Behavioural economics
policy. For example, it was demonstrated that indefinite quarantines with no well-defined endpoint – such as those imposed in Wuhan – risk having the most negative mental health side-effects. Additionally, things like extending the initial isolation periods have a high risk of demoralizing people and making people less likely to maintain any adherence to the lockdown restrictions. These discoveries indicate that governments need to focus on giving the public clarity and certainty about the timelines involved in the outbreak as much as they are able. The reason for the UK’s slow move to lockdown was based on the behavioural research done that suggested that, if the perceived threat by the public was too low, then fewer people would be willing to comply with the restrictions. Therefore, the decision was made to wait until the threat was large enough to ensure that people would want to stay at home as instructed. It is too early to say which choice was right. The main factor that affects the policies a country implements is how significantly they are willing to impact their economy. Some countries like the UK want to maintain some level of economic activity whilst attempting to ensure that people remain safe (e.g. ‘Eat out to Help out’). Conversely, there are places like New Zealand, who believed that their economy was in a strong position which allowed them to weather any serious negative impacts caused by the policies on the economy in the short term. These policies included closing their borders to all non-residents. For New Zealand specifically, China is their top trading partner, accounting for 28% of New Zealand’s total exports. This means that the country’s export sector has taken a major hit since the epidemic, affecting many industries around the country, including everything from timber to meat and fruit. Furthermore, New Zealand depends greatly on international trade in general, further demonstrating how necessary they believed their very strict lockdown to be in containing Covid-19; they deliberately chose to cut off one of the mainstays of their economy to restrict the spread of the virus. As was discussed before, New Zealand’s heavy lockdown restrictions were only effective because the government very quickly impressed upon the citizens how dangerous the virus was through the speed of their reaction and through how strictly they were enforcing a lockdown. These two factors meant that the people in the country were aware of the risks and so more happy to comply. Many of the economic impacts that New Zealand had to deal with are ones that the UK is trying to avoid, as they are placing more weight on maintaining the economy. One of the more interesting ways the government did this was through the education system. They placed a lot of weight on trying to get children back at school as quickly as reasonably possible, focusing on the younger ages and the children of key workers. This is mainly due to the strain on the workforce that was created by the school shutdown, as many parents were no longer able to go to work as they had to stay at home to take care of their children. Families that were most likely to be unable to pay for childcare are also the ones who tend to work in lower paid industries like hospital workers, supermarket staff, food distribution and transport, all of which couldn’t be done at home. This meant that those who are critical to the day-to-day operations of the country needed focused support with things like childcare. In conclusion, it can be said that behavioural economics has played a huge part in the UK government and many other countries’ policies towards the management of the Covid -19 crisis and to more effectively introduce economic and social policies to the public and make them more likely to be followed and impactful. Standard economics has also had an impact. However, due to the higher danger levels of these times, people will be reacting more and more irrationally as they fall back on subconscious biases. This means that the predictions and models of standard economics become less and less reliable and useful. It will now be interesting to observe how behavioural economics is used as part of the recovery process and how, both from a fiscal and monetary policy perspective, it is
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