Crisis, what crisis?: Reproducibility and Health Economics

Philip Clarke, Professor of Health Economics, Nuffield College, Oxford University.

For a decade, science has faced a replication crisis in that many of the results of many of the key studies are difficult or impossible to reproduce. For example, the Open Science Collaboration in 2015 published a paper involving a replication of 100 psychology studies that found that many replications produced weaker evidence for the original findings. A study in the journal Science reproducing 18 economic experiments soon followed and again found that up to one-third could not be reproduced. The question still to be answered is whether health economics faces a reproducibility crisis, and if this is the case, what do we do about it?

To fully understand the reproducibility crisis, one must look at the incentives for authors trying to publish scientific articles. It is only human nature to regard results that are perceived as positive or statistically significant as telling a better story than negative or non-significant results. A common manifestation is P-hacking which arises when researchers look to report effects that are deemed statistical significance above a threshold such as 0.05. A recent analysis of over 21,000 hypothesis tests published in 25 leading economics journals show this a problem, particularly with studies employing Instrumental variables and Diff-in-Diff methods. 

An initiative editors of health economic journals took in 2015 aimed at reducing P-Hacking was to issue a statement reminding referees to accept studies that: ‘have potential scientific and publication merit regardless of whether such studies’ empirical findings do or do not reject null hypotheses’. This appears to have had some impact, but health economics faces a unique set of challenges. Often there are pressures to demonstrate that an intervention is cost-effective by showing that it falls below a predefined cost per QALY threshold, which produces what could be termed cost-effectiveness threshold hacking.

Beyond formal hypothesis testing, the widespread use of key health economic results such as EQ-5D value sets means reproducibility is likely to be extremely important, as the results of such studies become inputs into potentially 100s of other analyses. It is perhaps not surprising that one of the only replications conducted in health economics has been over the EQ-5D-5L value set for England, although in less-than-ideal circumstances. Rather than a one-off, replication should be seen as integral to the development of foundational health economic tools such as value sets and disease simulation models that are critical to so much research.

The question now for the discipline is how can we promote and facilitate replication and avoid the pitfalls of P or threshold hacking?

One approach undertaken by the Mount Hood Diabetes Challenge Network has been to run comparable scenarios through various health economic diabetes simulation models. A recent challenge involved a comparison of 12 different Type 2 diabetes computer models that separately simulated the impact of a range of treatment interventions on Quality Adjusted Life Years (QALYs). The variation in outcomes across models was substantive, e.g. up to a six-fold variation in incremental QALYs associated between different simulation models (see figure 1). This suggested that the choice of simulation model could have a large impact on whether a therapy is deemed cost-effective and, when combined with threshold hacking, means that many economic evaluations are likely to be more in advocacy than science.  

To create greater transparency, the Mount Hood Diabetes Challenge Network has also created specific guidelines for reporting economic evaluations that use diabetes simulation models to enable replication and has developed a simulation model registry. The registry is designed to encourage those developing models to provide documentation in one place and report on a set of reference simulations. Modelling groups are also encouraged to update these simulations each time the model changes, which provides a benchmark to compare different simulation models and how models evolve. Health economic model registries can potentially improve the science of economic evaluation in the same way clinical trial registries have improved the conduct and reporting of randomized controlled trials in medicine.

Finally, those conducting experiments or quasi-experimental methods can now submit registered reports. This initiative started with psychology journals with the idea that authors submit the protocol before undertaking the study to a journal for peer review. After review, if the registered report is accepted, the journal commits to publishing the full study regardless of the results’ significance. Registered reports are a way of avoiding the pitfalls of P-hacking and publication bias.

There are now more than 300 journals that allow registered reports, but take up by economic journals has been slow. Quality of Life Research and Oxford Open Economics are the only two options for those undertaking health economic experiments. Hopefully, these initiatives and an online petition signed by more than 145 health economists will encourage other health economic journals to provide this option in future.

Health economics embracing registered reports and developing health economic model registers are two ways to strengthen the discipline as a science.

Figure 2 Comparisons of incremental life-years (ΔLYs) and incremental QALYs (ΔQALYs) across different models by intervention profile. Originally published Tew M, Willis M, Asseburg C, et al. Exploring Structural Uncertainty and Impact of Health State Utility Values on Lifetime Outcomes in Diabetes Economic Simulation Models: Findings from the Ninth Mount Hood Diabetes Quality-of-Life Challenge. Medical Decision Making. 2022;42(5):599-611. doi:10.1177/0272989X211065479 (Note figure is Creative Commons)

A new general interest journal to make economics open again

Agustín BénétrixAnanish ChaudhuriPhilip ClarkeAmrita DhillonAna Beatriz GalvãoPushkar MaitraUgo Panizza

In recounting his life as an applied economist, Nobel Laureate Angus Deaton concluded that he greatly benefitted from the openness of economics and its lack of nepotism and patronage (Deaton, 2011). Many now question this perception of openness and suggest that economics can be clubby and hierarchical (Galiani and Panizza, 2020).

In economics, the publication process is extremely long (Ellison, 2002). A lengthy publication process is frustrating for everybody but can be disastrous for young scholars on the tenure clock (Conley et al., 2013). The profession also gives excessive weight to publications in a small number of journals (often referred to as Top-Five) even though there is weak empirical support for the fact that these journals produce more impactful papers than lower ranked journals. There is also the risk that this excessive focus on a small number of journals ‘incentivises professional incest and creates clientele effects whereby career-oriented authors appeal to the tastes of editors and biases of journals’ and ‘raises the entry costs for new ideas and persons outside the orbits of the journals and their editors’ (Heckman and Moktan, 2020).

