July 17, 2020

The False Dichotomy of Left vs Right

Why is it that we use the physical layout of the French revolutionary assembly to define the political divisions in most countries today? The political terms "right" and "left" originated in the fact that the supporters of the monarchy sat to the right of the assembly president and those who supported the revolution to the president's left. They ceased to have much relevance even in France as the monarchy was abolished and the revolution fractured into factions that settled their internecine scores with the guillotine. 

Wikipedia, that ultimate source of fake news, would have you believe that the modern left represents "ideas such as freedom, equality, fraternity, rights, progress, reform and internationalism", whereas the right represents "notions such as authority, hierarchy, order, duty, tradition, reaction and nationalism". You need to read no further than the use of the term "ideas" to describe the left and the more derogatory "notions" for the right to know the political sympathies of those who edited the article. It is so biased you could be forgiven for thinking it first appeared in The Onion or Babylon Bee. One thing the Wikipedia article does get right is that it lists libertarianism on both sides of the left-right divide, which suggests that even the lefties who dominate Wikipedia editing realise that libertarianism doesn't fit the dichotomy.

The respectability of the left and the vilification of the right in the West today is inconsistent and highly hypocritical. The extreme left, in the form of Marxist-Leninism, Maoism, and other forms of Communism, has been responsible for far more human misery and deaths in the last century than the extreme right, and they are indistinguishable in their means and ends. The Chinese Communist Party today, for example, fits Wikipedia's definition of Fascism precisely: dictatorial power, forcible suppression of opposition, as well as strong regimentation of society and of the economy. The only real point of difference between Fascism and Communism in practice is that the former tolerates private ownership so long as it serves the purposes of the state - and this is also true of the Chinese political system today. Both Hitler and Mussolini saw themselves as socialists, and the left's casting of them at the opposite end of the political spectrum is a very successful piece of historic revisionism.

The real philosophical antipodes are totalitarianism and freedom, with extreme right and extreme left on the totalitarian end of the spectrum. Both are about using human characteristics to categorise people into groups that are set in opposition to one another. The extreme right uses nationality and race, whereas the extreme left has traditionally used class - but now also race, sex or gender, and sexuality. It's classic divide-and-rule and scapegoat tactics. Blaming the "other" for one group's misfortunes is the despot's oldest trick, whether it is the Nazis vilifying the Jews for Germany's misfortunes following World War One or Black Lives Matter blaming white people for the situation of African-Americans today.

The true contemporary Fascists are Antifa. You only need to look at them in their black outfits and masks, carrying weapons and beating up innocent people on the streets, to appreciate the parallels with Mussolini's blackshirts or Hitler's Brownshirts. The smashing and looting of businesses is a mirror of the events of Kristallnacht. The Black Lives Matter protestors who recently marched in cities all over the world are their "useful idiots", having been co-opted to their cause but perhaps not fully understanding what they are supporting.

The true liberals (in the classical sense of the word rather than the perverted American appropriation of it) are libertarians like me, who believe in individual rights and maximum freedom in all spheres of life - political, social and economic. We understand that you cannot have a big state proscribing freedom in one area without it affecting every other area of life. The desire of the left to have maximum freedom in the social sphere, such as the freedom to marry whoever you want, is incompatible with their desire to have the state dominate the economic sphere. Likewise, the right is contradictory when it (often somewhat selectively) advocates for free markets while trying to limit political or religious freedom.

Libertarians can be defined by their opposition to the use of force in political, social and economic relations. We believe individuals are sovereign and that governments derive their legitimate authority only from the consent of the governed. We believe that the legitimate purpose of government is to protect individual rights and that the role of government should be limited to activities that are consistent with this. That means the state ought not to interfere with who you marry or with whom you trade. It also means we are in opposition with big state advocates on the right or the left.

