In discussing control measures, many people think in terms of intratemporal tradeoffs (health vs wealth), while most economists think also about the intertemporal tradeoffs (health AND wealth today vs health AND wealth tomorrow). 1/17

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I think the latter are more important than the former, but very difficult to articulate in a punchy way. What also complicates things is that we face intertwined disease and economic dynamics. 2/17

Leaving aside disease dynamics, shocks to the economy have complicated effects. Amplification effects can lead shocks to one part of economy to influence other parts and then back again. Propagation effects mean that shocks have additional impact over time. 3/17

To complicate matters, economic agents and firms are forward-looking, so expectations about the future influence decisions today. Savings, investment, education choices, business expansions, hiring and firing etc. are all forward-looking decisions and shape the future. 4/17

Sorting these effects out and formulating policy is extremely complicated in the best of times. Turning to disease dynamics, infections spread is populations in complicated and highly non-linear ways. 5/17

Mode of transmission, patterns of social interactions/connectedness, heterogeneity etc. all play a role. And randomness is important for both economic and disease dynamics, adding complexity and unpredictability. 6/17

The problems we face now have the added complication that disease dynamics and economic dynamics are inextricably connected. Today’s decisions influence both the disease dynamics and the economic dynamics, conditioning the world tomorrow, when new decisions must be made. 7/17

By not suppressing infection today we may temporarily keep businesses going, but make future restrictions more likely because a surge of new infections may make them inevitable. So it’s really health and wealth today vs health and wealth tomorrow that’s important. 8/17

It is important to note the role of the right counterfactual, when evaluating different policy options. When we restrict the economy and social contacts today, we should not ask “is this better than in a world with no COVID”. It clearly isn’t and cannot be. 9/17

We should ask “does measure lead to a better future path for society than the alternative future path without restrictions?”. And to make this calculus in credible manner, we need to know the costs of different policies in terms of economic disruption. 10/17

We also need to understand how effectively different measures are in curbing infection. We can think of these choices being dictated by the intratemporal tradeoffs. But once we have found the best combination of measures, we need to think about intetemporal tradeoffs. 11/17

This involves comparing future paths of the economy and the epidemic over time and this is where thorough thinking and convincing planning is currently lacking. To date, policy has been mostly “reactive” and focused on very short- term objectives. 12/17

First it was “save the NHS” to avoid reaching ICU capacity. But what was the plan for the time afterwards? Then it was “save lives till vaccine arrives” https://twitter.com/MattHancock/status/1310950260097908740?s=20 But what is the plan for afterwards? 13/17

We seem to be stumbling through a series of short-term strategies, each time reacting to the current infection numbers without a clear idea of where we are heading. The spread of the epidemic is not completely under our control but we know we can influence its course. 14/17

After the Spring lockdown, restrictions were significantly reduced, leading to increasing infection and to situation we now face. While it’s hard to predict exactly how things will evolve, it’s no surprise at all that infections would eventually catch up with us. 15/17

Was this a pattern that achieved some desirable objective? What is the objective and has anyone given thought to the best way to achieve it? If not, the coming lockdown is a good opportunity to do some of this thinking and to clearly communicate it. 16/17

To finish, let me reiterate that these are extremely complex problems. So I would be suspicious of people who do not acknowledge the tradeoffs we face, the complexities of the situation or the difficulties in making the right decisions. 17/17