Opinion: Paul Romer on COVID-19

Economist Paul Romer won the Nobel Memorial Prize of Economics in 2018 for his contribution to the theory of endogenous growth. He was recently interviewed by EconReporter, a Hong Kong based journalist specialized in the economy and economic research. I was going to write a thing or two on my experiences in the United States and Hong Kong. The interview has given me a way to frame my thought. Click here for the interview:

https://en.econreporter.com/2020/06/interview-with-paul-romer-on-large-scale-covid-testing-the-transcript/?fbclid=IwAR24_BE8FnFMH-i0tqvitvj-NckjFLq7YaB7xODkNL3Il7UVMWtsK4f6WSs

HONG KONGMINNESOTA
Population7.45 million (2018)5.64 million (2019)
COVID-19 Cases1,20435,584
COIVD-19 Deaths71,460
Data from Google search on June 30, 8:40am HKT using “Hong Kong COVID statistics”, “Minnesota COVID statistics”, “Hong Kong population” and “Minnesota population”.

The Midwest fares better than the rest of the United States. Minnesota was one of the early states that enacted a stay-at-home order in March. As the “Land of the Free”, however, it is both politically and culturally impossible to restrict much of the movements within and in-and-out of the country. Adding to that, there is a significant resistance in wearing masks and a big push to reopen the economy. At the time of writing, the country has recored a daily number of new cases that surpasses the peak in April.

Hong Kong is a city that was scarred by SARS in 2003. This time, partly due to public pressure, they acted early to seal the border. In March, they imposed a strict quarantine rule for all returning citizens (and their spouses, and work visa workers) as the number of imported cases surged. Currently, all travelers who have been in South Asia (except Sri Lanka) and South Africa for the past two weeks must go to government quarantine facilities for 14 days. Other travelers are luckier and can choose to self-quarantine at home or in one of the hotels that sell quarantine packages. My friends in the U.S. were shocked to learn that all these arrangements are for people who are tested negative at the airport. People who are tested positive would be sent straight to hospital. The tests are free, and the government covers all the cost if one has to go to a government facility or the hospital. The self-quarantine period is simple and strict–you cannot step out of the quarantine unit, whether it is an apartment or a hotel room. You would have to wear a bracelet that syncs with your cell phone, and folks at the Department of Health would call you, or even knock on your door during that 14 days.

The entire process was not fun. After the first test, I had to wait for 8 hours at the Asian World Expo, a convention center built next to the Hong Kong airport, for the result. When I was in my hotel room, I could not step outside or talk to anyone in person. Delivery service Foodpanda became the highlight of the day.

Test-and-track is a simple idea. Hong Kong executes it effectively. People still wear masks on the street and the city is now on the path of full reopening. At some point, there was a hope that the United States would follow some of these best practices. Paul Romer has a plan but now he is skeptical whether something like that would be adopted at all.

From the interview:

“In Wuhan, the Chinese government spent about USD 13 per person they tested. Suppose it costs USD 20 to test each person in the US, to test 330 million people that costs about USD 7 billion. So, we could spend USD 7 billion on testing and solve this pandemic. Instead, the pandemic is costing us USD 8 trillion. It’s just crazy we are not spending the money to test and stop the losses.”

“I think this is partly a political failure — we don’t have good leadership right now. It’s partly a social failure — we don’t have the consensus that people have to follow rules sometimes, even it’s inconvenient for them but good for the nation.”

United States has a decentralized private healthcare system. It is not a well-functioning in normal times and its fatal flaw cannot be more apparent during this pandemic. A good leadership may help organize the agents in this complex system, I am skeptical that it can perform as seamlessly as the one Hong Kong has. The starting lines are not the same for the two, and the transaction cost in implementing an emergency policy action is probably lower for an established public healthcare system.

Policy makers need support from the public. People in Hong Kong are vigilante and were highly critical of the lack of action by the government in late January and early February. I was told that if I went out during the quarantine period with my bracelet, people would call the police on me. In this environment, pushing a strict quarantine procedure is easy.

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