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Tom Coupe on coronavirus. The quest for accurate statistics, misjudging risk, panic buying and the economic impact of pandemics

Tom Coupe on coronavirus. The quest for accurate statistics, misjudging risk, panic buying and the economic impact of pandemics

Today's Top 5 is a guest post from Tom Coupé, an Associate Professor in the Economics and Finance Department at Canterbury University.

As always, we welcome your additions in the comments below or via email to

And if you're interested in contributing the occasional Top 10 yourself, contact

See all previous Top 5s here.

I tried hard to resist, but given the SARS-CoV-2 virus [also known as coronavirus and COVID-19] has been dominating world news lately, I could not stop it from spreading to this Top 5. Here are some SARS-CoV-2 virus related articles I found particularly interesting and enlightening.

1) The quest for accurate statistics.

The discussions about the SARS-CoV-2 virus clearly illustrate the importance of having good statistics (and the consequences of lacking good statistics). Everybody wants to know the rate of infection and the mortality rate.  While many numbers can be found, it’s unclear what the ‘right’ numbers are. A comprehensive discussion, with updates about estimates and clarifications about the difficulty of computing mortality statistics can be found here:

“At present, it is tempting to estimate the case fatality rate by dividing the number of known deaths by the number of confirmed cases. The resulting number, however, does not represent the true case fatality rate and might be off by orders of magnitude [...]

A precise estimate of the case fatality rate is therefore impossible at present.”

2) Misjudging risk.

Having accurate statistics (and being aware of them) is important as without them, we are great at misjudging risk as this New York Times article outlines.

“But there is a lesson, psychologists and public health experts say, in the near-terror that the virus induces, even as serious threats like the flu receive little more than a shrug. It illustrates that unconscious biases in how human beings think about risk.

“Our feelings don’t do arithmetic very well,” Dr. Slovic said. That can be especially true when judging low-probability, high risk threats like nuclear war, terrorism – or dying from the coronavirus or the flu. Our minds tend to either “round down” the probability to “basically zero” and we under react. Dr. Slovic said. Or we focus on the worst-case outcome, he said, “which gives us a strong feeling, so we overreact.”

At the beginning of February this year, a YouGov poll estimated that 39% of US adults were very or somewhat concerned about personally experiencing the coronavirus For comparison, in October 2014, a similar survey found that 38% of US adults were very or somewhat concerned about personally experiencing Ebola. Ex post, only two people in the US, both nurses, became infected with Ebola and recovered.

YouGov also has an interesting survey comparing the fear across countries

3) Panic buying.

Like the virus, fear is contagious as is illustrated well by this video about empty Australian supermarkets: a person decides to buy extra food because he observed others buying extra food.

An interesting Insead article discusses the psychology behind the Coronavirus panic buying more generally:

“With tens of millions of people now under quarantine in China and COVID-19 rapidly spreading, it is unlikely that purchasing handwipes, instant noodles or even face masks will keep people completely safe. However, just purchasing the goods may help to keep them calm and give them a sense that they still have some control over their lives.”

4) How pandemics affect the economy.

Pandemics affect the economy in various ways, through sick employees, fearful customers and broken supply chains.

A good micro example is this article from The Washington Post with the title “With chefs idle and vegetables rotting, China’s virus hit restaurants say their goose is cooked”

“If people don’t eat at restaurants, that doesn’t just affect the restaurant but also the seafood supplier or farmer. If people don’t shop for clothes, that affects the silkmaker and weaver,” said Dai Ruochen, a Peking University economist who helps lead the survey group. “The economic impact isn’t contained; it sends ripples up level by level.”

A more general primer can be found here.

“The main factory for assembling iPhones in China, for example, has been shut down all month rather than reopening as expected at the end of the Lunar New Year celebrations. Apple can’t sell iPhones they can’t manufacture, so their share price has been especially hard hit. The new problem for companies like Apple is that their supply chains are so sprawling and complex that they have multiple points of failure and are at risk of needing to repeatedly shut down even if the pandemic is successfully controlled in particular places.”

And with a focus on New Zealand, here.

“Covid-19 will affect the health of New Zealanders and the economy. It presents the government with some unpleasant trade-offs. The more the government does to protect Kiwis' health, the larger the cost to the economy.”

Image sourced from Pixabay.

5) The economic impact of pandemics – some estimates.

