Uncategorised

I have been reading a lot about how the Economics Nobel Laureate Joseph Stiglitz has “praised New Zealand’s handling of the Coronavirus.” .

I am big fan of his and so I decided to read what Stiglitz actually has to say. I found that the article is not about the handling of coronavirus by either USA or New Zealand but rather about how covid-19 will lead to growing economic inequality around the world.

What did Stiglitz say actually?

“Still, two countries illustrate likely lessons that will emerge. If the United States represents one extreme, perhaps New Zealand represents the other. It’s a country in which competent government relied on science and expertise to make decisions, a country where there is a high level of social solidarity—citizens recognize that their behavior affects others—and trust, including trust in government. New Zealand has managed to bring the disease under control and is working to redeploy some underused resources to build the kind of economy that should mark the post-pandemic world: one that is greener and more knowledge-based, with even greater equality, trust, and solidarity.”

In my mind, “perhaps New Zealand represents the other” does not sound like full-throated praise.

But fine, let us accept the compliment gracefully and then go on to parse some of the other things he says.

New Zealand indeed is a high-trust country. Here is how I would expect a high-trust country to operate. Involve a wide range of experts and expertise in tackling a national challenge; provide a realistic assessment of the risks along with the costs and benefits of locking down a whole country. Establish clear guidelines and make decision making criteria transparent. Be honest with your citizens when you are asking them to make such big sacrifices.

How did we actually respond?

The government chose to listen to only one side advocating lock downs instead of calling upon a wide range of expertise. Others, including leading international scholars were dismissed in the media as contrarians or “lock down sceptics”.

The first nine days of our April lock down have been found to be unlawful by a court of law.  

A recent report from the Productivity Commission suggests that the cost of extending our earlier lock down by five days outweighed the benefits by more than 90:1.  Kate MacNamara points out in the Herald that the government has ignored this report and not commissioned any further cost-benefit analysis, which is an integral part of good policy making.

We have passed a new law under urgency, which among other things allow the police to enter homes without warrants, if they believe quarantine laws are being violated.

The family of a 11-year old girl who died suddenly was denied permission to travel through Auckland to Northland for a  tangi.

We jailed a woman for breaking quarantine to attend her father’s funeral but a man who also broke quarantine to buy alcohol escaped with only a sentence of community service.

Even if the first lock down was justifiable, that is hardly true for the second, particularly the one imposed on Auckland. A high trust government would have trusted its citizens to listen to requests for physical distancing and mask wearing. If it is safe to go out now with masks, surely the same was true prior to the second lock down in Auckland. And if it is was not safe then, how is it safe now, with the same level of community transmission?

Are these the actions of a high-trust government?

Those who are so happy about the Stiglitz endorsement seem curiously silent about the fact that others like the 2013 Chemistry Nobel Laureate Michael Levitt suggests that New Zealand’s elimination strategy will impose significant social and economic costs.

How have we managed to bring the disease under control, when life remains interrupted and the border is shut tight? Businesses, universities and even sports bodies are asking what the future holds for them.  

Are we working to redeploy underused resources to build the kind of economy that should mark the post-pandemic world: one that is greener and more knowledge-based, with even greater equality, trust, and solidarity?

What kind of solidarity is it when there are experts asking the government to make sure that Aucklanders not be allowed to travel outside the city? Did they miss the memo that in the absence of international tourists, it was Aucklanders that made up much of the shortfall in the wake of our first lock down?

How did we get from the team of 5 million to Jafas versus the rest of the country?

Much of the shovel ready projects seem to be going to roads and the big “win” for the Green Party is the nearly $12 million given to the Taranaki Green School.

In the United States, for all its faults, we have people like Alexandria Ocasio Cortez, pushing for a  Green New Deal. Where is our version of it?

After borrowing $50 billion, the government has raised taxes for the top 2% amounting to just over $500 million (assuming no leakage). This is a small fraction of the total borrowing. The former Reserve Bank Governor Alan Bollard recently pointed out that in order to improve the fiscal outlook, capital gains tax must be back on the table.

But, clearly not all experts carry the same weight or are worth listening to.

