The Economic Consequences of the Virus?

The inhabitant of New York could order by computer, sipping his morning coffee in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages; or he could decide to couple the security of his fortunes with the good faith of the townspeople of any substantial municipality in any continent that fancy or information might recommend. He could secure forthwith, if he wished it, cheap and comfortable means of transit to any country or climate with passport or other formality and could then proceed abroad to foreign quarters, without knowledge of their religion, language, or customs, bearing just a credit card upon his person, and would consider himself greatly aggrieved by the TSA but otherwise much surprised at the least interference. But, most important of all, he regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement, and any deviation from it as aberrant, scandalous, and avoidable. The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, exclusion and of pandemics which were to play the serpent to this paradise, were little more than the amusements of his daily twitter feed, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.

Only slightly modified.


I can think of no thinker of that age who has aged better than Keynes. I quote him constantly.

Yes, the quote actually works fine without the changes (London -> New York, Telephone -> Internet, etc).

Odd that Keynes completely ignored the 1918-1920 flu pandemic. Or possibly not, since he did survive it.

He was writing about the pre-WWI world...

"Who can look at anything any more...a door handle, a cardboard carton, a bag of vegetables...without imagining it swarming with those unseeable, undead, unliving blobs...waiting to fasten themselves on to our lungs?... Who among us is not a quack epidemiologist, virologist, statistician and prophet? Which scientist or doctor is not secretly praying for a miracle? Which priest is not...secretly, at least...submitting to science? The virus has...struck hardest, thus far, in the richest, most powerful nations of the world, bringing the engine of capitalism to a juddering halt... The mandarins who are managing this pandemic are fond of speaking of war... But if it really were a war, then who would be better prepared than the US? If it were not masks and gloves that its frontline soldiers needed, but guns, smart bombs...fighter jets and nuclear bombs, would there be a shortage?... The tragedy is immediate, real, epic and unfolding before our eyes. But it isn’t new. It is the wreckage of a train that has been careening down the track for years... What is this thing that has happened to us? It’s a virus, yes. In and of itself it holds no moral brief. But it is definitely more than a virus... It has made the mighty kneel and brought the world to a halt like nothing else could. Our minds are still racing back and forth, longing for a return to 'normality', trying to stitch our future to our past and refusing to acknowledge the rupture. But the rupture exists. And in the midst of this terrible despair, it offers us a chance to rethink the doomsday machine we have built for ourselves. Nothing could be worse than a return to normality. Historically, pandemics have forced humans to break with the past and imagine their world anew. This one is no different. It is a portal, a gateway between one world and the next. We can choose to walk through it, dragging the carcasses of our prejudice and hatred, our avarice, our data banks and dead ideas, our dead rivers and smoky skies behind us. Or we can walk through lightly, with little luggage, ready to imagine another world. And ready to fight for it."

Soapbox address duly noted.

You want an unexpected consequence? How about farmers that can't get foreign workers fast enough to pick the crops? Just when you thought pandemics will close the border, the markets force it wide open. Even xenophobes suck it up unless they want hyperinflation or worse, starvation.

So, are you calling for double digit inflation or not? Will you be as short sighted as the US stock market was in mid-February when China C-19 cases had already gone exponential? Well? You saying the US will have 'teens inflation? Reader? Don't be either surprised nor say "I told you so" unless you place your mouth bet online.

Bonus trivia: it's not clear why the stock market historically does poorly in inflation; surely some companies can pass on costs to customers?

Take a look at replacement costs accounting.

In a high inflation environment firms use historic cost accounting in their pricing decisions. But with the costs of replacement capital goods this is inadequate and leaves them unable to finance future capital spending. This was a major issue in the 1970s and the firms that could turning to replacement cost accounting to assure they were really pricing to cover their true inflation adjusted expenses.

Pretty sure that if none of the newly unemployed millions of Americans decide not to pick strawberries that the result won't be starvation or hyperinflation.

A modern country should have its food picked by automated machine, not virus carrying day laborers that require federal assistance to pay for the education and healthcare.