Given the absence of clear statistics on the health consequences, it’s hard to predict the overall economic consequences of the SARS-CoV-2 virus. There are studies, however, that have simulated the economic impacts of hypothetical large scale pandemics, using scenarios based on past pandemics. Not surprisingly the range of estimates these studies show is very wide, reflecting the uncertainty. One such paper reviewing several studies shows estimates of -0.4 to -9.1 % drops in GDP.

That paper also concludes:

 “Those studies that predict that a pandemic would have large negative impacts usually do so because they assume that large indirect effects would result from fear of the disease and consequent efforts by individuals to avoid infection. Fear is hard to measure, but we can measure how people respond to stressful situations. It is likely that people would be fearful during a 1918-type pandemic, just as they likely were in 1918. Some studies seem to assume that fear by definition implies widespread behavioural changes, with economies breaking down as people become dysfunctional from fear of infection. There is ample evidence that people do not respond to fear in this way. An emerging literature that merges insights from psychology and economics suggests that people engage in strategies to effectively manage fear and avoid becoming paralysed by it. Furthermore, it is not absolute risk that determines behaviour, but rather the perceived relative risk and cost of a particular behaviour relative to an alternative. Perceived relative risks may be much smaller than absolute risks, particularly if a risk is pervasive.

If a pandemic were to occur, human suffering and loss of life would outweigh economic concerns. GDP impacts are not necessarily the best measure of the effects on people of a virus or other natural disaster.

Consistent with the above, so far, international organizations' growth forecasts have been revised fairly modestly. :

"2020 growth for China would be 5.6 percent. This is 0.4 percentage points lower than the January WEO Update. Global growth would be about 0.1 percentage points lower.

While the OECD says:

Even under a best-case scenario of containment to China and limited outbreaks in other countries as we see today, the OECD expects a sharp slowdown in world growth in early 2020. We have revised our projection for the year from an already low 3% in November to only 2.4%, lower than in any year since the financial crisis. In a downside-risk scenario where epidemics break out in some other countries across the globe, the slowdown will be sharper and more prolonged. Our modelling suggests that the level of world GDP would fall as low as 1.5% this year, halving the OECD’s previous 2020 projection from last November of 3%.

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who would blame the rest home workers who called in sick en masse in sydney when a resident died of coronavirus,placing their own families wellbeing balanced against the low financial reward they came up with the logical conclusion it was better to stay 1918 people starved to death because their neighbours refused to risk helping them.

Let's hope the Israeli's are on to it. "Israeli scientists are on the cusp of developing the first vaccine against the novel coronavirus, according to Science and Technology Minister Ofir Akunis. If all goes as planned, the vaccine could be ready within a few weeks and available in 90 days, according to a release."

I bet they won't be giving it to Iran lol

In early February a research team at Oxford University's Jenner Institute was producing 1,000 doses for the first clinical trials, and will transfer it to Italian manufacturer Advent Srl, for initial production Potential vaccines have been produced quite quickly all over the world. The sticking point will be all the trials and protocols that must be satisfied before public release. That could take over a year.

The good news is that it seems with extreme quarantine/lock-down measures it is possible to contain the spread of COVID-19. The bad news, as some of these articles describe, this has a huge impact on those economies at almost every level.

If just 2 or 3 countries need to enact these sorts of restrictions the world economy can probably muddle along. If a large number of economies across the world need to go into lock-down, it starts compounding the impacts. When you combine this the massive debt overhang worldwide and lack of central bank "ammo" left to counteract a downturn, this could become a genuine economic crisis.

The question now is "what chance do we have of containment?". Can the spread be stamped out before a large proportion of economies need to go into lock-down?

We don't know that it really works in practice once virus is well established, though it will certainly slow disease progression. Chinese data are entirely unreliable - it is all propeganda designed to get people back to work - there have been leaks of much worse real data (from Shandong) and soon after that another leak of govt directions to destroy data in another province (Chaoyang city) one surmises that is in an effort to prevent such future leaks.

The lockdown is simply not sustainable. some business owners in my hometown (a city in northwest China) had a protest asking the local government to allow them to resume bau, but the government refused it. China has become the victim of the fake optimism built by herself.

I am so sorry for the horrible situation they find themselves in. There are no good answers Probably best that can be hoped for is Government pouring every effort into building more critically ill treatment facilities and training recovered people to staff them so that fewest will die during the remainder of the epidemic.

How to shoot down a balloon with a laser. David vs. Goliath 2020. "Last month, the team proved the efficacy of their system by downing explosive balloons traveling across the border from Gaza. The system was paired with Elbit’s SupervisIR threat detection system in the test, and operated by the Border Police. "We succeeded in downing everything that came within our field of fire," Ishaaya said."