Monday, June 15, 2020

The Real Problem with Police Violence in America

My last post was a fairly pessimistic epistle entitled "The End of the World as We Know It" in which I lamented the fact that the four greatest decades in human history were over and we were at risk of throwing away everything we had gained. But even I could not have predicted what has transpired over the last month. I imagined the Covid-19 lockdown would see a newfound respect for individual freedom and the wonders of free enterprise as the most important factor in improving human wellbeing over the last two centuries. I was wrong - the pandemic has only served to give strength to the arms of those who believe that the only way to improve human existence is for them to impose their authoritarian will on the rest of us.

The death in the United States of a black man, George Floyd, at the hands of a white police officer, was the match that lit a tinder-dry kindling of carefully-nurtured resentments and manufactured grievances. Under the banner of "Black Lives Matter", thousands of protestors took to the streets not only in Minneapolis, where Floyd was killed, but in cities across America and the world. Even Auckland had a mass gathering. Political leaders, reading the mood of the crowd, turned a blind eye to the massive flouting of the Covid-19 lockdowns that they had hitherto enforced with pedantic officiousness. In some places the protests turned violent, with vandalism and looting of shops (the targets invariably being the stores with the most desirable consumer products), and assaults on innocent bystanders and property-owners. 

I think a degree of outrage is justified by the death of Floyd and others at the hands of American police, but the problem is not, as claimed, primarily one of institutional racism. When you examine the statistics, as Heather MacDonald does in this Wall Street Journal article [sub. required], white Americans are as likely to be killed in a encounter with police as blacks, and in this article, Coleman Hughes lists many cases of white victims who died in equivalent circumstances to George Floyd in recent years. In this part of the world, we were appalled to hear of the case of Justine Damond, the Australian women who was also shot by a Minneapolis police officer after she had summoned the police to investigate screams she had heard near her house. The case demonstrated that anyone, even a law-abiding Antipodean, could be the innocent victim of police violence in America.

The real problem is the unrestrained nature of the US Government. Other countries may have far more authoritarian regimes, but America's position as the most powerful state on Earth means it can bring to heel not only its own citizens but any person, anywhere in the world. It can force other governments or global institutions to comply with its wishes and has come to regard the entire world as being subject to its jurisdiction. The result of this virtual omnipotence is that American officials have an arrogance that is rare even in totalitarian regimes. Like the great imperial powers of history, the American state regards itself as towering above the people it rules, and its satraps and panjandrums are so estranged from those they are meant to serve that they act like a separate tribe - and as is customary in tribal engagements, violence is the norm.

I have been to the United States many times, and every time I go there I am more incredulous at the attitude of officialdom to the public. There is none of the courtesy or humour that is characteristic of public officials in New Zealand. The normal demeanour of American officials is haughty high-handedness and surly suspicion. The last time I went to the US was on the way to Mexico, and in spite of the latter country's immense problems with violent crime, I felt safer talking to a Mexican police officer than any of the American officials with whom I had to deal.

Notwithstanding the merits of the original cause, it is apparent that the outrage over George Floyd's death is being exploited by some pretty cynical and dishonourable groups for their own political ends. The more extreme protest actions on the streets of American cities have been organised and coordinated by the loose affiliation of extreme-left-wing groups known as Antifa. Today's Antifa is the philosophical successor to the original Antifaschistische Aktion, which was an offshoot of the Communist Party of Germany in the early 1930s. According to the Anti-Defamation League, Antifa "proactively seek[s] physical confrontations with [its] perceived fascist adversaries" and should not be confused with other, non-violent, anti-fascist groups.

I have always been able to imagine the sort of society the likes of Antifa want to create, but you don't need to imagine it - this week they have created a small example of it in Seattle. The so-called Capitol Hill Autonomous Zone or "CHAZ" was formed after police and city officials abandoned the East Precinct area of Seattle to the protestors. It didn't take long for a leader to emerge - a former rapper named Raz Simone, armed with an AK-47 and accompanied by equally well-tooled paramilitaries, announced that he was the police now and was filmed allegedly assaulting multiple protestors who disobeyed his orders. The citizens of CHAZ began to experience economic life as it would inevitably be in their imagined utopia - they were soon begging for donations of food (vegan fare, no less) from supporters outside the zone. Communism always looks like this - violence and starvation - although not even I expected that that they would get to the end state so quickly.

