The coronavirus will harm the economy – ours and the world's – but how much damage it does will be determined not just by how far and how fast the virus spreads, but by what the government does to protect us from that spread and what people take it into their heads to do to protect themselves.
There's a good chance the reaction to the threat of the virus will do far more damage to the economy – and the livelihoods of the people who constitute it – than the damage it does to life and limb.
If the reports we hear of people stripping supermarket shelves and deserting cafes, bars and other places of recreation are a guide, the main consequence so far is an outbreak of national hypochondria. Crazed by an overexcited world media, Aussies have gone into panic mode well before the threat has materialised.
I suspect part of the problem is that word "pandemic" – the thing Scott Morrison last week acted on ahead of the World Health Organisation having declared. To many of us it's a highly emotive word, raising images of people dropping like flies as the disease spreads.
In the minds of epidemiologists, however, it just means the virus has popped up in quite a number of countries, without saying anything about how far and fast it's spreading in those countries.
According to Professor Ilan Noy, a specialist in the economics of disasters at New Zealand's Victoria University, "All signs point to a global overreaction to this crisis, and therefore to an amplified economic impact."
According to Professor Cass Sunstein, of Harvard Law School, "A lot of people are more scared than they have any reason to be. They have an exaggerated sense of their own personal risk."
That's because humans are notoriously bad at assessing the risks they face. Studies by psychologists and behavioural economists show individuals typically overestimate risks that are memorable, vivid or generate fear, while underestimating more common risks.
Noy says that, in a survey of 700 people in Hong Kong at the height of the SARS epidemic in 2002, 23 per cent of respondents feared they were likely to become infected. In the US, 16 per cent of respondents to a survey felt they or their family were likely to be infected. The actual US infection rate was 0.0026 per cent.
Sunstein says it's likely that, for residents of a particular city, "The risk of infection is really low and much lower than risks to which they are accustomed in ordinary life – say, the risk of getting the flu, pneumonia or strep throat."
One implication of this, he says, is that, "Unless the disease is contained in the near future, it will induce much more fear, and much more in the way of economic and social dislocation, than is warranted by the actual risk.
"Many people will take precautionary steps - cancelling holidays, refusing to fly, avoiding whole nations - even if there is no adequate reason to do that. Those steps can, in turn, increase economic dislocations, including plummeting stock prices."
But let's say you defy the odds and actually get infected. What are your chances then? Last week WHO said that, using the figures for China, for every 100 cases of coronavirus, about 80 people get better unassisted, 15 have serious but manageable problems, five are very serious and about three die. But that's for China. For the rest of the world it's more like 1 per cent who die.
So, like the flu, the coronavirus is usually something you get over fairly quickly. The people who don't recover quickly tend to be the elderly, and the few who die are usually those with another complication, such as asthma, cancer, cardiac disease or diabetes. (Oh no, that's me! I'm done for.)
But while you await your certain demise, remember something Scott Morrison said last week that didn't hit the headlines: "You can still go to the football, you can still go to the cricket, you can still go and play with your friends down the street, you can go off to the concert, and you can go out for a Chinese meal."
When it comes to the economy, remember that the share market is the drama queen of the financial world. It tends to overreact to bad news – but it does so knowing that later in the week it will be overreacting to good news. A cut in interest rates? God be praised.
Even so, the coronavirus and the efforts to contain it – official and amateur - have had adverse effects on the Chinese economy, with flow-on effects to our economy among others. The Chinese are already getting back to business, but it will be slow and economic activity – producing and consuming – has been seriously disrupted in the present quarter and probably the next. The world economy isn't strong and this will make it weaker.
Our border controls are hitting our tourist industry and universities. How much the overreaction of individuals adds to that we'll soon start seeing in economic indicators rather than anecdotes. In principle, we're experiencing a temporary adverse shock to the economy extending over a quarter or three, followed by a partial bounce back as consumers release pent-up demand and firms rush to fill back orders and re-stock.
Coming on top of all our other economic woes, however, it won't be fun.