The launch of a new general interest economic journal is an opportunity to address these challenges.

Oxford Open Economics is the first general interest journal in Economics that is fully open access. The approach of providing open access to sound science has been popular in the natural sciences for a while with journals such as Scientific Reports from the Nature Publishing Group or the Public Library of Science journals. With Oxford Open Economics, the discipline of Economics can now be part of this movement designed to provide better access and easier dissemination of research findings.

Economic journals often reject papers on the basis of subjective evaluations of likely impact and breadth of interest. These subjective evaluations become a source of publication bias and reinforce the impression that economics is elitist and clubby. Oxford Open Economics will strive to avoid such subjective evaluations by adopting ‘sound-science’ peer review, where the focus is on methodological rigor rather than subjective judgments of novelty.

Furthermore, many scholarly journals are published not by university affiliated publishers but by commercial publishers, who often charge hefty subscription fees to libraries. The rationale of this commercial model of charging high fees for research results and peer review of the same carried out for free by academics at publicly funded universities has been questioned by authors such as Bergstrom (2001). This pricing model results in limiting access to new research, particularly in developing countries, whose libraries are often unable to afford the exorbitant charges. Providing open access to the latest research can go a long way toward removing this barrier.

The goal of Oxford Open Economics is to become a top general interest economic journal but it wants to be more than that by also publishing high-quality articles that are usually shunned by traditional journals. Funding agencies emphasize the need for interdisciplinary research, but interdisciplinary articles are traditionally difficult to publish in an economic journal. Oxford Open Economics aims to be an outlet for high-quality and interdisciplinary research. Along similar lines, papers with null results are often difficult to publish, a fact that leads to selective reporting (or p-hacking) and ‘file drawer effect’. Oxford Open Economics plans to address this issue by publishing high quality studies with null effects. A recent evaluation by Blanco-Perez and Brodeur (2020) showed that the editors issuing such an explicit statement had an impact in reducing publication bias and so we plan to adopt a similar policy with Oxford Open EconomicsOxford Open Economics also looks forward to publishing review articles that take a strong stand on the state of the literature on a given topic.

With Oxford Open Economics, we plan to offer a quick turnaround. We want to reduce repetition and redundancy in the review process by allowing authors to share reports and decision letters from previous submissions or to opt for a no-revision option, which means that they will not receive a revise and resubmit decision. Even for authors who do not submit previous reports and decision letters and do not opt for the no-revision option, we plan to provide a first decision within 6–8 weeks from submission and avoid multiple rounds of revision.

As noted above, the publication process in Economics tends to be lengthy. Part of this seems predicated on the premise that while research questions in the medical and natural sciences require rapid dissemination due to their immediate impact on health-related and social outcomes, issues in the social sciences are slower-moving and hence the turgid pace of the publication process is perfectly acceptable.

A recent editorial in the journal Science has argued the case of the need for much greater level of translational research (Proctor and Geng, 2021). For example, developing a highly effective COVID-19 vaccine is not enough if people choose not to get vaccinated. In this regard, economists alongside other disciplines have much to contribute. Take for example, a large pre-registered randomized controlled trial in Sweden and data on population-wide administrative vaccination records, Campos-Mercade et al. (2021) show that modest monetary payments of $24 increased vaccination rates by 4.2 percentage points from a baseline rate of 71.6%. In contrast, behavioral nudges increased stated intentions to vaccinate but had only small and not statistically significant impacts on vaccination rates. Whether one agrees with or disputes these findings, the fact remains that this line of work clearly falls within the purview of economics and that these results should be of immediate interest to both researchers and policy makers. There is no obvious reason why researchers undertaking such work must automatically look at natural science outlets for disseminating their results rather than ‘economic’ ones.

The purpose of peer review is to make sure that research findings are reported honestly, backed up by rigorous evidence and are free of mistakes. Yet, the current incentives in economics have degenerated to a point where the peer review process becomes an opportunity for reviewers to look for excuses to reject papers or to request elaborate and time-consuming revisions that often do not add value and slow down the process considerably.

Where possible, we, as editors, also plan to both implement and generate evidence that can both improve the journal and the publication process for both reviewers and authors. For example, in 2015, several health economic journals adopted a policy that reminded referees to accept studies that ‘have potential scientific and publication merit regardless of whether such studies’ empirical findings do or do not reject null hypotheses’. We also plan to look to generate evidence that increases both the scientific value of the journal and the process of publication for both authors and reviewers.

In a world populated by predatory publishers, credibility and high academic standards are key for a new journal and Oxford University Press is a guarantee along these lines. Oxford University Press is the largest university press in the world and the second oldest; it publishes more than 450 academic journals, including some of the most prestigious economic journals and a newly launched series of fully open access journals. Oxford University Press is thus the ideal partner for a new journal that wants to make economics open again.

Our team of senior editors has expertise in Macroeconomics and International Finance, Experimental Economics, Health Economics, Political Economics, Applied Econometrics and Development Economics and our editorial board covers the whole spectrum of economic research. Hence, we welcome submissions in all fields.


Bergstrom, T. (2001) ‘Free Labor for Costly Journals?’ Journal of Economic Perspectives, 15: 183–98.

Blanco-Perez, C., and Brodeur, A. (2020) ‘A Publication Bias and Editorial Statement on Negative Findings’, The Economic Journal, 130: 1226–47.