Protestors are now calling for the abolition of the police, and in Minneapolis the city council has acceded to their demands, but if the alternative is the sort of anarchy that now exists in Seattle, I think most people would vote to stick with the devil they know. And besides, the city council is responsible for the police and must accept blame for its dysfunction - I would be more impressed if they were to vote to abolish their own council.

Robert Peel, the British prime minister who established the Metropolitan Police Service, which is considered the template for the modern civilian law enforcement authority, said, "The police are the public and the public are the police." He meant that they should be an integral part of the community to which they belong, and he would have been horrified at the division that has arisen between his progeny in America and the people they are meant to serve. We shouldn't stand for an out-of-control police, but we should realise that it is merely the symptom of an out-of-control government.

Monday, May 11, 2020

The End of the World as We Know It

The four decades from 1980 to 2020 produced the greatest growth of liberty and prosperity in human history. Most of the great 20th Century dictatorships that had imprisoned half of the world's population collapsed or were replaced by more liberal versions of themselves. Average human income as measured by GDP per capita increased from approximately $2500 (in current US Dollars) to more than $11,000, and those living in extreme poverty as defined by the World Bank reduced from 44% of the world's population to less than 10%. The economic deregulation of the 1980s resulted in a wave of technological innovation in medicine, telecommunications, energy production, finance and consumer goods that has enabled people all over the world to live better and longer lives. The social liberalism that started in the 1960s accelerated during this period and, in the West at least, most of the remaining discriminatory laws against minorities such as gay people were swept aside.

The authoritarian instinct wasn't gone, however. In China, the Communist Party refused to follow its Russian and European counterparts into oblivion and in 1989 at Tiananmen Square reasserted its totalitarian rule with a bloodbath of tanks and guns against unarmed protestors. A few formerly-liberal countries like Venezuela also bucked the trend and embraced an austere form of socialism of which even the Khmer Rouge might have been proud. The United States reacted to the terrorist attacks against the World Trade Centre and other major landmarks in 2001 by invading Afghanistan and Iraq and introducing the repressive Patriot Act, turning its sophisticated surveillance capabilities against its own people, and many other Western governments followed suit. We had some economic stumbles, most notably the dotcom crash of 2000 and the global financial crisis of 2008, but while these interrupted the long periods of growth, the overall upward trend continued.

That era is over. Covid-19 has been the catalyst for, but not the exclusive cause of, a sea change in our social, economic and political lives that is unlikely to be short-lived. The signs were there before the pandemic. Elements of the environmental movement such as Extinction Rebellion had become shrill in their calls to sacrifice our economic and political freedom to avert a millenarian doomsday, and a combination of enhanced censorship laws and a "cancel culture" - complete with virtual-pitchfork-wielding mobs - saw the casting out from mainstream discourse of anyone who defied the increasingly narrow political orthodoxy. Voters responded by electing contrarian political bruisers such as Donald Trump in the United States, Jair Bolsonaro in Brazil and Viktor Orbán in Hungary, who vowed to overturn some of their opponents' excesses and imposed a few of their own. Covid-19 has merely brought all of this to a head.

Whether or not the Covid-19 lockdowns that most countries have imposed are justified from a epidemiological perspective, there is no doubt now that the economic costs and the political and social impacts will be significant and long-lasting. The elimination of the spread of the disease within a country's borders is just the beginning of the journey back. We will have to live with a less-onerous form of lockdown, including quarantine at the border, until we have a vaccine or develop natural herd immunity. According to the OECD, the lockdowns will have an initial negative impact on GDP of between 15% (Ireland) and 35% (Greece). The longer term economic impact is uncertain, although many economists are now expecting a U-shaped, rather than a V-shaped, recovery. We almost certainly haven't seen the full impact on stock prices, and as earnings plummet and more companies fail, the consequential impact on global markets is likely to be felt for years to come. Governments that already have high levels of national debt and large deficits will have limited capacity to use monetary and fiscal policy to drive long-term economic recovery, particularly with interest rates at historic lows.