Can you point to a modern country that fully automates their agriculture?

Apparently until now migrant labor has been the most cost-effective method. When I was a teenager working in the fruit orchards of central Washington state, I overheard the following from a young girl who was too young to pick but was supervising her brother while her father picked. “Daddy, hit Johnny with a pear! Hit Johnny with a pear!... Ouch! I said hit Johnny!” Dad should have been a pitcher rather than a picker. But such families didn’t require much remuneration ca. 1970.

The UK has solved the problem:

"Scottish fruit farmers have solved a recruitment crisis that could have resulted in this year’s harvest of strawberries, blueberries and raspberries being destroyed.

Several thousand people, including students and restaurant and bar workers laid off because of the coronavirus outbreak, have taken low-paid fruit-picking jobs in Tayside and Fife normally done by seasonal workers from Bulgaria and Romania."

Prior approval will be ecstatic to hear it. He does seem to worry so about the subject.

A friend grew up in Vietnam during the war. Once, when she was a small girl, the South Vietnamese army was parked on the road in front of the house, and the Viet Cong were in the trees behind the house. Still her dad, a stout anti-communist, thought it would be better if the armies did not have a battle right there. So he sent one of his older sons out to tell the commies to clear off, which they did.

Our pandemic might seem like a great tragedy to us, and it is something we can take seriously, but in the scale of things people have to live through it's not that large. We aren't living through Vietnam from the Vietnamese perspective. Nor Iraq from the Iraqi perspective. Nor Syria from the Syrian perspective.

But it is a taste of the human condition.

And in the best outcome we remember our humility and our humanity.

+1 Thoughtful post. We'll need to remember, when this is all done, that people are people, and life is messy. Appreciate what we have rather than what's lost.

Thanks. I think it was the Queen's Speech that put me in that mood. Good Speech.

Elizabeth Warren when discussing her wealth tax.

“ “Don’t worry too much about Bill Gates,” Warren’s website stated. “If history is any guide, if billionaires do nothing other than invest their wealth in the stock market, it’s likely that their wealth will continue to grow.”

Bill Gates is using his money to build vaccine testing and manufacturing facilities. Elizabeth Warren and you wanted to use his wealth to subsidize the university consumption of upper middle class families who could pay their own way.

Guess which one would be using the money better right now. Guess what senator still believes she would put that money to a better use today.


I agree with your criticism of Warren but anonymous was just adding some well intentioned historical perspective and context.

Clever bugger, Maynard Keynes. The fact that even he couldn't make a good job of macroeconomics means that it's most unlikely ever to come good as a discipline. Still, it's a nice little earner, eh?

Dear me, you do realize Keynes got rich from stock market speculation, so surely he must have sensed something about cycles? After Keynes first got bailed out by his father for going broke speculating. You need discipline to be a good trader, that, or a backstop like a rich father.

Brilliant. Someone mentions macroeconomics as an intellectual discipline and a Yank immediately refers to making or losing a fortune.

I recognized the paragraph literally before I finished the first sentence. I had forgotten who wrote it, and in fact, thought it was written in the late 19th century. The reason I remembered it, was because it was so surprising in a superficial way——superficial in the sense that few were rich enough to do what Lord Keynes said—-but still surprising—-because I like to write similar things about he 50s and 60s and not sure I would have captured all that Keynes did. Another funny “what if” game I enjoy is “would you rather be Uber-wealthy in 1900 or “50-95%” in 2020” . The year 1900 is my break even point——but might go further back in time.

Now I know why I thought it was written earlier—-Had not seen your real version first. Keynes was referring to an earlier point in time when he wrote it.

the great stagnation started 100 years ago!

Ventilator prototype by Tesla using widely available Model 3 parts. This is how yoy disrupt Medtronic

I hope nothing torpedoes this idea.

“Billionaires should not exist.” Bernie Sanders. Apparently, then ventilators and vaccines also should not exist.

I own a Tesla and like it. I would not want to be the first either on Elon's rocket to Mars nor his ventilator if I can help it. I hope both work out, though.

