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.

Comments

'many people dismissed the threat by thinking that we were somehow different'

Yet it does appear the U.S. is different - only one country is cutting the wages of its medical personnel in the middle of a pandemic. Which may be precisely the sort of savings to avoid, as an economist would point out. marginalrevolution/2020/04/why-is-physician-pay-being-cut-in-a-crisis.html

Providing an exceptional once in a lifetime insight into a truly unique system is not exactly the sort of thing one expects in a pandemic, but as the tide goes out, you see what is left on the mudflats.

You realize you are pointing to a small example and extrapolating to an entire country?

Not to mention, reading through the information there will actually point to you exactly why this is happening.

The troll is certainly correct that US health care capacity has proven far more robust than was predicted.

It's worth remembering that the troll was one of those predicting that the US healthcare system would be overwhelmed, and I suspect we'll never see him reflect on why he was wrong. That's why he's a troll, after all.

If there was different leadership at the highest levels, those leaders would be singing the praises of how emergency and cute healthcare has responded to everything that has happened.

However, since the national media has become so White House-centric, there has not been enough reporting on how people at much lower levels have dealt with problems and issues.

Just maybe wait a week or two before being so confident that the American health care system is up to the challenge. If NY, population 20 million, was seen in isolation, its numbers of dead is higher per capita than Italy's, population 60 million. As of today, that is.

And American testing is about 7,191 per million, compared to Italy's 14,114. Testing in NY is much higher, which simply means the average other places is must lower - Maryland's is 6,918 and Virginia's 4,214 even though their region is expected to be a hot spot in the near future. Meaning that the proper focus of testing before the pandemic starts to overwhelm medical facilities, that is, finding out who needs to be isolated, and tracking their contacts, is not being performed in a manner to keep spread as low as possible.

Worldometer is truly useful when making comparisons, and with a bit of memory, also comparing commentors here who were talking just a short week or two ago about how Spain, Italy, and France were definitely declining.

The truly sad thing is that NY has more confirmed cases, today, than Italy - absolute, not per capita. That is not the sign of a well functioning public health system, unless one would also think that an equivalent of almost a half million confirmed cases in Italy was the sign of a well functioning public health system.

"The troll is certainly correct that US health care capacity has proven far more robust than was predicted."

He's not really saying that, he's making a passive aggressive comment and is clearly hoping that the US healthcare system will fail with lots of suffering, so he can smugly tell everyone he was correct.

Look at his response:

"Just maybe wait a week or two before being so confident.."

'is clearly hoping that the US healthcare system will fail with lots of suffering'

Nobody is hoping that lots of people will suffer, much less die, anywhere. But after listening to Italian and Spanish leaders talk about how things were improving starting a couple of weeks ago, it might make sense to wait a week or two to see what is happening just in NY, much less the entire U.S.

Looking at www.worldometers.info/coronavirus/ just once a day for several countries provides the data to contrast with whatever hopes politicians are expressing in the middle of a pandemic in their countries. Hope is not a bad thing, as long as it does not cloud the data.

Italy's new case number today is still higher than on March 13, and its death rate remains higher than since March 17. Spain's comparable numbers are since March 22 for under 4000 new cases and under 400 deaths.

Sadly, till now, there is nothing to suggest that NY is doing a better job than either Spain or Italy, and it makes absolutely no difference what anyone feels about it. The numbers will tell the story of what happens in each region and country, numbers that will reflect the horrible cost of a pandemic. And unlike many commenters here seem to do, that cost is not measured in money, but in suffering and death, country after country in turn. One can hope that Australia and New Zealand will learn from the failures in China, Europe, and the U.S., since we are running out of rich countries able to take the necessary precautions in time to stop a pandemic disaster.

"Savings also follow an exponential process, . . . ." Unfortunately, down as well as up. "[S]tart saving early in order to capture the big gains in your 50s and 60s as you approach retirement." What about someone in his sixties today who did invest the big gains in his 50s and 60s only to see the big gains vanish like a fart in the wind? Does he get a do-over, continuing to work into his 70s and 80s to replace the big gains that vanished today? Indeed, will he have no choice but to continue working into his 70s and 80s because funding for social security (and for government sponsored programs generally) will be as broken as his worn-out body?

That depends... the S and P 500 as it about the same level as the fall of 2017. This shouldn't be making a huge impact (just a small one) on the decision to retire. The returns over the past 30 to 40 years (or just the past 10) have been very good even accounting for the recent downturn. Your hypothetical retiree is doing just fine if she was diligent about saving to begin with.

That depends on sequence of returns risk. Suppose your best earning years were 2017-2019 and you were putting a lot of money into the markets then; in that case your portfolio probably isn’t looking too great. The S&P 500 over the last 10 years also strongly outperformed other indexes; investors who were more diversified into small-caps or foreign stocks would not have such good returns.

This really shouldn't be affecting near-retirees that much. They might put off retirement 1 or 2 years (not 10 or 15). They should have been putting money in for more than the past two years. If they weren't, they aren't near ready to retiree anyway or they were just planning on social security to make up the bulk of their income (in which case they are relatively unaffected).

