COVID-19 The Economics of Trust
Countries are dropping travel restrictions (stay at home orders) in response to the economic fallout from those travel restrictions. The feeble hope is consumers will ignore the existence of COVID-19 and economic life will return to normal.
Can you trust your barber to not have CODID-19?
There are two answers to this question; the answer you choose will depend on your level of Trust in the pandemic numbers for your community.
If you trust the numbers for your community and you trust the assessment that there is no community spread then you can trust your barber to not be infectious.
However, if that chain of trust is compromised in any manner, then you cannot trust your barber.
The absence of Trust has real economic consequences.
If you do not trust your barber to be COVID-19 free, then you interactions with your barber will change. This can include fewer haircuts. This can include going to a barber who only has a few select customers versus a barber who will cut the hair of anyone that walks in the door. These changes in the absence of trust have economic consequences for the barber.
The chain of Trust includes more people than just the barber you are dealing with. The chain of Trust includes the co-workers of the barber. The chain of Trust includes the vendors providing services to barber. The chain of Trust includes the other customers of the barber. If anyone in that chain of Trust is infected, then the barber will get infected and so will you.
The barber needs to create an environment of Trust, even when that trust is not warranted. That is where things get expensive for the barber. The barber has to spend more and make less in order to create an environment of Trust. If the barber fails to create an environment of Trust, you will go elsewhere.
Even worse, if the environment of Trust is violated, that is, when someone around the barber gets COVID-19, the barber will be shutdown.
So, without Trust, it will cost more to provide services, the number of possible clients will be reduced, and if there is any out break the business will be shutdown period. Increased costs and lower revenues are the ingredients for an economic death spiral.
No matter what the economy is doing, people still need water, food, shelter, clothing. Modern governments understand this and have the economic tools to address these needs in times of crisis. Government intervention in the economy creates a floor, a base level of economic activity to meet these needs; as a result, we will not see another Great Depression.
New Zealand is COVID-19 free. I trust that statement because the people reporting that information have demonstrated that they deserve my trust. New Zealand will now benefit from that trust. In New Zealand you can trust your barber is COVID-19 free and will remain that way. The barber can generally return to business as usual.
Asymmetrical Trust and Travel
New Zealand is COVID-19 free and I trust that is true. As a result of that trust, New Zealand and Australia are discussing how to resume travel between the two countries (which given their close ties is very important to them both).
Australia is not COVID-19 free, so the trust is asymmetrical.
Australia trusts that anyone traveling from New Zealand is COVID-19 free, but New Zealand cannot trust that anyone traveling from Australia is. This will be the norm for every border crossing in the world.
New Zealand needs to decide how to deal with the risk that a person traveling from Australia is infected and doesn't know it. The lack of trust has economic consequences.
Chain of Trust and Air Travel
Air travel by its nature (its very quick) is the culprit for the rapid spread of COVID-19 around the world. Air travel has been shut down because there is no trust in any of the screening measures that were put in place at the beginning of the pandemic. As with the barber, for air travel to resume, an environment of trust needs to be created. The barber did not have to deal with customers crossing an international border, airlines do. International borders complicate the chain of trust.
If both sides of a flight can be trusted (eg if New Zealand can trust Australia) then air travel can resume business as usual. But that case will be unlikely for awhile. So airlines must assume that flight crew and passengers are not trusted to be COIVD-19 free and act accordingly.
The good news is, there is a product that can return test results for COVID-19 within a hour (currently pulled from use, but expected to be recertified). With these types of test kits, everyone can be tested before they pass through security on departure and tested again before clearing customs on arrival. While not a 100% guarantee of being infection free, it does raise the level of trust to where flights can resume at almost business as usual.
Trust is the basis for renewed air travel and business in general.
By far the simplest approach for the renewal of business activity is for each nation to be trustworthy and COVID-19 free. Nations which are not trustworthy will become social pariahs; travelers from those nations will be subjected to travel restrictions and quarantine orders.
