The best economic plan against the coronavirus

I have produced a 7 pp. document, mostly micro- rather than macroeconomics, leaving the pure health and health care issues aside, you will find it here (link is now corrected).  Intended for policymakers.  Here is the opening bit:

“We need a series of policies to achieve some rather complex ends, and in conjunction. Other than the obvious goals (“minimize human suffering”), these ends are:

  1. Scale down economic activity in a rapid way to keep people at home, but without devastating the physical, cultural, or organizational capital that will be needed to restore growth and normality.

  2. Boost the confidence of markets — both retail and financial markets — by showing progress in limiting the spread of the disease. (But note that merely slowing the spread of the disease may not help the economy, as uncertainty would linger for longer periods of time.)

  3. Keep business in a position to rebound.

  4. Create incentives for production to bounce back once that is appropriate.

You will notice a tension between #1 and #2-4, which is what makes this policy issue so difficult. The ideal policy mix should both lower and raise output, and at just the right speed. No one ever taught us how to do that.

Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans). 

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”

Again, here is the link, please do leave your suggestions in the comments section of this blog post.  I thank Patrick Collison for some writing and editing assistance with this document, though of course he is not liable for its final contents or conclusions.

Comments

This is interesting. I do not understand the current macro stimulus policies at all. They are designed to encourage investments. This is not helpful, when we shut down the economy at the same time. What would be needed is financial support to keep the economy alive (put it in hibernation) so it can re-bounce in a few months. This would need completely different financial instruments (support with debt payments for a limited time, government guarantees for existing debt, etc.)

Agreed.

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I think they are designed to keep the financial system from collapsing. Remember, the repo market was seizing up last fall.

I imagine the fed is pretty aggravated that banks aren't dropping mortgage rates commensurately and instead are pocketing the spread.

A bigger issue is they are actually lending less to small businesses. Basically, it's a repeat of the 2008 financial crisis. We might realize how few actual changes we've made in the past decade.

At least IOER is dropping to 0.1%, reducing the incentive for banks to sit on the sidelines.

No there is a rate that should go negative.

@ Ted Craig - banks are still in the business of assessing credit risk. They're not going to lend to a closed small business that has zero revenue for an indeterminate period of time of their own volition, no matter how cheap bank funding is or how much capital and liquidity they have. * Bars and independent restaurants have really high failure rates even when the country *isn't* shut down by a pandemic. The Fed and Treasury are either going to have to order banks to do it or give banks an incentive to do it with a program that backstops a good portion of losses.

Kevin Warsh suggested just such a program in Monday's WSJ - https://www.wsj.com/articles/let-the-fed-administer-an-antiviral-shot-11584314083 .

Quoting key points from Warsh's idea:

"A new Government-Backed Credit Facility, or GBCF, would require everyone to have skin in the game: all parts of the government, all institutions in the banking system, and a broad cross-section of small businesses, large corporations and households ...

Thousands of regulated banks ... would underwrite loans based on the quality and value of collateral and the expected cash flows of borrowers, evaluating applicants based on their credentials as of Jan. 1, before the pandemic. Borrowers would need to demonstrate that they are unable to obtain credit elsewhere but are solvent, consistent with the requirements of the Federal Reserve Act.

The 12 geographically dispersed banks in the Federal Reserve system would judge whether the loans underwritten in their region pass muster. The New York Fed would evaluate each package of loans, and price them at spreads modestly higher than would be customary in normal times.

Loans would be for a term of up to 90 days, subject to renewal as long as the virus is affecting the economy. The GBCF would have a maximum life of 18 months. If the virus dissipates quickly, the Fed’s program would be wound down quickly as well.

The president could authorize the Treasury secretary to use funds from the Exchange Stabilization Fund to kick-start the program by providing assurance to the Fed that there is sufficient collateral to support it. Crucially, Congress would also authorize a fiscal backstop to offset any loan losses incurred by the Fed or the banks themselves. These actions would maintain an appropriate line between monetary and fiscal policy."

I do think that Warsh is overly optimistic about how quickly to wind it down. I'd structure repayment as something like interest only until 12 months after the pandemic ends, followed by equal monthly P+I payments over the next 5 years. The GBCF could take a security interest in all assets of the business that weren't encumbered prior to CV. That would be at least a modest incentive for businesses to repay their loans early if they're able to do so.

* There's a slight exception for a business that has hard assets as collateral, such as commercial real estate. The problem is that many small businesses don't have such assets (e.g., bars and restaurants that lease their real estate) For the ones that do have such assets, a lot of the assets are already used as security for existing debt (e.g., mortgages on commercial real estate). Plus, the value of those assets looks a lot less now than it did on January 15: it's not as if banks should realistically think that it's a good credit decision to extend a second mortgage on a commercial property that takes the total LTV up to 95% of the appraised value as of January 15.

Mortgage rates? Is there actually someone considering buying a house on the basis of their present income?

Apocalypse Not Now? Australian researchers claim they are onto a pretty effective treatment, and are ready to start testing it on humans:

https://m.thechronicle.com.au/news/cure-found-for-coronavirus-in-australia/3973564/

The article is about treatment not prevention. Anti-viral vs vaccine. Way too little data yet to declare victory.

I agree with Danjos that we still lack information, but if this works it would be great news.

I didn't see a specific mention of what it does to hospitalization rates, but I infer the idea is that people on this course of treatment would be dramatically more likely to avoid ICU-level hospital care.

I recommend that you follow President Trump’s coronavirus task force press conferences.

So, when I clicked on the google link, it said this - "Some tools might be unavailable due to heavy traffic in this file."

