Month: March 2020

The optimal duration of lockdown

Here is a new AEI paper by Anna Scherbina.  I have not read it and am not endorsing (or criticizing) its conclusions, here goes:

We investigate the optimal duration of the COVID-19 suppression policy. We find that absent extensive suppression measures, the economic cost of the virus will total over $9 trillion, which represents 43% of annual GDP. The optimal duration of the suppression policy crucially depends on the policy’s effectiveness in reducing the rate of the virus transmission. We use three different assumptions for the suppression policy effectiveness, measured by the R0 that it can achieve (R0 indicates the number of people an infected person infects on average at the start of the outbreak). Using the assumption that the suppression policy can achieve R0 = 1, we assess that it should be kept in place between 30 and 34 weeks. If suppression can achieve a lower R0 = 0.7, the policy should be in place between 11 and 12 weeks. Finally, for the most optimistic assumption that the suppression policy can achieve an even lower R0 of 0.5, we estimate that it should last between seven and eight weeks. We further show that stopping the suppression policy before six weeks does not produce any meaningful improvements in the pandemic outcome.

I hope there is a variable in the analysis for “risk of extreme societal pressures,” though I am not sure if those are higher for extreme lockdown scenarios or for extreme “let it rip” scenarios.  In any case, such risks are a significant factor in how I view these questions.

And now I must teach! (on-line, of course).  But I wanted to get this up for your attention before the evening closes.

Did unconventional interventions unfreeze the credit market?

By Hui Tong and Shang-Jin Wei, newly relevant!

This paper investigates whether and how unconventional interventions in 2008–2010 unfroze the credit market. We construct a dataset of 198 interventions for 16 countries during 2008–2010 and examine heterogeneous responses in stock prices to the interventions across 7,873 nonfinancial firms in those countries. Stock prices increase when the interventions are announced, particularly for firms with greater intrinsic need for external capital. This pattern is corroborated by subsequent expansions in firm investment, R&D expenditure, and employment. Among various forms of interventions, recapitalization of banks appears particularly effective in channeling the intervention effects from financial to nonfinancial sectors.

That is from the new issue of AEJ: Macroeconomics.

Failure to Prepare is Endemic

LA Times: They were ready to roll whenever disaster struck California: three 200-bed mobile hospitals that could be deployed to the scene of a crisis on flatbed trucks and provide advanced medical care to the injured and sick within 72 hours.

Each hospital would be the size of a football field, with a surgery ward, intensive care unit and X-ray equipment. Medical response teams would also have access to a massive stockpile of emergency supplies: 50 million N95 respirators, 2,400 portable ventilators and kits to set up 21,000 additional patient beds wherever they were needed.

In 2006, citing the threat of avian flu, then-Gov. Arnold Schwarzenegger announced the state would invest hundreds of millions of dollars in a powerful set of medical weapons to deploy in the case of large-scale emergencies and natural disasters such as earthquakes, fires and pandemics.

…But the ambitious effort, which would have been vital as the state confronts the new coronavirus today, hit a wall: a brutal recession, a free fall in state revenues — and in 2011, the administration of a fiscally minded Democratic governor, Jerry Brown, who came into office facing a $26-billion deficit.

And so, that year, the state cut off the money to store and maintain the stockpile of supplies and the mobile hospitals. The hospitals were defunded before they’d ever been used.

…Together, these two programs would have positioned California to more rapidly respond as its COVID-19 cases exploded. The annual savings for eliminating both programs? No more than $5.8 million per year, according to state budget records, a tiny fraction of the 2011 budget, which totaled $129 billion.

…Now, many California hospitals are being forced to ration their inadequate supply of N95 masks, and hospitals are rushing to rent ventilators in anticipation of a severe shortage as COVID-19 caseloads grow.

A useful reminder that failure to prepare for low probability but high cost events spans the political spectrum.

What will post-pandemic New York City look like?

That is the topic of my latest Bloomberg column, here is one excerpt:

Most of all, there will be an exodus of elderly residents. New York City will become even more the province of young people, assuming the role that Berlin has long played in Germany. That will be good for the city’s long-run vitality. [TC: No, I am not saying this is a good thing overall.]