Campos-Mercade, P.  et al.  (2021) ‘Monetary Incentives Increase COVID-19 Vaccinations’, Science, 374: 879–82.

Conley, J. P.  et al.  (2013) ‘The Effects of Publication Lags on Life Cycle Research Productivity in Economics’, Economic Inquiry, 51: 1251–76.

Deaton, A. (2011) Puzzles and Paradoxes: A Life in Applied Economics. https://www.princeton.edu/~deaton/downloads/Angus_Deaton_Puzzles_and_Paradoxes_v1.4_9_13_10.pdf  Mimeo, Princeton University.

Ellison, G. (2002) ‘The Slowdown of the Economics Publishing Process’, Journal of Political Economy, 110: 947–93.

Galiani, S., and Panizza, U. (2020) Publishing and Measuring Success in Economics, London: CEPR Press.

Heckman, J., and Moktan, S. (2020) in ‘Publishing and Promotion in Economics: The Tyranny of the Top Five’ Ugo Panizza and Sebastian Galiani, (eds) Publishing and Measuring Success in Economics, London: CEPR Press.

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Does support for elimination imply support for lockdowns?

John Gibson and Ananish Chaudhuri

John Gibson is Professor of Economics at Waikato University. Ananish Chaudhuri is Professor of Economics at the University of Auckland. The views expressed are their own.

A recent New Zealand Herald poll finds that 46% of respondents support “elimination” while a further 39% support “elimination till vaccination”.

Does the support for elimination imply support for Level 4 lockdowns? If so, then for how long and for how many more lockdowns will people support?

How do the 39% supporting elimination till vaccination interpret their position?

Israel has vaccinated a large proportion of its population with the same Pfizer vaccine we are relying on. Yet, that vaccine has proved insufficiently effective against the Delta variant. Infections in Israel have skyrocketed of late.

A recent paper by Pfizer’s own scientists shows vaccine efficacy (VE) for infection with the Delta variant falls by 10 percentage points per month, to be just 53% if the second jab was more than 4 months ago. Falling protection was almost as fast against other variants, declining by 8 percentage points per month.

VE for the at-risk elderly (≥ 65 years) starts low and wanes at a similar rate as for all-age groups: VE against infection (from all variants) is highest at 80%, within a month of the second jab, and by four months later VE is down to 43%.

Waning protection was almost as fast against other variants, declining by 8 percentage points per month.

The Ministry of Health website suggests that New Zealand’s elimination strategy is based on four pillars.

First, “Keep it out”, which involves border control and managed isolation “designed to keep COVID-19 out of the New Zealand community and prevent onward transmission of COVID-19 from New Zealand to other countries (e.g. in the South Pacific)…”

Second, “Prepare for it”: here the key risk being mitigated is to prevent “undetected cases of COVID-19 in the community”.

The third pillar is “Stamp It Out” which “encompasses contact tracing and case management to eliminate COVID-19 as quickly and efficiently as possible from the community, and the activation of higher Alert Levels to contain the spread of any incursion.”

The fourth pillar is “Manage the impact” which is less immediately relevant to the current discussion.

The above does not automatically suggest that “elimination” and “Level 4 lockdowns” need to be synonymous. Leaving aside border control policies, with adequate testing and contact tracing, elimination should be achievable even in the absence of Level 4 lockdowns.

Indeed, other countries such as Taiwan seem to have managed such elimination successfully.

Suppose we assume that elimination is synonymous with lockdowns. What have we learned in the last eighteen months or so?

The headline results from the (in)famous Imperial College paper of Ferguson et al assume an absence of “spontaneous changes in individual behaviour” (p.6).

Yet empirical study of actual humans (e.g. their shopping patterns) finds almost 90% of response was private action, and so the models greatly overstate lockdown efficacy (and are too alarming about the no-lockdown option).

Subsequent studies looked at Covid-19 deaths, as the outcome that really matters, and also because deaths data should be more reliable than infections data. Variation in the strength of lockdown (or lockdown versus no lockdown) is not related to variation in Covid-19 death rates. Yet the question of death with Covid versus death from Covid affects these studies, especially as jurisdictions with good public health data start to retrospectively revise Covid death totals, which were inflated by up to one-third.

The most recent studies look at all-cause mortality, as these data have fewer biases (one is dead or not, irrespective of cause) and also show lockdown collateral damage. Across European countries, stricter lockdowns did not reduce excess mortality, while across 43 countries and all U.S. states excess mortality rose following the imposition of lockdowns.

Local defenders of lockdown may note New Zealand had no excess mortality in calendar year 2020. However, an unprecedented post-lockdown surge in deaths that carried on through the summer into 2021 largely reverses that pattern if the full 12 months after the first lockdown is considered.

While lockdowns have not worked to reduce deaths in the present, they almost certainly harm future life expectancy. This especially matters for New Zealand, due to the following:

The long-run relationship between the real value of our economic activity (what we produce) and life expectancy is 50% higher than the OECD average. A 10% fall in real GDP, in the long-run, reduces NZ life expectancy 1.8% below what it otherwise would be. So these trade-offs should matter more here than elsewhere.

Real GDP in 2020 was 5.2% below expectation (using the last 2019 fiscal update). Part of this fall was outside our control but much is from a “go hard” approach. With a Covid response stringency of the median OECD country our 2020 GDP growth rate would be 3 percentage points higher (lockdown stringency is unrelated to mortality so this is all pain no gain).

