Wednesday 27 January 2021 6:00 am

Cash for Covid? Cash for jabs makes far more sense

Paul Ormerod is an economist at Volterra Partners LLP, a Visiting Professor in the Department of Computer Science at UCL, and author of Against the Grain: Insights of an Economic Contrarian, published by the IEA in conjunction with City A.M.

As the snow fell on Sunday, I almost expected a Cabinet minister to address the nation that very evening: “Don’t go out in the snow. Don’t slip and sprain an ankle. Save the NHS!”

It could have been backed up by a scientist brandishing a chart and a “model” to demonstrate that icy weather led to an increase in broken limbs.

In this case, of course, the science would have been very well grounded and supported firmly by the evidence, something which has definitely not always been the case with Covid-19 pronouncements.

Read more: Avo and toast all the way to growth? Don’t ask millennials to bail out the economy

Economics, like epidemiology, is an inexact science. But It can still tell us useful things about the world.  

What is probably the best supported insight of economics has been in the real news this past week. Namely, that when incentives change, people change their behaviour.

The proposal that those who catch Covid-19 be paid £500 as an incentive to self-isolate attracted widespread ridicule. The idea was well meaning. It would remove the incentive to go to work in order to get paid.

As many have already pointed out, the concept was flawed. It would create a perverse incentive, especially for younger people for whom the risks are very low, to go out and catch the virus. More simply, there was nothing to stop those who test positive from pocketing the loot and still going out to work.

Economists did point out early in the pandemic that test and trace systems in general faced challenging problems, even if the technology really did work properly.

Self-isolation is not simply a personal inconvenience. For many, it involves a loss of income. There are strong incentives therefore not to comply, which is indeed what has happened.  

It is not easy to design a system of monetary incentives around test and trace which only reward good behaviour. The risk of people discovering how to game the system is high. 

For example, a £10,000 fine was introduced for failure to self-isolate. This incentivised people either not to sign up at all, or to provide false information when asked.

Incentives still have an important role to play.

They need not be monetary. The over-60s have an incentive to have a jab, for example. The incentive here is to stay alive.

But there is worrying evidence that substantial numbers of younger people may not accept a vaccine when their turn comes. And we need high participation to squash the spread of the virus.

Why make the effort of going for a jab, especially if you might then not feel so good for a couple of days, when you personally are at very little risk?

The government could usefully offer everyone under 60 some ready cash if they get vaccinated. For the whole 16-59 year age group, at £25 a head the bill would come to just under £1 billion, a mere drop in the ocean in terms of the costs of Covid overall.

Public policy and personal incentives would be perfectly aligned. Cash for the under 60s when they get a jab. It makes good sense.

Read more: Government set to announce £1,500 hotel quarantine policy for UK arrivals today

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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