Let's call it the MR effect, because really, public intellectualism is about coining the terms of the realm.

That's the kind of snark I'd expect from a ZMP worker such as yourself.

The next few weeks are going to reveal just how many people are truly ZMP - pretty much anyone associated with hospitality, tourism and air travel has become basically ZMP for at least the next few weeks. The cascade effects will further reveal how many other people are also ZMP.

Yes. Very interesting. The most interesting comment I heard so far, is when Dr. Birx said that she is asking for information from Europe on a weekly basis knowing how overwhelmed they are dealing with the crisis.

Not more often.

Another was the change yesterday, where she and Dr Fauci described why they made the adjustments, and why the specific recommendations for families. It seemed to be due to the information they were getting in Europe as to means of transmission.

Definitely worth watching. You come out with a deep abiding disgust of most journalists, with exceptions, and a grudging respect for the people in the middle of this.

Dr. Birx and Dr. Fauci are definitely underated as sources of
factual (not rumor) medical information

This is a good question, but I wish you would just put it on this site rather than having to go the Google route. You can make it small print or have a link to a pdf doc.

Google has much, much better tools for metrics.

We should either have a China-style shutdown of everything and be done with this and ready to restart in a month like China is, or do nothing and have the virus run its course. “Flatten the curve” strategies that run indefinitely until we have a vaccine (which could be never!) really seem to threaten to end the world as we know it. Production should naturally bounce back if it’s just a one-month shutdown because of the pent-up demand. The government could temporarily suspend debt payments and at the same time pay unemployed hourly workers to make masks, sanitizer, and other needed equipment (or end rules on price gouging to encourage importation and reselling) during that month. But the longer a shutdown is, even if it is less complete than the shutdown in China, the more these economic measures are going to be unsustainable and the greater the threat of a depression that will radically change our society for the worse on top of the health crisis. Note the stock market response to this crisis—when China had its lockdown in place, the Chinese stock markets fell a bit and global markets continued to rise, but there was nothing like the absolute market meltdown, which is so far on a worse trajectory than 1929, when locally spread virus cases started appearing in other countries that did not seem to be able to engage in such extreme but temporary measures.

Actually the government should just suspend all dates under its control for two months, not only debts but everything from court dates to tax filing to when licenses expire. Make clear that we’re just going into hibernation and are going to pick up right where we left off without people having to sort out a mess of missed payments and deadlines.

The IRS announced a 90 day extension of the tax filing date, I believe

We should also find a way to create a presumption of rehire for workers laid off due to the virus: they should be able to expect to return to their old jobs insofar as possible when things resume, not have to search for new jobs. The hiring process has become so byzantine and maze-like in recent decades that every recession now has a long tail of a jobless recovery. If we want a quick bounce back we need to avoid that problem like, er, the plague.

Or the U.S. could try to adopt an alomst 120 year old idea from Germany called Kurzarbeit - something that started weeks ago among German logistics companies, as the China shutdown led to a dramatic drop in shipping.

The Kurzarbeit idea of shared working is good if a business faces a sales drop on the order of 10% to 20% (with confidence that sales will rebound after a temporary downturn , of course).

There are some industries where that makes sense in our current situation. The problem is that we have other industries (bars, airlines, maybe hotels, various tourism industries) where the demand has gone to zero (due to government-mandated shutdowns) or very close to zero.

Tyler, this is just a ramping up of business as usual. I can't see how that stacks up. This is a war like event which needs a war like mechanism to allocate resources. https://medium.com/swlh/a-war-footing-surfing-the-curve-f5ffe6134e37

Pace that Israeli Nobelist in this field (see yesterday's MR links) who says the Covid-19 virus will run its course and naturally burn out, as seems to be the case in China even without massive restrictions other than social avoidance, but yeah, 'war like event', sure.

Bonus trivia: TC gets a +1 for this: "The Federal government should promise to protect the patents and copyrights of major innovators in this area" can you guess why?

Because if innovators think that governments will just appropriate any new vaccines and treatments without compensation, no one other than government agencies will do the research.

Could more services be shifted to remote/delivery modes of operation? E.g. could restaurants shift to doing more deliveries, hiring more drivers who might have lost their jobs in more people-facing sectors?

Instead of trying to make digger makers make hospital equipment as UK Prime Minister Boris Johnson recommended, he should be asking his scientific advisors to brainstorm to find a quicker way of verifying existing and proposed medicines and vaccines. These improved methods probably already exist with various innovative start up companies but themselves need verifying.

Recessions also kill people.

Fast tracking vaccines and medicines may not be perfectly safe, but they should be safer than shutting everything down for a year or two.

I suspect that this will happen because there is no real alternative, and when it does, the markets will turn around.

“Recessions also kill people.” Economists could provide a service by modeling the public health consequences of crashing the economy: Millions of unemployed, foreclosures, repossessions, homelessness. People without hope are not likely to docilely accept the dictates of a government that has destroyed them, and thus crashing the economy might be disastrous in the containment effort.

With what credibility though? We've already heard a lot of spooky stories before.

==> “We need a series of policies..."

...of course that means "Government Policies" -- commannds from government politicians & bureaucrats.

The government-hammer is always the "best" tool for any problem in society (not)

I think this crisis shows how much government interferes rather than helps. Regulations on testing prevented testing, restrictions on communications prevented the flow of information, tariffs on supplies from China created mask and medical shortages so now the government is lying about the efficacy of mask use, etc. Meanwhile the efforts to fight this disease like social distancing have generally been led by private companies and local governments (which are basically private parties in my opinion because there are no legal restrictions on your ability to move to another locality). I think a lot of the policy changes the government should take involve giving fewer commands.

