Month: April 2020
Friday assorted links
1. Balaji on heterogeneities and data integration.
2. Citizen’s handbook for nuclear attack and natural disasters. Do we need a new version of this?
3. The Amazon: “We show that, starting at around 10,850 cal. yr BP, inhabitants of this region began to create a landscape that ultimately comprised approximately 4,700 artificial forest islands within a treeless, seasonally flooded savannah.”
4. How much distance do you need when exercising? And against crowded spaces.
5. Dan Wang letter from Beijing in New York magazine.
6. Trump pushing to reopen by May 1.
7. Lots of new testing results from Germany, consider these as hypotheses but still a form of evidence.
8. Good and subtle piece on Tiger King (NYT). And betting markets in everything.
9. The Vietnamese response seems pretty good so far.
10. Joe Stiglitz discusses his love of fiction (NYT)
12. Ronald Inglehart on the shift to tribalism.
13. Explaining the Fed lending programs.
14. MIT Press preprint of new Joshua Gans book on Covid-19, open for public comment.
Pandemic Policy in Developing Countries: Recommendations for India
Shruti Rajagopalan and I have written a policy brief on pandemic policy in developing countries with specific recommendations for India. The Indian context requires a different approach. Even washing hands, for example, is not easily accomplished when hundreds of millions of people do not have access to piped water or soap. India needs to control the COVID-19 pandemic better than other nations because the consequences of losing control are more severe given India’s relatively low healthcare resources, limited state capacity, and large population of poor people, many of whom are already burdened with other health issues. We make 10 recommendations:
1: Any test kit approved in China, Japan, Singapore, South Korea, Taiwan, the United States, or Western Europe should be immediately approved in India.
2: The Indian government should announce a commitment to pay any private Indian lab running coronavirus tests at least the current cost of tests run at government labs.
3: All import tariffs and quotas on medical equipment related to the COVID-19 crisis should be immediately lifted and nullified.
4: Use mobile phones to survey, inform, and prescreen for symptoms. Direct any individual with symptoms and his or her family to a testing center, or direct mobile testing to them.
5: Keep mobile phone accounts alive even if the phone bills are not paid, and provide a subsidy for pay-as-you-go account holders who cannot afford to pay for mobile services.
6: Requisition government schools and buildings and rent private hotel rooms, repurposing them as quarantine facilities.
7: Rapidly scale up the production and distribution of masks and encourage everyone to wear masks.
8: Truck in water and soap for hand washing and use existing distribution networks to provide hand sanitizers.
9: Accept voter identification cards and AADHAAR cards for in-kind transfers at ration shops.
10: Announce a direct cash transfer of a minimum of 3000 rupees per month (equivalent to the poverty line of $1.25 a day or $38 a month) to be distributed through Jan Dhan accounts or mobile phone applications such as Paytm.
See the whole thing for more on the rationales.
Addendum: As we went to press we heard that India will lift tariffs on medical equipment. My co-author lobbied hard for this.
Zoom Bombing a High School Class
I “zoom bombed” a high school class that is using Modern Principles of Economics. I thought that it would be useful to relate some virus economics to some regular economics. Here’s what I said:
Why has the response to coronavirus been so poor? Exponential growth, rare events, and the necessity of using theory instead of experience.
Coronavirus infections, when unchecked, double approximately every three days. If we start out with 1000 infections that means in 10 doublings, just 30 days, there will be one million infections (1,2,4,8,16,32,64,256,512,1024). If you act early and stop just one doubling, you prevent 500,000 people from being infected. Speed is of the essence. But you need to act when the problem appears small. You need to use theory rather than observation which isn’t natural or easy.
People get good at something when they have repeated attempts and rapid feedback. People can get pretty good at putting a basketball through a hoop. But for other decisions we only get one shot. One reason South Korea, Hong Kong and Taiwan have been much better at handling coronavirus is that within recent memory they had the SARS and H1N1 flu pandemics to build experience. The US and Europe were less hit by these earlier pandemics and responded less well. We don’t get many attempts to respond to once-in-a-lifetime events.
Even as coronavirus swept through China and Italy, many people dismissed the threat by thinking that we were somehow different. We weren’t. Even within the United States some people think that New York is different. It’s not. Most people learn, if they learn at all, from their own experiences, not from the experiences of others–even others like them. Learning from your own mistakes and experiences is a good skill. Many people make the same mistakes over and over again. But learning from other people’s mistakes or experiences is a great skill of immense power. It’s rare. Cultivate it.
