Month: May 2020

Friday assorted links

1. Paul Kedrosky assorted comments.

2. Thread on collider bias.

3. The Florida strategy.  Too early to say in my view, but still this piece is of interest.

4. “Magnus the platform” lets it rip.

5. America’s top spelling searches: in Virginia, they don’t know how to spell “Virginia.”  Recommended.

6. Volunteer history booming during the lockdown.

7. Mainstreaming Karl Marx.

8. Plexiglass vs. Plexiglas(TM).

9. The polity that is Dutch: grandmother ordered to delete Facebook photos.  At least they didn’t kill her.

10. A real smokescreen.  Really.

11. The new seroprevalence studies show relatively low rates of infection.

12. Fast Grants active at UC Berkeley.  Good coverage.

13. TreatEarly, a new biomedical initiative (possibly influenced by Fast Grants?), looks interesting note I have no direct knowledge of their work.

Alan Merten, RIP

Alan Merten, former President of GMU, has died after a battle with Parkinson’s disease. I got to know Alan just a little when we visited China together in 2008. Our visit was part of GMU’s 1+2+1 program in which students in China earned their degree by doing 1 year at a partner university in China, 2 years at GMU and then a final year in China. We were touring the partner universities to participate in their graduation ceremonies. It was a great trip. I visiting the Great Wall, stayed in a Hutong in Beijing, and visited Kunming in Yunan province.

I also found it exhausting as we traveled from graduation ceremony to graduation ceremony. One night at the beginning of another such ceremony I said to Alan “I guess your job is to go to a lot of these events” and he turned to me beaming and full of energy and said “Oh yes, I love seeing the students so happy and their parents so proud. It’s the best part of my job.” And he meant every word. I’ve never forgotten that. He was a good university president.

Income Share Agreements Looking Up

The Federal Reserve Bank of Richmond has a good piece reviewing income share agreements, aka income-contingent loans, including a timely example:

ISAs provide students with funding to cover their education expenses in exchange for a portion of their income once they start working. Under a typical contract, recipients pledge to pay a fixed percentage of their incomes for a set period of time up to an agreed cap. For example, a student who has $10,000 of his or her tuition covered through an ISA might agree to repay 5 percent of his or her monthly income for the next 120 months (10 years), up to a maximum of $20,000. ISAs typically also have a minimum income threshold before payments kick in; if the recipient earns less than the minimum, he or she pays nothing. This means that ISAs offer students more downside protection than a traditional loan.

This downside protection is what attracted Andrew Hoyler to Purdue’s “Back a Boiler” ISA program, which launched in the fall of 2016. Hoyler, who graduated from Purdue’s professional flight program in 2017, signed up for Back a Boiler in his senior year. He received $21,263 in reduced tuition and flight fees in exchange for agreeing to repay 7.83 percent of his monthly income for 104 months, or until he had paid back 2.5 times the amount he originally received. Now a pilot for PSA Airlines, a subsidiary of American Airlines, he has been making payments on his ISA for about 30 months.

…Hoyler is particularly grateful to have that safety net now, as the airline industry is being rocked by the COVID-19 outbreak. “The ISA is giving me a sense of relief. If I find myself furloughed, my payments stop with zero interest,” he says.

Interview with Josh Angrist

From the Richmond Fed Bulletin:

EF: You’ve looked at the question of how much peers matter. Many parents obviously seek schools where they believe their children will have higher-quality peers, whatever they may mean by that term. You and your co-authors have looked at Boston and New York City selective public schools, and you concluded that peer effects don’t seem to matter much. Why is that?

Angrist: I’m always beating that drum. I think people are easily fooled by peer effects. Parag, Atila Abdulkadiroglu, and I call it “the elite illusion.” We made that the title of a paper. I think it’s a pervasive phenomenon. You look at the Boston Latin School, or if you live in Northern Virginia, there’s Thomas Jefferson High School for Science and Technology. And in New York, you have Brooklyn Tech and Bronx Science and Stuyvesant.

And so people say, “Look at those awesome children, look how well they did.” Well, they wouldn’t get into the selective school if they weren’t awesome, but that’s distinct from the question of whether there’s a causal effect. When you actually drill down and do a credible comparison of students who are just above and just below the cutoff, you find out that elite performance is indeed illusory, an artifact of selection. The kids who go to those schools do well because they were already doing well when they got in, but there’s no peer effect from being exposed to higher-achieving peers.