This is way out of place for this... but will you all do a post about the numbers today.

They are way out of whack. I think the CDC is starting to lie to us. And that is as sad of a conclusion as I have ever drawn about America. Purposeful lying.


We are China now. Horrible.

I'd look at this differently. The Chinese have dealt with nasty situations for years simply by disappearing people who make a fuss. It was and still is a habit. Why? Because it works. Except when something bigger comes along, like this virus. We know the rest of the story. They don't have accurate numbers for the simple reason that they couldn't count them, they couldn't collect the data from the various places it came from, and could barely control the monster that was about to consume their whole country.

So the lie isn't in the numbers, the lie is that the numbers have anything to do with any reality anywhere.

Same with the CDC. The protocols, policy papers, procedures and even what we call 'science' are all profoundly ill equipped to deal with this reality. It is happening too quickly, the stakes are too high. The answers are available when the questions are no longer relevant. You are 3 seconds into an 8 second bull ride and it is stomping on your head.

They aren't lying. They simply have no clue, and there isn't anyone who does have a clue. Decisions need to be made essentially based on a gut feeling. That gut feeling changes day by day.

The problem isn't the response. The problem is the vulnerability. The lie is that the world could be connected intricately and deeply where 3rd world public health practices would generate a virus. Or where intricate and exquisite mathematical formulas would give value to a mortgage issued to a guy who couldn't afford it. Or that the exquisite and complex web of travel ends up with two buildings at the center of a civilization being knocked over.

It isn't the data, it isn't the response. It is the vulnerability. Why is the world shutting down because some useless chinese apparat disappeared some non compliant doctor?

Speaking of New York, the handling of the virus has been so much worse there than anywhere else in America that it might be interesting to consider the tri-state area (NY, NJ, CT) as its own thing, and the rest of the nation as its other own thing.

The tri-state area currently boasts more deaths per million (165) than any country except Spain (270) and Italy (263). Belgium (125) and France (124) are the next two.

The other 300 million Americans are looking at 15 million deaths per million right now, worse than Canada (7) or Norway (13) but better than Germany (19). Pretty good company.

US deaths are growing faster than Europe, so these results might change, but this is what it looks like right now.

After a stunning series of bureaucratic bungles, the US is now the world leader in coronavirus testing. The tri-state area has tested almost 1.3% of its population. Only maniacal small, rich countries that were on it early like Luxembourg (3.8%), Norway (2.0%), and Switzerland (1.8%) have done better.

The other 300 million Americans have been tested at about a 0.5% rate, only half of Germany's number but almost twice the UK number. And of course testing will continue to expand in the USA.

the numbers in the USA look bunk today. So below the trend, I don’t think they are real anymore. I am questioning if we can trust our gov to put out real numbers anymore. Just look at them. They don’t fit the models. It’s hard to believe they are real.

Is Canada lying too?

No, Canada’s numbers are completely on trend. Their most recent growth factor (GF) 1.04. That’s perfectly on trend.

The US numbers are way way off trend. Like 3-5 weeks off trend. No way we hit a GF of 0.74 today. The April 5 numbers for the USA can’t be right. I guess I don’t know why, but they can’t be right. They are so off trend that I don’t buy them. Something is wrong about them.

Models are models. I don't know what model you are using, but given the massive uncertainty at the heart of handling exponential phenomenon and all the unknowns around this particular virus, I'd be a bit humbler about any model.

Huge parts of Canada are a lot like huge parts of the United States. Everything I'm seeing suggests that Canada is doing quite a bit better than the US, even if you exclude the tri-state tire fire.

How much better is your model expecting Canada to perform than the US hinterland and why?

That’s a good point. Models can be wrong but when they have been working well and suddenly on day looks crazy, it makes you wonder. After catching my breath, I’d venture more reasonably that yesterday’s new case data for the US was not done correctly on (worldometer at least).