Now let’s apply these issues to another one close to your life. Savings and retirement. Savings also follow an exponential process, albeit one neither as rapid nor as certain as those involving viruses. The same principles apply, however. But in this case instead of wanting to avoid the gains at the end you want to start saving early in order to capture the big gains in your 50s and 60s as you approach retirement. You don’t get many attempts at retirement so you need to use theory rather than experience. And because you don’t get many attempts you need to learn from other people, including other people’s mistakes, to guide your savings decisions today.
The students asked good questions and we also talked about aggregate demand and supply and how to think about the economic crisis.
Hat tip: Joel Cohen and Dr. Brian Dille.
P.S. I didn’t actually zoom bomb the class. I was invited but it was a surprise to the students.
Does working from home work?
Better than you might think. Here is a paper from a few years back, by Nicholas Bloom, James Liang, John Roberts, and Zhichun Jenny Ying:
A rising share of employees now regularly engage in working from home (WFH), but there are concerns this can lead to ‘‘shirking from home.’’ We report the results of a WFH experiment at Ctrip, a 16,000-employee, NASDAQ-listed Chinese travel agency. Call center employees who volunteered to WFH were randomly assigned either to work from home or in the office for nine months. Home working led to a 13% performance increase, of which 9% was from working more minutes per shift (fewer breaks and sick days) and 4% from more calls per minute (attributed to a quieter and more convenient working environment). Home workers also reported improved work satisfaction, and their attrition rate halved, but their promotion rate conditional on performance fell. Due to the success of the experiment, Ctrip rolled out the option to WFH to the whole firm and allowed the experimental employees to reselect between the home and office. Interestingly, over half of them switched, which led to the gains from WFH almost doubling to 22%. This highlights the benefits of learning and selection effects when adopting modern management practices like WFH.
Via Matt Notowidigdo. Of course in that paper, the schools were not all closed…
The economics of supply cut-offs
As a number of people have pointed out, cable TV, cable internet connections, and cable streaming have been remarkably robust throughout this crisis. Why might that be? Let’s think through a few basic points about the economics of supply cut-offs. This will not be a complete model, but it will focus attention on perhaps one possible factor of interest.
Imagine a seller with market power who comes close to perfect price discrimination. That supplier will take great care to avoid supply cut-offs (imagine an electric utility investing in emergency capacity, for instance). If a cut-off were to happen, the profits of the supplier would be much lower. As a first-order approximation, such suppliers will invest a near-optimal amount of resources to prevent such supply interruptions.
Alternatively, imagine a nearly perfectly competitive situation where all of the surplus goes to consumers and producers earn the going rate of return. Fixed costs are not significant. A market collapse or supply cut-off doesn’t cut much into profits, and in essence the suppliers do not care about the losses of the inframarginal consumers, were a supply interruption to occur.
As a simple theorem, if the market is good for the producers in the first place, supply interruptions are less likely. If the market is good for consumers in the first place, supply interruptions are more likely.
Might this also apply to health care systems? The U.S. hospital system, in normal times, spends way too much. Still, it has the “cultural mentality” for making capital expenditures, far more than say Britain’s NHS does. And so the United States has far more ICU units per capita than does Britain. Whether justly or not, the U.S. health care system might come out of this crisis looking not entirely bad.
Fiction and classics to read under lockdown
A number of you asked me for a list of books to read during lockdown, mostly novels and fiction (like Plato, right?). Here is a list I drew up maybe fifteen (?) years ago, with only slight revisions since. I feel a current list might be quite different, but actually the early list is perhaps closer to most of your tastes? Here it is. It starts with classics and then goes through more recent novels maybe up through 2000 or so.
Thursday assorted links
1. “We are at a critical juncture for the market.”
2. Pandemic insurance for Wimbledon cancellation.
3. Borjas on who is undertested, from NYC data.
4. Japanese cook draws every meal he eats.
5. How to close a bag of chips with no clip.
7. How is the Swedish approach working out?
8. Re-entry stickers for the Florida Keys — get the picture?
9. Stapp and Watney, masks for all.
10. Hong Kong quarantine diary.
11. How the Faroe Islands aced it (so far).
12. “Many brands are using keyword blocklists to stop their adverts appearing next to stories about Covid-19, meaning that even though news websites are getting record traffic from readers they are barely earning any money from the clicks.” Link here.