The $14 billion of output not produced in 2020 is not shifted through time, it is a permanent loss. The same will be true for the 2021 lockdown. A share of future output also has to go on debt-servicing, as NZ tried to borrow her way out of this pandemic, and so is not available to fund improvements in life expectancy.

New Zealand residents currently alive can expect 224 million more life years (based on the latest 2017-19 period life tables). If real GDP ultimately falls 10% below what was expected pre-Covid (e.g. if Level 4 lasts as long as in 2020), and if we apportion half of this to the unusually harsh NZ response (rather than to overseas factors), then our politicians and health bureaucrats will have presided over a fall in life expectancy where there are two million fewer life years than would otherwise be expected. If this loss was full concentrated on a select group, it is equivalent to 46,000 deaths.

In case one doubts these calculations, note that the Treasury long-term fiscal forecasts released recently show future life expectancy is almost two years below what they had previously forecast in 2016. 

Putting all of the above together, a thorough review by Canadian economist Douglas Allen concluded that lockdowns will go down as one of the greatest peacetime policy failures.

A strategy for vaccination success.

The Prime Minister has recently laid out some plans for opening New Zealand’s borders. Contrary to what some may think, re-joining the rest of the world is crucial for our future prosperity. The longer we delay the further behind we will fall. 

What is our biggest challenge now? Getting the adult population vaccinated.

Recently, John Key proposed telethon-type messaging on vaccination rates with this information being updated and shown on TV screens.

Here is a better idea.

Despite what the government would have you believe the vast bulk of people are not anti-vaxxers or rabble-rousers. They just want to get on with their lives. What then prevents vaccine uptake? Inertia! 

Currently the government is asking people to log on to websites, find a centre close to where they live, figure out a suitable date and then sign up for a jab. This may be thought of as the “opt-in” option. 

Instead, here is what we should be doing. Send each eligible adult a date, time and place for vaccination. Those above 65 or 70 could be given times during the weekday while those younger would get times during the evening or in the weekend. If needed pay extra to those administering jabs during evenings and weekends.

We do something similar before the elections when we send people information about where to go to vote. This should not be logistically too onerous.

People have the option of changing those dates but offered a date, a vast bulk of people will go ahead and show up at the appointed time.

It would also be useful if people could get this done with their own GPs since when it comes to medical advice these are our most trusted advisors. 

Research suggests that when it comes to retirement savings with employer-matched contributions, firms that use the “opt-in” option, where they ask workers to sign up to a program, often end up with fewer enrolees. On the other hand, firms that use the “opt-out” option do better. In this latter case, workers are automatically enrolled but have the option of opting out. Most workers do not and stay enrolled in the scheme. These people end up with much higher savings.

In one firm that switched from opting in to opting out, participation rate was 35 percentage points higher after three months on the job and remained 25 points higher after two years.

In another firm that offered a default contribution rate of 3 per cent of salary, more than one-quarter of workers contributed exactly that amount, even though the employer matched contributions up to 6 per cent of salary. Once the firm raised the default to 6 per cent, workers started contributing the same proportion.

A 2013 report in the Guardian found that approximately one year after Britain introduced automatic enrolment with an opt-out feature, there were 1.6 million more savers in workplace pensions. Only 9 per cent chose to opt out.

Relying on the “opt-out” option for vaccination will lead to much quicker uptakes. In countries such as Canada or Sweden governments are also trying other innovative approaches such as lotteries and/or financial incentives.

In the meantime, we need to stop talking about vaccine mandates, vaccine passports and ostracizing the unvaccinated etc. None of those things will come to pass or help and such talk only ends up raising people’s hackles. 

To those who are not generally opposed to vaccinations, I suggest the following. Yes, the Covid vaccines are not particularly effective against mutant strains. But nevertheless, the expected value is still positive. If you meet another person, vaccinated or unvaccinated, you are still better off being vaccinated. In the parlance of game theory, this is a dominant strategy; a strategy that does better against all other strategies adopted by others.

Are there side-effects? Maybe. But all vaccines have side-effects and there is little evidence to suggest that the side-effects to the current ones are any more dire than others. These are very low probability events that people often over-estimate. If you are scared or worried, let it be; opt-out. 

But equally the government needs to realize that we will never get as many vaccinated as we ideally want. And it also matters less than is being made out to be. There is little value in holding out for a great outcome when we can get a perfectly good outcome. We need to get going. 

Why we could not just “trust the science” in dealing with covid-19

Throughout the Covid-19 pandemic, we were told to just “trust the science” implying: listen to the advice of epidemiological researchers. But this was a narrow view of what the relevant “science” was. Epidemiologists can tell us about case and infection fatality rates of pathogens or their prospective path of transmission. But what we do with that data, what level of risk we are willing to tolerate, what costs we are willing to bear and what freedoms we are willing to sacrifice is no longer a question for epidemiologists. In fact, this question should not be left to them. It requires expertise from other social sciences and humanities. In reality, this “trust the science” mantra was an abdication of responsibility by our leadership for decisions that require statesmanship and are fundamentally political in nature; a pretense that a narrowly defined view of science can substitute for ethical judgments that ultimately need to be made by elected leaders.    

Which brings us to the news that there is much consternation around the fact that the consumer price index is up by more than 3% on an annual basis. Why the surprise? This is one of many inevitable outcomes of the zero-Covid mindset. The government has refused to acknowledge that Covid-19 was not merely a health crisis; it was also a social and economic crisis requiring a multi-pronged response rather than single-minded devotion to elimination. The “scientists” advising the government failed to understand that while too little social distancing leads to loss of lives and livelihoods from Covid-19, too much social distancing implies a loss of lives and livelihoods from other diseases and factors. Little thought was given to issues like our geographical isolation, the impact on global supply chains; that vaccination roll-outs may take a long time; that this will make it increasingly difficult to hunker down in Fortress New Zealand.  

