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Faculty of Economics

Thursday, 17 June, 2021

A world-wide pandemic could have started at any point in the past century since Spanish Flu circled the globe. However, as Dr Toxvaerd explains; “To a certain extent the world ‘got lucky’, and the world was almost lulled into a false sense of security; it was thought we could contain a virus as well as we did SARS. This turned out to be wrong.”

He had previously warned of the possibility of such an event, and says SARS, which began in the Guangdong province of China in 2002, was contained.

“SARS was treated as a local event. Almost a little bit exotic, something that happened in a remote part of Asia, but which really had little impact on the rest of the world,” he says.

He has been studying Economic Epidemiology for many years, and argues that while it gained a few headlines at the time, this lack of attention in the west was echoed in the academic literature, which treated epidemics as recondite. “There was a flurry of publications around the HIV epidemic, but you had to dig around to find any research in terms of the economic effects of epidemics,” he says. Where it existed, it was mainly to do with developing economies and diseases such as malaria. “Really, very little research had been done about the impact of airborne diseases, and it was at the margins of literature.”

How this has changed, a year and a half into Covid-19, with thousands of researchers around the world studying the Coronavirus, including many in the Faculty. They use real time data into the impact of policy moves, showing how people and the economy react, to help us be better prepared for ‘the next time’.

“In the past macroeconomists just didn’t treat research into a pandemic as important,” he says. “After all, no Western economy really suffered, and the prospect of a truly global pandemic was treated as something only Hollywood would consider, in a film,” he says, referencing the eerily precedent 2011 movie ‘Contagion’.

However, he adds this pandemic almost occurred at just ‘the right time’ when it comes to technology. “It might have happened at anytime since ‘Spanish Flu’”, he says. “But Covid thankfully appeared just when humans had the ability to develop vaccines far quicker than before; to do so on a global scale within a few months of a virus appearing, is a testament to how far technology has come.”

Dr Toxvaerd has spent a decade bringing economic tools to bear on economic policy in preparation for a situation like the current pandemic. For example, what should a Health Authority do to modify behaviour if a new disease arises? “The tools and techniques are very similar for many different scenarios,” he says. “We almost had a ‘playbook on the shelf’ directly applicable to this current situation, and we were ‘tooled up’ and ready to fight. Sure, it was a new disease in a sense, but we knew what to do and we had a sense of what the impact of each of the control levers we could pull would be.”

Equally, he says the arrival of vaccinations was far faster than expected, but how people would act was to a certain extent predictable. His interdisciplinary approach considers the science of disease outbreaks alongside the beliefs and practices of public health professionals, and how these influence the efficiency of outbreak responses.

His interdisciplinary approach considers the science of disease outbreaks, along with the impact on our economy. Dr Toxvaerd says the development of technology has been very fortuitous too. “Twenty years ago, no one would have been able to ‘Work From Home’, and lockdown would have had a much worse impact on the economy. Even ten years ago a few might have staggered through with dial up email, but GDP would have taken a much harder hit.”

Other research in the Faculty has looked at the impact of lockdown. Dr Chris Rauh has found that women, and parents, have been heavily economically impacted, in particular by home schooling, and mental health issues have surged.

Flexible working arrangements have been given a boost, and now the pandemic is almost ‘over’ many office workers are planning to only pop into the office one or two days a week. However, without a commute many are working longer hours than contracted from home. We can only imagine how that will impact on productivity, and give a further boost to the economy, in the future.

Others in the Faculty have examined the Covid R number (the reproduction number, or roughly how easily the virus is spreading). Professor Andrew Harvey has been developing a class of time series models with NIESR, which has been monitoring the pandemic.

One part of Dr Toxvaerd’s research has been around how people react in the event of a virus. “In the old days there was no sense that we could monitor, and indeed consider measures other than isolation: now, we can see how Social Distancing impacts everything from public transport to spending, in real time.”

Technology has also helped his research. “Google and Apple were very willing to share their mobile location data, and we had very detailed transaction data that wasn’t available before. As an academic it’s been a godsend to have such good data which means we can see the way the virus impacts our lives in real time.”

The Faculty’s Vasco Carvalho has also researched economic activity during the pandemic, with his paper examining 1.4 Billion Transactions.

In the past few months the question has arisen as to how effective vaccines and lockdowns are, which has the most significant economic and pandemic impact, and Dr Toxvaerd looked at how the vaccine will change our behaviour.

“It isn’t surprising people act differently after they ‘get the jab’,” says Dr Toxvaerd. “Once someone has had the vaccine, they may be far less worried about catching Covid, and hence if they go out shopping; they just stop caring so much. Subconsciously they stop maintaining a distance with other shoppers – even if the other shoppers haven’t had the vaccine yet.”

Already the Faculty’s research has been able to compare different techniques in different countries, and see their economic impact. In the paper The Great COVID-19 Vaccine Rollout: Behavioral and Policy Responses he and Christopher Auld from the University of Victoria find that after the vaccine rollout in high income countries such as the UK and Australia, there is a decrease in average social distancing, particularly so for visits to retail establishments.

“Alas, we still haven’t learnt enough about the techniques to combat a new variant that spreads widely. For example, the UKs test trace is not world beating. We were saved by getting lucky with vaccine development, but the policy isn’t brilliant,” he says. He has also found some countries also have a lot to learn about cooperating with others in a pandemic.

Now, he is researching why people let down their guard after just one jab, in some cases, before being fully inoculated.

Complex social, political, economic and ecological forces not only drive infectious disease emergence, and they also impact our behaviour. “You can see that countries which have the most vaccine rollouts have the largest decrease in social distancing. The question is why: “Is it because they have been vaccinated, or because they are ‘around’ people who have been vaccinated and therefore act differently?”

Many academics in the Faculty agree that the cost of this pandemic will take years to calculate, and economists will be sharply dividing the time from BC – Before Corona – to after, when they look at how our behaviour has changed.

The Faculty’s Noriko Amano-Patiño, Elisa Faraglia, Chryssi Giannitsarou and Zeina Hasna have found a major impact of Covid on Economists' Research Productivity, while Giancarlo Corsetti researched supply disruption, and Chris Rauh discovered in the pandemic women were more likely to be furloughed, plus they were also less likely to have their salary topped up.

However, it is the change in our behaviour that will last generations, such as with education, and we will have the baggage of this pandemic for years to come. “For example, the first lockdown was very bad for education. Some school age children didn’t have laptops and couldn’t ‘Learn from Home’, so I’m pessimistic if there is another virus, the educational decline will impact on a generation,” says Dr Toxvaerd.

As he gets back to work analysing the lifting of the lockdown and the rollout of the vaccine in the UK and abroad, he sums up the current state of play by saying there are some things we’ve achieved that would have been impossible a few years ago. As humankind, we should be impressed with recent scientific progress. “The science has been brilliant, but the policy less so. Next time around, the vaccines might take a lot longer to get right. It may not feel like it, but quite frankly, we got very lucky.”

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