I am very interested in Iran. The situation there is much worse than the stats suggest.
In a country that is already fragile, is this the black swan event that leads to violent revolution?

Iran is reporting 3500 cases of COVID19 in a country of 81 million people.

Two of the cases in NZ are a person who recently returned from Iran and the other who was in contact with someone who returned from Iran.

Now of a population of 81 million these two people have been extremely unlucky to have caught the virus or the numbers of infections in that country are being dramatically under reported.

Yeah exactly. Plus 23 MPs or more with it.
I would put my money on it having infected hundreds of thousands

2 weeks back epidemiologists were already estimating 20k infected in Iran based on number of infected travellers being found coming from Iran. ~10x increase since based on established growth rates. More than a week ago the infected Deputy health minister in Iran said 1400 were dead. Again pointing to more than 100k infected. At this rate by April whole of Iran will be infected and millions dead, though likely it will be slowing up as people try to isolate themselves, many/most are in abject poverty and will starve if they don't get out of the house.

When all over the world - government and media are announcing the numbers (which they have to) fear is bound to be created.

Till vaccine is created and experts know more about the virus, panic situation will continue and if not found soon may be devasting as was reading one article, which mentioned that it could be the worst crisis of the century and no amount cheap and easy money will help. Infact cheap and easy money has / had created Giant artifical bubble in all asset class be it Stock or Housing. First hit will be Stock (process is on) and if it continues next hit will be housing market that will affect everyone (Desipte low interest as interst may fall by anothe $50 per week but earing may fall much more and also possiblility of losing business and jobs if it continues).

Not sure about the housing market. Unless people are forced to sell due to an uptick in unemployment, the property market will attempt to bunker down and ride this out.

As the potential leader of New Zealand People's United Party, I URGENTLY demand people living in NZ to wear P2 or N95 face mask in public, cancel large gathering for the next two weeks, stock food for at least next two weeks, self-isolation for the next two weeks for whoever got in touch with confirmed cases even if that would result in lock-down for some schools.

Ha ha
This is definitely parody. Keep it up mate, it's funny

yes,and avoid using cash to prevent it spreading.we can follow australias lead and use toilet paper as an emergency currency.

One small technical issue, masks are sold out everywhere.. where can we buy them from?

Hahaha I love it. Blown your cover

You 'demand', xingmowang? As the unknown 'potential leader' of some CCP-related outfit? You have something to learn about living in a free and democratic society. New Zealand isn't - and never will be - a little PRC.

Peoples United Party? He's trying to sell us a PUP.

Every PUP i've ever dealt with has pissed on the carpet if you let them in the house.. so this PUP should be left out in the garden.

Potential leader of an imaginary party. Keep up the LOLs, CCP Parody Bot.

These countermeasures were put in place after an outbreak already occurred in entire China. They were out of nothing but the desperation. If the Party didn't cover up the virus, and the Chinese people were informed in advance, they might not need to do these at all. Yes, the Party has merits in the forced lock-down which slowed down the fast spread of the virus and bought time for the medical intervention, but such lock-downs are not sustainable. You need to see it objectively. What NZ doesn't need right now is the false optimism the Party is trying hard to sell.

Critical data is what is CFR (case fatality rate) for no ICU treatment? To date most people in west have had good hospital treatment, and only ~2% die. But 10-15% need hospitalisation. What proportion of those would die without it? Because that is inevitable in a months time when hospitals are overwhelmed. If CFR goes up to 10% with no hospital then govt needs to lock down and quarantine everyone immediately. Chinese data (lies) are entirely unreliable in figuring this out.

quoting random broad based numbers like 2% mortality rate is really useless, there is a more granular assessment on line that breaks this rate into age groups, and this is more important for this virus than for many other illnesses because when you assess it this way you see that young people up to age 30 ish are negligibly impacted while those over 70 get rated at 15% mortality.
The government should be taking this on-board immediately and insisting that all aged care facilities confirm their action plans on several fronts, visitor control, staff control and internal client monitoring.
I have asked my Mothers care facility for their action plan,they are "working on it" , which i take to mean they don't have one, and when they do it will be too late,expect 15% of inmates to die as a result, possibly including my Mother, and i have no way to change that outcome since her condition means there is no practical alternative for her.