Many of the changes we have adopted during the lockdown will survive the easing of restrictions. Some of these changes are positive - for example, the widespread use of working-from-home technology lessening the need for people to commute to central city offices (with a consequential reduction in traffic congestion and pollution). Others aren't so positive - such as the permanent loss of jobs in retailing and food service from the accelerated use of online shopping and home delivery. One of the worst effects may be a permanent disruption to social relations, particularly amongst the elderly, as people struggle to restore tenuous community relationships that existed before the lockdown. The pandemic has seen traditional social niceties replaced by mutual suspicion and this trend won't be easily reversed.

The biggest permanent impact is likely to be political. Covid-19 has seen the largest expansion of state power over our lives since World War II. We have broken through an invisible wall of convention that constrained governments as much as any formal constitutional barriers - the presumption that a citizen can do anything so long as it isn't legally forbidden has given way to the expectation that our governments will tell what we are allowed to do. This hasn't happened in defiance of the will of the people - polls indicate that a majority of voters in most Western nations favour the extension of the lockdown, and any questioning of its necessity is regarded by many as disloyal. The established media have been cheerleaders of the measures and their traditional role of holding government to account has been assumed by bloggers and podcasters, who are often cast as troublemakers. The traditional Western political divide between conservatives and progressives hasn't defined the battlelines over the lockdowns - governments of both political hues have adopted similarly stringent measures and it has been the ultra-progressive Sweden that has been a libertarian outlier.

We don't have to be dire pessimists to think that it will be many years before we shake off all of the effects of Covid-19. International travel, for example, won't return to normal until we have a vaccine and airlines may be required to make social distancing permanent, halving the number of passengers on a plane and doubling the fares, thereby returning air travel to the relative luxury of the 1970s. Perhaps we will see a levelling of the disparities in incomes that have grown up in recent decades between blue collar jobs and the managerial elite, as some of those "essential" workers demand wages more commensurate with the importance of their role in the lockdown. Recent moves towards greater protectionism in trade is likely to accelerate as nations embrace isolationism and autarky, which is likely to further constrain economic recovery and growth. And some governments will be reluctant to hand back the power they have assumed during the lockdown, justifying further constraints on liberty by the ongoing impacts of the lockdown itself, in a vicious circle of escalating repression. It will be a virtuous government indeed that abandons all of their lockdown measures at the earliest possible opportunity.

Those of us whose adult lives have largely played out over the last four decades should be grateful that we have lived through the best of times, but we owe it to our children and grandchildren to give them at least the same opportunities that we have had to enjoy happy, healthy and fulfilling lives. How we handle the recovery from Covid-19 will determine whether we do so.

Wednesday, May 6, 2020

Understanding Risk in the Time of Covid-19

I am something of a risk management expert. A significant part of my professional career has been advising organisations on how to effectively manage risk, so I can justly claim to know a thing or two about the subject. The responses of governments all around the world to the Covid-19 outbreak have demonstrated how poorly understood the science of risk management is amongst our leaders.

Risk is quantitatively assessed as likelihood times impact. In other words, the chances of the risk eventuating (if we don't do anything to avoid it) multiplied by what happens if it does. One of the problems with Covid-19 is that governments, at least initially, under assessed the likelihood. They have also overestimated the impact with their projections of huge numbers of deaths. Having assessed the risk, you then have to assess the possible mitigations and their costs. Governments have compounded their errors by going straight to the most extreme form of mitigation and not quantifying the costs.

Time can be a significant factor in risk mitigation. I was listening to a podcast this morning in which an academic in America was discussing the poor state of infrastructure in many US states. He gave an example where a state government had decided to defer repairs on a short stretch of highway that would cost $6m if done today. Leaving the maintenance unaddressed for just two more years would result in a six-fold increase in the cost of repair. Under those circumstances, it seems crazy not to carry out the mitigation today.