How does one create a knowledge-based economy by hobbling one’s universities, international connections and by shutting itself from the expertise of a large section of its own knowledge workers?

Around the world new results are being published and serological testing is shedding additional light on the virus and how to control this and future pandemics. But, sitting in New Zealand, one would never get to hear about any of this. All one would know is that there is no other recourse than to implement periodic lock downs till a vaccine arrives.

Recently, The BMJ (formerly the British Medical Journal), a highly prestigious outlet, featured two scholarly and well-reasoned articles arguing for and against locks downs. The opposing view has been written by the academics dismissed and ridiculed as “contrarian” in New Zealand. Why are we so averse to debating the merits of the alternative viewpoints?

The fact is that the citizens of New Zealand are indeed highly trusting, of themselves and of their government. But our government has hardly reciprocated that trust. I say this with an enormous amount of regret as an admirer of our Prime Minister and a long-time supporter of our governing party. By shutting itself off from different sets of expertise our governments has done itself and the population a singular disservice.

Air NZ to lay-off 387 pilots

Ananish Chaudhuri

I don’t envy Greg Foran; what a way to start a new job, in the midst of a historically unprecedented catastrophe. I also don’t have access to the budgetary nuts-and-bolts of Air NZ. It is clear that the company is facing a tremendously difficult time. I think it is an extremely well-managed company, something that is not true of many other enterprises in NZ.

I think Mr Foran is making a mistake.

Laying off workers in a recession is a common practice. Though, it needs to be noted that this is not true of all countries in the world. Companies in USA or NZ typically resort to lay-offs while others in countries like Germany or France are more reluctant to do so. This has to do both with history as well as the legal institutions in these countries.

But, in general, in a country like NZ, the easiest way of reducing costs is to lay off workers. This is for a number of reasons. First, given the scale of revenue loss, it is virtually impossible for Air NZ to cut costs to an extent that it would actually make a difference.

This is also partly because all that needs to happen to make a position redundant is to remove and re-allocate items from one’s job description. Once, all such items are removed, the position becomes redundant. The other advantage is that layoffs lead to other cost savings in the form of perks, benefits, retirement contributions and other fixed costs such as office space etc.

But, this is also somewhat myopic. Recessions pass. In fact, large scale lay-offs often make recessions worse. Workers who are laid off are pessimistic about their chances of getting work in the future. Even the ones who have work are afraid of losing their jobs and therefore cut down on spending. This exacerbates recessions.

Already there are signs that the worst of COVID19 may be over, particularly in the developed nations. The disease is beginning to taper off in much of the world. Of course, it is still raging in the US, which probably accounts for a large part of Air NZ revenue.

It is not clear to me that there are nearly 400 qualified pilots available at short notice. The same goes for other qualified and trained staff who are facing the axe. So, what does Air NZ do, when business starts to take off again?

I suggest Mr Foran negotiate with the government for a much larger bail-out package than the NZ $900 million credit limit the government has offered.

Then, I suggest that Mr Foran look into the German practice of Kurzarbeit (working short-time). This is essentially a furlough program, where employees agree to or are forced to accept a reduction in working time and pay. In the present case, this may well imply some people going on unpaid leave for 3-4 months.

But at the end of that period or even before, if and when business picks up again, Air NZ will promise to re-hire those workers. They can be re-hired on the basis of length of service or some other performance-related criteria.

Air NZ should probably come to terms with the fact that the US sector as a source of revenue will either take a long time to recover or possibly not recover at all to its previous state.

In the interim, if the US market does not pick up, I would look into ramping up flights to other parts of the world. Increase direct flights to Shanghai and Beijing and/or look into other large metropolitan cities like Tianjin, Shenzen, Guangzhou and Chengdu. Each of these are cities of more than 10 million people.

The same would be true of cities like Bangkok (population of Thailand: 69 million), Jakarta (population of Indonesia: 264 million), Kuala Lumpur (population of Malaysia: 31 million), Manila (population of Philippines: 104 million) and New Delhi (population of India: 1.3 billion).

