In April of this year, I sat down to interview Edward Chancellor, who offered me his view on the response to COVID-19 as a financial historian, which challenged more mainstream ideas around lockdown. As I sat at my desk to discuss the topic (the interview was conducted via Zoom, of course), Chancellor’s ideas around the influence of behavioural psychology on the global reaction, stood out to me. In drawing parallels between the disease cycle and financial cycle, Chancellor touches on crowd behaviour and cognitive dissonance to explain the reaction to COVID-19, and why extrapolation errors are so dangerous. We also discussed Johnson’s government’s imitative behaviour, and the importance of truth-seeking.
Having authored several books on financial history, such as Devil Take the Hindmost and Crunch Time for Credit, and having written for the Wall Street Journal, New York Times, Reuters and FT among others, Chancellor was more than qualified to put forward an answer to my question:
“As a financial historian, what’s your view on the global response to the COVID-19 pandemic?”
First, Chancellor reflected on the perspective he has, as a historian and investor, which has influenced how his opinions have been shaped around COVID-19:
“The first thing I would say, is that I’ve no formal understanding or training in fields of epidemiology or viruses; I’m a historian. However, if you work in the field of finance, as I’ve done for 30 odd years and if you’re a historian, one is a generalist. That means that one develops a capacity to move from one field to another. One works also much more by analogy. That’s what I tried to do with COVID-19 when it came out. Finally – and this is linked to my speciality in speculative manias and my own investment work – one has trained oneself to be a contrarian. In the investment world, if everyone is thinking about something in the same way, it is in the price, there’s nothing to be had by it. So, one is trained to be sceptical of the market position, but also the authorities and the ‘experts’.
In my own field I may be an expert, but this doesn’t mean people shouldn’t be sceptical of what I say. I wouldn’t advocate a sort of reflex contrarianism, like some child who closes the door because her mother tells her to open it. However, I am interested in open-mindedness when addressing problems, and I think this open-mindedness would also include recognising when one has made a mistake.”
We then spoke about the similarities between financial cycles and disease cycles, and how the tendency to extrapolate trends is especially mistaken in relation to COVID-19. In his view, it is this, along with strong cognitive dissonance and groupthink, that has led to lockdowns being enacted. Chancellor argues that these lockdowns are completely ineffective.
“I’ve read a book on epidemiology by Adam Kucharski called ‘The Rules of Contagion’. What I found interesting was the notion that diseases go through boom-bust cycles, which is the same nature of a speculative boom-bust. Both diseases and financial manias follow the same sort of trajectory; a tipping point then going down. Closely related to this, a very common area in financial analysis is to take an exponential trend and then extrapolate it into the future; this is where the great bubbles occur (take what’s going on at the moment with electric vehicles). If things go in waves or cycle, then this linear extrapolation in a cyclical world is going to lead to great mistakes; people seem to have the behavioural kink of extrapolation.
We can see this through the fact that, if you fast forward a year, there’s absolutely no evidence that lockdowns work. You can get the data and look at it globally, so take a country like Peru. Peru had a very early, very fierce lockdown, and it has one of the highest Covid death rates in the world. Japan – no lockdown, one of the lowest death rates in the world. Or you can take it on a regional basis, so the US, lockdown states vs non-lockdown states, if you average them out, they’re bang in the middle. In Europe vs Sweden vs the EU average, they’re bang in line. If a Martian arrived on earth and said, “I don’t care about the politics of lockdown. I don’t care about antivaxxers vs everyone else, just give me the data.” I can guarantee you he wouldn’t be able to identify which country had locked down or not. There is this extraordinary cognitive dissonance that’s gone on, and I would say quite strong groupthink.
… That’s where I came from. I wrote a piece on what I thought were the behavioural flaws in evidence. I’ve cited groupthink and cognitive dissonance. [Lockdowns] are an absolutely classical example of cognitive dissonance; once you’ve formed a set of beliefs and you’ve invested in those beliefs you will forever stick to them. I read quite a nice comment once, which was very much in the field of behavioural finance, “I’ll see it when I believe it”. Lockdowns are certainly an example of this idea in action.”
This relates directly to how the UK Government reacted to COVID-19. Chancellor criticises the PM and argues that Johnson’s government were overly influenced by other countries in enacting the UK’s lockdown.
“You also have an agency problem: the problem arising when you get someone else to do something for you. The trouble with agents is that they have their own interest. You have to think of the elected governments as your agents. What happened in late March is that the governments, the agents, didn’t know what to do, they were beset by uncertainty. They also had the likes of Piers Morgan telling them they were killing people. Then, they had spooky epidemiologists with faulty models, like Neil Ferguson, saying that millions of people were going to die unless they did something.
What seemed to have happened that the government capitulated – as one person capitulated in one country, they influenced behaviour in another country. You can see that non-pharmaceutical interventions exponentially took off: Italy, then France, then England. There’s no new information out there, the only news is what someone else has done. It was really a contagion of imitative behaviour.
Now, is it forgivable? People keep coming back to me saying, “Boris Johnson had no choice!” I say, if you’re truth seeking, then it’s ridiculous to say you have no choice. I see Boris Johnson now as a rubber duck, who’s been thrown down the river, just bobbing along, not making actual decisions. I mean if that’s all you are, if you’re not really an autonomous human being, but just something that goes with the flow, then yes you have no choice. Anyhow, I do think that was part of the problem of lockdowns.”
Chancellor concludes with his view on the negative consequences of lockdown, and on the importance of open, truthful discussion to better our society.
“The people who have proposed and enforced lockdowns and those have professed to shed a tear over those who have died, have, as we know, caused at the same time an inordinate amount of misery. Destroying the lives of children, and in particular the education of under-privileged people. I find it very sinister that the government used behavioural scientists, they call them scientists but they’re really propagandists, on SAGE, to instil fear in the population. Having instilled fear, and partly because of the noise on social media, the public’s perception of the risks is completely disproportionate. This is doubtless the case – even if you disagree with my arguments on lockdowns – that people beliefs around the risks of Covid are disproportionate.
What I would say to the thrust of the conclusion of our discussion is that we all want the truth. We all want the best for our society, all of our societies. And in order to pursue the truth and to do the best thing for your society, you have to hold your positions openly and analyse them, which is what I have aimed to do.”
So, how does this point of view, put to me in April, look 6 months on? While one can debate the pros and cons of lockdowns, what we have certainly seen is the UK government’s decision to move away from them, albeit with far superior vaccine protection. In addition, Chancellor’s point that lockdowns cause ‘an inordinate amount of misery’ seems all too poignant with news of massive NHS backlogs/missed consultations being brought to life.
The notion that lockdowns are completely ineffective is certainly controversial, and the fact that we have all had to endure them over the last 18 months makes us less willing to debate their efficacy. Was it all really for nothing? However, what Chancellor maintains throughout is the undeniable importance of openly analysing arguments, what he calls truth-seeking, to best benefit our societies. Hence, we must be able to consider contrasting points of view, even if they are hard to swallow. Whether you agree with Chancellor’s opinions or not, it is important not to dismiss an argument without giving it due consideration – especially when it concerns topics with such far reaching implications.