13. The Pandemic Challenge, from Singularity University.
14. Will Covid-19 induce a decline in religiosity?
Where we stand
I thought it useful to sum up my current views in a single paragraph, here goes:
I don’t view “optimal length of shutdown” arguments compelling, rather it is about how much pain the political process can stand. I expect partial reopenings by mid-May, sometimes driven by governors in the healthier states, even if that is sub-optimal for the nation as a whole. Besides you can’t have all the banks insolvent because of missed mortgage payments. But R0 won’t stay below 1 for long, even if it gets there at all. We will then have to shut down again within two months, but will then reopen again a bit after that. At each step along the way, we will self-deceive rather than confront the level of pain involved with our choices. We may lose a coherent national policy on the shutdown issue altogether, not that we have one now. The pandemic yo-yo will hold. At some point antivirals or antibodies will kick in (read Scott Gottlieb), or here: “There are perhaps 4-6 drugs that could be available by Fall and have robust enough treatment effect to impact risk of another epidemic or large outbreaks after current wave passes. We should be placing policy bets on these likeliest opportunities.” We will then continue the rinse and repeat of the yo-yo, but with the new drugs and treatments on-line with a death rate at maybe half current levels and typical hospital stays at three days rather than ten. It will seem more manageable, but how eager will consumers be to resume their old habits? Eventually a vaccine will be found, but getting it to everyone will be slower than expected. The lingering uncertainty and “value of waiting,” due to the risk of second and third waves, will badly damage economies along the way.
So there you have it.
My Conversation with Emily St. John Mandel
I am a fan of her two latest novels Station Eleven (about a post-pandemic world) and The Glass Hotel, and many other smart people like them too. Here is the audio and transcript. Here is the CWTeam summary:
She joined Tyler to discuss The Glass Hotel, including why more white-collar criminals don’t flee before arrest, the Post Secret postcard that haunts her most, the best places to hide from the Russian mob, the Canadian equivalent of the “Florida Man”, whether trophy wives are happy, how to slow down time, why she disagrees with Kafka on reading, the safest place to be during a global pandemic, how to get away with faking your own death, how A Canticle for Leibowitz influenced her writing, the permeability of moral borders, what surprised her about experiencing a real pandemic, how her background in contemporary dance makes her a better writer, adapting The Glass Hotel for a miniseries, her contrarian take on Frozen II, and more.
By the way, I would fake my own death by going on a cargo vessel and bribing them to claim I fell overboard. Here is one bit about the pandemic:
COWEN: Have people been more or less cooperative than you had thought?
ST. JOHN MANDEL: My impression — and the problem is, we don’t see people anymore — but my overall impression is they’ve been more cooperative.
Definitely in the literary community, I’ve seen a lot of people really trying to support their independent bookstores, which has always been a thing. But I think there’s been a greater awareness that if you don’t buy your books from your independent bookstore — and by the way, they do all sell online mostly — then that store might not be there when all of this ends. So I see people pulling together like that, to try to support the businesses they love. That’s been a major one.
I wish I could see people and bring back a report from actual humanity, [laughs] but that is my impression. There’s been more cooperation.
And:
COWEN: In so many postapocalyptic novels, it seems that people wander a lot. Do they wander too much? Should they just stay put?
ST. JOHN MANDEL: I had this conversation with another postapocalyptic novelist. Would everybody stop walking? Why is everybody wandering endlessly in a postapocalypse?
And:
COWEN: How good is Frozen II, if I may ask?
ST. JOHN MANDEL: It’s pretty good.
COWEN: Pretty good?
ST. JOHN MANDEL: Yeah. This is a controversial statement. I know a lot of parents who hate it, but I find it more interesting than Frozen I.
Perhaps I like The Glass Hotel a wee bit better than Station Eleven, but maybe Station Eleven is better to read first?
There’s No Such Things as a Free L̶u̶n̶c̶h Test
In a short-sighted blunder, India’s Supreme Court has ruled that private labs cannot charge for coronavirus tests:
NDTV: “The private hospitals including laboratories have an important role to play in containing the scale of pandemic by extending philanthropic services in the hour of national crisis…We thus are satisfied that the petitioner has made out a case…to issue necessary direction to accredited private labs to conduct free of cost COVID-19 test,” the court said.