If Air NZ can fly to Chicago and is thinking of flying non-stop to New York City, then each of these cities are within reach. Taken together, this amounts to roughly 3 billion people with a burgeoning middle-class. Even if the customer base amounts to 1 percent, this is still 30 million people. If it is 5%, then this is 150 million people. Soon, this starts to look as big as the US market.

A similar argument would be true of direct flights to both Brazil, Argentina and Chile.

What Air NZ is proposing now, will essentially gut the company and pretty much destroy any chance of it turning around when the crisis passes.

But, has Mr Foran and the think-tank at Air NZ really gamed out all potential situations? Is someone playing Devil’s Advocate in that boardroom? What if we did this other thing instead of this thing?

One of the problems with dealing with crises is that we get consumed by dealing with the here and the now. At times, it is important to take a step back. Reason analogically, look at other times when Air NZ faced a catastrophe like this. Look at other airline companies that may have faced similar ruinous situations. Did they manage to work their way out? What was the response? What worked? What did not?

I may well be wrong. I am simply asking whether there may be other ways out; whether all the different options and the trade-offs have been adequately weighed.

Ananish Chaudhuri is Professor of Experimental Economics at the University of Auckland and during January-June 2020, Visiting Professor of Public Policy at Harvard Kennedy School. The views expressed are those of the author alone and do not reflect the views of these institutions.

Government right to pivot away from elimination

Ananish Chaudhuri

Ananish Chaudhuri is Professor of Experimental Economics at the University of Auckland and the author of the book “Experiments in Economics: Playing Fair with Money”. The views expressed are his own.

It is clear that the government has begun to realize how costly lockdowns can be in terms of their economic and social impact. As a result, the government now seems to be willing to pivot away from their goal of total elimination. This is made clear by the recent announcement by the Minister of Health that Auckland will most likely be allowed to drop down from the current 2.5 level even if community transmission does not drop to zero.

This is welcome news since elimination via lockdowns was never really a feasible goal given the significant collateral damage inflicted by such lockdowns.  

Some commentators, however, would like us to “stay the course”.  According to this view: “We’ve come this far and given up so much, it would be crazy to stop now.”

This is actually a common intuition among many but happens to be misguided. Economists call this the “sunk cost fallacy”. To understand why, I need to relate two stories.

The first story refers to an exercise that I often carry out in my classes on decision making. This is called “The $20 auction”.

I start the lecture by taking out a $20 bill out of my wallet and tell my students that I am going to sell it to the highest bidder.

I then invite students to bid on the $20 bill with one small caveat. This is an “all pay” auction. That means that everyone who bids an amount must pay with only the highest bidder winning the money. But the losers must also pay whatever they bid.

This type of situation is quite commonplace. Think about running for public office. Every candidate/party spends substantial amounts of money but there can only be one winner with the expenses incurred by everyone else being lost. Similarly, right now companies around the world are in a mad race to develop a vaccine for Covid-19. They will spend billions of dollars in doing so and finally only one of them will be successful; the one whose vaccine eventually goes to the market. The investments made by others will likely come to nought.

As the auction starts, there is a general sense of amusement at first. A titter here, a nervous chuckle there. But eventually someone or the other takes the plunge and bids $1. If the bidding stops there, then this person would have won $20 for $1 and will make a $19 profit.

But soon others join the fray and the bids start to increase. Pretty soon, people actually start to bid more than $20 to win $20! Why?

Suppose you have bid $20 while someone outbids you by going up to $21. If this person wins the $20, then this person has lost $1 while by being outbid you are now looking at losing the entire $20 you bid. So, even if one has to go above $20, people do it because now it is a question of minimizing losses.

The second story comes from my colleague Tim Hazledine at the University of Auckland and relates to Auckland’s City Rail Link.  According to Tim, when the city rail link was first proposed the benefits of the project (on a net present value basis) were estimated to be about $2 billion, and the construction cost was originally estimated to be about $2 billion also. Then, in April 2019, with $700 million already spent, the costs were revised upward to $4.4 billion with no change in the estimated benefits and no guaranteed finish date.