I don't want to go all evolutionary psychology on you, but I still think a lot of it is just "danger far away."

For much of human history, if we had the ability to worry about problems, we didn't want to paralyze ourselves worrying about ones that were far away.

It's kind of a long odds thing that a problem far away does show up on our doorstep. Usually we have closer rational concerns.

And yet here it is.

Zoom bombing market fundamentalism in a time of public health and economic crisis: https://www.washingtonpost.com/outlook/2020/04/10/covid-19-is-exposing-market-fundamentalisms-many-moral-practical-flaws/

Ha! "New York is not different" ...."South Korea is different" ....Tyler - South Korea is not different! A bit fortunate that the first outbreak was in a tightknit cult, but not different.

I think the data on number of cases and deaths between NYC and S Korea kind of show that NYC and S Korea are, indeed, different.

It even shows that Italy and NYC are different - and that the Italians are doing a better job, even without having the benefit of watching how the pandemic works, like NY did,

In this thread prior_approval compares the densest city in the US to the nation of Italy

Milan - population density 20,000/sq mi, Italy 521.4/sq mi
NYC - population density 27,751/sq mi, NY 416.42/sq mi

Does not seem all that overwhelmingly different, actually. Especially since Milan is notably denser than another major European urban hot spot, as Madrid's density is 14,000/sq mi. Paris however has a bit less than twice the density of NYC, with 53,000/sq mi.

Well, it's dubious to compare a city to a country or combine cities into a single number ... The UP in Michigan is doing fine so far ... Detroit, not so much.

65% of cases in S. Korea were in Daegu. 66% of all cases in Daegu were in a single church. S. Korea got fortunate. Japan was probably not testing to keep the Olympics.

Tyler should listen to himself.

Other cities in S. Korea, Japan, ect. will all have the same issues as NYC, or this virus isn't as contagious or deadly as is claimed.

There's no reason the virus couldn't have spread out from the church group much more than it did (or , so maybe S. Korea's response was just more effective. And let's not move the goal posts once confronted with the data. You said "South Korea is not different."

Yo! I admit as a Boomer I had to Google this on Bing.com (MSFT has been good to me and my 1% family, they are still at Dec 2019 levels, amazing):

“Zoom Bombing” is a slang term that describes a meeting being invaded by disruptive people who are taking advantage of lax or default Zoom security settings and flooding the meetings with obscene and annoying rhetoric.

Some find libertarian economics obscene. I know I for one do.

You just blog bombed!

You don’t get many attempts at retirement so you need to use theory rather than experience.

That's the "modeling" tactic that's being used to predict the future for all sorts of things since computers have been used to crunch increasing numbers. That was the methodology that gained international acceptance of the idea that flourocarbon refrigerants were destroying the ozone layer and forcing southern Argentine children to stay home from school while their parents' sheep staggered about the pastures blindly. We've heard zero about that since the day the Montreal Protocol was passed. "Modeling" has since led to the AGCC crisis, predicting a devastating destruction of glaciers and a rise in sea levels that will rapidly inundate New York, Miami, maybe even parts of Denver.

Sure, we all must make daily assessments of the future and how we should prepare for it. We make models in our own minds of the best plan. The plans now being advocated don't actually endorse savings but instead "investment". Savings would, as is pointed out in the case of the short-sighted Japanese, stifle investment and negatively affect the "consumer" economy. A model others should abhor. Instead invest a portion of your income, perhaps in shares that include Discovery Channel, whose CEO, David Zaslav, was rewarded with a compensation package for 2018 valued at $129,449,005.

Random thought: It would be great if public intellectuals were more inclined to analyze their errors with a level of depth equal to or greater than that of their predictions. It would be great to see more "What I got wrong and why posts" in the world.

I won't go as far as to say that most are loath to admit when they got something wrong, but I do think most have a bad habit of speeding right past their errors while on their way to their latest prediction.

There has been a fairly significant amount prognostication on this site as of late, and that's great. I just hope the retrospective analysis is as thoughtful and earnest as the predictions have been.

The general tenor one sees these days is, "if the facts don't match my predictions, that's an indicator of the success of my suggested policies."

Good god, man. The only people *to* listen to are the ones that roll with new data.

The Fed has been dumping an enormous amount of liquidity into the stock and bond market and, not surprisingly, it's had it's intended effect: stopping the collapse in stock and bond prices and recovering part of what's been lost. Alas, home owners aren't so fortunate. Of course, home owners don't know that home prices are collapsing, which is part of the reason why the Fed focuses on stocks and bonds rather than home prices. It will be a repeat of 2008-09 but worse, the effect of which will be a huge financial hit for the middle class, prompting another round of an increase in wealth inequality, resentment among middle class home owners, and a further political shift to the right among the white working class. Groundhog Day!

Shouldn't that lead to a shift to the left though instead?