Try something as simple as this yourself. Compute the daily growth factors and plot them. Explain how we go from trending between 1.15-1.05 the last few weeks, and suddenly hit 0.74 over night. If today’s numbers are right and that trend continues, this thing will be over in a week. It’s that big of a change. You just can’t see it by looking at the counts, you have to look at the ratio of the daily changes.

I see, you are making predictions from case trends. In a country that has been ramping up testing like the US, that tells you a lot about the trend in testing and only a little about the trend in infections.

Now that the US has largely caught up in testing, daily case trends will become more meaningful.

The trend in deaths is much better data, even if there have been shenanigans. The death pattern tends to be a few weeks of exponential growth, followed by a plateauing of around two weeks, then a decline.

Italy is farthest along this path and daily deaths have been trending down for more than a week. Spain was hit later and death growth numbers looked hella scary a week ago, but even they appear to have topped out now and daily deaths may be starting to decline there too.

Does your model include a prediction of what happens when you finally unwind from a backlog in testing? High case counts until the backlog is gone, then lower case counts after. What is the ratio of tests completed day over day?

Also I'm dealing with an issue like this at work right now. Upper management looks at daily numbers that are riddled with noise. The assumption is if the only thing they know about is *small input change X* yesterday that it must be responsible for *big output change Y* today. No, in this case, daily metrics are just noisy and are impacted by a dozen things we have bad visibility to.

I don't see a lot of point to making long-term forecasts, given uncertainty.

But there are a lot of natural experiments we can look to as we try to figure out how to re-open while containing the virus.

Japan is interesting to me. Very little testing, huge emphasis on bottom-up behavioral stuff, close schools but otherwise open for business, identify and jump on "hot spots" with isolation, quarantine etc. 77 corona deaths.

Sweden is also relying on bottom-up measures and limited testing and remains open for business. Their death numbers look worse than average among Europeans, but not (so far) in a running-away exponential way.

South Korea has been famously successful, they look like Japan but combined with widespread testing.

We need to remain shut down for another week or two and hopefully the first wave runs it course and we become habituated to the new behavioral regime.

Then the tricky part begins, but in the meantime we can learn from the pioneers. If Sweden makes it work, that's great news, if they blow up, we gotta figure out something else.

"the numbers in the USA look bunk today. So below the trend, I don’t think they are real anymore."

The confirmed infected numbers were expected to drop once the US caught up on testing. That's not surprising in the slightest.

Overnight?!!? Really. We just took a 4 week jump in slowing the spread. Suddenly overnight, we are 3-5 weeks ahead of where we were trending.

Could be noise, maybe today it will pop back up to trend. Or maybe not. Keep your pants on.

To explain, the trend we've been watching is the testing trend, where the US was behind in testing, so there was a large pool of likely cases that needed to be tested. The growth in confirmed infected was an artifact of expanded testing, not the actual underlying growth of the virus. At some point, as more of the population gets tested the two trend lines will merge.

If this were an artifact of testing, and if testing were increasing, the trend of the number of new cases would be going up. April 5 was a huge decrease in the trend of the growth factor. I mean huge. 3-5 weeks worth of decrease happened overnight in the face of more testing? I don’t think so. I think is a day of bad data. If not, it’s the best news since Christmas. We are officially out of the woods and at this rate, we will have zero new cases in about 2 weeks.

No, you are mistaking the testing pool for the general population. The trend line isn't necessarily downward. We just dropped from a case rich pool, to a pool that more closely matches the general population. It's possible that there could be an actual downward trend, but I would expect the trend line would start back upward from a lower base, assuming the virus population is still accelerating.

It's important to keep in mind, that this doesn't imply that the number of new cases per day is now headed downward, just that we are starting to see growth more closely correlated with reality. It's probable that the growth is positive. We just aren't testing as rich a pool of suspected cases.

The April 5 numbers suggest the was a huge decline in the growth rate of new cases. If the data are real, the us will have zero new cases by April 24th. I wish that were true. I hope it is. I just don’t think that rapid of shift in the spread of the virus could possibly happen in a 24 hour period.

I don’t think people realize how big of a difference small changes in the growth factor make. Over night, the date we hit zero new cases just shifted forward like 2-3 months. No way.