Not hard to work out mate the death rate will triple with no ICU. unless you have your own ventilator and oxygen when you need it your in trouble

I disagree with the idea that panic buying is not a rational behavior. Do you think anyone who took part in emptying the supermarket shelves in northern Italy and other infected places regrets it?
While panic buying is a selfish behavior, when the general public is faced with a situation where they know they are being mislead by governments and MSM (due to constantly changing narratives and facts) and that governments don't have it under control the risk becomes unmanageable so they "take out insurance".
Plus if the buying is done early enough it provides shelf space for stores to restock and the liquidity to do so. If institutions want to stop panic buying provide the information to the public so they can quantify and manage their risk.

Its seems intellectually fashionable right now to downplay risk. It seems to me like a new form of stoical virtue signaling. What the legacy media labels as panic I perceive as a rational response to a real threat. Would I eat yum char right now, No! would I go to the Wuhan Cafe? No! Will I try to avoid public gatherings? Yes! Did I stock up? Yes! Will I wear a mask in public? not yet but I'm almost there.

Agree. It's like saving but of tangible household items rather than cash. Gathering extra resources for when or if they are needed

could be some numbers missing from the stats,there are countries that dont make the list,where they still have leprosy and rabies and nobody would be interested in keeping tabs on a new version of the flu.

Stats are always low and would still be low even with 100% transparency because either some people never even know they had it or they are not even being tested for it. This combined with government suppression means it already way worse than being reported. Problem is that its harder to fake it when large numbers start dyimg. Social media will take over if it gets really bad

yes, so those that never know they had it increase the R0, but significantly decrease the CFR..

The hysteria that this virus has created is almost unbelievable. You have almost no chance of dying from it and economies right around the world are crashing and burning!

The vast majority (It will come out in the end but conservative estimates are around 90% of all cases) of people will barley notice the difference between this and a common cold.

I just throw my hands up at the stupidity of all this.

i am reporting the derogatory user name of this commentor.

I hope David can deal with as soon as possible please.


Ching mowing is far more derogatory

Do you want to be called stupid or just plain wrong Chinaman1 ?

i prefer stupid

Do you want to be called scared or a fearmonger Carlos?

The common cold doesn't kill 10x or more the numbers of the flu. This does, and it appears to spread as easily or more easily than the common cold. You're being naive. YOU likely won't die from it or even feel too bad. But that doesn't mean you won't be directly affected by it, economically or personally.

roughly 90000 cases in China and 3000 deaths as reported.

I suppose you believe those figures.

I believe that the actual cases to be somewhere between 10 and 20 times that figure which would make it less deadly than the flu. We will never know as the majority of cases will never be reported or known.

Interesting point. Are we confident the reported deaths are more reliable than the reported cases?

Unfortunately finding out will wait until we see how full hospitals and cemetaries do or dont get compared to previous years.

"" You have almost no chance of dying from it "" unless you have certain factors: over 70, male, high blood pressure, heart trouble -- well that's me done for. May as well spend my last few weeks making comments.

You have to laugh at Donald ...........he takes the P!$$ out of the press, like no stand-up comedian has ever been able to do to any group.

And the press are like seagulls around a fish and chip takeaway , its a feeding frenzy , and they love every moment of it .

Truth is , he epitomizes politicians of all persuasions , lie , mislead and spin , the only difference is he could not give a rats you-know-what if he is caught out

Former QLD Premier Joh Bjelke-Petersen called his daily media conference "feeding the chooks".

Fact is the Don sells newspapers (assuming there are still printed newspapers).

1. Indeed. The WHO estimates the CFR of the Spanish flu at 2-3%; not that much above current estimates for COVID-19. But the Spanish flu went on to kill 30-50 millions people.

4. This is a false trade-off. With or without travel restrictions there is a reasonable chance of economic recession. If it is indeed in the same ball park as the Spanish flu, rampant spread of the virus will sink us just as sure as travel restrictions. Governments are stuck between a rock and a hard place.

Governments chance to do something relatively cheap (quarantine of all international arrivals and as much testing as possible of any symptomatic people) to keep life in NZ near normal was a month back. They failed to act and here we are.

Keep your eye on Italy. Two weeks ago 3 known cases, now 4000 and have run out of ICU capacity, so death rates will skyrocket (already at 4%, terrible considering it is low-ball due to rapid spread and 2 week it takes to die). That could be NZ or just about any other western country in a couple of weeks. Italy's govt now closing down all schools etc. But it's too late, huge numbers will die. NZ needs to lock down and quarantine everyone NOW, might already be too late.

A couple weeks ago two Kiwis told me, independently of each other, about how rich they believed they were going to get as a result of the flood of coronavirus refugees seeking shelter in New Zealand and thus pushing up already over inflated house prices even further. Kiwis are such clever folk. Good luck.