Yeah that's crazy talk to most people.

It's clear to them that no matter how many times any government program or agency fails, if you just put different people in charge and throw more money at the problem, it will magically be fixed - this time.

Locally the official public health COVID-19 web page is trailing the information flow, not leading or driving it. The site this morning says that one person has tested positive in the county, but local news sources several days ago identified a second, and the grapevine reports a third case. Bureaucrats exist to restrict, slow down, and control. Facilitation and streamlining is not in their DNA.

It's none of my business, and I obviously don't know the full story...but if Patrick Collison is willing to be thanked publicly for his writing and editing assistance, then he should consider being willing to put his name on the document as some kind of co-author. If this document is truly intended for policymakers, then the ROI of having a young up-and-coming tech mogul formally on board would be huge, with limited to no downside (worst case is policymakers ignore the document).

In normal times, the phrase "I thank So-and-So for his assistance with this document, although he is not liable for its final conclusions" is an admirable act of courtesy, as it absolves the giver of assistance. But here there is really nothing to absolve...so perhaps the expectation of courtesy runs in the other direction?

Just to expand a bit on the above:

In normal times, the phrase "I thank So-and-So..." is an admirable act of courtesy...and there is a certain chivalry in the giver of assistance politely accepting the thanks while disclaiming credit for the work itself. But that doesn't really apply here: Patrick is more or less pregnant already, so just go ahead and get married (i.e. become a formal co-author). Again, the ROI for the policymaker audience would be very high.

Who? Patrick Collision is pregnant, what? Oh, I see, a 30-something young billionaire. Finally, if he reads this blog, there's somebody richer than I am. About time. And his company? Stripe. Trivial what he did, online payments in ASP/HTML/JavaScript etc. I once tried to do that pre-Stripe, and indeed it was a pain. I set up a mock Visa/Mastercard web method as I recall, linked to something Google was offering for developers, that was supposed to be fake, and guess what, I got charged in real life when I made a mock purchase! True story. I had to explain to the credit card company this was my own mock purchase, and I got the charges reversed. But is making such online payments easy for developers worth over $3B? I say no, but I'm not the final arbiter of that. Incidentally I've also helped clients get patents in the mobile payments sphere, and they made a lot of money.

> Relax state and local laws against price gouging. Although the practice is unpopular, higher prices give suppliers an incentive to keep goods on the shelves.

Sigh.... as with many things in economics, it depends on the details. If you know there are a million rolls of toilet paper coming in next week, but customers aren't aware, you obviously want to sell everything you quickly (to induce panic demand), and have a high price, to further increase profits.

> Higher prices also discourage panic buying and increase the chance that the people who truly need particular goods and services have a greater chance of getting them.

As a few thousand people have been saying, increased prices for basics mostly affect those at the bottom. Similar price hikes in core items (like gasolone, or bread) have caused riots and theft in other places and times....

> In any case, speculation should not be the law enforcement priority moving forward.

Does theft of supplies (e.g. masks), induced by their speculative value count?

As a bonus, it looks like most price gouging doesn't even serve as a useful price signal to manufacturers, because it's not the manufacturers doing it, but rather random resellers. A reasonable policy would be to keep strict restrictions/quotas on the distribution side of things, but allow manufacturers to raise prices accordingly if they need to scale up production. (Wait, isn't this current policy?)

I'm glad you mentioned toilet paper.

I have no idea why people are buying so much and I don't really care. However, I happened to actually need some because I was almost out but was aware I was going to have a difficult time finding it and was trying to make a plan.

Meanwhile, I'd stopped by my local Target for something else and when I walked in, I saw a stack of Northern 12-packs just sitting there - about 15 of them. Sign in front of the stack said "$22.00" per pack. These normally sell for about half that - maybe a bit more, but nowhere near $22. However, I needed it - so lucky me.

There was a woman standing there as I walked up to grab two packs and she was telling her friend that she already had plenty of toilet paper so she wasn't going to buy more when Target was clearly price-gouging.

I am not usually in favor of talking to people I don't know, but in this case, I couldn't resist saying to her:

"Thank god they're over-priced. If they weren't, you - and others like you - would have bought more even though you already have plenty - and I wouldn't have been able to get any even if I really needed it - which I do because I am out and willing to pay the premium to get it. You call it price-gouging, I call it price signaling. In the end, we're both happy."

@DBG8492 - lol, as you can imagine, I'm sure the woman thought you were crazy, and, in a way, she was right.

Why? Because I'm not buying toilet paper like crazy or because I don't believe in "price gouging"?

In every transaction there is a buyer and a seller. If the seller is asking too much, the buyer is free to walk away. If the seller can't find a buyer at their price, they will have to lower it until they find a buyer.

The dynamics of this situation shouldn't change simply because a buyer believes - rightly or wrongly - that they "need" whatever the item is. And if everyone gangs up and takes whatever the item is from the seller and gives it to the buyer, well then that's theft - even if you "pay" the seller what you and the gang believe the item "should be" worth. It's theft because it wasn't your item to begin with.

If the government - which is really the people and not some "thing" that exists separately - uses force to take something, even if they "pay" an amount for it, it's the same as a gang of thugs stealing.

And no, giving everyone - including the owner - the opportunity to vote on whether or not to steal the item(s) in question doesn't make it any better.

You can couch this in any terms you like and rationalize it any way that makes you feel better. But at the end of the day it is what it is: stealing.

