COVID-19 is not the great leveller, it’s the great revealer

Source: https://twitter.com/stphnmaher/status/1249767849352101890?s=20

In a medical sense, COVID-19, as highly contagious as it is, can be thought of as the great leveller. No one has immunity, and we face the health risk of this virus with a sense of our common humanity.

But in a socio-economic sense, it is not as contagious. The jobs some of us hold give us an economic immunity, and we face the economic risk of this virus with a very different sense of our interconnectedness.

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Canada’s unemployment rate will likely double to 10%, and that’s an understatement

Normally, I don’t venture into to predicting month-to-month changes in the unemployment rate, but this month is an exception for two reasons. The changes are certainly going to go well beyond the statistical noise inherent in the Statistics Canada survey, so there is no chance that the picture will be clouded. And history really isn’t a guide to what is coming next (in the very short term), so sophisticated models based on past data don’t have a particular advantage. My bets are on an almost doubling of the Canadian unemployment rate between February and March, with even this being an understatement because the official survey preceded some of the more dramatic shutdowns that happened later in the month. I’m suggesting that we are even probably close to 15% right now.

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What you need to know about Statistics Canada’s survey of the labour market

On Thursday, April 9th Statistics Canada will release the results of the Labour Force Survey for the month of March 2020. COVID19 makes this one of the most scrutinized releases in the 75 year history of the survey, reporting as it will on jobs and unemployment during the week of March 15th to March 21st. Here’s what you need to know, and what to look for.

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Intergenerational mobility over time and space

This is Lecture 7 of the course ECON 85600, “Inequality, Economic Opportunity, and Public Policy,” that my class and I are now conducting online. You are welcome to participate, and can review all the course materials at https://milescorak.com/equality-of-opportunity/teaching/ .

Warning: this is likely to interest social scientists in sociology, economics, or other fields, interested in developing a specialized knowledge of the subject!

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Public policy in competitive markets, for the bad and for the good

In this seventh lecture of Economics for Everyone, we address the nature of government intervention in perfectly competitive markets.

Perfectly competitive markets lead to efficient outcomes, in the sense that no one can be made better off without making someone worse off. But that doesn’t mean we like the outcomes, that they are fair or justice, and as a result governments are often pressured, or even captured, to intervene, sometimes not for the broader social good, but for the benefit of a few to the cost of many.

At the same time competitive markets don’t always lead to efficient outcomes because prices don’t may not reflect all social costs and benefits. So we may have too much, or too little ,of some goods if we let the market work. Governments are often pressure to intervene for the benefit of many, but also at the costs  of some.

Source: https://clcouncil.org/economists-statement/

In this lecture, we work through a number of practical examples to illustrate rent-seeking behaviour in which a group can capture government policy to their benefit, and we also discuss market failures, and the consensus view of economists that these should be corrected with appropriate taxation. Agricultural support programs are one example, and putting a price on carbon is another.

Download the presentation for Lecture 7, “Understanding public policy in competitive markets” as a pdf, and if you like listen to narrated version.

Big government, just in time

Big government road into town just in time, but alas when he jumped off his bronco and reached for his six-gun it became clear he wasn’t just-in-time government.

What is clear from the COVID-19 crisis is that we should always choose our leaders with one thing in mind: character.

Character determines how they will stand up to the unexpected. That’s what matters, and whether it is Legault or Ford, Kenney or Horgan, whether Nenshi or Tory, and yes of course whether it is Trudeau, Canadians feel they are all passing the test.

Opinion polling shows that strong majorities see their leaders as doing a good job responding to COVID-19. And it’s impressive, their sensibility to consult, their conviction to act. Now, when we need them, they’ve all shown up, just in time.

Source: Angus Reid, March 26, 2020, http://angusreid.org/covid-19-healthcare-confidence/

“Think Big” has become the guidepost for these abnormal times, but we can’t be governed by character alone. Good governance needs an infrastructure that can deliver, and thank goodness Canadians can also count on a professional public service. But at the same time we fear its muscles can’t flex in real time.

The biggest stumble of the past week was the Trudeau/Morneau over-reach in the first draft of Bill C-13, an attempt to skirt parliamentary oversight and seize control over taxing and spending for two years. Not immediately tasteful, not in character, and certainly not contributing to the we-are-in-it-together spirit that is crucial for good governance and success.

This over-reach was probably driven more by insecurity than by partisanship, springing from having to look through the veil of uncertainty that has fallen over Ottawa. Staring into the mirror and seeing no reassuring reflection, the Minister of Finance wished for a pot of gold, just in case, you never know, down the road, we may need it.

Insecurity about a fluid situation, and insecurity about how quickly programs can be delivered, flows out of clogged government plumbing, a hard constraint on Big Think: for years we’ve neglected, cut, denigrated, and now the public service has a tough time doing just-in-time.

Employment Insurance, that grand social insurance scheme born from the disaster of the Great Depression, intended to offer income support to all in need, to insure against the great social risks we collectively face, risks that would bankrupt private insurers in no time, how is it performing during a collective crisis of the very kind it was intended to address?

It is straining, with computer code written in the 1980s running its servers, processing power and devoted personnel stretched to the limit, overcrowded service centers that are now shut down. The public service is doing the best it can with old plumbing.

Ottawa mandarins often muse about an “all of government approach,” a busting across the silos of different ministries to address all aspects of a policy challenge. But the biggest silos of all have never been breached, those between policy development and service delivery. And now the delivery plumbing is conditioning the choices that Big Thinkers can make.

What is also clear from the COVID-19 crisis is that we should always be investing and innovating in public service delivery, something easy to ignore in normal times.

There is no doubt that the income support programs the federal government moved quickly out of the drawing room and into legislation last week were designed with an eye, not simply to whether they were big enough, but how they would be delivered. The cheques won’t be in the mail for weeks. In times of Corona, that’s a lifetime.

Our governments have to think big, but they can only implement incrementally, a couple of quick steps forward, another back. Events are moving too fast, capacity is too limited, for Canadians to expect otherwise, even if what they really need is both big and just-in-time government.

Source:https://twitter.com/CanRevAgency/status/1244278188651528194?s=20

When Trudeau’s team first came to power they were enamoured with the idea of governing with data. Measure outcomes, set targets, recalibrate in the face of results, and move forward with a “there’s more to do” attitude. But lags in information and delivery make all that fall short.

There is always a big gap between intention and result, never mind in times of crisis, and that gap has to be filled with the trust that character instils in partners and citizens.

Trust gives us the assurance that the cheque is indeed in the mail, and character, now more than ever, needs to deliver. It can’t stumble too many times, before trust rides away.

[ A version of this post was published in The Globe and Mail on March 30,2020 under the title “Ottawa is struggling to be a just-in-time government.” ]