April 5 was a Sunday. Is it relevant that even in a crisis many city, county, state, and hospital administrators and bureaucrats still don’t work weekends? Maybe gaps in the data?

Curiously, the only other times the growth factors were below 1.0 in the US were on March 8th and 21st. The 8th was a Sunday, the 21st a Saturday.

Early on Birx said that she was getting data only once a week from Europe, as she said they were quite occupied at the moment.

What you are logging is reporting delays. Another change is that the testing is no longer all CDC, but there are many other people doing testing, each with their own reporting latency.

>They don’t fit the models. It’s hard to believe they are real.


New Orleans and Louisiana are not doing better than the tri-state region.

prior, is that you being an ass again?

I'm beginning to think that Skeptical has a point when he says you might be a misanthrope. Though, I still lean towards the old man with a bitter grudge, theory.

Not much daylight between misanthrope and old man with a grudge. It's not that complicated. prior is pure troll. Find something to annoy your audience and hit it, hard, relentlessly, with all the passive aggressive snark you can muster.

+1, yes that does sum it up.

To be fair, back a few years ago, prior was obsessive about GMU/Mercatus, etc but he still managed to post some good thoughtful comments about the topic at hand. Now he's probably 80%+ troll.

In terms of per capita deaths, Louisiana is on par with NJ (103), ahead of CT (53), and way better than NY (214).

They're all pretty bad, Mardi Gras timing was unfortunate, but NY has been by far the worst. They might catch Italy or Spain yet.

One big problem with NY is separating the city region from the rest of the state. However, this is the WSJ from April 4 - "The coronavirus is killing residents in southeast Louisiana at higher rates than in other parts of the U.S., a new analysis shows, adding urgency to efforts to slow its spread through an already unhealthy population."

And there was Pro Publica reporting was from March 21, describing the situation in one New Orleans hospital. It is completely unsurprising that NYC in particular gets all the attention, but what has been happening in New Orleans is quite comparable to those regions where covid19 spread during the Mardi Gras period.

There seems to be an almost willful ignorance on the part of some people to realize what is actually happening in the U.S. That Pro Publica starts this way - "I spoke to a respiratory therapist there, whose job is to ensure that patients are breathing well. He works in a medium-sized city hospital’s intensive care unit. (We are withholding his name and employer, as he fears retaliation.) Before the virus came to New Orleans, his days were pretty relaxed, nebulizing patients with asthma, adjusting oxygen tubes that run through the nose or, in the most severe cases, setting up and managing ventilators. His patients were usually older, with chronic health conditions and bad lungs.

Since last week, he’s been running ventilators for the sickest COVID-19 patients. Many are relatively young, in their 40s and 50s, and have minimal, if any, preexisting conditions in their charts. He is overwhelmed, stunned by the manifestation of the infection, both its speed and intensity. The ICU where he works has essentially become a coronavirus unit. He estimates that his hospital has admitted dozens of confirmed or presumptive coronavirus patients. About a third have ended up on ventilators.

His hospital had not prepared for this volume before the virus first appeared. One physician had tried to raise alarms, asking about negative pressure rooms and ventilators. Most staff concluded that he was overreacting. “They thought the media was overhyping it,” the respiratory therapist told me. “In retrospect, he was right to be concerned.”

Sadly, there is precisely zero reason to think that things have improved in New Orleans at this point, even if many seem to think NY is the center of America's pandemic.

The virus cares nothing about what we think about it. Or how some hospital admins seemed more interested in covering up what was going on.

Louisiana deaths per million are well below Belgium. Is Louisiana's experience being undercovered compared to Belgium?

Apparently, the virus has it in for

Keynes Derangement Syndrome was triggered by his prescience in The Economic Consequences of the Peace. Will the world repeat the post-WWI economic and military suicide pact? Trump and his sycophants are building the foundation for a global economic disaster and a global military disaster, just as the architects of the post-WWI peace.