Whether the private labs should be reimbursed by the government, will be decided later, Justices Ashok Bhushan and S Ravindra Bhat said in a hearing conducted via video conferencing.
The Supreme Court’s ruling will reduce the number of tests and dissuade firms from rushing to develop and field new drugs and devices to fight the coronavirus. A price is a signal wrapped up in an incentive. Instead of incentivizing investment, this order incentives firms to invest resources elsewhere.
Nor do private labs have a special obligation that mandates their conscription–an obligation to fund testing for all, falls on all.
The ruling is especially unfortunate because as Rajagopalan and Choutagunta document, India’s health care sector is predominantly private:
…India must rely primarily on the private sector and civil society to lead the response to COVID-19,…the role of the government should be financing and subsidizing testing and treatment for those who cannot afford to pay. India’s private healthcare system is better funded and better staffed than the government healthcare system, and it serves more people. It is estimated to be four times bigger in overall healthcare capacity, and it has 55 percent of the total hospital bed capacity, 90 percent of the doctors, and 80 percent of the ventilators.
The temptation to requisition private resources for state use in an emergency is ever present—but Indian policymakers must resist that temptation because it will compromise instead of increase capacity.
Benevolence is laudatory but even in a pandemic we should not rely on the benevolence of the butcher, brewer or baker for our dinner nor on the lab for our coronavirus tests. If we want results, never talk to suppliers of our own necessities, but only of their advantages.
Happiness and the quality of government
From John F. Helliwell, Haifang Huang, and Shun Wang:
This chapter uses happiness data to assess the quality of government. Our happiness data are drawn from the Gallup World Poll, starting in 2005 and extending to 2017 or 2018. In our analysis of the panel of more than 150 countries and generally over 1,500 national-level observations, we show that government delivery quality is significantly correlated with national happiness, but democratic quality is not. We also analyze other quality of government indicators. Confidence in government is correlated with happiness, however forms of democracy and government spending seem not. We further discuss three channels (including peace and conflict, trust, and inequality) whereby quality of government and happiness are linked. We finally summarize what has been learned about how government policies could be formed to improve citizens’ happiness.
Having read through the paper, I thought the main interesting result was that quality of service provision (effectiveness, rule of law, regulatory quality, and absence of corruption) is correlated with happiness whereas kind of democracy is not, with the latter democracy variable being an index related to voice, accountability, stability, and freedom from violence.
Of course it would be very interesting to rerun such a test during pandemic times.
Wednesday assorted links
1. Air pollution is very bad for Covid-19 deaths (NYT). Worse than had been thought.
2. U.S. vs. Europe.
3. Using mobility data to predict the growth of Covid-19 cases.
4. Allcott, Boxell, Conway, Gentzkow, Thaler, and Yang: “We then present new survey evidence of significant gaps between Republicans and Democrats in beliefs about personal risk and the future path of the pandemic.” Recommended.
5. Averting the 1957 pandemic with a vaccine.
6. Why New Zealand is doing so well.
7. Coronavirus MIE: “A German fourth-tier club have sold more than 100,000 tickets for a match against an “invisible opponent” – despite averaging crowds of 3,000.”
8. How measles and coronavirus are interacting.
9. My Friday Princeton webinar on the economics and social implication of Covid-19, limited availability but you can sign up at the link.
10. Redux of my January 27 Bloomberg column on Covid-19.
11. A good thread on why contrarian views on Covid-19 probably are wrong. By J.D. Vance, recommended.
12. Hundreds of Dr. Fauci-related products for sale.
13. It seems so far we have returned to the 1925 death rate in America.
Fast Grants against Covid-19, an extension of Emergent Ventures
Emergent Ventures, a project of the Mercatus Center at George Mason University, is leading a new “Fast Grants” program to support research to fight Covid-19. Here is the bottom line:
Science funding mechanisms are too slow in normal times and may be much too slow during the COVID-19 pandemic. Fast Grants are an effort to correct this.
If you are a scientist at an academic institution currently working on a COVID-19 related project and in need of funding, we invite you to apply for a Fast Grant. Fast grants are $10k to $500k and decisions are made in under 48 hours. If we approve the grant, you’ll receive payment as quickly as your university can receive it.