In April 2020, the city rail link management announced that, because of Covid-19, costs would rise further and the impending May budget should make allowances for this. No mention was made of the possibility that Covid-19 may actually reduce the benefits of the rail link, through more people continuing to work at home rather than commute. Tim wrote:

“Adding in some substantial costs missing from the official calculations, the costs of disruption to business and citizens during the build, and the cost of the huge subsidy on the price of rail tickets, it seems sadly reasonable to predict that we now have a $5 billion+ monster on our hands. Even with more sunk costs incurred since last year, we are looking, in the best scenario, at having to fork out another $4 billion to finish a possibly $2 billion value project.

This behaviour lies at the crux of the sunk cost fallacy; the idea that people often pursue goals even when the benefits fall short of the costs.

Countries keep on fighting ruinous wars even when it is clear that nothing remotely resembling victory is possible. Candidates keep campaigning even when it is clear that the additional costs of doing so will outweigh any potential benefits given the virtually zero chance of victory.  In fact, the fact that they have incurred substantial costs is reason for doubling down and getting in deeper.

This argument applies to our policy on Covid-19 as well. The fact that we have incurred substantial costs does not imply that we should continue to do so when the projected benefits fall considerably short of the costs. A recent report from the Productivity Commission suggests that the cost of extending our April lockdown by five days outweighed the benefits by more than 90 to 1.

So, it is good news that the government, albeit belatedly, has recognized the error in the previous approach and is now adopting a more practical view of controlling the pandemic.

Do we really need yet another lock down?

Ananish Chaudhuri and Simon Thornley

The authors are members of the Department of Economics and School of Population Health respectively at the University of Auckland. The views expressed are their own.

During the Vietnam war, the well-known (and Kiwi-born) journalist Peter Arnett is supposed to have quoted a US Major as saying “We had to destroy the village in order to save it.”

Regardless of whether anyone actually said this or not, we cannot help reflecting on the idea behind this as we go into yet another lock-down.

Back in March, when we entered our first lock-down, the evidence was not so clear. Reasonable people could have disagreed about the sagacity of the lock-down. Some of us did but on the whole most were willing to abide by the government’s decision.

But the evidence is clear now. Lock downs are not a panacea. There is, at best, weak if any correlation between lock downs and the spread of the disease. At best, they merely postpone the spread of the infection.

When the Swedish authorities said this, the rest of the world sneered at them.

Now, there is increasing recognition that maybe the Swedes did get it right. Certainly not all of it; they did experience a failure to protect the frail and elderly. But, on balance, it appears they will emerge from the pandemic stronger than their neighbours and that in the current globalized world, lock downs are not and cannot be a sustainable solution.

A recent report from the Productivity Commission now provides support for this Swedish view by asking questions about the relative costs and  benefits of prolonging our earlier lock down. The conclusion: the costs conservatively outweighed the benefits of an extended lockdown by 95:1.  

And the Swedish approach has been reiterated by Camilla Stoltenberg, Director General of the Norwegian Institute of Public Health; that Norway could have handled the disease without locking down.

There is no vaccine and if there is one, it is still some time away. The fastest vaccine ever developed, for mumps, took four years. In any event, even with a vaccine there is no way of guaranteeing that every Kiwi will take it. In fact, unless we keep our borders closed forever, we need everyone else in the world to take the vaccine too. Diseases we thought had been eliminated, like measles, have made a come-back.

Consequently, in an earlier article we pointed out that elimination is not and never was a realistic strategy and suggested ways of moving forward and resuming normalcy including opening our borders.

It was certainly inevitable that the disease would recur. What was not inevitable was the steps we took along the way and the economic and social costs of those steps.

Did we really need to spend the time, effort and resources to force people into quarantine? Could we not trust them to self-isolate like we did earlier with prosecution of violators? Like Sweden, New Zealand is a high trust society. Why does our government have such little faith in its citizens? Why does it claim for its police the right to enter people’s home without warrants to enforce quarantine?

And if a government does not trust its citizens, then why and how long should the citizens continue to trust the government?

Even with preponderance of evidence that lock downs are mostly useless, our government has responded to an outbreak with another lock down. The initial rationale for a lockdown was protecting our hospitals, but now with cases linked to only one household, the threshold for pulling the lockdown trigger has dropped considerably.