@ dude, lol, you trolling me? Because nobody in a Target or elsewhere talks such nonsense unless they're special. Did you also discuss Ricardian equivalence with the shopper or that didn't come up?

Actually, it is pronounced "Target."

> price-gouging

When I use the word, I mean things like the 4-50x increases in price that briefly occurred on Amazon.

A 76% increase in price (22$/12.5$) for a short period isn't that steep, and as your anecdote shows, it does make it clear that the price has increased. Also, I'm pretty certain that Target is also enforcing a quota on toilet paper, which no doubt works against the few for whom price is no barrier. I'd argue that a combination of strategies is generally best.

Looking at Wikipedia's claims about price gouging laws, it looks like e.g. California limits increases to 10%, which (assuming there are no reasonable exceptions) is probably too low to curtail overbuying from the range of people like your example, relative to the annoyance and additional price paid by people who actually need items in a short time frame.

I'd really like to see a dataset of price increases, quotas, and buying/non-buying patterns when this is all over.

There was no limit. It was the first thing I checked even though I only bought two - because I was curious, not because I would have bought more. It's only my son and I at the house so 24 rolls will last a long time.

And I still fail to understand exactly *why* people are buying up all the toilet paper. Pardon the pun, but if the shit does hit the fan for real, you can use the shower or just wash it off with a hose. If it gets so bad the water isn't running, toilet paper is the *last* thing you're going to need...

People are buying it because they are concerned about other people panic-buying it.

Letting the price double is good.

"And I still fail to understand exactly *why* people are buying up all the toilet paper."

There's a secret plan in place to TP the house of all the infected. It's the new version of marking the plagued. ;)

The craziness around toilet paper is weird. Even in my country where most houses have bidets (which allow you to wash the butt with water and soap), we see a lot of people buying toilet paper.

If this is a multi-season event, or affects behaviour beyond the immediate crisis window, then you need to prepare for more structural change. Cruise ships are just the tip of the iceberg. Restaurants, bars, clubs, meeting spaces, tourist spots, airlines - these might all be subject to profound disruption, and as such authorities need to be careful with cash bailouts. Harsh but probably fair.

> which sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans).

Don't be so quick to vilify cruise ships based on these metrics. There is a large on-shore industry supported by cruise ships including at ports of departure such as Miami and Ft Lauderdale as well as ports of call such as Bar Harbor, Puerto Rico, and the US Virgin Islands. All of these places employee many Americans and sustain many American businesses. Additionally, ownership of cruise lines is mostly American so as a country we benefit from the global revenue of such an industry.

Exactly, we shouldn't blankly accept any industry just dying. Give me a break.

Tyler's take smacks of dismissing any industry we don't personally utilize!

In which case, maybe this is an opportunity to right-size universities. We have too many of them producing too many over-credentialed, unemployable, debt-ridden youth. Sacrifice the PHDs for the good of America!

My pitchfork is out and ready. Where is the gathering?

May I suggest we enlarge the mandate to include public k-12 facilities?

Obviously a biased source, but one that estimates a $53B impact to the US economy from the cruise industry (despite "foreign flags" and "non-American" employees on the ships themselves). Cruising is much bigger than what happens out in the ocean:

https://cruising.org/news-and-research/press-room/2019/november/cruise-industry-contributes-nearly-53-billion-to-us-economy-in-2018

For sure, if cruise passengers weren't able to play shuffleboard and bridge on the high seas they would set that money on fire and nobody would see any economic utility of it. There's just no alternative to an ocean cruise.

"Furthermore, policymakers need to figure out which sectors a) we wish to keep up and running (food, health care), b) which sectors we want to contract rapidly but bounce back rapidly as well (education), and c) which sectors we do not want to protect at all and would be willing to see perish (e.g., X, note that most operate under foreign flags and employ mainly non-Americans).

Those classes of sector may require very different economic policies, most of all we should not waste aid on the latter class of sectors. Be nervous of general proposals for “the economy.”"

X = tech companies

'Be nervous of general proposals for “the economy.”'

I adapt Mrs Thatcher:

'And, you know, there's no such thing as [the economy]. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours.'

The point is to avoid destroying the capacity to look after ourselves, our families, and our neighbours. Without income, and the prospect of income, we can't do these things.

Folk wisdom directs that we must not kill the goose that lays the golden egg, which is pretty much the same point.

Good point, and I'm afraid to a degree TC has drunk the Kool-Aid that says we must quarantine to stop Covid-19, when in fact it may, like SARS, just burn itself out naturally, see the link from that Israeli Nobelist the other day at MR.

I think your points about child-care over the summer being an essential way to get families back to work makes intuitive sense. However, it would lead to long-term disruption to K-12 education as a result of educator burnout and lack of planning for the upcoming school year. Instead, there could be an opportunity to hire out of work Americans to operate summer camps, tutoring, childcare, etc in schools, YMCAs and churches across the country. With most teachers already salaried through the summer, this would add jobs and capacity to a stressed education system.

Educator Burnout? You must mean that teachers are unlike other year-around 40hrs/week wage slaves that don't get "burned out".

Pleased to see some relaxing in the rules to cash unemployment benefits and debt/mortgage relief for individuals.

Losing your home because your town was quarantined and you cannot work to generate income is only second to losing a family member to the illness.

At the risk of sounding stupid, why send every American a $1,000 check instead of $2,000 just to those employed in sectors that are vulnerable to the virus?

Number 1) is a wrong premise so no need to read further.