The Covid-19 recession is also different. In the past, governments were fighting recessions caused by shocks that had already happened. But for the Covid-19 induced recession, faced with declining output and the prospect of large-scale unemployment, our government started borrowing heavily, thereby dramatically increasing the government’s debt. But simultaneously, the government (in the guise of the Reserve Bank) bought back that same debt in a massive program of quantitative easing; printing money to stimulate economic activity. This would be funny if the consequences were not so dramatic. Not surprisingly, it became clear soon enough that the ability of quantitative easing to stimulate business spending was going to be limited. This is because what was holding back such spending was not a lack of credit but an acute uncertainty about what the future held.   

In most recessions house prices take a nose-dive. But not this time around; partly because this recession hit the non-asset owning blue-collar workers far more than the while-collar ones. The latter had the option of working comfortably from home and therefore, did not experience much economic hardship. The historically low interest rates set off a quest for higher returns, resulting in investors gravitating toward houses and equities, furiously bidding up prices and fueling speculative bubbles. Among other things, this will create long-term wealth (and inter-generational) inequality. A government that touts its progressive credentials was essentially giving away free-money to the asset holding class. 

On top of this, the government decided to adopt another common populist tactic: the minimum wage was put up to nearly three-quarters of the adult median wage. I firmly believe that the negative employment consequences of minimum wages are often blown out of proportion by opponents. But not in a recession and certainly not in a situation when the country’s borders are shut tightly thereby depriving businesses of making compensatory adjustments. In any event, the inflationary pressures we are experiencing are more due to the quantitative easing rather than the minimum wage increase. These policies hew closely to ones followed by other populist regimes such as in Argentina or Venezuela. First, money creation to deal with large fiscal deficits; followed by wage increases (helped by substantial minimum-wage hikes) and declining unemployment. Soon, however, bottlenecks appear and prices skyrocket.  

The government is supposedly keen on having more skilled labour. This would require building up capacity in the tertiary education sector. Yet, by restricting funding and forcing redundancies, the government is in the process of bringing our universities to their knees. The government deficits are creating a temporary boom in consumer spending and giving people the impression that everything is fine; but this will be short-lived. In the meantime, long lasting damage is being created to the country’s productive capacity. Unfortunately (or maybe fortunately) another group of people will be tasked with repairing that damage, which will become ever more apparent with the passage of time. As the saying goes, those who would give up essential liberties for temporary security will have neither security nor liberty.  

Proposed Hate speech law further proof of nz government’s authoritarian streak

There is understandable unease with the proposed new hate speech law. But for those of us paying attention, this proposal is part of an established pattern manifesting an inherently authoritarian mindset.  

Back in mid-March, 2020, New Zealand was in Alert Level 2. Then we went to Level 3 for one day before moving to Level 4. At the time, two legal experts wrote: “[The lockdown] imposes the most extensive restrictions on New Zealanders’ lives seen for at least 70 years; perhaps ever. No matter how ‘necessary’ these may be, we should expect such restrictions to have a clear, certain basis in law and be imposed through a transparent and accountable process.”  

Subsequently, a Court found that the first nine days of this lockdown was “unlawful”. In response, the government passed “under urgency” the Covid19 Public Health Response Bill. According to one report in Newsroom “the bill went through Parliament in less than two days and with no select committee hearings (and) grants police warrantless entry to premises if they reasonably believe virus-related orders are being breached.”

Both the Human Rights Commission and civil rights advocates expressed reservations about this law given the concentration of power in the hands of the Executive.

Later in 2020, New Zealand Ombudsman Peter Boshier revealed that he was “horrified” to learn that in the aftermath of the pandemic the government had actually considered suspending the Official Information Act, before backing down. Curbing freedom of the press is a well-established authoritarian practice.

Recently, another court found the government guilty again of exceeding its powers (ultra vires) when it rolled out a universal vaccination program under the 1981 Medicines Act. This once again required a hasty fix to the existing law to ensure that the vaccination program is lawful.

In a recent article, my colleague Robert MacCulloch argues that even the government’s climate change strategies are more about power than about prudent policy making. Another columnist noted that the government is well on its ways toward establishing a command and control economic and social structure.

A recent paper by two European researchers shows that countries hit to the same extent by Covid-19 were more likely to declare a state of emergency when their constitutional emergency provisions granted them more discretionary power.

But the assumption of such emergency powers by the Executive has long term consequences for a country’s development.

Now we have the proposed hate speech law.

The fact that the drafters of the law have little understanding of what they are talking about is made clear by an example that is provided in the draft bill.

It states: “For example, the film classification regime limits the freedom of expression of creators and viewers to uphold the rights of children and other members of the public, to protect them from content they might find harmful or that breaches society’s standards.”

At best film certification regimes can be construed as a form of censorship. This is a far cry from classifying something as hate speech since a film maker is seldom thrown into prison for making a movie with controversial content. At worst, the movie gets a R rating or is prevented from being shown widely.

Possibly the most problematic part of this new law is Proposal Two, which would prohibit speech that “maintains or normalises hatred, in addition, to speech that incites or stirs up hatred.” The word “hatred” replaces four different terms in Section 131 of the Human Rights Act: “hostility”, “ill-will”, “contempt” and “ridicule”. “Hatred” is obviously so much easier to define than the other terms.

