We mustn’t allow panic to create a greater crisis

The course this virus will take is currently uncertain, but it is not always rational to prepare for the worst

Growing up, I never heard the phrase Keep Calm and Carry On. The wartime poster on which it was emblazoned did not feature in any of the jingoistic comics I read as a child because it was never actually distributed, or at least not widely. Propagandists felt the sentiment would not go down well among people being bombed out of their homes so most of the posters were pulped, disappearing from public view until a few were rediscovered in a bookshop in Northumberland in 2000 and commercialised.

The slogan really came into its own around the time of the financial crash in 2008 and all of a sudden it was everywhere, a faux-nostalgic evocation of British stoicism in the face of adversity. At the time, there were predictions of the end of capitalism, of the collapse of democracy, of people wheeling their belongings through a blasted post-apocalyptic landscape like Cormac Mccarthy’s The Road.

OK, I exaggerate; but the uncertainty was real and unsettling, just as it is now with coronavirus.

It is not knowing how to judge the risk that is the real problem. Radical

Uncertainty, a new book by the economists John Kay and Mervyn King, seeks to explore what constitutes rational behaviour in a world where the consequences of particular actions are impossible to discern. The authors quote with approval Donald Rumsfeld’s maxim about “known knowns, known unknowns and unknown unknowns”, which was widely derided when uttered, yet sums up how people and governments must approach uncertainty.

Unlike risk, which is quantifiable against precedents and probabilities, uncertainty has no calculus by which to measure the right response. All we can do is prepare and cope. People manage and adapt, even to the most difficult circumstances. Although coronavirus is troubling because of the unknowns, from what we have seen so far its spread can be contained, albeit with a combination of draconian controls and sensible precautions. Partly these are state applied but mostly they are personal actions.

The action plan published by Boris Johnson yesterday endeavours to get this balance right through “necessary and reasonable” measures while emphasising the uncertainty. As the Prime Minister said in response to many of the questions he fielded in No 10 yesterday: “It’s too early to say.”

The worst-case scenarios hinted at in the 27-page plan would have a maximum of 80 per cent of the country infected, but that has not happened in China, nowhere near it, and it is not going to happen here. In extreme circumstances, entire towns could be cordoned off and one fifth of the working population quarantined at home or in hospital while soldiers patrol the streets.

But for now, during the containment phase, the principal aim is for people to carry on pretty much as they are at present, while taking sensible precautions. If we can get to the Easter school holidays without a major outbreak and the virus proves susceptible to warmer weather then things might look up.

The real danger is panic, though at what point does that become the rational response; or rather, when is it wise to behave in a way that we would normally repudiate? We are all wondering how to best protect ourselves while avoiding the headless chickenism that will merely make things worse for everyone. For instance, is it sensible to stockpile food and provisions?

We know that if we go to the shop and strip the shelves of tinned soup then no one else will be able to buy tinned soup. On the other hand, if we don’t and everyone else does then we are the ones who go without. In such circumstances, the rational response may well be to panic-buy.

It is like a run on a bank. In 2008, people with money in Northern Rock all knew that if every customer took out their cash at the same time, the bank would crash. But the rational response, if your life savings were at risk, was to join the queue and hope to get your money out before the collapse. Otherwise you would look a bit silly sitting there congratulating yourself on being rational and enlightened, but broke. The bank crashed.

We get into difficulties through action that everyone knows must eventually blow up in our faces but which it seems irrational at the time not to join. That’s how sensible people in 17th-century Europe ended up paying a fortune for tulip bulbs that had no intrinsic value, only an inflated one produced by an asset-price bubble.

Even if Charles Mackay’s account of this mania in Extraordinary Public Delusions and the Madness of Crowds (1841) has been debunked by modern economists, our propensity for what seems like irrational behaviour is considerable. On the other hand, who wants to lose out on a surefire profit? Speculation can be a perfectly rational approach, if you get out in time.

The sub-prime mortgage debacle was another example when not missing out on the bonanza seemed the rational thing to do. Why would you when banks were prepared to lend you the cash with no questions asked? In The Big Short, his classic account of the crash, Michael Lewis quotes a banker who realised things had gone seriously wrong when his cleaner told him she was buying her fifth home. When the crash happened, catastrophe was only averted because governments stepped in to rescue the banks.

The real danger of any crisis, and especially a pandemic whose course is yet to be determined, is panic and governments have to make sure they do not contribute to it while preparing for the worst. For now, most people are just getting on with their lives. Coming into London every day, I hardly see anyone in a mask, though that might be because the entire stock has already been bought up.

Some fret at the lack of sanitising gel but it is not a panacea; hot water and soap to wash our hands will suffice. The people who really need the proper kit are the health workers most likely to come into contact with sufferers.

We need to be sensible and avoid any overreaction that could shut down the country. If things do get as bad as they might then we can cope, because we have to – just as we have before, in far worse circumstances.