Wednesday 8 April 2020 11:00 am

Coronavirus: A traffic light loosening gives the economy hope

The strategy of exiting from the lockdown is far too important to be left in the hands of health professionals.  

The government’s advisors have played very valuable roles in helping to avert the sort of crisis which overwhelmed the health services in Northern Italy.  

Many who were seriously ill with the virus died unnecessarily because of a lack of ventilators. People with other dangerous conditions died because resources were diverted to virus patients. Britain, from an admittedly standing start, has learnt from those mistakes. 

But there is growing realisation of the huge costs being incurred economically.  A consensus is emerging amongst economists that the British economy has shrunk by about 30 per cent.  In money terms, this is a loss of over £2 billion a day.

The costs are not just monetary.  Stories of increases in domestic abuse proliferate.  Worries about general mental health are growing, with the former Governor of the Bank of England, Mervyn King, adding his voice to them last week.

From a purely health perspective, the lockdown might persist until there is no longer a risk of someone with the virus infecting anyone else and so ensuring that no one dies. 

We could take a similar view with road traffic. We could save almost 2,000 lives a year and avoid some 25,000 serious injuries by abolishing motor vehicles. 

As a society, we are willing to make the trade-off. We accept this level of death and injury in return for the benefits which road traffic creates. 

Obviously, governments take measures to try and reduce these accidents. In the late 1960s there were nearly 8,000 deaths a year. But we are happy for cars and lorries to continue to trundle around.

The virus imposes health costs. It takes up resources. People die and some survivors have long term damage.  Getting the economy back to speed brings large benefits.

This is why I devised with Gerard Lyons of Net Wealth, and chief economist to Boris Johnson when he has Mayor of London, a traffic light strategy for getting Britain back to business.

The epidemiologists warn that loosening the lockdown will lead to another large wave of cases.

If behaviour reverts to what it was before the crisis, they are correct.

But behaviour will change.  How many people will shake hands as soon as the lockdown is lifted?

This means that the chances of a disastrous second wave in which the NHS is overwhelmed are very much lower than the epidemic models suggest.

We suggest that lockdown is followed by three phases, as in a traffic light, from red to amber to green. Then everyone is clear about the sense of direction. At each stage different economic activities and behaviours are allowed. It will also give hope.

In the red phase, for example, more shops could open such as hairdressers, with social distancing and face masks. In the amber, unlimited private car travel. Only in the green phase could mass gatherings such as football crowds be allowed.

Combining epidemiology with economics is the way to get Britain back to work.

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 Institute of Economic Affairs in conjunction with City AM

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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