Is this really sustainable: To lurch from one from lock down to another with breaks in between?

Yes, resuming normal life will lead to more cases and there will be more deaths due to Covid-19; just as there will be more deaths from auto accidents, flu, pneumonia, respiratory illnesses, loneliness and self-harm. We also now appreciate that the age distribution of deaths from Covid-19 is indistinguishable from background mortality.

Maybe we need to better confront the idea of our own mortality. Such a conversation is topical given the upcoming referendum on euthanasia.

If we could shut down all motorized vehicles, then the reduction in pollution will save many lives that are lost from respiratory illnesses. But, no one suggests that since this is not a realistic proposition. Instead, we set emissions standards in such a way that the social benefit of driving or flying is equal to or higher than the social cost.

Contrary to the culture of fear besetting us, Covid-19 is hardly the threat it has been made out to be. Both the case fatality ratio (number of deaths divided by the number of reported cases) and the infection fatality ratio (number of deaths divided by the number of people potentially infected) is relatively low and much lower than say Ebola or other corona viruses such as Middle Eastern Respiratory Syndrome (MERS) or Severe Acute Respiratory Syndrome (SARS). It is now clear that lockdowns are a blunt instrument that is disproportionate to the threat posed by this virus.

Simon Thornley, Gerhard Sundborn, Ananish Chaudhuri and Michael Jackson

It is clear now that estimates of death from the Covid-19 pandemic were exceeded by factors of hundreds, if not thousands. This sparked public and political panic and led to our government enacting one of the most stringent lockdowns in the world.  Te Pūnaha Matatini predicted 80,000 deaths even with mitigation strategies, while the University of Otago team forecast 12,600 to 33,600 deaths.  Their best possible estimate was 5,800 deaths. The models encouraged the government to enact tight control measures. Now, we are largely over the epidemic, although some of the modelers have warned of secondary waves. New Zealand now has 22 ‘official’ Covid-19 deaths – a far cry from the forecast doom and gloom, with at least a 263 fold over estimate at this point. A recent article about Sweden followed suit, predicting a total of 60,000 deaths for that country, and decrying its decision not to lockdown.

How was it possible for these forecasts to be so erroneous? The interesting aspect, reading the modelling now, is that the number infected under each control policy scenario, including lockdown, was about the same. The Matatini group described 89% of the population being ultimately infected under even the most stringent strategy. The moment the handbrake was let off, another outbreak would occur. However, in the paper, the modellers themselves questioned the effect of lockdowns. They wrote:  “In other countries, including those that have instigating (sic.) major lockdowns such as Italy, there is as yet insufficient evidence that this has reduced [the epidemic]”. They then stated that “successful mitigation requires periods of these intensive control measures to be continued for up to 2.5 years before the population acquires a sufficient level of herd immunity.” The conclusion was that lockdowns were buying time for vaccination and learning from other countries. The modelling that justified the lockdowns was itself clearly stating that such policies were far from a panacea.

Models incorporated lockdown measures yet still predicted thousands of deaths. Critics will say that the lockdown is precisely why the models were so inaccurate. We were saved from catastrophe. Several lines of consistent statistical evidence does not, however, support this idea. US States that did not lockdown report lower Covid-19 cases and death rates on average than States that enforced heavier restrictions. Time trends in Europe show that lockdowns prolonged the recovery from the epidemic after these policies were enforced. Closer to home, it is clear that cumulative per capita cases and deaths of Covid-19 are lower for Australia than for New Zealand despite more relaxed restrictions over the Tasman.

The major factors behind these erroneous models include: (1) an overestimate of the infection fatality rate, and (2) a reciprocal underestimate of the immunity of the population.  Mathematical models of infections project the assumptions of the modellers into the future. They are mathematically elegant, but also based on many untested assumptions. Models assume a far greater degree of certainty than is true in reality.