We also have papers where we show that the elite illusion is not just a phenomenon relevant for marginal kids. This is in response to an objection that goes, “If you’re the last kid admitted to Stuyvesant, it’s not good for you because you’re not strong enough.” We can refute that with some of our research designs.

There are good stories and analyses throughout.

The Japan model

So what is the Japan model? First, it is a cluster-based approach, derived from a hypothesis obtained from an epidemiological study based on Chinese data and conducted on the Diamond Princess cruise ship that entered the port of Yokohama on February 3, 2020. This hypothesis accounts for the many passengers who were not infected with the coronavirus despite having had close contact with infected persons. It posits that the explosive increase in infected persons is a result of the high transmissibility of certain infected individuals, which forms a cluster. Infected individuals with even higher transmissibility appear from these clusters to form more clusters and infect many others. Based on this hypothesis, under the cluster-based approach, each cluster is tracked to the original infection source and persons with high transmissibility are isolated to prevent the spread of infection. For this reason, pinpoint testing is carried out and broad testing of the population is not required, in contrast to the approaches taken in other counties.

This cluster-based approach is conditioned on an environment in which there are only a few infected persons and clusters are detectable at an early stage. In February 2020, when the spread of infection was observed in Hokkaido, a cluster-based approach was adopted. As a result, Hokkaido was successfully able to contain its outbreak.

For the cluster-based approach to be effective, protective measures at airports and ports are important. Hokkaido has the advantage of being an island, making it comparatively easy to control the inflow of infected people. Behavioral changes are also required. On February 28, 2020, acting without legal basis, Hokkaido Governor Naomichi Suzuki declared a state of emergency and called on residents to refrain from going outside. Residents took the call seriously, and are responsible for the success of the cluster-based approach. Following its success in Hokkaido, the cluster-based approach was adopted nationally. On February 25, 2020, a Cluster Response Team was established in the Ministry of Health, Labour and Welfare.

Here is more from Kazuto Suzuki, with other points of note.

The economics of Covid-19 liability

The more you are interested in test, track, and trace, the more you should favor at least partial liability waivers for business, at least that is how I see it.  Here is an excerpt from a new paper by Daniel Jacob Hemel and Daniel B. Rodriguez:

Ex ante (before an exposure), the specter of liability generates incentives for businesses to take precautions that reduce the risk of virus transmission. Ex post (after an exposure), fear of liability may deter businesses from proactively informing customers and workers that they have been exposed to the virus through the business’s operations. The desire on the part of businesses to spare themselves from litigation may interfere with comprehensive contact-tracing efforts. To minimize the potentially perverse ex-post consequences of liability without sacrificing significant ex-ante benefits, the article proposes a limited safe harbor from liability for businesses that promptly contact customers and workers after learning about a possible exposure.

Again, here is my short liability study with Trace Mitchell of Mercatus.

Are faculty myopic?

Facing devastating financial losses related to the coronavirus pandemic, colleges and universities are cutting costs just about everywhere they can. Increasingly, that includes faculty and staff retirement benefits.

Duke, Georgetown, Northwestern and Texas Christian Universities are some of the institutions to announce cuts to retirement contributions in recent days. Some of these decisions have been more severe and more controversial than others…

Georgetown president John J. DeGioia also announced that the university will suspend all contributions to its employee retirement plan for the coming year, starting next month.

Does this mean they think their faculty are myopic, and also liquidity-constrained low savers?  Are the faculty myopic?  Especially if faculty are myopic, isn’t this worse for faculty welfare than just cutting nominal wages a bit?  What would Cass Sunstein say?  How should we model this response in terms of an underlying dynamic for admin.-faculty relations?  If this “works,” what will the next move of admin. be, with or without coronavirus in the world?

What might this possible myopia imply about the associated defects of faculty research and teaching?

I thank Bryan for an underlying conversation relevant to this post.  Here is the full article.

