Read on Twitter
Read our 1-page position paper for ending #lockdown in SA. Repeal unworkable distinction between essential/non-essential. Limit high-risk activity, not specific biz/sectors. Allow firms to innovate for safe operation. End special licencing requirements. https://etmmacro.com/covid-19-policy/
The govt draft doc distributed on social media this week envisages a "risk-based" approach too, but it is very different from ours. The state's draft version envisages a top-down delineation of "sector risk" and then 5 risk alert levels. Ours is decentralised risk management.
The problem with a "sector risk" approach is 2-fold. 1) firms do not neatly fit into sectors. Sector categorisation is blunt and broad, whereas firms are highly complex and specialised. 2) Firms within 'sectors' may operate very differently, meaning their risk is not comparable.
There is in fact a 3rd problem with the "sector risk" approach which mirrors the "essential/non-essential" problem: Firms in sectors that MAY operate rely crucially on firms in sectors that MAY NOT operate for sales & supply. This is therefore economically unworkable in our view.
This unworkable "sector risk" approach is then proposed to be integrated into a 5-level risk alert system, which would be run at the provincial level (9 provinces). The idea seems to be to be able to switch from say level 4 to level 3 and back to level 4 depending on COV19 risks.
It seems that provincial govt will have some control on risk alert levels, but also that central govt can override provinces. It is believed that COV19 risk levels can be dialled up or down and S.Africans will get used to it quickly b/c of their experiences with load-shedding.
We believe it would be a grave mistake to think such a system is even remotely applicable to a complex epidemic and complex economy. Not only would firms have broken linkages with other firms, but now cross-provincial supply/demand networks could be severely impaired. Moreover...
...dialling risk levels up or down based on complex epidemiology creates unbearable uncertainty for firms. Capital allocation, hiring and investment decisions require time horizons far beyond the short-term horizons implied by switching between risk alert levels.
The result of such a "sector risk" and "5 levels" approach would not be an orderly, efficient, productive end to lockdown, but create immense confusion, acute and chronic supply/demand dislocations, and investment stasis. The draft proposals therefore are profoundly unworkable.
We should emphasise that the govt doc in question that was distributed widely on social media (titled: Risk-adjusted strategy for economic activity) is merely a set of proposals that may inform the policy expected to be announced today. Actual policy may differ materially.
Our proposed approach ( https://etmmacro.com/covid-19-policy/), which has garnered support from some of SA's leading economists, small/medium business investors, and business chambers, recognises that commerce and its COV19 risk profile cannot be centrally planned without dire consequences.
Public policy officials must avoid the trap of believing that a 60 million people economy, facing deep economic risks and a health epidemic, can be micro-managed using spreadsheets and political directives. This would, in our estimation, be a grave miscalculation by government.
The lesson of sound economics is that commerce and health risk management are unfathomably complex. Decisions about production and safety must be put in the hands of managers, workers, consumers, suppliers. Govt should administer some sensible COV19 public health rules, fairly.
Under our post-lockdown proposal, lockdown ends entirely with no army deployment required. Tolerable COV19 precautions remain, but none include lockdowns or blanket bans on 'sectors'/'non-essentials'. Managing COV19 and averting an economic tragedy is absolutely achievable.
Once again, here is our position paper on ending lockdowns and getting SA families back to putting food on their tables, safely. If you agree with this thread and our proposals, please RT and share the link below widely. END https://etmmacro.com/covid-19-policy/