The models used are built for infections which declare themselves, like measles. Covid-19 is different, it produces high rates of infections in people who feel well. Measles primarily affects young children who are unlikely to die from other causes. Covid-19, on the other hand, has shown to be most vicious at the other end of the age spectrum, specifically causing death most frequently in people at a mean age very similar to our life expectancy, about 82 years. This is curious, as it strongly suggests that the virus does not shorten life, since our life expectancy, or average lifespan, is similar with or without the virus on board. There is little mention of this in the Matatini document, and it is relegated to the appendix of the University of Otago report. Instead the Otago group talk of deaths of the magnitude seen in World War I. Given the age differences of deaths in World War I (mean about 27 years), compared to Covid-19, this must surely be classed as exaggeration.

Neither modelling team attempted to quantify loss of life in terms of ‘years of life lost’ (YLL), a standard epidemiological technique for comparing disease burden. Such statistics would have produced a totally different picture than headline death tallies, portrayed simplistically by the media. YLL is the sum of the differences between age at death and median life expectancy and weights death in the young higher than deaths in the old. Since Covid-19 deaths occurred at an average age in the 80s, this method of measurement would have produced a much less striking picture than the less sophisticated count that values infant and nonagenarian mortality as equivalent. Years of life lost from Covid-19 are extremely low, and pale in comparison to other risks to health, such as cardiovascular disease, diabetes and cancer.

As in the case of swine flu, antibody tests of the virus, are dialling down the infection fatality rate, to a range similar to influenza (0.03% to 0.5%). This contrasts from the genetic test evidence used by some commentators. This cuts down the dire predictions for Sweden by a large ratio. Since even people without antibodies have evidence of seeing the virus, the true infection fatality ratios are likely to be even lower than those adjusted for antibody tests alone. It is now clear that the dire prediction is very unlikely to be correct, since Sweden is now well into the downward slide of its epidemic curve for Covid-19 deaths. The value of observed data over modelled predictions is demonstrated here.

Related to the immunity tests, a strong, and very questionable assumption of the modelling is that we are all, as a population, susceptible to the ‘novel’ virus. Since from early on in the epidemic, it was clear that infection was more likely in the elderly, this was unlikely to be so. Recent evidence from immunologists strongly indicate cross-reactivity between “common cold” coronaviruses and SARS-CoV-2, which was present in at least 30% of people that don’t show other evidence of having seen the disease before. This theory is supported by a study that showed that 34% of a sample of healthy blood donors who did not have antibodies, instead had other evidence of immunity, with reactive T cells to the virus. Also, the finding of test-positive samples in France well before the epidemic ‘officially’ occurred, dents the ‘we are all sitting ducks’ theory.

In trying to make sense of these erroneous predictions we have to ask how this happened? We believe two basic features of the human psyche have been at work. The first of these is loss aversion: the desire to avoid losses that are right in front of us even if it means larger losses elsewhere or further down the road. The second is confirmation bias: that is the tendency to look for evidence that confirms one’s pre-supposition and discounts evidence that calls those beliefs into question. Of course, the 24-hour news-cycle, the cacophony of social media, the need for eyeballs, clicks, likes, tweets and retweets exacerbates these matters, since apocalyptic predictions are more likely to draw attention.

A casual look at an epidemic curve of Covid-19 deaths from Sweden shows that dire predictions, are extraordinarily unlikely to come to pass. Swine flu in 2009 was instructive as pessimistic models dictated an over-reaction. A post-mortem concluded that models “impress governments and provoke fears” and were overly pessimistic. Surveillance and reliance on biology and observed data were instead recommended. It seems that with Covid-19, we have learned little from this episode.[ST1] 

Several lines of evidence give us hope, to counter pessimistic modelling. One thing the inaccuracy of the models teach us is that our understanding of the behaviour of the virus is incomplete. Better understanding should translate to more accurate prediction. Epicurves by country in Europe and many parts of Asia, along with Australia and New Zealand are showing waning epidemics with insignificant secondary peaks. These patterns strongly suggest growing immunity in these countries, despite measured low antibody prevalence in some areas. The high rates of cellular and cross immunity explains this phenomenon. China, a very densely populated country, has now widely opened up after a lockdown and had few secondary waves. Japan is the same, although they had lighter restrictions. The sustained low number of cases when the curve falls strongly indicates that we can safely return to normality much more rapidly than was thought possible.

