A new threat has emerged that could challenge the fragile economic recovery that currently looks to be in train in the UK. Forget Ireland, Portugal or even Spain. Poor US jobs numbers are a sideshow. No, the real problem is the snow.
Or so, if you read some more excitable parts of the British press, you might believe. The Daily Mail site ran a story this morning reporting Tesco's latest results, but the snow managed to make it into both the title and the first sentence. 'Recent bad weather had affected trading' the article warned, going on to highlight the worrying prospect of people being forced to walk to the shops rather than driving. Other analysts have put the cost to the UK economy at something approaching £1bn each and every day – that's 40,000 nurses' salaries (of 25K) each twenty-four hours!
Needless to say, the usual suspects are getting themselves far too over-excited again. The snow has caused disruption and misery throughout the UK, but it is not about to tip the UK back into the quagmire of recession. To put the data in context, even if the UK lost £1bn a day for a fortnight, that would still equate to just 1% of the UK's annual national income. More importantly, the idea that this activity or spending is permanently lost is just nonsense. While many business meeting will have been cancelled, and activity hit by snow-stuck lorries or the general collapse in large swathes of the travel system – the claims just a few weeks ago that rail companies were prepared seem very hollow now – this activity will be made up in the weeks and months ahead. Even if there is a tiny impact on GDP at the end of 2010 (remember the data are measured in three-month chunks), that impact will overwhelmingly reflect delayed business, rather than outright cancellations. Meetings will be rescheduled. Deliveries do eventually arrive (and the cold may even have helped some perishable fresh produce). The end is definitely not nigh.
Perhaps the bigger question, to me as an economist, is why we get so excited about all this. Adverse weather conditions are an occupational hazard in the UK. True, we had a string of very mild winters before the recent three-year freeze kicked in. But, as a nation, we are not persistently blanketed in snow like other parts of Europe. Investing in waste swathes of snow-clearing equipment does not really make sense in terms of the cost-benefit analysis. The downside of that, of course, is that when bad conditions do hit home we suffer more.
In some sense, this is a lot like insurance. Are we, as a nation, prepared to pay large sums in case something bad happens? The answer, of course, depends on how bad the bad thing is, and how large the sums are. Complaining that rail companies should do it all for us is no answer, as either they have to do less of something else, like run fewer trains (and, much as we may hate it, they do need to deliver some return to shareholders in the form of profits), or we will have to pay higher fares. On a very fundamental basis, this is the classic economic problem of allocating scarce resources.
Being an economist, I also believe in revealed preference. This suggests that both the previous and current Governments didn't worry that much about getting ready for the snow. But revealed preference also works on an individual basis – for instance, how many of you bought snow chains, just in case, ahead of this winter? I am no paragon here – in fact, what is worse is that I meant to buy chains, but didn't get around to it in time (revealed preference again).
And, in fact, there is a far cheaper alternative than imposing snow-tyre switchovers or buying legions of snow clearers. The best solution to a problem does not always lie in tackling it head-on. The push, in recent years, towards flexible working, internet-based communication and deliverables and even the still-mocked 'working from home' will have reaped dividends to any firm that took it seriously. I, for one, was stuck in snow for half of last week, but still managed to write research, talk and work with my colleagues, and even find time for a journalist or two.
I suspect a key difference is that my approach to snow is far too rational – I am an economist, after all, not a real person. And if everyone else started to think about this like I do, we wouldn't be able to whinge and moan any more. Where would be the fun in that?