The Behavioural Economics of Government Responses to COVID-19
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Journal of Behavioral Economics for Policy, Vol. 4, COVID-19 Special Issue 3, 11-43, 2020 The behavioural economics of government responses to COVID-19 Gigi Foster1* Abstract How have governments around the world responded to the novel coronavirus first discovered in China’s Wuhan province in late 2019 (the cause of COVID-19 disease)? What has driven governments’ responses, and to what extent can behavioural economics help us to understand the policies that have been enacted? In this short paper I examine the responses of four countries, mapped against media reporting, local context and viral spread, and discuss how core behavioural economics insights can illuminate the possible reasons for those responses. The paper concludes with observations about how these insights can be used for good by governments – in predicting public reactions, and in setting and selling government policy – the next time that the world faces a pandemic. JEL Classification: H12; I18; Z18 Keywords COVID-19 — fear — media — salience — reference dependence 1UNSW Business School, University of New South Wales, Sydney, Australia *Corresponding author: [email protected] Introduction review a suite of well-documented behavioural phenomena and outline how each of them may have played a role in gener- The world has been shaken by the COVID-19 pandemic in ating the public sentiment and subsequent political responses a way unlike what we have seen in any prior global health we have seen. Part 3 concludes with a set of lessons from the event. What started as a local health anomaly in one Chinese experience that humanity can take to its next confrontation province quickly became a world-stopping crisis affecting with a contagious global health threat. every major nation in 2020. Industries from travel to man- No certainty about causality is claimed in any of this anal- ufacturing suffered acute, sudden disruptions due to politi- ysis, nor is there a claim that the news reports and announce- cal action to lock down cities and block free movement of ments analysed, gathered in good faith but under significant people and goods between countries. This experience pro- time pressure, are an unbiased selection of all reporting deliv- vides an unprecedented opportunity to examine political lead- ered during this period to residents of each country. Rather ers’ responses to an acute global crisis in light of the wealth than focussing heavily on sample representativeness of media of insights from behavioural economics, and ask which be- reports or convincing econometric identification, I employ in havioural elements may have influenced public sentiment and this paper mainly logical scientific deduction, with the goal the ensuing political responses we have seen. Scientific re- of delivering policy-relevant reflection on what we have been flection on what has happened is a step towards enabling through, and guided by the assumption that the stylized be- governments around the world to better prepare for the likely havioural insights observed in many other contexts will likely public response, and be better equipped to implement counter- also have played a role here. The analysis in this paper bene- measures to safeguard human interests, when the world faces fits from some, but not perfect, hindsight: while we now know another pandemic. far more than we did in January 2020 about this new virus, we This short paper proceeds as follows. In Part 1 I review the are still learning. As the remaining uncertainty resolves over timeline and nature of responses of several nations to the de- the coming months and years, the picture of what we should veloping coronavirus phenomenon, selecting geographically have done in response to the virus will also become clearer. and economically diverse nations that saw varying degrees of penetration of the virus. A core feature of this review is to Part 1: Responses of world leaders chart popular media reports about the virus accessible to the public in each country, and to discuss the chronological align- to COVID-19 ment of those reports and other global and national markers Leaders in developed and developing nations, with different of the pandemic’s trajectory with the country’s public policy evolving trajectories of novel coronavirus infection and deaths announcements. Second, informed by the results in Part 1, I due to COVID-19, have responded in different ways to the The behavioural economics of government responses to COVID-19 — 12/43 new virus. Tables 1A-1D provide week-by-week timelines of 1b Sweden country-specific viral and economic trajectories, local context, As shown in Table 1B, the Swedish policy timeline starts to be global events, and media reports relevant to the virus,1 mapped very active before mid-March, with multiple announcements to government responses for a selection of countries from and proactive steps taken by the government, including state- different points on the spectra of economic development and ments on 12 March about the efficient allocation of testing degree