People should do live as usual, locking them in their house is wrong in many many levels, from abuse of authority, psychological consequences of being isolated, lack of productivity. People should rebel against this abuse and instead they are applauding it only to regret and despair about it in a few weeks.

Two suggestions/comments:

A friend owns four restaurants in the Denver/Boulder area where they were shut down by the state yesterday. They are being denied business interruption insurance because of a virus exclusion. It may be as simple as the federal government mandating the shut down will trigger insurance payment but it deserves scrutiny as this will be the difference between his employees being paid and keeping health insurance and probably bankruptcy.

Let parents gift money to their children tax free up to the current estate tax exemptions for the rest of the year. There is enormous wealth held by the baby boomer generation that could be useful and it wouldn't cost the taxpayers.

Good point. Business interruption insurance as a way, in the future, to deal with disruption caused by government orders for closure.

Another way insurance markets can work would be to create a new product under the state's workers comp system whereby workers comp insurance would include paid sick leave when there is a government health event.

These are all rare events. If you priced them out--hey, is there an actuary in the crowd--they probably wouldn't cost much for the protection. Maybe I can talk to Warren Buffett about this.

When was the last time we had a national health emergency declared or a community wide shut down.

Markets work. Sometimes you have to make the market by mandating or configuring the product, too, so that you don't have to deal with big disruptions later.

Note then that business interruption insurance would become significantly more expensive, which in turn would mean that fewer businesses would buy it in the future. They would thus risk being ruined by smaller events that otherwise might have been insured against, because their insurer had to price in the possibility of a black-swan catastrophe.

Why would it be more expensive.

Name the last national health crisis that shut down a business. Post date and location below.

There is such a thing as reinsurance, and insurance companies do plan for black swan events.

Tom,
Speaking black swans,
Did you know
YOU can buy
Alien Abduction Insurance.

Here are some odd risk insurances you can buy: https://www.policygenius.com/blog/9-weird-types-of-insurance-you-never-knew-existed/

"It may be as simple as the federal government mandating the shut down will trigger insurance payment but it deserves scrutiny as this will be the difference between his employees being paid and keeping health insurance and probably bankruptcy."

Eh, so you are arbitrarily going to transfer the bankruptcy from certain businesses to the insurance companies. So, the insurance companies go bankrupt instead. And you are voiding the contract, thus ensuring that insurance companies will attempt to write even more onerous contracts in the future because the government over rode the last set.

This all seems emotional and of questionable rational.

If you want "free" tax payer money just point it toward affected businesses. Don't cause an entire chain reaction of dubious value.

I could not access the document, I need a permission. I will have to consider what is written in the post. I have three question for you, Mr. Cowen.

What do you think are the expected failures of the market in addressing this issue? Why do you think central planning has an edge over the spontaneous order of the market?

Do you think the Constitution gives the federal Executive (or the Legislative, for that matter) the power to do it? This is basically ensuring people from the hazards of life. Was Cleveland wrong to veto the Texas seed Bill in 1887? Note that I am not talking about ethics, I am strictly referring to a literal interpretation of what is written in the Constitution.

Assuming the cruise-ship industry is the one the market deems most likely to bounce back and create the highest return on the scarce resources available now, why should not be there where the money is best spent? Are you postulating that there are benchmarks to judge what is best for society better than the total wealth created (if you want, including externalities, if you at least try to quantify them with estimates)? If there are, how do you find a common denominator? For example, how much loss of total income would you consider adequate to avoid (the distress of, I guess) an American going jobless for a month?

One benefit of the Cruise industry - it is more flexible and dynamic than many other industries. The ships can be redirected to different ports of call on a moments notice, almost regardless of port infrastructure (they have their own port infrastructure thanks to all of the boats they bring with them that can ferry passengers to and from shore). Plus the ships can be converted to temporary housing, as has been used for Super Bowls, conventions, disaster relief, etc. What other industry is this dynamic in terms of geographic response and breadth of use?

Need more hospitals in Seattle? send a cruise ship!

Prior has gone over the edge of senility ?

I wish Tyler well on this, but I'm afraid that state and federal legislatures are going to move so fast that the only input is going to come from people already standing at their elbows.

If you are an elbow stander, do diligence!

A nice well thought out list mostly.
I wonder what percent of these policies will be adopted? Maybe 30% or so?

Remember the Katrina discussions on Federal flood insurance and rebuilding.

First, we're going to ban rebuilding in low (flood prone) areas.
New Orleans public outcry.
Ok, you can rebuild but all foundations must be at least Base Flood level Elevation + 2 feet.
New Orleans public outcry.
Ok, screw it just rebuild them, we'll bail you out next time anyway.

"It was very much a political response just because people were so concerned and then you know, before any other decisions could be made, ...
The advisories shifted base flood elevations up for several years after Katrina. These new elevations served to push up target elevations for those who built new or tried to rebuild severely damage homes, if they could not revise the damage assessment.

But now city officials say that under the new FEMA maps that New Orleans is adopting this year, the minimum elevation is generally at a lower level that reflects greater protection from the new levees and other improvements..

Thousands of residents who got the $30,000 grants through Road Home did not elevate, several audits have found. Due to the structure of the federal program behind those grants, residents had to promise to use the money for elevations, but it was left to local governments to enforce it. "

Anyone who hasn't read Imperial College London paper that came out last night should do that right now. It lays everything out very clearly.

https://www.imperial.ac.uk/media/imperial-college/medicine/sph/ide/gida-fellowships/Imperial-College-COVID19-NPI-modelling-16-03-2020.pdf

Until there is a vaccine, which they say could be 12-18 months, the choice is fairly harsh social distancing or an overwhelmed health service. The best you can do is intermittently relaxing the social distancing requirements, but we're still looking at most service industries being closed for 9 of the next 12 months. The article is very clear and addresses many questions. It seems to me that the most obvious policy responses are to increase ICU capacity at all costs, speed up vaccine developments at all costs, and to experiment with different social distancing combinations in different regions to see which combination leads to the best balance between critical care rates and socio-economic damage.