---

In the aftermath of the Covid19 pandemic, it has been observed that countries led by female politicians have done better in terms of implementing social distancing measures. Examples include Angela Merkel of Germany, Jacinda Ardern of New Zealand, Mette Frederiksen of Denmark and Sanna Marin of Finland.

There is some controversy regarding the appropriate response and whether countries that locked down will experience additional waves once they emerge from lock down as opposed to a country like Sweden, which did not enforce such stringent policies. It is also the case that only a small number of countries around the world are governed by women. Extrapolating from small numbers is fraught with risks. 

But leaving those caveats aside, why were female leaders so much more pro-active in implementing social distancing policies?

Evolutionary theory may provide an answer. Evidence suggests that women tend to be more risk averse than men. An obvious consequence of this is that men tend to be hyper-competitive and over-confident. Faced with the risk of large-scale loss of lives, female leaders moved more swiftly to implement social distancing to minimize the risk. It is possibly not an exaggeration to suggest that the countries that have struggled the most in charting a consistent course (notably UK and USA) are led by competitive and over-confident men.

Evolutionary theory teaches us that a primary human drive is to pass on our genes to successive generations. Given that the amount of parental investment required of men is much less than that required of women, males can have many more off-springs than females. If a male can out-compete other males in terms of having a greater number of sexual partners, he can have more progeny. So, males have more of an incentive to compete, which in turn necessitates more risk taking, since there is always the possibility of injury or loss of life in such competitions for mates.  

In the animal kingdom, males are generally showier, more aggressive and more territorial. The level of male aggression is higher among animals that are polygamous as opposed to those who are monogamous. Males are also physically much larger than females in polygamous societies than in monogamous ones. Bull elephant seals are much larger in size than females and often engage in brutal battles for control of female harems.

Closer to home, Lise Vesterlund and Muriel Niederle show that women often tend to shy away from competing with men, even where there are no differences in their respective performance or ability. It is equally true that men tend to be over-confident and over-estimate their chances of success and therefore tend to compete “too much”.

There is now a large literature that looks at gender differences in risk aversion. Catherine Eckel and Philip Grossman point out that results from studies looking at either decisions made in abstract lottery choice experiments or in the context of financial decision making show women to be more risk averse. One example of this is that when it comes to retirement savings, a larger proportion of women prefer to invest in less risky options such as term deposits rather than stocks.

The same insight comes through if we look at actual investment behaviour of men and women.   Brad Barber and Terrance Odean study 35,000 investment accounts sorted by gender. They find that women outperform men mostly because men tend to be over-confident and trade a lot more. Women had turnover rates of 54 percent while for men this is 77 percent and the accounts with higher turnover performed worse than the average market return during this period.

In fact, there is also evidence to suggest that because women tend to be more risk-averse, they are less likely to generate asset bubbles (such as tech stock bubbles or housing bubbles) of the type that fueled the global financial crisis of 2008-09.

Helga Fehr-Duda and collaborators provide an alternative perspective on the supposedly greater female risk aversion by suggesting that men and women differ in the weights they assign to different probabilities. Women tend to underestimate probabilities of gains to a higher degree than do men, i.e. women are more pessimistic in the gain domain. The combination of these factors may lead to higher degrees of risk aversion for women.

It is also the case that such gender differences in risk taking tend to get compounded in times of stress. And existing evidence suggests that the such risk-aversion leads to the well-documented gender wage-gap, at least partly due to greater female reluctance to negotiate salaries. As Linda Babcock and Sara Laschever point out: Women don’t ask. The reluctance to negotiate may result in small differences between male and female salaries at the outset, but given that things like bonuses, outside offers and merit increases are all based on current salary, small differences in the beginning translate into large differentials a few years down the road.

However, here is a caveat: women who attend single-sex schools and those who grow up in matrilineal societies like the Khasi in India, exhibit similar risk-taking and competitive tendencies as men.

Bottomline: In times of crisis, whether it is a pandemic or a global financial crisis, when risk minimization becomes important, being led by women may be beneficial both for corporations and for countries. This also calls for greater diversity, both in the boardroom as well as in government for more reflective and deliberative policy making.