More than $10 million in support is available in total, and that is in addition to earlier funds raised to support prizes. The application site has further detail and explains the process and motivation.
I very much wish to thank John Collison, Patrick Collison, Paul Graham, Reid Hoffman, Fiona McKean and Tobias Lütke, Yuri and Julia Milner, and Chris and Crystal Sacca for their generous support of this initiative, and I am honored to be a part of it.
Meanwhile, elsewhere in the world (FT):
The president of the European Research Council — the EU’s top scientist — has resigned after failing to persuade Brussels to set up a large-scale scientific programme to fight Covid-19.
In contrast:
During World War II, the NDRC accomplished a lot of research very quickly. In his memoir, Vannevar Bush recounts: “Within a week NDRC could review the project. The next day the director could authorize, the business office could send out a letter of intent, and the actual work could start.” Fast Grants are an effort to unlock progress at a cadence similar to that which served us well then.
We are not able at this time to process small donations for this project, but if If you are an interested donor please reach out to [email protected].
Safety Protocols for Getting Back to Work
China bent the curve, Italy bent the curve and I believe that the curve is bending in the United States. Suppression is working and the second part of the strategy of test, trace and isolate will start to come into play in a few weeks. The states are gearing up to test, trace and isolate and several large serological surveys are already underway which will gives us a much better idea of how widely the virus has spread. Ideally, we will move from test, trace and isolate to a situation where we can conduct millions of tests weekly which will take us into the vaccine time.
Before testing is fully operational, however, we will need to follow safety protocols. We can learn about what works from what essential workers are doing now. Green Circuits in CA, for example, redesigned the shift schedule:
His first move was to redesign the plant’s work schedule. The company, owned by the Dallas-based private equity firm Evolve Capital, always had the first and second shifts overlap for a half-hour. That allowed workers arriving in the afternoon to confer with colleagues as they handed off duties.
But O’Neil said they realized that would risk their whole workforce getting quarantined for 14 days, if someone got infected by the coronavirus and spent time at the factory as part of this larger group.
The solution was to create three separate teams of 40 workers each. The first shift now ends at 2 p.m., and then there’s an hour when the workspaces, tools, and breakrooms are sanitized. The third team does not work at all, but rather is held in reserve and available to jump in if an illness hampers one of the two other teams of workers.
Other safety protocols include:
- Shift work for white collar workers as well as for blue collar workers. Including spreading work over the weekends.
- Senior shopping hours.
- Temperature checks, perhaps via passive fever cameras at work and public transport.
- Mandatory masks for public transportation.
- Masks for workers.
- Sanitation breaks for mandatory hand washing.
- Quarantining at work for essential workers, as the MLB is thinking of doing despite not being essential.
- Reducing touch surfaces (even with simple things like propping up bathroom doors) and copper tape for hi-touch surfaces that cannot be eliminated.
It will take longer to reopen restaurants, clubs and sports stadiums but I believe that applying these protocols will allow many of us to work safely. We aren’t ready yet but now is the time to plan for our return.
Do better incentives limit cognitive biases?
There is a new paper by Benjamin Enke, Uri Gneezy, Brian Hall, David Martin, Vadim Nelidov, Theo Offerman, and Jeroen van de Ven:
Despite decades of research on heuristics and biases, empirical evidence on the effect of large incentives – as present in relevant economic decisions – on cognitive biases is scant. This paper tests the effect of incentives on four widely documented biases: base rate neglect, anchoring, failure of contingent thinking, and intuitive reasoning in the Cognitive Reflection Test. In preregistered laboratory experiments with 1,236 college students in Nairobi, we implement three incentive levels: no incentives, standard lab payments, and very high incentives that increase the stakes by a factor of 100 to more than a monthly income. We find that cognitive effort as measured by response times increases by 40% with very high stakes. Performance, on the other hand, improves very mildly or not at all as incentives increase, with the largest improvements due to a reduced reliance on intuitions. In none of the tasks are very high stakes sufficient to debias participants, or come even close to doing so. These results contrast with expert predictions that forecast larger performance improvements.
Via Kadeem Noray (EV winner, btw). This is perhaps related to behavior during and leading up to the lockdown…