(apologies for double-post, I put this on the wrong thread initially)

'we're still looking at most service industries being closed for 9 of the next 12 months."
I'm not sure the economy could recover from that for a long time.

@luzh - UK Dr. Neil M Ferguson wrote an alarmist piece about two months ago that predicted 100k new cases about now, which has not panned out. So I would be skeptical of his model. Also note that "do nothing" ends up the same as the most severe home quarantine (Figure 2) in the long run. In other words, "flatten the curve", as I, and indeed pioneer blogger on-this-issue Benjamin Cole have pointed out, is a triage strategy so as to not overwhelm existing hospitals. If so, why not then simply build more hospitals, keep calm and carry on? Why should the entire economy shut down because some doctors don't want more competition (bring in nurses to do doctor's work, as TC suggest) and hospital administrators don't want temporary "Chinese -style" hospitals being constructed but insist we only construct "gold standard" hospitals? That's really what's at issue here, since Ferguson et al assumes eventually it's only a matter of time before the entire world population is exposed to the SARS-CoV-2 virus.

I don't think a lot of people--including the otherwise mostly intelligent, though obvious not as smart as me readers of this blog--realize the issue as I framed it above. A lot of people are confused into thinking social distancing and quarantines will 'kill Covid-19' when in fact the models are not predicting that at all. Some scientists like the Israeli Nobelist the other day think Covid-19 will die out naturally but if so we don't really need mandatory quarantines, just personal responsibility as to who you interact with. In some ways, Covid-19 is not unlike the vaccines debate in the USA. If people are foolish enough not to want a vaccine for themselves or their kids, that's not your problem but their problem (largely, some vaccines depend on herd immunity for maximum effectiveness but that's a "5% better", "secondary smoke" argument that doesn't negate my point).

@myself - Ferguson predicted 100k new cases *a day* by now; hasn't happened.

You should consider the possibility of 'Don't Test, Don't Tell', wherein testing figures have been highly under-representative of real cases due to lack of testing, intentional or otherwise.

@Ray
Whether the assumptions in the model are right or wrong, I don't think anyone can say, but given the initial rates in Italy and Wuhan were exponential 100k cases seems an absolute certainty in a "do nothing" scenario, but maybe you could link to the claim you make about Ferguson's previous research.

How are you interpreting Figure 2? Fig 2 only includes scenarios without general social distancing, but with home quarantine or social distancing for over 70s. All cases in Fig 2 lead to massively overwhelmed healthcare systems. Do you think we can get to 10x capacity in two months?

Fig 3 includes the scenarios for general social distancing. They do keep us under capacity, but only as long as the general social distancing is maintained. Note this does not include all workplaces or mass gatherings, but a reduction outside of workplace by 75%.

Some of these suggestions should be permanent.

Instead of shutting down all public gatherings to keep people at home, I would like to see a more targeted approach.
Policymakers seem to be operating in a data vacuum, but I'm sure the data are out there somewhere.

Shut down the biggest community spreading venues first and revive them last. I can see how schools and indoor sports venues can be problematic, but I doubt outdoor spectators at soccer or baseball games, or the drunks at Moes' Tavern, are spreading the bug. But maybe I'm wrong. Who knows, if we never see the results of all the "contact tracing"?

Instead of opening up schools as de factor daycare centers, why not just subsidize actual daycare centers. Daycare workers are much more economically vulnerable.

It requires a certain finesse to ensure that such policy papers are read by people who matter. Here is an example, which should not be hard to guess as to source.

“A bold, new precedent is being set, the world will once again benefit greatly from America’s leadership. . . . The federal government, state governments, private businesses, top hospitals all coming together, under the president’s leadership, to stem the tide of the coronavirus.”

The America’s leadership part is especially necessary to say with gravitas and sincerity, since not taking responsibility for failure is a big part of the last three years of American leadership.

Anyone hazard a guess as to what windmill Prior is tilting at?

What, you don't recognize a Hannity quote? Clearly, this is a quixotic comment attempting to show how someone like Hannity knows precisely the best way to pander to his audience.

Possibly, Hannity might just start talking about the need for older people to not go on cruises, and the importance of hand washing. Right in step with whatever it is the White House says - such as the updated schedule, with the problem becoming unimportant is August under the president’s leadership.

My short answer: going through and identifying the industry of every listed employer to decide whether it was impacted would be tough. There'd be ongoing confusion and questions about "why x, but not y?"

Relax occupational licensing for medical professionals
Labor supply
Limit the costs of the trade war
Prizes
Unemployment insurance
Increase the federal matching rate for Medicaid
Payroll tax cut, for the employer side only, for small and medium-sized enterprises (Why only for employers and why only small and medium ?)

All these things should be done regardless of the pandemic and/or make permanent .

A fixed monetary prize encourages small teams in favor of large teams and discourages sharing of ideas between teams. Doesn't seem that great here.

Yeah, Tyler seems obsessed with his idea that prizes will solve so many problems. We commenters have been pointing out numerous weaknesses with this idea, and your observations about competition vs cooperation between teams, as well as team size, are two additional important ones.