Rents and land prices are likely to fall. This is not necessarily because of a high number of deaths, a ghoulish and difficult detail to predict. Nonetheless many businesses will think twice about locating their headquarters in New York City, if only because senior managers tend to be relatively old. The net effect will be to make the city less attractive for businesses but more affordable for residents, most of all young people. It will be more like the New York of the 1970s and 1980s, with fear of infection replacing the fear of crime.

And:

If Covid-19 survivors have immunity, as is the case with many viruses, the city’s social life may become very segregated. Survivors will have time-stamped immunity certificates and lead relatively active social lives. Those who have not had the virus will be far more Puritan — spending more time online, refusing to shake hands, biking rather than taking the subway. Different bars and even different parts of town will have reputations as better for one group or the other.

This kind of segregation is not an especially appealing prospect. Yet New York City, with its incredible choice and diversity, will be better suited to deal with it than will rural or suburban America. Of course if you haven’t been infected yet, and cannot prove immunity and get into the safe clubs and bars, you will be all the more scared to visit the riskier outlets available to you.

In fact many people, especially the young, may actually expose themselves to the virus deliberately, to join what is ostensibly the more fun-seeking crowd. Maybe there will be bars and parties for people in the “actively infected” phase.

I hope to return to the broader topic of our future in subsequent posts.  And here is a new NBER piece that the coronavirus curve already is flattening in NYC.

Tuesday assorted links

Emergent Ventures winners, eighth cohort

Eibhlin Lim, Penang and University of Chicago.

“I interview founders from different industries and around the globe and share their origin stories to inspire the next generation of founders to reach for their own dreams. I previously shared these stories in Phoenix Newsletters, an online newsletter that organically grew to serve more than 7000 high school and university student subscribers primarily from Malaysia. In July 2018, I decided to self-publish and distribute a book, ‘The Phoenix Perspective’, which contains some of the most loved stories from Phoenix Newsletters, after learning that some of our biggest fans did not have constant access to the Internet and went through great lengths to read the stories. With the help of founders and organizations, I managed to bring this book to these youths and also 1000+ other youths from 20+ countries around the globe. I hope to be able to continue interviewing founders and share their origin stories, on a new website, to reach even more future founders from around the world.”

Carole Treston/Association of Nurses in AIDS Care

To jump-start a Covid-19 program to produce cheap informational videos and distribute them to their nurse network for better information and greater safety, including for patients.

Kyle Redelinghuys

“Right now, the main sources of data for Coronavirus are CSV files and websites which make the data fairly inaccessible to work with for developers. By giving easy access to this data more products can be built and more information can be shared. The API I built is an easily accessible, single source of Coronavirus data to enable developers to build new products based on COVID19 data. These products could be mobile applications, web applications and graphed data…The API exposes this data in JSON which is the easiest data format to work with for web and mobile developers. This in turn allows for quick integration in to any products. The API is also completely free to users.”

Seyone Chithrananda

17 year old from Ontario, wishes to work in San Francisco, he does computational biology with possible application to Covid-19 as well, Twitter here.  His Project De Novo uses molecular machine learning methods for novel small molecule discovery, and the grant will be used to scale up the cloud computing infrastructure and purchase chemical modelling software.

Joshua Broggi, Woolf University

To build an on-line university to bring learning programs to the entire world, including to businesses but by no means only.  His background is in philosophy and German thought, and now he is seeking to change the world.

Congratulations!

There is also another winner, but the nature of that person’s job means that reporting must be postponed.

Here are previous Emergent Ventures winners, here is an early post on the philosophy of Emergent Ventures.  You will note that the Covid-19-related work here is simply winning regular EV grants, these are not the prizes I outlined a short while ago.  I expect more prize winners to be announced fairly soon.

The biggest supply chain risk right now?

Trump administration officials are asking India to lift restrictions to give the U.S. access to pharmaceutical ingredients needed to produce a range of drugs, amid fears of a potential U.S. drug supply shortage prompted by the coronavirus outbreak, three sources familiar with the matter told NBC News.

The two governments are holding discussions aimed at easing newly imposed restrictions on pharmaceutical exports from India, which Delhi introduced to ensure the country would have medicine needed to handle the pandemic inside of its borders, the sources said.