The direction populism draws people is difficult to predict: some are drawn to the right, some to the left. Scapegoating is often the lure for the right (Rene Girard again). It was during the Great Depression and it was during the Great Recession. Today's crisis will likely be far worse than the financial crisis of 2008-09 and the Great Recession, and home owners will likely fare far worse. In the Great Recession, "elites" were the scapegoat. Who is the scapegoat for a pandemic? Of course, one can see who will be the likely scapegoats: the Chinese, the "elites" who are responsible for shifting production to China, the "experts" in government who are on a mission to undermine Trump, the naysayers who deny the splendid job done by Trump in an attempt to undermine Trump. Those drawn to the left will likely include younger adults, who are suffering economically more than other age groups. As for seniors, a reliable voting block for Republicans, how will they respond when entitlements are cut due to massive government debt incurred during this crisis? If Biden is elected, he will be blamed, just as Obama was blamed for a crisis not of his own making. If Trump is re-elected, I can't see seniors blaming him: Trump is a demagogue, very good at scapegoating others. All things considered, I foresee a populist shift to the right and even more strain on our already strained political system.

rayward, re: scapegoating being the domain of the right:

can you point to a left-wing ideology that does not scapegoat (((The Rich))) or (((Billionaires))) or (((Millionaires)))) ?

Pretty hypocritical, considering the long-standing right-wing denunciation of (((academia))), (((cultural elites))), (((Hollywood))), (((the media))) and (((George Soros))). Scapegoating is not exclusive to the right but it is clearly a favored pass-time.

Ok maybe...on the other hand it seems that trump's supporters are mostly in the 50-64 range (according to a recent poll), so they might turn on him if he doesn't deliver in terms of getting the economy back on track... also, immigration cannot be really blamed for the virus, otherwise one must also blame travel in general, which is more difficult obviously... anyway what I'm seeing currently is a shift back to (broadly) centrism, let's see if it lasts...

"You don't get many attempts at retirement so you need to use theory rather than experience."
Start by looking at the experience the older are suffering in Venezuela.

Students. Does the capacity to learn from others’ mistakes, if well- and consistently-employed, prompt exponential growth? Discuss.

I don't suppose so; the breadth of mistakes you encounter diminish since many people make the same ones over and over again, for they're themselves poor at learning from others' mistakes.

"Most people learn, if they learn at all..."

More dripping condescension from the MR crew.

>Why has the response to coronavirus been so poor?

In the USA, the response has been excellent.

What country are you talking about?

Yeah right... not sure what makes you think that?

What about the response has been bad? Once the bureaucracy of the CDC and FDA was cut through, the Feds have done pretty okay. State by State and city by city it has differed.

Admittedly, NYC and SF had terrible responses - as late as Mid March or late February still advising people to go party and stand strong...

But the television ratings!

The "bureaucracy of the CDC and FDA" is what made the response so bad. In a problem where acting early pays off more than acting late, you can't make up for early failings by later successes. The US was not testing people when everybody and their dog was talking about confirmed community transmission in NYC and the west coast, and (if I remember correctly) large parts of Europe were already in lockdown. Sure, the US eventually responded well, but saying "the US response was excellent, except for the one horrific failing in the beginning that went on for ages" doesn't really cut it....

.... Yes, that was clear from my message.

We basically need to frequently refresh our Federal Agencies. The same bureaucrats in the CDC and FDA that bungled swine flu also bungled COVID, they will bungle the next one. Either privatize or begin a process of regular Federal Layoffs to eliminate the bureaucracy and the red tape.

If you've ever worked in a federal agency there is a reason the response is always the same to a crisis - the same bureaucrats will work there for 35-40 years making the same bad decisions, using the same awful processes and rules.

You don't have to like Trump (actually, you can hate Trump and still realize it) to recognize that deregulation and regular layoffs are the only way to fix the federal government.

Not sure how that follows? Seems like your ideology convinced you of that rather than facts...?

Well compared to the East Asian countries, the US response was quite bad.
Compared to other Western countries, the US response was mediocre, maybe in the lower half...

Another great post - good treatment of the (tricky) material, and better illustration on how to convey it. Thank you, twice!

"If you act early and stop just one doubling, you prevent 500,000 people from being infected."

That's a shocking statement. The "500,000" people would simply be effected in the next time period. What were you attempting to teach the children?

We really don’t have a good economic theory for rare events. It requires some imagination. Supposedly the national pandemic equipment stockpile such as we had one came started when Bill Clinton read a novel about a fictional global pandemic.

Alex, Please don't zoom bomb. I know, you said you were invited.
When my daughter's teacher can't positively ID everyone in the on-line class, they have to shut it down and start over. Wasted time for everyone....

Alex: "you want to start saving early in order to capture the big gains in your 50s and 60s as you approach retirement"

This seems dubious to me, if by "saving" you mean conventional things like putting money into mutual funds, and by "early" you mean your 20s.

Someone in their 20s has more important things to spend money on. Education. Experiences that will point them to what they want to do in life. Social activities, including ones that help them find a spouse. These are "investments" of a sort, of course, but ones with far higher returns than mutual funds.

Any savings they do should go into reasonably stable and liquid investments, so that they provide an emergency fund.

Why has the response to coronavirus been so poor? Exponential growth, rare events, and the necessity of using theory instead of experience.
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Exponential growth is a disequilibrium condition. True, but the significance of it I have not looked closely. The problem is time, banks who insure time are insuring against a disequilibrium condition that may happen.

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