Another way to put it: as pretty much anybody in science or in academia has noticed, in recent years there have been more and more papers published with more and more co-authors. Papers with multiple authors don't even cause an eyebrow to be raised now (I remember being annoyed at having to remember Baumol Bailey Panzar Willig and even now I'm fuzzy about which of them participated in what paper so I just memorize "Baumol et al"). Some papers have hundreds of co-authors.

Research team sizes are growing -- or at least the ones who get publication credit are.

This doesn't mean that prizes are a bad idea, but that they can lead only to marginal improvements. We've seen this for years with the Nobel Prizes, which do provide incentives -- and also unfairness with their limit of 3 winners per prize. So tough luck if you're say Rosalind Franklin -- or maybe even William Baumol.

I remember a made-for-TV movie about the discovery of insulin as a treatment for diabetes. It included not only the story of the discovery but also the controversy over who should get credit for it, including who should receive a Nobel Prize. "Glory Enough for All" was the title -- and while not a first-best policy solution, it realistically may have to be part of any realistic solution. Some deserving people are not going to get credit. In terms of having proper incentives, that stinks, but there may be no first-best solution.

Well, we're about to learn the consequences of MMT.

Very thoughtful list of recommendations. I have two comments.

Relax occupational licensing: why just for medical professionals? Relax them across the board. People shut out of work, like in the restaurant industry, should be able to pursue other activities with few hurdles.

Prizes: maybe, but I don’t think they are necessary. The incentives to come up with solutions, medical and otherwise, are strong enough already.

The over-arching theme is to unleash the market as much as possible. The bridge to assist people who are hurting needs to come from the government, but the solution to the medical crisis can only come from the market. It will. This is not 1917, and the US is not China.

Word salad and caps, coming home to roost.

It's over your head, beyond your myopic knowledge levels.
As Bill Hicks said, "If you don't get it, just relax and enjoy your hair."

Tyler: You write the following in the document:

".......sectors we do not want to protect at all and would be willing to see perish (e.g., cruise ships, note that most operate under foreign flags and employ mainly non-Americans)."

What's the game-theoretic implication of every nation planning policy that screws other nations. I can understand prioritize America over others but this seems to have the flavor of "screw the others".

Which could still be valid. But are we entering the age of "screw the others" policies by all nations? Which would sort of make IMF / WHO / UN / World Bank etc. moot?

this suggests the english nhs herd immunity
plan could bigly cull the herd

https://www.theguardian.com/world/2020/mar/15/uk-coronavirus-crisis-to-last-until-spring-2021-and-could-see-79m-hospitalised

Yeah, but just think how their economy is going to quickly bounce back and once again become the model of the world.

Or

The could become

Italy.

What I've not seen addressed so far, is that there's tension with keeping people shut-in at home and them being maximally disease resistant.
Most normal organized sports and gyms are shut down at the moment.
Here's some stats on what that'll do to you:
https://greatist.com/fitness/how-long-lose-your-fitness#athletes
Even someone who's trained will loose some of their great overall condition very quickly,

This is the time to get out and run (in secluded nature, obviously), to make your lung stronger, so that when you eventually get infected you have the best odds of shaking it off quickly.

Think of what's going to happen with all the people staying in all day. You think they won't get depressed by the millions? You think depression is good for your immune system? That this itself wouldn't be a large public health threat?

We definitely need some door-to-door salesmen, that sell office treadmills, standing desks and daylight lamps, right now.
Humans aren't meant to be cooped up and sedentary.

Sure, modern people tend to do that to themselves, but most counteract this to some degree.
But they're all dependent on their usual routines that involve gyms, the swimming hall, the basketball court..... all which is closed now.
You think that those people will spontaneously do a hundred pushups and burpees a day to counteract this? Are you?

You may not be interested in centralized economic decisionmaking, but centralized economic decisionmaking is interested in you.

And I am taking my own advice. I find cardio dreadfully boring and HIIT incredibly aversive. But I'll start running every day now and add regular Tabatha sprints as well, cause I know what's good for me.

My apartment building has a workout room, but they've closed it off.

So yesterday instead of using an elliptical machine I walked some laps around a nearby high school's track. (Running would be a better workout but I've had a sore ankle for months; I can walk and hike but don't want to subject it to the pounding of running.)

But if the shelter-in-place orders include prohibitions against just walking around outdoors, yeah fitness will be had to maintain. Jumping rope (rope skipping) might be about the only vigorous aerobic activity available, unless one has a stationary bicycle or other exercise device.

Personally, I think we should move away from shutting down restaurants and bars and instead do temperature checks at entrances. Nobody gets in who has any level of fever. If you have a fever, they get sent to the nearest testing station, otherwise, go about your business.
Hand out free thermometers and alcohol swabs too, so people can monitor themselves.

Side point: given the shortage of testing, temperature checks could be a cheap and easy substitute which could help filter people that really need to get tested to the front of the line. Separate people with the common cold from those who are more likely to have flu or covid-19.

but it might make sense to reduce the occupational capacity for a bit.

I see nothing in that short bit that makes any sense at all.

I see nothing at all even indicating that some information should be gathered before shutting things down.

For instance. Food distribution requires transportation, lots of it. According to the White House this is likely to run into the summer. Before you shut the god damned economy down might it be worth at least thinking of asking what the current status on spare parts and replacement vehicles is? How much is there available, how soon would there be shortages that would cause distribution disruptions?

Please, don't be stupid.