Why may this be problematic?

I have been highly critical of aspects of the government’s Covid-19 elimination strategy. While I am certainly not opposed to vaccination, I am deeply sceptical about vaccinating children for Covid-19. Globally very few children have contracted Covid-19 and therefore they are unlikely to pass it on. These children are being vaccinated not for their own health, but in order to protect other, mostly elderly, citizens. This is not dissimilar to (at times forced) sterilization policies to reduce population growth, notably in Indira Gandhi’s India back in the 1970s and Alberto Fujimori’s Peru in the 1990s; inflicting an invasive medical procedure on individuals supposedly for the greater good.

There is a serious moral dilemma here that vaccine proponents are choosing to ignore.

The draft suggests that “more groups would be protected by the law if hatred was incited against them due to a characteristic that they have.” How is characteristic defined? This implies that the new law could well find me guilty of violating Section 21 of the Human Rights Act for inciting hatred toward the elderly and medical professionals.

“Knowledge workers” like academics, performers, journalists or lawyers, who tend to dominate airwaves and social media typically skew left of centre. Consequently, we worry a lot about right-wing authoritarianism. But left-wing authoritarianism is a problem too. Stalin and Mao were no less evil than Hitler or Mussolini. But the proper functioning of a liberal democracy is crucially dependent on calling out authoritarianism, whether on the left or on the right. After all, the price of liberty is eternal vigilance.

The government’s zero Covid stance and its future implications

The on-going crisis over the Covid-positive person who visited Wellington from Sydney raises questions about the government’s zero Covid stance.

Leaving aside other economic and moral drawbacks of a zero Covid approach, here are some immediate reasons why this goal poses problems going forward.

Most people (and quite possibly those in government) thought that in order to achieve this zero Covid goal, all we needed to do is to keep our borders closed till the vaccines arrived.

But, in reality, we need to keep our borders closed till the entire world (or at least a large chunk of it) achieves herd immunity. By most estimates this means that somewhere around 60%-70% of a country’s population must be immune.

As of now there are around 120 countries in the world that have not managed to vaccinate even 10% of its population.

New Zealand features on that list, as does Australia. New Zealand has managed to vaccinate only around 8% as of June 23rd. Why?

Many have blamed government incompetence. But I suspect the reason lies elsewhere.

New Zealand is getting its vaccine through the COVAX facility. Under this agreement, countries that are able to pay (self-financing countries) will get enough vaccines to vaccinate 20% of its population to start with.

How was the sequence of distribution decided? A plausible answer is that among self-financing countries, those with higher rates of Covid incidence got their quotas first. Countries like New Zealand (or Australia), which have reported low numbers of cases, most likely found themselves at the back of the queue.

According to statistics available from Our World in Data, New Zealand has received a shade above 1 million doses. Note that while this does correspond to 20% of the population, this only corresponds to around 500,000 (or 10%) fully vaccinated since the Pfizer vaccine requires two doses.

But even 20% is nowhere near enough for herd immunity.

When do we get the next lot? No one knows because under the guidelines established by COVAX, after all the self-financing countries have received their 20%, those countries that are unable to pay and need help will get their quota of 20%.

So, it will be a long time before New Zealand manages to get its share of those fully vaccinated high enough to achieve herd immunity.  

The government website says that NZ has “secured enough vaccines” for the entire population. But I seriously doubt that we actually have 10 million doses sitting in refrigerators around the country.  

It is likely that even the government has no idea about the timeline for getting all the remaining doses. If they do, they should tell us about it.

In order to open up, we must make sure that we only interact with those other countries that have also achieved herd immunity.

At the very least, this list will include developed nations such as Australia, USA, Canada, UK, all of Western Europe, Scandinavia and some Asian countries like Singapore and South Korea. When will these countries reach herd immunity?

While we seem to have written off large parts of the developing world including people in the Cook Islands., what about China, one of our large trading partners?

China will most likely achieve a high rate of vaccination on the basis of its indigenous vaccine, Sinovac. The current vaccines are not fully effective since we know that even vaccinated people have caught the virus. But let us concede that the vaccines, even if not fully effective, still slow the spread of infection.

Even the Chinese government is clear that Sinovac has just about 50% efficacy. Is this high enough? There are reports of large number of people catching Covid even after being vaccinated with Sinovac.

As of now there are 40 countries around the world including large South American countries like Brazil and Argentina that are relying on Sinovac.

How about the Russian-made Sputnik V or the Indian-made Covaxin?

Back in 2020, the first nine days of our April lockdown were found to be unlawful. In response, the government rushed to pass a new Public Health Response law under urgency. More recently a court ruled that the government did not have the power to roll out a universal program under the Medicines Act. This again required another rushed change to the law.

It all seems completely ad hoc. Is there a plan for opening the border? Is it really possible to keep it shut till the entire world has reached herd immunity? How long will that take? I believe these questions require answers since the current policies are proving ruinous for many.

Why would China leak covid-19?

There is increasing chatter in the Western press that Covid-19 escaped from a lab in Wuhan.  

Suppose we concede that Covid-19 did escape from a lab. What of it? This is not the first time such an accident has happened and it certainly will not be the last.  

A 2003 article in The Lancet Infectious Diseases suggests that a case of Severe Acute Respiratory Syndrome (SARS) was the result of a lab accident. A 2004 New York Times article reported that a Russian scientist working for a former Soviet biological weapons laboratory died after “accidentally sticking herself with a needle laced with Ebola.”  