One of the worst effects of a lack of understanding of risk management is the precautionary principle. This is the belief that unless you have complete knowledge about the likelihood and impact of the risk, either you shouldn't take any action at all (e.g. not allowing the trial of a new drug) or you should go all-out to prevent the risk eventuating (e.g. locking down the population in a pandemic).

Imagine you have a sore leg and you go to the doctor, who takes one look at it and says it might be cancer and therefore he should amputate. This is the precautionary principle. At the very least, you would want to understand the likelihood of it actually being cancer and the prognosis for that particular form of cancer before you agreed to the surgery. Some cancers are benign and don't need to be treated at all. Others are minor and localised and a simple excision of the tumour might be sufficient. You would weigh up the likelihood and consequence of the diagnosis against the cost (in loss of mobility, ability to work, etc.) of the mitigation. You may decide that the cost of any mitigation is more than the benefit gained from the treatment (a not-uncommon decision particularly amongst elderly cancer patients).

The most obvious real-world example of reliance on the precautionary principle today is the various zero-carbon initiatives legislated by governments around the world. Stopping all or most of the use of fossil fuels, which we literally rely on to keep us alive, in the belief that it will prevent global warming is, from a risk management perspective, extreme folly. The claims of "settled science" notwithstanding, we have little certainty about the direct impact of manmade carbon dioxide emissions on the climate, so banning the most common, economic and safe forms of energy before we have the chance to develop reliable alternatives, is unjustified.

Some experts were calling for the New Zealand Government to quarantine everyone entering New Zealand back in February, when we had no Covid-19 cases. That mitigation, as disruptive as it would have been on our tourism and international education sectors, would have cost a fraction of the complete lockdown of our economy that was adopted once we had multiple cases of the disease within our borders. Philip Thomas, a professor of risk management at Bristol University, has estimated that if GDP falls by over 6.4 per cent over the next two years as a result of prolonged economic inactivity, more lives will be lost than saved thanks to rises in poverty, violent crime and suicide. So, even if you ignore the actual dollar costs, the lockdown may end up costing more in lives than the unmitigated impact of Covid-19 itself.

Effective risk management is almost always about choosing the lesser evil. There is seldom a costless mitigation option. Economists and actuaries understand this, which is why they quantify the value of human life in their models. For example, the economic cost of a death from a motor vehicle accident in New Zealand is valued at $4.34 million. Personally, I consider my life worth a lot more than that, but the transport authorities have to use an average value of life that represents the trade-off they are prepared to make in mitigating the risk of death on the roads. Make it too high, and the models would indicate we should ban all travel by motor vehicles, which would cost a lot more than the value of the lives lost. The problem with government responses to Covid-19 all around the world is that they haven't done these calculations, so it is not surprising they all jumped on the precautionary principle bandwagon and locked us all down.

A further problem with risk management is reliance on specialist expertise. This may seem a strange criticism for a risk management expert to make, but experts are, by definition, narrowly focused on their area of expertise. It would be surprising to find an epidemiologist, for example, who knows a lot about economics. So when governments take their advice exclusively from a epidemiologist, it isn't surprising that their response doesn't give sufficient weighting to the economic costs. Part of the challenge in defining and quantifying a risk is in finding the right range of expertise to do a balanced assessment of likelihood and impact. An engineer who specialises in fluid dynamics, for example, may be as qualified to advise about the spread of a disease as a doctor.

I feel like we're in the early stages of a nuclear war and there is still time to stop the missiles with only moderate damage to each side, but no one has the courage to agree a ceasefire. At some point rational thinking has to enter the higher realms of decision making about Covid-19. Our governments have largely ignored the costs of mitigation, but once these become apparent - like the smouldering remains of nuclear strikes - we're all going to wonder why we didn't come to our senses earlier.

