The Weird Way That Virus Testing Is Just Like A Carbon Tax

(Bloomberg) -- Shutting down was the easy part.

Covid-19’s daily exponential growth to the tune of 33% or more dwarfed all other concerns. The choice was between “shut down now” or “shut down later.” Shutting down the U.S. a week earlier would have cut deaths by around a factor of 3, two weeks earlier by around a factor of 10.

Emerging from our current medically induced economic deepfreeze will not be as quick, but there, too, is a first-best approach that dwarfs almost all else: test, test, test. Test early, test quickly, test often. Even a bad test beats no test. The U.S. alone will have to do millions of tests for any hope of crushing, not merely flattening, the virus curve. In fact, why not just test everyone? Iceland is attempting to do just that.

If we were able to test everyone all at once, it would be possible to isolate the infected while letting the rest go on about their regular lives. If only.

Shouting “test” has quickly become the equivalent of shouting “carbon tax” as the perfect response to climate change. Yes, pricing CO₂ is the first-best response. Doing so at any politically feasible level easily passes a benefit-cost test.

The same goes for Covid-19 testing. Much like shutting down the economy passed any benefit-cost test, so does testing millions a day.

Both taxing and testing have their clear limits. First, much like pushing for a “simple” carbon tax bill may be wishful thinking politically, so is calling for unlimited testing now. Even those advocating for going big aren’t, in fact, advocating for testing everyone. Economic laureate Paul Romer, one of the most vocal advocates for large-scale testing, argues to conduct daily tests of around 7% of the population.

Second, it is clear that neither taxing carbon nor testing for Covid-19 provides the complete picture. A carbon tax alone might be climate economics 101. A comprehensive green industrial policy should include pricing carbon and subsidizing clean alternatives. Covid-19 response is no different. Testing is an important input in decision-making, but it is only one of many sources of high-value information.

Third is the complexity of taxing or testing itself. Even a first-best “carbon tax” is often short for any climate policy that assesses a price—typically seen to be either a tax or emissions trading. “Carbon,” meanwhile, is typically short for other greenhouse gases. Testing, too, gets more complicated the closer one looks. For one, there is testing for either the disease (Covid-19) or for immunity to the virus (SARS-CoV-2) among those who had previously been infected. Then there are many different testing strategies to pursue once idealized models meet real-world limitations.

One important tool is group testing, proposed by, among others, climate economist Christian Gollier. Failing mass testing, he argues for targeting randomized tests within groups that live—or, for essential employees, work—in close proximity and, thus, are likely to infect each other. Infectious disease physician Ben Pinsky and his team have used just such group testing to estimate the spread of Covid-19 in the Bay Area, despite severely limited tests. There, too, the devil is in the details. Using group testing might work well to determine how many in any particular area have the disease. If the goal is to identify groups ready to go back to work—Gollier’s goal— group testing is a rather risky strategy, given the threat of false negative results.

Then there are the counterintuitive conclusions. One way to economize on tests may well be not to test anyone showing mild Covid-19 symptoms. Instead, simply assume that anyone with symptoms has the disease and focus testing elsewhere.

One of the most important lessons spanning both Covid-19 and climate responses is the importance of coordination—at every level. Lack of federal coordination has led to states looking to each other for guidance, when they are not busy outbidding each other for essential medical supplies. For testing, too, lack of coordination might pose yet another bottleneck. Climate, of course, is also beholden to just these constraints, making international coordination like the Paris Agreement so important.

In the end, the largest parallel between climate and Covid-19 may well be the need for decision-making—and public communication—with large, endemic uncertainties. We simply don’t yet know when and how societies will emerge from the pandemic. Some pathways point to physical distancing for many months—even years—to come. Climate, too, forces leaders to make decisions in light of deeply-seated uncertainties.

There’s some hopeful scientific news, too. Contrary to common beliefs, communicating uncertainties honestly may well increase public trust in the numbers, and in those conveying the uncertainties succinctly and directly. Say what we know, and say what we don’t. Don’t hide the uncertainties. The public can handle the truth—even, or especially, when it is messy.

Gernot Wagner writes the Risky Climate column for Bloomberg Green. He teaches at New York University and is a co-author of Climate Shock. Follow him on Twitter: @GernotWagner. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

©2020 Bloomberg L.P.