With coronavirus potentially disrupting the global supply chain for medicine, India earlier this month restricted the export of 26 pharmaceutical ingredients and the medicines made from them, including acetaminophen — a common pain reliever. India is the world’s leading supplier of generic drugs and is a key source for active pharmaceutical ingredients, or APIs, used to produce a range of medicines.

We need to get on this one right away, I have heard similar worries from very reliable sources.  Here is one article.

A new NBER paper on the Wuhan lockdown

We quantify the causal impact of human mobility restrictions, particularly the lockdown of the city of Wuhan on January 23, 2020, on the containment and delay of the spread of the Novel Coronavirus (2019-nCoV). We employ a set of difference-in-differences (DID) estimations to disentangle the lockdown effect on human mobility reductions from other confounding effects including panic effect, virus effect, and the Spring Festival effect. We find that the lockdown of Wuhan reduced inflow into Wuhan by 76.64%, outflows from Wuhan by 56.35%, and within-Wuhan movements by 54.15%. We also estimate the dynamic effects of up to 22 lagged population inflows from Wuhan and other Hubei cities, the epicenter of the 2019-nCoV outbreak, on the destination cities’ new infection cases. We find, using simulations with these estimates, that the lockdown of the city of Wuhan on January 23, 2020 contributed significantly to reducing the total infection cases outside of Wuhan, even with the social distancing measures later imposed by other cities. We find that the COVID-19 cases would be 64.81% higher in the 347 Chinese cities outside Hubei province, and 52.64% higher in the 16 non-Wuhan cities inside Hubei, in the counterfactual world in which the city of Wuhan were not locked down from January 23, 2020. We also find that there were substantial undocumented infection cases in the early days of the 2019-nCoV outbreak in Wuhan and other cities of Hubei province, but over time, the gap between the officially reported cases and our estimated “actual” cases narrows significantly. We also find evidence that enhanced social distancing policies in the 63 Chinese cities outside Hubei province are effective in reducing the impact of population inflows from the epicenter cities in Hubei province on the spread of 2019-nCoV virus in the destination cities elsewhere.

That is by Hanming Fang, Long Wang, and Yang Yang, of course do beware data quality issues.

Monday assorted links

1. Looming condom shortage?

2. Kotlikoff argues for group testing.

3. “The Trump administration is leaving untapped reinforcements and supplies from the U.S. Department of Veterans Affairs, even as many hospitals are struggling with a crush of coronavirus patients.

4. Why America took so long to test, and yes the FDA is largely to blame (NYT).

5. “Those shown to have developed immunity could be given a “kind of vaccination passport that allows them, for example, to be exempted from curbs on their activities”, Gérard Krause, a leading immunologist co-ordinating the study, told Der Spiegel magazine.”  (The Times)

6. Why Singaporean health care workers have remained relatively safe.

7. This Week in Virology podcast.  I have not heard it, but it comes recommended.

8. The Gottlieb/Rivers/McClellan/Silvis/Watson AEI policy paper.

9. Audrey Moore RIP, Fairfax County environmentalist, she influenced my life a great deal, both good and bad.  Fairfax County now has 427 parks, in part because of her.

10. Robin Hanson argues for variolation.

11. The gender gap in housing returns.  (Do women care more about the non-pecuniary factors?)

12. The Ebola scare helped Republicans.

13. New SEIR infectious disease model from NBER.  And a new James Stock paper with a model.

14. Summary of where John Cochrane is at.

15. MIT The Elevate Prizes, up to $5 million.

16. Viral load as a source of heterogeneity?

17. James Altucher interviews me about the coronavirus economy, podcast.

A Solution if We Act

Many simulations have been run in recent weeks using standard epidemiological models and the emerging consensus, as I read it, is that test, trace and isolate can be very effective. Paul Romer’s simulations are here and he notes that a COVID-19 test does not have to be especially accurate for the test, trace and isolate strategy to work. Indeed, you don’t even need to trace, if you test enough people. Linnarsson and Taipale agree writing:

We propose an additional intervention that would contribute to the control of the COVID-19 pandemic and facilitate reopening of society, based on: (1) testing every individual (2) repeatedly, and (3) self-quarantine of infected individuals. By identification and isolation of the majority of infectious individuals, including the estimated 86% who are asymptomatic or undocumented, the reproduction number R0 of SARS-CoV-2 would be reduced well below 1.0, and the epidemic would collapse….Unlike sampling-based tests, population-scale testing does not need to be very accurate: false negative rates up to 15% could be tolerated if 80% comply with testing, and false positives can be almost arbitrarily high when a high fraction of the population is already effectively quarantined.