Sunday, May 3, 2020

Ignorance Upon Uncertainty

It has been more than a week since I last posted and since then in New Zealand we have come out of Covid-19 lockdown Level 4 into Level 3. I have no idea what these levels mean in terms of detailed rules and the authorities seem to be making it up as they go along, with the New Zealand Police refusing to release their own advice about the legality of their enforcement of the rules. This Kafkaesque uncertainty is the hallmark of authoritarian governments everywhere - if the rules are arbitrary, you can always be deemed to be in breach of them.

I have imagined that among the small blessings of the lockdown, an increased appreciation for the value of the producers in society might come out of this situation. People have become aware that they can't take it for granted that their supermarket has plenty of the right type of toilet paper or packaged flour. They have also become aware that the people who run the factories, who drive the trucks that deliver the goods, or who stack the shelves in the stores, should be considered "essential workers" as much as the doctors and the nurses tending the Covid-19 patients. But most don't understand the workings of the complex supply chains that ensure the shelves are full with what they need, or how the packages that they order on Amazon or AliExpress miraculously arrive at their door from the other side of the world. It would astound most people to know that there is no central organising authority that operates those supply chains, but rather they are a result of the collaborative efforts of a myriad of businesses, big and small, all around the world.

Even worse is the fact that most people (including many of our leaders) don't understand how the broader economy works, and they don't seem to appreciate the economic and social damage that is being done with the Covid-19 shutdown. They believe the government can flip a switch and turn the economy off or on at will and that all will soon be back to normal. Employers are being criticised in the media for laying off workers or even for closing down, as if the proprietors of such businesses are traitors acting against the national interest.

Our prime minister, Jacinda Ardern, showed her utter ignorance of how the economy works - or worse, a Marxist understanding of the economy - with her comments that the private sector should value their workforce in the same way government does. This is particularly galling to business owners who are struggling because of her lockdown policies (which, as I have written before, are only necessary because of Ardern's early inaction to prevent Covid-19 entering New Zealand) and in increasing numbers are losing their life's work. Does Ardern not realise that every cent government spends ultimately comes from a private business somewhere? She is criticising private business owners for not being as generous as she is with the money she seizes from them!

Ardern's criticism came after one of her colleagues, Deborah Russell, in an example of the most breathtaking left-wing arrogance, blamed businesses themselves for not being able to withstand the government-ordered lockdown. The left likes to go on about victim-blaming but in typically hypocritical fashion are happy to engage in a little of it themselves when the victims are business owners.

Meanwhile the deputy prime minister, Winston Peters, leader of the "far right" New Zealand First Party, wants to "put up the shutters" to foreign investment and trade, returning New Zealand to the "Polish shipyard" economy of his mentor Robert Muldoon's government during the 1970s and early 1980s. New Zealand at the time had a protected manufacturing sector that produced shoddy, expensive goods; draconian exchange controls that meant you had to apply to the Reserve Bank to get a strictly-limited amount of foreign currency before travelling overseas; and - Muldoon's coup de grace - wage and price controls that meant a corner store had to apply to the prime minister personally if it wanted to put up the price of tea. The economy was Soviet in all but name and it is to this state that Peters wants to return this country.

The problem is not just with central government. Local councils refuse to cut back their spending in the crisis and are intent on increasing their tax take from struggling businesses and home owners. They seem oblivious to the evidence that many New Zealanders are already struggling to meet their existing financial commitments.

All of the Covid-19 assistance programmes have involved greater spending by the state. The Government is acting like a benevolent rich uncle, doling out wage and salary assistance, business loans and increased welfare benefits as if New Zealanders won't realise they will have to pay back every cent. Perhaps the Government is right to count on the public's ignorance - it is apparent that many people do not realise governments have no source of funds other the taxes they extort from hardworking citizens. Even government borrowing is just a demand on future taxpayers.

I don't see any evidence that Covid-19 will result in an increased appreciation for the producers in society. I think we are fated to repeat the mistakes of the past, whereby governments and the public regard the producers as milch cows, to be exploited until they are empty vessels, and then to be blamed for not being productive enough. Perhaps if the economic downturn from the Covid-19 is long and deep enough, governments will realise at some point that they need to release their grip on the producers' throats. I fear that may take many years.