In 2014, an article in The Guardian reported on numerous safety breaches at UK labs. “One blunder led to live anthrax being sent from a government facility to unsuspecting labs across the UK, a mistake that exposed other scientists to the disease. Another caused the failure of an air handling system that helped contain foot and mouth disease at a large animal lab.” 

The same year, the American Centers for Disease Control and Prevention (CDC) potentially exposed researchers to anthrax when the microbes were sent to laboratories “that were not equipped to safely handle the pathogen.”  

So how exactly does it matter even if Covid-19 escaped from a lab in Wuhan?  

The only way this story makes sense is to eventually accuse China of engaging in bio-terrorism; that China knowingly and deliberately let loose this scourge on humanity. 

But this narrative has problems. First, regardless of the hype and hyper-ventilation, Covid-19 is a relatively mild pathogen. The disease is less deadly and less infectious than originally assumed.  

So, to buy this story, one would need to assume that China spent enormous amount of time and effort to develop and release a virus that is not all that deadly. One would further have to assume that China did so because it was certain that the release of this pathogen would cause the West to lose its mind and inflict catastrophic social and economic damage to itself on its own (or possibly aided by Chinese misinformation).  

But, if China really wanted to engage in this type of bio-terrorism then why waste time with Covid-19? Why not invest in something more deadly such as Ebola, anthrax or bubonic plague?  

The reality is different.  

As the Western countries emerge from the pandemic, they are realizing that the geo-political reality has changed rapidly. China has vastly expanded its economic and political reach among developing countries whose markets are much coveted by the Western nations. 

This process, happening for a while, has gained steam recently. During the pandemic the Western countries effectively made it clear to developing countries that when it came to vaccines or other help the latter were completely on their own. The West’s priority was the West as they closed off their borders to the denizens of the third world. 

Into that breach stepped China with huge financial investments and now their own vaccine. As of now forty countries, including much of South America, are using the Chinese developed vaccine.  

The West is not only staring at the possibility of losing these markets but big pharma is distraught at the thought of losing out; especially now that it looks like we will be taking the Covid-19 vaccine every year.  

The only feasible option left is to prove to the World that China let lose this pathogen deliberately.  

But bear in mind that this charge is coming to you from the same fertile minds that attacked Iraq following the September 11 attacks; even though Iraq had nothing to do with those attacks. Those same people also spun the story that Iraq had weapons of mass destruction and spoke ominously about mushroom clouds. It was clear to many at the time that these stories were fabrications and the invasion made the truth clear to all.  

Now, we have this campaign to isolate China. To be clear a unipolar world dominated by China, a Communist dictatorship with no allegiance to due process, human rights or basic legal protections will be infinitely worse than a unipolar world dominated by the United States, which, in spite of all the recent assaults, still has robust legal institutions in place.  

But, trying to circumscribe China’s influence via a campaign of baseless canards will not advance the West’s civilizing mission and will further tarnish the image of democracy. Scientists should ponder at length before lending their credibility to this smear campaign.   

A lesson for our Govt: Inviting the next Sergey Brin to build the next Google

When it comes to something like the budget, everyone has an opinion. Unless one is deeply familiar with the nuts and bolts of the budgeting process, it is not easy to understand what the trade-offs were and why the calls that were made were made.

It is also the case that for us average punters, the numbers are pretty much meaningless. A billion here; a billion there, what does it all mean? We don’t know if this is an increase or a decrease from the current baseline; what fraction of crown revenue does this represent and what does the increase in spending in one area mean for spending in another?

It is also the case that the budgeting process for a small open economy in the middle of the South Pacific is not easy since we are seldom the masters of our own destiny. A lot will depend on what happens to our trade with China or the US, which in turn depends on how those economies rebound from the pandemic.

So, we pontificate on the basis of our own perspective; so we talk up those things that we like and disdain those that we do not.

But having said that and a with a due mea culpa for my own pontificating, here are few thoughts that come to mind.

A budget needs to be understood as an aspirational document that sets out our priorities and goals.

And in that case surely there is something wrong with a budget that starts out with the explicit purpose of correcting three decade old wrongs. This does not mean that those old inequities should not be addressed, but my fear is that the authors of the current budget are not only worrying about three decade old wrongs but trying to address them with three decade old thinking.

Three decades ago, there was no Iphone or Ipad; “googling” had not become a verb; China was still a relatively poor country; the massive off-shoring of jobs was still to come; Amazon was still a river in South America and social media did not exist.

Let me give an example. The New Zealand government talks a lot about climate change. General Motors has just announced that by 2035 (on in fourteen years’ time) they will only produce electric vehicles. It is likely that most other car makers will follow suit.

Let us suppose that in short order all Kiwis start driving electric cars. Can our current electric grid support this? If not, then is this not something that should be a priority?

The Finance Minister has made a big deal of saying that crown debt which was supposed to exceed 50% in about three years’ time will be held down to a lower proportion. Why?

Japan’s debt is more than 200 percent of its GDP. There are other countries like Greece with debt  standing at more than 100% of GDP.

If it was fine to effectively quadruple debt in 3-4 years from its pre-pandemic level, then why the sudden pusillanimity?

Having run up that debt, why not invest in large infrastructure projects and industries with large value added?

Currently two of our biggest export industries, tourism and higher education, are on their knees.

What is the thinking here? That one fine day we will open up our borders and things will go right back to where they were?

This is highly unlikely to happen. For one thing many airlines have re-routed their existing flights so that if and when we open up there will be far fewer options and consequently higher prices.