of severity of the virus’s attack: Australia, Thailand, resources and the potential negative consequences of closing Sweden, and the UK. The timelines run from mid-January to schools and undirected testing. Instead of blanket instruc- the end of April 2020. tions directed towards everyone in the society at all times, specific instructions are provided in government messaging 1a Australia pertaining to certain activities and population sub-groups in The trajectory of the virus in Australia was very muted during the days leading up to the release of the Imperial College the window of observation compared either to epidemiolo- London estimates. The only large-scale policy act even in the gists’ initial projections,2 or to the trajectory followed by the days immediately following the release of the ICL estimates virus during this window in many other developed countries. was the closure of senior high schools. Headlines do not seem However, Table 1A shows that media reports about the virus fearful but instead mainly report facts, and as early as 24 through the month of March were increasingly frantic. Early March focus on optimistic angles such as a reduction in home in that month, headlines were offering grim infection and break-ins and “stories of progress to bring you hope”. death count projections and signalling an imminent economic tailspin, with stocks in “freefall”, tourism and the finance 1c Thailand sector reeling, and consumers panic-buying essential supplies. Table 1C shows that Thailand’s headlines were reasonably During February and the first week of March, government sparse until mid-March, focussing mainly on mask supplies, policy focused mainly on travel bans and announcements grad- depressive effects on the tourism industry, and reporting of ually upgrading the risk posed by the virus. On 11 March, single- and double-digit counts of new infections, while the Australia’s health minister said the country could not pre- government announced reactionary steps until that time that dict the trajectory of the virus, and words and phrases that mainly targeted particular traveller groups perceived to be at stoke fear continued to appear in headlines over the ensuing risk. With the exception of one plea not to stockpile food, three weeks – like “chaos”, “panic”, “slaughtered”, “fears”, the government did not make any reassuring statements dur- “go bust”, “hit the wall”, “falls off a cliff”, and “edge of a ing this period that may have helped calm its residents (and precipice” – when speaking both of the virus and, particularly, the request against stockpiling may well have come across of projected economic effects. In headlines focussing on the as desperate and itself sparked more panic). On 18 March, virus itself, there is little evidence of comparisons against two days after the release of the abovementioned Imperial existing illnesses, death rates for different age groups, or other College London projections, new modelling was released that perspective. At late as 13 March the country’s chief med- projected 400,000 infections in the country, and this was fol- ical officer tried to urge calm, saying that COVID-19 was lowed by a slew of government action a few days later towards “a very mild illness” (an accurate description of most novel lockdown. After that point, the headlines shift to describing coronavirus infections). However, between 16 March (the the orders and punitive measures one would expect in a police release date of Imperial College London modelling predict- state, and government policy focusses mainly on control of ing millions of deaths in the US and the UK) and 30 March, the population, with only two announcements about aid: one the government moved to gradually lock down the economy. from the government purse, and a second one requesting help After this point, reporting became less focused on stoking from private donors. fear, and more focused on providing the public with informa- tion and tracking about the disease that had arguably taken 1d The United Kingdom up residence in their minds as the right thing to fear at this Headlines early in the window of observation in the UK (see moment. Table 1D) are reasonably controlled, presenting facts and ex- plicitly pushing against fear (“UK warns against mass panic”) but also increasingly suggesting that the government was 1 Headlines tabulated in Tables 1A-1D were selected from sources and under-reacting (e.g., the sarcastic headline “Now wash your according to the search algorithms detailed in the Appendix. Data on gov- ernment actions were gathered from the news sources from which headlines hands” on 27 February, and the near-simultaneous reporting were selected plus official sources, such as the UK government’s daily press in late February of dire warnings about the virus and reassur- briefing. Supplementary data on the actual spread of the virus and local con- ing statements from the government).3 15 March brought the text (drawn from local sources) and notable chronological markers covered telling headline that a surge in the death toll “forces [Boris] broadly in worldwide news are also shown in each timeline.