{"id":8036,"date":"2021-01-08T15:00:00","date_gmt":"2021-01-08T15:00:00","guid":{"rendered":"http:\/\/www.economicsobservatory.com\/question\/news-8-jan-2021"},"modified":"2021-02-26T15:26:57","modified_gmt":"2021-02-26T15:26:57","slug":"news-8-jan-2021","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/news\/8-jan-2021","title":{"rendered":"High costs of indecision"},"content":{"rendered":"\n

Newsletter from 8 January 2021<\/strong><\/p>\n\n\n\n

The UK is facing a bleak start to 2021.<\/p>\n\n\n\n

Daily new\u00a0coronavirus cases<\/a>\u00a0and hospital admissions are surging to levels far beyond last year\u2019s first peak; and daily Covid-19 deaths are over a thousand for the first time since the spring.<\/p>\n\n\n\n

A\u00a0Financial Times<\/em>\u00a0survey<\/a>\u00a0of nearly one hundred economists (including several Economics Observatory lead editors and contributors) foresees a slower economic recovery than the country\u2019s peers, in part because of the impact of Brexit.<\/p>\n\n\n\n

And the renewed\u00a0national lockdown<\/a>, including school closures at least until February half-term, is likely to cause further damage to struggling sectors like hospitality and reinforce the pandemic\u2019s unequal impact on women and the young.<\/p>\n\n\n\n

This week\u2019s extraordinary reversal of government policy from Sunday\u2019s claim that \u2018schools are safe\u2019 to\u00a0Monday\u2019s announcement<\/a>\u00a0that schools and colleges across England must immediately move to remote provision is the latest example of the costs of indecision in public health. As with the first lockdown in March, it seems clear that imposing the measures even a couple of weeks earlier could have made a big difference to the spread of the virus, pressures on the NHS and ultimately lives lost in this crisis.<\/p>\n\n\n\n

But the costs of indecisive public policy-making are not confined to healthcare. As Lindsey Macmillan and colleagues at the\u00a0Centre for Education Policy and Equalising Opportunities<\/a>\u00a0say in\u00a0their latest piece<\/a>\u00a0on the Observatory, they are just as much of a problem in education.<\/p>\n\n\n\n

Until this week, the Department for Education promised that high-stakes GCSE and A-level exams would go ahead as usual this coming summer. Now the exams have been cancelled, there is little clarity about the government\u2019s contingency plans beyond an indication that it will \u2018trust teachers rather than algorithms\u2019, a reference to the fiasco with last summer\u2019s A-level exam grades \u2013\u00a0discussed on the Observatory by Steven Proud<\/a>. The\u00a0latest astonishing news<\/a>\u00a0suggests that the final plan will not be ready until the end of February.<\/p>\n\n\n\n

In a\u00a0previous piece<\/a>, written while GCSEs and A-levels were still due to go ahead, Lindsey and her colleagues outlined why externally marked exams remained the \u2018least worst\u2019 option for assessing years 11 and 13 school students. In the\u00a0new post<\/a>, they argue that switching to teacher assessment risks a lack of rigour and fairness. They conclude that there remains a strong case for in-class testing of A-level students \u2013 with flexible timing and content \u2013 to take account of differences in their learning experiences.<\/p>\n\n\n\n

Indecision about how young people are assessed at key points in their education has high potential costs because of what it means for their future lives. Indeed, as has been shown in a series of Observatory articles over\u00a0recent months, the pandemic, lockdowns and ill-judged policy responses have had hugely damaging and unequal effects \u2013 including on\u00a0migrant pupils<\/a>,\u00a0children with special educational needs<\/a>, the\u00a0mental health of adolescents<\/a>,\u00a0recent school leavers<\/a>\u00a0and\u00a0new graduates<\/a>.<\/p>\n\n\n\n

In a new piece this week,\u00a0Andrew Eyles and Lee Elliot Major<\/a>\u00a0remark that they are also likely to exacerbate educational inequalities. Learning losses from further school closures could have long-term consequences for the life chances of children from disadvantaged backgrounds, leading to a decline in relative social mobility in the UK. Again, this potential outcome demands decisive policy action in the form of additional resources for disadvantaged children and perhaps more radical measures to \u2018level the playing field<\/a>\u2019.<\/p>\n\n\n\n

Grounds for optimism<\/h3>\n\n\n\n

Other pieces we\u2019ve posted this week are a little less bleak. As the Covid-19 vaccine rollout gets underway, Debopam Bhattacharya and Oliver Linton at Cambridge explain what it means to say that a\u00a0vaccine is 95% effective<\/a>. This number is not your chance of staying Covid-free after vaccination, they clarify: rather, it estimates how much your chance rises relative to not being vaccinated. With the vaccine, your chance of staying Covid-free is in fact 99.96%.<\/p>\n\n\n\n

And Anna Valero and John Van Reenen at the\u00a0Centre for Economic Performance<\/a>\u00a0(CEP) ask\u00a0how Covid-19 is affecting UK firms\u2019 adoption of new technologies<\/a>. They note fears that a fall in adoption would add to the country\u2019s persistent problem of weak productivity growth. In fact,\u00a0CEP\u2019s early evidence<\/a>\u00a0is encouraging: businesses have rapidly adopted new technologies and new ways of working in response to the massive disruptions of the pandemic. If such innovation continues, it could boost the UK economy in the long term.<\/p>\n\n\n\n

Round-up<\/h3>\n\n\n\n

Finally, a reminder of some other things we\u2019ve posted recently:<\/p>\n\n\n\n

Do we need a new constitution for central banking?<\/a>\u00a0Former deputy governor of the Bank of England\u00a0Paul Tucker<\/a>\u00a0observes that the global financial crisis, persistently weak growth and now Covid-19 have created tensions between politics and central banking. The time is ripe, he argues, for a refreshed constitution, making clear the purpose of independent central banks, and what should fall to fiscal authorities.<\/p>\n\n\n\n

Are Bitcoin and other digital currencies the future of money?<\/a>\u00a0William Quinn at Queen\u2019s University Belfast looks at the rising price of Bitcoin during the pandemic, which has renewed interest in private digital money. His conclusion: while it is most unlikely that Bitcoin will replace existing currencies, the emergence of \u2018cryptocurrencies\u2019 and \u2018stablecoins\u2019 has prompted exploration of central bank digital currencies.<\/p>\n\n\n\n

Closing price of Bitcoin (USD), 2016-2020<\/h4>\n\n\n
\n
<\/div>\n\n