The government seems to believe that New Zealand will become this Covid-free haven where everyone, tourists, workers and students will want to come.

This seems far-fetched. By the end of 2021, most countries in the world will be Covid-free. If I am skilled worker or student located overseas and I am looking to emigrate, will New Zealand be a priority for me?

I would be thinking: am I better off emigrating to a small country with a small market in the middle of the South Pacific? What if I get stuck there without a job when the next pandemic hits? Or am I better off looking at some of the bigger countries and markets in North America or Western Europe, which offer greater mobility and job prospects?

Already there is evidence that international students are going away from Australia to the UK. The same is most likely true, and probably to a greater extent, for New Zealand.

In per capita GDP terms, New Zealand is already one of the poorer of the OECD countries with a per capita GDP that is close to the OECD average and comparable to South Korea and the Czech Republic.

Can New Zealand sustain a first world lifestyle on the basis of primary products exports and without skilled migrants?

Yes, the Chinese economy is growing rapidly. But unless China manages to establish democracy it will never achieve the economic vibrancy of the US or Western Europe. Why? Simply because currently the best minds of the world migrate to those latter countries with new ideas and new optimism. The vast bulk of Silicon Valley start-ups were started by migrants to the US. None of these people will consider heading to China. Japan, once an enterprising pioneer, has been in decline for a long time now.

With increasing global connectivity, a stable, non-corrupt and crime-free society, why should New Zealand not be able to attract some of this talent particularly in the service sector? But governments cannot figure out who the next Sergey Brin will be; what they can could do is the make it easy for talented people to come to the country and leave them alone to build the next Google.

It is not clear that the current government understands these challenges or how to deal with them.

Quantitative Easing and Inflationary Pressures

recent report in the Herald suggests that inflationary pressures are beginning to appear with a small increase in the Consumer Price Index for the March quarter and more upward pressure on prices expected.  

Another report suggests that such inflationary pressures are being caused by the rise in minimum wages on April 1. 

Could higher minimum wages eventually lead to higher prices? Yes, but it is too early for that to happen and any case this should not impact price rises in the March quarter.  There are other likely suspects such as supply chain disruptions and increased freight costs. 

But it is important to acknowledge the elephant in the room; that these price increases are an inevitable outcome of policies followed by the government in recent times.  

A lot of this has to do with our response to Covid-19. What our government failed to understand is that while it was possible to be too lenient in terms of social distancing, it was also possible to be too restrictive where the economic costs become prohibitive. Our government has consistently chosen to err on the side of being excessively restrictive.

The Covid-19 recession is different from others. In the past, governments were fighting recessions caused by shocks that had already happened. But in this case, governments were fighting a recession that they were exacerbating, if not causing in the first place.  

Faced with the economic fall-out the government initiated a massive program of deficit spending. Net core Crown debt is expected to reach more than 50 per cent of gross domestic product over the next five years.  

But alongside this massive deficit we have been also running a policy of quantitative easing whereby the Reserve Bank buys up the government bonds used to issue this debt. This injects liquidity into the system. Think of this as cash floating around. The aim here is to keep interest rates low and if and when needed provide capital to businesses.  

But in the absence of business expansion and increasing output, this extra money sets off inflationary pressures.   

We have historical precedent for such policies. Sebastian Edwards, an international economist at UCLA points out that

“Four episodes in particular are instructive: Chile under President Salvador Allende’s socialist regime from 1970 to 1973; Peru during President Alan García’s first administration (1985-1990); Argentina under Presidents Néstor Kirchner and Cristina Fernández de Kirchner from 2003 to 2015; and Venezuela since 1999 under Presidents Hugo Chávez and Nicolás Maduro. 

In all four cases, a similar pattern emerged. After the authorities created money to finance very large fiscal deficits, an economic boom immediately followed. Wages increased (helped by substantial minimum-wage hikes) and unemployment declined. Soon, however, bottlenecks appeared and prices skyrocketed, in some cases at hyperinflationary rates. Inflation reached 500% in Chile in 1973, some 7,000% in Peru in 1990, and is expected to be almost ten million percent in Venezuela this year. In Argentina, meanwhile, inflation was more subdued but still very high, averaging 40% in 2015.” 

Given that the Reserve Bank is tasked with maintaining inflation at low rates we will have to wait and see how they respond but in any event there will likely be significant economic pain as the Reserve Bank tries to rein in inflation.

The other issue is that such expansionary monetary policies, besides generating inflationary pressures, will also exacerbate our wealth inequality.  

For most households, their major source of wealth is the house they own. In previous recessions such as the Global Financial Crisis, house prices had taken a beating, making investments in real estate a losing proposition. But this was not the case this time around.  

It is also the case that the lockdowns disproportionately affected blue-collar workers often working for hourly wages. White-collar workers who could work from home were not particularly affected or, at least, not to the same extent. By and large, they did not suffer adverse shocks to their wealth. This meant that these households whose income and/or revenue streams were unimpacted were free to invest in financial assets.  

Our quantitative easing policies have fuelled huge speculative bubbles in financial assets such as houses and stocks.

Data from New Zealand suggests that residential property owners are among the largest beneficiaries of government-related support provided during this pandemic. Mortgage holders will receive around $2.3 billion of relief on their repayments over the course of 2020, thanks to the low interest rates.

But these benefits can only accrue to those who already own property and/or other assets or have the financial means to invest further. Low interest rates have been a massive boon to the asset-owning class to the detriment of those with little collateral.