Trump is doing his part, but sycophant Pompeo is leading the pack of imbeciles. And Pompeo thinks he is the natural heir to Trumpism and the likely successor to Trump. If one thought things couldn't be worse, consider President Pompeo. Tabarrok should complete his essay and, like Keynes, offer a prediction of the looming disaster if we adopt the Trump/Pompeo suicide pact.

Keynes, much like Hayek, is vastly overrated by his adherents, and rather underrated by his detractors.

rayward, you speak as though the entire planet is following Trump’s lead. Last week the narrative was that Trump is lagging the world’s lead. Which is it?

Whether Trump is too aggressive, or not enough, or too authoritarian, or not enough is like medical advice on eggs. They're good for you on Tuesdays, Thursdays and Saturdays, bad for the other days.

Reading this, one would think the subsequent period would have been characterized by dislocation, gloom and depression. That would be what is now known as the Roaring Twenties.

Well, sort of - does hyperinflation say anything to you? Or the Weimar Republic?

Britain’s 1920’s depression (The economic consequences of Mr. Churchill). And the Bolshevik Revolution or Central Europeans famines? The 20’s were a load of fun outside the US.

The Bolshevik Revolution, Central Europe famines, Britain depresssion (The economic consequences of Mr. Churchill), the impetus for the General Theory, ). And Weimar, Mussolini coming to power. Outside the US, the ‘20’s were such a load of fun that ended so well , even the for the US.

Looking back at all of history, is there any single tragedy or mistake greater than World War I? I don’t think so—in addition to being awful on its own terms, it led directly to communism, fascism, World War II, and more authoritarian politics even in democratic countries, and it arguably also caused the Spanish Flu, Japanese expansionism, almost a century of problems in the Balkans, and ongoing problems in the Middle East. That’s what happened when people discarded globalization in favor of chauvinism last time, and we should not do that again.

Ending the rule of the Kaiser, the Czar, the Sultan seems like a fairly positive thing. The old regimes were bad enough.

The emergence of Communist revolution in Russia and then its export elsewhere (no good thing) can be seen in terms of a consequence of war, but also as a long consequence of local inequalities, which the early heyday of globalization nourished. It could have quite easily happened without WWI.

What does proletarian internationalist class solidarity, the fundamental principle of the Russian revolution, come from, if not as a reaction to an international alliance of the bourgeois and the capitalist class? And what does globalization nurture, if not an international bourgeois-capitalist alliance in place of national fealty and loyalty?

The American mid-century, with its broad based nationalism, its broad based affluence, faith in national democracy and relatively closed migration, was a consequence of rejecting that global class solidarity between the working class that led directly to Communist revolution.

A slightly more optimistic take on the longer term future:

Asian countries have been burned with pandemics before. They have a culture of mask wearing and social distancing. It's not a big deal. Japan makes well over a billion masks a year and the average person uses 44 each year.

We're all probably wearing underwear made in China, global supply chains can easily supply masks for the bulk of the planet. Hospitals can convert to using PPE as normal procedure, not just when epidemics erupt. Stockpiles can easily be amassed privately and publically to carry the country thru multiple months of even higher use.

Ventilation systems can be improved, esp. in hospitals and areas with a lot of intense crowds. The economic cost of this is not all that great. The problem isn't the price it's the time, no one set themselves up to make a billion masks in a month.

Combine with surveillance for new viruses. Extra credit add in R&D for a universal flu vaccine, a common cold cure or vaccine and ways to accelerate the discovery and rapid manufacture of new vaccines.

After that most things will appear normal. People will be able to go out to eat, go to concerts, see movies. Even air travel will return (it's not like those things don't happen in S. Korea). Maybe cruises will vanish but then maybe not.

A time traveler beamed from 2019 to 2022 might be surprised at the mask wearing and non-hand shaking in the US but would find a lot of other things the same. He may notice commercial office space has more vacancies than he might have projected, might notice more people working from home but if he doesn't review headlines from the past year he might not see a huge change.

I think calling this the end of the neoliberal belle epoque are a bit overinflated.

We could add a note from Robert Graves, "goodbye to all that."

Comments for this post are closed