Economics Analysis

Lockdown alternatives look good on paper: So do nuclear reactors

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Cartoon by Mark David / @MDavidCartoons

Amid mounting pressure for a "hands-off" approach to pandemic controls, Professor John Quiggin explains the real costs of the "let her rip" strategy.

BACK IN 1953, the founder of the U.S. naval nuclear program, Admiral Hyman Rickover, drew a striking contrast between "paper reactors" and "real reactors": 

An academic [paper] reactor or reactor plant almost always has the following basic characteristics: (1) It is simple. (2) It is small. (3) It is cheap. (4) It is light. (5) It can be built very quickly. (6) It is very flexible in purpose (“omnibus reactor”). (7) Very little development is required. It will use mostly “off-the-shelf” components. (8) The reactor is in the study phases. It is not being built now.


On the other hand, a practical [real] reactor plant can be distinguished by the following characteristics: (1) It is being built now. (2) It is behind schedule. (3) It is requiring an immense amount of development on apparently trivial items. Corrosion, in particular, is a problem. (4) It is very expensive. (5) It takes a long time to build because of the engineering development problems. (6) It is large. (7) It is heavy. (8) It is complicated.


The tools of the academic-reactor designer are a piece of paper and a pencil with an eraser. If a mistake is made, it can always be erased and changed. If the practical-reactor designer errs, he wears the mistake around his neck; it cannot be erased. Everyone can see it.

Rickover’s insight has been borne out many times, as a long series of new reactor designs, promising power "too cheap to meter", have come in over time and over budget. The latest such paper reactor, the Small Modular Reactor being developed by NuScale Power recently received design approval from the U.S. Nuclear Regulatory Commission. Quietly tucked away in the announcement was the prediction that the first 12-module plant being developed for Utah Associated Municipal Power Systems would be operational by 2030. Until last week, the announced target was 2027. And when the project was first funded, commercial operation was projected for 2023.

The contrast drawn by Rickover applies equally well to the policies proposed by critics of the elimination and suppression policies adopted around the world in response to the COVID-19 pandemic.

The paper policies these critics have all or most the following characteristics: 

  1. they don’t involve significant restrictions on movements or on the operation of businesses; 
  2. they don’t involve significant unemployment and business failure; 
  3. they don’t require substantial public expenditure; 
  4. they don’t require compulsion; 
  5. the growth of infections is slow enough for the hospital system to give everyone optimal treatment; 
  6. they result in very low fatality rates;  
  7. they don’t have any long-term adverse effects for people who get the virus but survive; and
  8. old people are protected from contact with the infectious young (9) there are no adverse psychological effects.

Unlike Rickover’s paper reactors, these theoretical policies are typically not spelt out in much detail. Rather, the adverse effects of real policies, such as the hardship associated with travel restrictions and the economic cost of lockdowns are pointed out, and it is claimed that it would have been far better to accept a few deaths, mostly of old people who were going to die soon anyway. 

Implicitly, the paper alternatives imply a slow and controlled spread of the disease, without requiring any controls to achieve this, and without sufficient public concern to produce a slump in economic activity and an upsurge in psychological problems such as depression.

But as with Rickover’s paper reactors, the policies advocated by the critics have never actually been implemented. In most countries, national governments have acted – sometimes promptly and sometimes not – to prevent or halt the catastrophic outbreaks, with overwhelmed hospital systems, seen in the early stages of the pandemic in places like Bergamo. Where national governments have failed to act, as in the U.S., states have imposed their own restrictions and where both have failed, people have responded by staying home as much as possible.

Broadly speaking, the earlier and more comprehensive the control policy, the better the outcomes in terms of both (market) economic activity and health outcomes. (With a proper understanding of economics, health outcomes are economic outcomes, whether or not they affect market activity).

To the extent that the critics will praise any country, it is Sweden. Sweden can reasonably be compared with other Scandinavian countries and with Australia and New Zealand — all of which had more advance warning than Western Europe or the USA. Within this comparison group, Sweden is about average in terms of the reduction in market activity, but far worse in terms of death rates. There’s nothing surprising about the market outcome.

Sweden did not adopt the "let er rip" strategy imagined by some. The restrictions were less severe than in other jurisdictions but remained in full force while lockdowns were lifted elsewhere. The most distinctive feature of the Swedish policy was reliance on voluntary compliance rather than compulsion. This was highly effective — state epidemiologist Anders Tegnell says his modelling indicates that, on average, Swedes have around 30 per cent of the social interactions they did prior to the pandemic.

The cost of the hands-off approach to controls was the huge death rate among older Swedes in the early months of the pandemic. But for the advocates of paper policies, as Rickover says: ‘If a mistake is made, it can always be erased and changed.’  

The critics of lockdown policies in Australia and elsewhere imagine an improved policy where the infectious young are kept apart from the vulnerable old. This, despite the failure to achieve such an outcome in Australian outbreaks and the inherent difficulty of the task.

It’s easy to point to failings in the real policy responses of governments around the world. It’s harder, but not impossible, to point to adjustments which might reduce the cost of sustaining a given health outcome. It’s much less useful to base a critique of real policies on the basis of a "paper" policy model that has never faced the test of reality.

John Quiggin is Professor of Economics at the University of Queensland and the author of 'Zombie Economics and Economics in Two Lessons'. You can follow John on Twitter @JohnQuiggin.

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