New Zealand’s Prime Minister Jacinda Ardern has won effusive praise in the overseas media for her handling of the Covid19 pandemic. (https://www.nytimes.com/2020/04/30/opinion/coronavirus-leadership.html)

Ardern is a warm, charming and empathetic human being and an excellent communicator. Unfortunately, the government she leads does not seem imbued with similar qualities.   

Back in mid-March New Zealand was in Level 2. Then we went to Level 3 for one day before moving to Level 4, with everything other than essential businesses closed down for four weeks. According to Oxford University Blavatnik School of Government’s Coronavirus Response Tracker, New Zealand enacted one of the most stringent lock downs along with India and Israel.

 (https://www.bsg.ox.ac.uk/research/research-projects/coronavirus-government-response-tracker)

Some commentators, including me, questioned at the time the sagacity of imposing a nation-wide lock down in a country with very low population density in general, particularly in the South Island.  

(https://www.newsroom.co.nz/ideasroom/2020/04/08/1119994/a-different-perspective-on-covid-19)

Reasonable people can certainly disagree on a decision. The government made the decision it thought was the best given the information at hand. But what was striking was the lack of consultation or justification as to why we needed to move to Level 4 so quickly. The legal basis for ordering the lock down is now in question; something that the government is now trying to clean up, ex post facto.

Two New Zealand 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.”

 (https://thespinoff.co.nz/covid-19/28-04-2020/the-legal-basis-for-the-lockdown-may-not-be-as-solid-as-weve-been-led-to-believe/)

Recently the government responded to questions on these matters by dumping a trove of documents in the public sphere. This was done on a Friday afternoon. Ministers have been asked to “dismiss” questions; ostensibly on the ground that the government enjoys public support and therefore, there is no need to engage with anyone offering contrarian views.

The New Zealand Ombudsman Peter Boshier commented that the move by the government, while not a violation of the legal principles of the Official Information Act, was certainly contrary to its intent. He also said 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. (https://www.stuff.co.nz/national/politics/121237698/coronavirus-officials-pitched-oia-suspension-during-covid19-lockdown)

Then, last week, the government passed “under urgency” the Covid19 Public Health Response Bill. According to one report “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.” https://www.newsroom.co.nz/2020/05/13/1171049/covid-19-powers-approved-under-urgency

Both the Human Rights Commission and civil rights advocates have expressed strong reservations. A columnist for a leading daily suggested, rather diplomatically, that the government has “lost perspective”. https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12331686

Not only does our government not trust us to do the right thing in public, they do not even trust us inside our own homes. The police can now enter homes without a warrant if they believe Level 2 restrictions are being violated. This vast expansion of the powers of the state is something that one expects in an authoritarian state; not a liberal democracy. Many authoritarian rulers think twice before enacting a law like this, which violates basic democratic principles including the protection against illegal search and seizure.

Caught in this rising tide of intolerance are thousands of migrant workers, who find themselves out of jobs and are now going hungry. The Deputy Prime Minister Winston Peters is the Leader of New Zealand First, a nativist party, which is part of Ardern’s governing coalition. Queried about the plight of migrant workers, he declared that they should probably go home. How? We live on an island and there are no flights!

(https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12331405)

New Zealand is a founding member of the International Labour Organisation (ILO). Referring to migrant workers, Article 8 of ILO Convention 143 (1975) states:

1. On condition that he has resided legally in the territory for the purpose of employment, the migrant worker shall not be regarded as in an illegal or irregular situation by the mere fact of the loss of his employment, which shall not in itself imply the withdrawal of his authorisation of residence or, as the case may be, work permit.

2. Accordingly, he shall enjoy equality of treatment with nationals in respect in particular of guarantees of security of employment, the provision of alternative employment, relief work and retraining.

In the aftermath of the pandemic, concerns have been expressed about the expansion of state powers and the erosion of civil rights. It is unfortunate that New Zealand, usually known for its liberal stance on such matters, should fall victim to the same pressures. The Prime Minister’s resoluteness in the face of the crisis was a matter of pride for Kiwis but the turn toward authoritarianism by her government should be a cause for concern.