Similarly, Berger, Herkenhoff and Mongey conclude:

Testing at a higher rate in conjunction with targeted quarantine policies can (i) dampen the economic impact of the coronavirus and (ii) reduce peak symptomatic infections—relevant for hospital capacity constraints.

This is exactly the strategy I discussed in, Mass Testing to Fix the Labor Market, where I wrote “Testing, isolating and tracing will [get the economy back on track] much faster and cheaper than dealing with a prolonged recession.”

I want to expand on the costs because it’s clear that a mass testing regime will require millions of tests. Is that cost-effective? Yes. The two types of tests we have are a RT-PCR test for COVID-19 (there are several versions) which costs something like $100 but could probably be much less as we ramp up. (We can cut costs and greatly increase throughput, for example, by pooled testing.) The second test, a blood test for antibodies, is, as best as I can tell, in the realm of $10. Both types are useful. I am going to be very conservative and say that we use a combination of tests at $75 per test. To test the entire US population, therefore, it would cost on the order of $25 billion dollars. Coincidentally, $25 billion is about what we spent on the Manhattan Project in current dollars. Thus, I am proposing a Manhattan Project for testing.

Twenty five billion dollars to test the entire US population. Now suppose the pandemic knocks 5% off US GDP over the next year or two, that’s roughly a trillion dollars lost. Or to put it differently, $3 billion a day. Thus, if mass testing reduces the number of days we are away from work by 9, it pays for itself. Let’s again be conservative and say that testing will also require a $25 billion fixed cost to build the enzyme factories and so forth, for a total cost of $50 billion. 18 days and it’s worth it.

We would also save medical costs by suppressing the virus. (The focus on ventilators has perhaps been overdone given that ventilators in no way guarantee survival–better to stop people needing ventilators.) We would also save lives. Thus, a program of mass testing seems like a no-brainer. Yet, there is no direct funding for anything like this in the $2.2 trillion CARES bill which is stunning. Here’s Austan Goolsbee:

We literally put in a tax break for retailers and restaurants to expand their capacity but not money for production of more COVID tests.

Here’s Paul Romer:

We have an economic crisis because it is not safe for people to work or consume. Our Congress just passed a bill that will spend $2.2 trillion to deal with the crisis. Can anyone identify any spending in this bill devoted to making it safe for people to work and consume?

As I wrote:

We need to attack the virus with test, isolate, and trace. More money for counter-attack!

Objections will no doubt be raised. Isn’t there a shortage of reagents? Do we have the personnel to test everyone? To which I answer, $50 billion solves a lot of problems. We won’t know how many till we try. We don’t need all of final testing capacity at once and even poor tests like simple temperature checks will help but we need to move rapidly in the right direction. The main constraint is time. Social distancing and lock downs are starting to have an effect. I expect the emergency will peak in mid-April and then things will slowly start to get improve. Even when the worst of the emergency passes, however, we will still need lots of testing. This virus will be with us and the world for some time. Let’s get on it.

Oregon Closes Online Schools!!!

Well this has got to be the dumbest thing I have read all week:

WW: The Oregon Department of Education has closed the state’s online charter schools under Gov. Kate Brown’s order to close public schools to halt the spread of COVID-19, according to a document obtained by WW.

…Marc Siegel, a spokesman for the Oregon Department of Education, confirms that although Brown’s order did not explicitly call for the closure of online charters, state education officials believe that is the intent of the governor’s order.

I have to think this is an oversight soon to be corrected but maybe there is a method behind the madness. Some are worried that students will switch into online charter schools reducing other public school funding:

“Enrollment of new students to virtual public charter schools during the closure would impact school funding for districts across Oregon and therefore may impact the distribution of state school funds and delivery of services as directed under the executive order,” the department said in its guidance to districts.

Unbelievable.

Hat tip: Raghu Parthasarathy.