My three tweets on what coronavirus could/should inspire in the USA.
https://perkurowski.blogspot.com/2020/03/my-tweets-on-what-coronavirus-should.html

Nice to see Patrick is happy to let non-American jobs perish, given that they paid for his education.

Some have suggested we should get Elon Musk st start building medical ventilators -- that would both allow some increase in outputs and address what everyone says is one of the key constraints on treating the critically sick.

Could be someone else and maybe in this case some of the less efficient producers might actually be a better solution.

The government should give $1000 to every American and then put a 100% tax on the goods people are hoarding. Keep turning up the tax in people keep hoarding it.

Tyler wanted to get rid of price gouging laws, but I don't think people will understand why they hurt so much. This gives the perfect time to teach people how and why.

Tourist destination communities are going to be devastated. They are characterized by restaurants, bars and other service industries all of which are closed. They rely on high season sales (March, the summer, Christmas to keep them going through the slack periods.) Smaller towns will be especially affected. Local government needs to help as well. Reduce local sales taxes, rundown budget reserves to provide assistance, reduce regulation to encourage the bounce back.

What you may need is more of a demand creation rather than a local tax reduction strategy.

I've been meeting with local stores to form a cooperative delivery service for their members. People came in the past to visit the stores, and have loyalty to them. So, we are working to get a local foundation to support a model where regular clients, say, of a grocery or gift store, could place their order and have them aggregated for delivery. The grocery store already delivers to elderly people; this is an extension of it to include other retail stores in the area.

Part of the problem with shopping though is people like to graze and look at things so that could be a problem.

But that is not really demand management. The problem is a catastrophic decline in income in these towns

I'm not sure of the mechanism or legality -- but if the government could force a temporary reduction in all commercial & residential rent by property owners by say 40% -- that would likely be effectively targeting small business owners and lower-income individuals who do not own their property and are also most likely most at risk for bankruptcy and unemployment.

It's an intriguing idea, but I see a couple problems.

- It's not targeted enough. There are in fact many people and companies who can still afford to pay the rent.

- Building on that other problem - it would quickly extend to a big problem for banks, because so much real estate is secured by debt.

This is an area where I think that distributed solutions work best. If a city or county wants to put a moratorium on residential evictions for a period of time, then it can do so. If the sheriff is needed for eviction, then no evictions can be justified solely on grounds of social distancing.

For individuals, we can also help with a combination of fiscal stimulus (checks from the government) and unemployment benefits. Those are general measures that also help pay the rent.

While there will be at least some landlords who will be jerks, there's also a practical component from their side of it. Why would you evict a commercial or residential tenant right now? Who is out looking for business space or a new apartment with all of this going on? That situation will presumably remain a similar story during the early part of a recovery.

LIving in one weird smallish country in central europe where the government is doing their best to screw up things... Seriously. You can't make this up. They have explicitly forbidden some labs doing the tests, they totally screwed up supply of face masks and respirators. Should we ask them to do *more*?

The virus is all around Europe. It won't go away in 2 weeks. But we need to start working normally in about that time or things will start going seriously bad. We need to find some reasonably effective and *cheap* way to slow down the virus. Currently in europe the governments went into socialism mode and that's currently clearly very expensive.

So what should governments do? Mandate people wearing facemasks in crowded areas (the government didn't do that; people seeing the totally incompetent government switched within 2 days). Some people wearing respirators. Temperature checks. Washing hands (hey, soap is enough!!) Mass virus testing. Find a way to restore cultural events, even if for half the audience to keep the distance. Find a way to restore education and sports for children - temperature check for children at least? More home office.

We cannot shut down everything for 2 months. We need to find a way to work normally while slowing it down. It's basic economics: find the cheapest way to achieve maximum result. Stopping the economy is darn expensive.

If the fear is the capacity at peak, why not build enough ICU beds with ventilators to cover that capacity and just go about our business; 200,000 might die (as opposed to 50,000 seasonal flu), but those will be people soon to die. 200,000 die from suicide right? Is THIS worth it?

I've advocated for an elapsing voucher stimulus; if possible, focused on those elements of the economy most impacted.

Meaning: a pre-paid card is distributed to taxpayers, which will "activate" when triggered (presumably when an all-clear from the pandemic is announced).

The card would contain, say, $500 in funds that can---again ideally---only be spent at certain types of businesses (restaurants, theaters, hotels etc).

If not spent to a minimum degree each month, the funds automatically decrement by a set amount on the first day of successive months until zero is reached.

As in: we set the minimum spend to $100/month. So in month 1, if you only spend $20, the remaining balance drops to $400 on day 1 of month two. But if you spent $120 in month 1, the balance remains $380 on the first of the following month.

In other words, the amount elapses if not spent at a certain rate.

This could boost confidence in the businesses most affected...that there will be a reasonably guaranteed ready market when normalcy returns.

+ Perhaps the voucher funds could only be used on taxable items. If it's too hard to segregate types of spending...maybe the taxable element is a useful proxy.

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Completely missing from this document are strategies for safe reopening of our economy. We need a gameplan. I believe a central part of that gameplan is private but shareable data on immunity -- initially through exposure to the disease, but perhaps in the medium term through vaccines. Without this data, how do we ensure a safe first-line workforce interacting with our most vulnerable? Furthermore, how do politicians and CEOs, schools and public spaces, reopen without risking uncontrolled case rebounds and PR backlash? We need a stepping stone to eventual solutions (herd immunity, effective treatments, vaccines, etc), and that is, in our minds: timestamped, validated, secure, tamper-proof, and privately held (but shareable) individual health data. We're working on such a platform and would welcome collaborators and feedback: imsafepass.com

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