More vaccines, less economic suffering are key to a return to normalcy • The Berkeley Blog


the young couple

In January, my nephew Judah informed me that he planned to get married this year and told me that he will time the wedding so I could participate. I arrived in Israel to join the wedding last week, after being vaccinated in late February. Israel is now in transition to a post-pandemic reality, as most of the adults (Jews and Arabs) are vaccinated.

While people still wear face masks, and there is much caution, especially when it comes to children, businesses and restaurants are reopening. Young people are traveling all over, taking advantage of low prices in resorts like Cancun, and feeling revived. The wedding was amazing, in particular, dancing that lasted until 2 in the morning (this old soul left at 11 PM), and there was a liberating feeling among everyone.

Yet when I flew from Israel to the US through Germany, and I saw that the reality in the EU is different. The pandemic is still spreading widely, vaccination rates are very low, compounded by concern about (relatively few) blood clots impeding the use of the AstraZeneca vaccine.

My concern is that Europe is clinging to extreme interpretations of the “precautionary principle” that aim to avoid any risky activity, are actually expanding suffering from the pandemic, and slowing the recovery that can be attained by vaccination. Arriving back in Berkeley, I realized that we need to be vigilant in mitigating against the spread of COVID, but progress in vaccination offers real hope from increased freedom and normalcy. COVID is a rare crisis that transformed our lives and our economies. Much of my recent research has focused on understanding these impacts. I’d like to share some of our findings:

  1. You Snooze You Lose – Delayed Introduction of COVID Control is Very Costly

In a recent paper, Moshe Elitzur, Scott Kaplan, Zeljko Ivezic, and I developed a model that describes the dynamics of a pandemic and apply it to analyze the first stage of the spread of COVID using data from 89 nations and US states. We estimate that without any intervention, both the infection rate and reported death from the pandemic may grow exponentially for up to 36 days, and afterward we will see a decline in the growth rate, in essence, “flattening of the curve”. This decline may reflect a precaution on behalf of the population. The results show significant heterogeneity among countries and states reflecting differences in their policies and public response.

We find that government restrictions indeed slow the spread of the pandemic and estimate that one week delay of the first intervention almost triples the number of cases. We find that “stay-at-home” orders have a relatively low impact on prevention, perhaps because they were not the first policy intervention and, in most cases, other policies (e.g., requiring to wear masks, limiting the size of social gathering) were impactful in slowing the transmission of covid-19. This analysis suggests that once a government introduces restrictions, the public takes notice and modifies its behavior accordingly. Of course, the modification is constrained, the capacity of nursing homes and factory and manufacturing workers to adapt is limited without extra resources and smart policy interventions. My interpretation is that government leadership and trust in government are essential to controlling the pandemic. I share the perspective of Dr. Deborah Birx, that our president and administration mismanaged the crisis and hundreds of thousands of deaths were avoidable.

  1. The Pandemic doesn’t represent a tradeoff between Economics and Health Costs – High Rate of Casualties are associated with high Economic Costs

Another article by Scott Kaplan, Jacob Lefler, and I of COVID-19 on the political economy demonstrates the diversity of responses among countries and states. The paper suggests that differences in climate, travel, demography, and genetics affected the spread and the deadliness of the pandemic. Regions with older populations, higher population density, and exposure to travel, as well as colder weather, suffered more cases and fatalities. Significant learning by doing in medical treatment is also evident, as the mortality rate has declined over time. But policy matters immensely. The figure below, based on 2020 data on deaths per million and percentage loss of GNP resulting from the pandemic, shows that for most countries there was no trade-off between saving lives and economic cost.

covid death and costs

 

Countries that implemented strict policies initially (mostly in Asia), which saw the pandemic as war and rallied a unified front against it, had relatively smaller losses in both GNP and population. Other countries, especially in Europe and the US, which were slow to respond had lost more, both in terms of lives and treasure. While I’m very critical of the US response, Europe also needs to examine the reasons for its failures, both in terms of the high infection rates and more limited ability to develop a vaccine. Throughout the world, the burden of the pandemic wasn’t shared equally. Some of the most vulnerable populations suffered most and the gap between the children of the rich and the poor increased. Fortunately, the relief policies in the US and elsewhere softened the distributional blows of the pandemic and provide a better foundation for recovery.