That was then, this is now, the new world of coronavirus romance

Jeremy Cohen, a freelance photographer, noticed a woman dancing on her rooftop. He wanted to ask her out, but New York City residents have been attempting to socially distance to slow the spread of COVID-19, as the city has become an epicenter of the virus in the US. So he got creative, and flew a drone to her roof with his number attached.

Spoiler: It worked….

The couple finally met face-to-face, with a special trick made to keep them both safe amid the virus. The two met up for a walk, while Cohen was inside a giant inflatable bubble. Cignarella wore plastic gloves and Cohen had a bouquet of flowers in his hand, and the two walked down the streets of Brooklyn, side by side.

Here is the full story, with photos, maybe all done for “affect” but still something like this will be a trend.  Via Michael Rosenwald.

Who and what will rise and fall in status?

A reader asks:

will we see a post from you with predictions of ‘risers & fallers’ in our new coronowartime world?…What are your predictions for (semi-) permanent changes in status of various insititutions & ideologies in the new times?!

Here goes:

Risers

Health care workers — duh, and much deserved.

The internet and the tech community more broadly — Their institutions have performed the best, and even Anand G. has more or less recanted.

Big business

Singapore, Taiwan, and South Korea

Peter Thiel, who numerous times cautioned us about the fragility of globalization and global supply chains.

State capacity libertarianism

The NBA and Adam Silver — They led the charge to shut things down.

Surveillance — It worked in parts of East Asia, and Europe’s unwillingness to use it will cost many lives.

Telemedicine

Science and scientists

Balaji Srinivasan, who saw it all coming on Twitter.

Individuals who can create structure for themselves — the true winners of lockdown.

The Federal Reserve System and Jay Powell — hail QE Infinity!

Losers

The FDA, CDC, and WHOouch.

Social justice warriors — who cares about your microaggression these days?

Rudy Gobert — will never be in the running for “Defensive Player of the Year” ever again.  That said, his being Covid-positive led to the closing of the NBA and may have benefited America more than any other NBA player “action” has done, ever.  He has since given a good deal of money to charity and ought to go up in status.

Bill de Blasio, mayor of New York.

Bolsonaro, López Obrador, and populism more generally.

Academics in the humanities — have they added much to our understanding of the situation, or to our response?

The media.  No matter what you think they might deserve, they just seem to keep on going down in status.  Bet on the trend!

Mixed

Various “right wing types,” of varying degrees of fringe, were early on this issue.  But I suspect they will rise in status only within their “in groups.”  Same with Matt Stoller.

Triage — we had to do it, and we did it unflinchingly.  But in the “social record,” will this go down as OK, or as horrifying and “we can’t ever let this happen again”?  Or maybe we’ll just forget about it, and pretend those silly philosophers doing trolley problems are wasting our time.

Donald Trump and also China.  I’ll delete any comments that discuss these, because as topics they do not encourage subtlety of response.  No matter what you may think is a just outcome here, in predictive terms the paths of these reputations are still difficult to call.

I thank C. for some assistance with this post.

Price dispersion and pandemics

Price dispersion is an excellent indicator of transactional frictions. It isn’t that absent price dispersion, we can confidently say that frictions are negligible. Frictions can be substantial even when price dispersion is zero. For instance, if the search costs are high enough that it makes it irrational to search, all the sellers will price the good at the buyer’s Willingness To Pay (WTP). Third world tourist markets, which are full of hawkers selling the same thing at the same price, are good examples of that. But when price dispersion exists, we can be reasonably sure that there are frictions in transacting. This is what makes the existence of substantial price dispersion on Amazon compelling.

Amazon makes price discovery easy, controls some aspects of quality by kicking out sellers who don’t adhere to its policies and provides reasonable indicators of quality of service with its user ratings. But still, on nearly all items that I looked at, there was substantial price dispersion. Take, for instance, the market for a bottle of Nature Made B12 vitamins. 

Prices go from $8.40 to nearly $30. It is not immediately clear why sellers selling the product at $30 are in the market. It could be that the expected service quality for the $30 seller is higher except that between the most expensive and the next lowest price seller, the ratings of the next highest seller are lower. And I would imagine that the ratings (and implied quality) of Amazon, which comes in with the lowest price, are the highest.

p.s. Sales of the boxed set of Harry Potter show a similar pattern.

That is all from Gaurav Sood.