  1. Adaptation of the food sector to the pandemic – Some firms actually gained by pivoting to new strategies

COVID-19 and the responses to it shocked the food sector and a recent study by Tom Reardon, Amir Heiman, Liang Lu, Chandra S.R. Nuthalapati, Rob Vos, and Myself (Reardon et-al forthcoming) overviewed how supply chains, especially in developing countries, adapted to these shocks. The pandemic induced more rapid adoption of multiple innovations, especially in e-commerce and logistics. When consumers couldn’t come to stores or restaurants, those stores, and restaurants that could “come” to the consumers survived and even flourished. That led to increased reliance on the internet and e-marketing, and the emergence of creative delivery services,

Many of the changes will last- we will continue to zoom and more intensive use of e-marketing in the food sector will continue globally.  The adaptation may require pivoting by multiple firms. For example, food distributors or processors that were mostly serving restaurants or other institutional buyers may pivot to sell to retailers or individuals and may partner with logistical enterprises, like ride-sharing companies that switch to or add food delivery to their existing services. Similarly, brick-and-mortar retailers, like Walmart in the US, invested in e-commerce capacity and expanded logistics to reach out and reclaim their “housebound” consumers. By aggregating the retail experience in this way (like bus versus individual car commuting), they are lowering search and transaction costs and even expanding certain markets. In China, online grocery shopping orders increased 400% in the first trimester of 2020 compared to 2019.

Such adaptation and changes have occurred throughout the supply chain. While some firms discovered new ways to reach new clientele and develop new products, many others were unable too late to adapt, some have gone or are likely to go out of business. These adjustment patterns depend on complex local characteristics, and even with similar challenges the opportunities to adapt vary in different contexts and different countries. One thing is clear – a lot of these changes will continue. Food supply chains throughout the world are more digitalized, the share of e-marketing in food is increasing, and a new class of intermediaries is emerging across the food product and service landscape. The good news is that, despite the gravity of this public health crisis, the agri-food systems are adapting to the pandemic and we have been able to avoid large-scale food shortages.

The pandemic offers many lessons – some specific but many that can inform our long-term progress

  • The importance of international collaboration in tracing and mitigating pandemics and other disasters before they spread.
  • The importance of supporting research and pursuing science-based policies, because in the end, they deliver.
  • Investment in both physical and digital infrastructure has actually paid off. Furthermore, it’s crucial to invest in human capital to allow further innovation, adaptation, and resilience.
  • The value of prevention and preparedness before a crisis occurs.
  • The importance of trust in government and science and the challenge of government and science to earn this trust.
  • The challenge of leadership to confront a crisis when it occurs and unify the nation rather than divide it. Good governance is rewarded. The prime minister of New Zealand was re-elected with a large margin while the US President was replaced.
  • Our food system is quite resilient, and the private sector has the capacity to adapt to crisis situations.
  • Many lose from crisis situations and efficient and inclusive safety nets are essential for a timely, equitable recovery and healthy society.
  • Being vaccinated is liberating. The pandemic taught us to adapt to living in relative seclusion but traveling and visiting family and friends makes life so much better!

berkeley is ready to wake up

Hopefully campus will return to full life life soon

References

Reardon, Thomas, Amir Heiman, Liang Lu, Chandra S.R. Nuthalapati, Rob Vos, David Zilberman. “Pivoting” by food industry firms to cope with COVID-19 in developing regions: e-commerce and “co-pivoting” delivery-intermediaries. Agricultural Economics. Forthcoming.



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