Thursday assorted links

1. The coffin culture that is Peruvian municipal politics.

2. Carmen Reinhart named new World Bank Chief Economist.

3. The Georgia reopening seems to be going OK.

4. New essay by Deirdre.

5. Amateur archaeology from home during the lockdown.

6. The declining middle class and yes based on consumption data.

7. Economic Development in Puerto Rico after US Annexation: Anthropometric Evidence.

8. “I’m thrilled to announce a new online learning program in progress studies for high school students: Progress Studies for Young Scholars.”  Link here.

How will Fairfax County evolve?

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

The immediate future of my region thus appears to be a major demand shock to the stores, acceptable continuing employment for the upper middle class, and economic devastation for lower-income individuals. The traditional mix of government-connected employment and retail will swing heavily in the direction of government. In essence, the federal government will pay its employees to click on Amazon while working from home.


The ethnic dimension of Covid-19 in Fairfax County is especially noteworthy. Latinos make up 16.8% of the county’s population, but account for 62.7% of the diagnosed Covid-19 cases. And if you assume that perhaps lower-income Latinos are less willing or able to go to a doctor, the true percentage of the Latino cases may be higher yet.

I thus foresee a future where people are more reluctant to hire Latino immigrants for housework or for child care, and thus additional home responsibilities will fall on parents, probably disproportionately on women. In turn, I expect many Latinos to leave the area, at least temporarily, unable to afford the higher rents when there is little work. There may also be greater employer discrimination against Latino applicants, as unfair or unjust as that would be.

Those developments will lead to Fairfax County becoming whiter. (If you are wondering, blacks are a slightly lower Covid-19 case share in the county than population share).

Recommended, for all those who care.

My (second) Conversation with Paul Romer

Interesting throughout, here is the audio and transcript.  Here is the summary:

Paul Romer makes his second appearance to discuss the failings of economics, how his mass testing plan for COVID-19 would work, what aspect of epidemiology concern him, how the FDA is slowing a better response, his ideas for reopening schools and Major League Baseball, where he agrees with Weyl’s test plan, why charter cities need a new name, what went wrong with Honduras, the development trajectory for sub-Saharan Africa, how he’d reform the World Bank, the underrated benefits of a culture of science, his heartening takeaway about human nature from his experience at Burning Man, and more.

I liked the parts about charter cities and the World Bank the best, here is one excerpt:

COWEN: How optimistic are you more generally about the developmental trajectory for sub-Saharan Africa?

ROMER: There’s a saying I picked up from Gordon Brown, that in establishing the rule of law, the first five centuries are always the hardest. I think some parts of this development process are just very slow. If you look around the world, all the efforts since World War II that’s gone into trying to build strong, effective states, to establish the rule of law in a functioning state, I think the external investments in building states have yielded very little.

So we need to think about ways to transfer the functioning of existing states rather than just build them from scratch in existing places. That’s a lot of the impetus behind this charter cities idea. It’s both — you select people coming in who have a particular set of norms that then become the dominant norms in this new place, but you also protect those norms by certain kinds of administrative structures, state functions that reinforce them.

And this:

COWEN: If you could reform the World Bank, what would you do?

ROMER: Oh, that’s an interesting question. I think the Bank is trying to serve two missions, and it can’t do both. One is a diplomatic function, which I think is very important. The World Bank is a place where somebody who represents the government of China and somebody who represents the government of the United States sit in a conference room and argue, “Should we do A or B?” Not just argue, but discuss, negotiate. On a regular basis, they make decisions.

And it isn’t just China and the US. It’s a bunch of countries. I think it’s very good for personal relationships, for the careers of people who will go on to have other positions in these governments, to have that kind of experience of, basically, diplomatic negotiation over a bunch of relatively small items because it’s a confidence-building measure that makes it possible for countries to make bigger diplomatic decisions when they have to.

That, I think, is the value of the World Bank right now. The problem is that that diplomatic function is inconsistent with the function of being a provider of scientific insight. The scientific endeavor has to be committed to truth, no matter whose feathers get ruffled. There’s certain convenient fictions that are required for diplomacy to work. You start accepting convenient fictions in science, and science is just dead.

So the Bank’s got to decide: is it engaged in diplomacy or science? I think the diplomacy is its unique comparative advantage. Therefore, I think it’s got to get out of the scientific business. It should just outsource its research. It shouldn’t try and be a research organization, and it should just be transparent about what it can be good at and is good at.

And toward the end:

COWEN: Last question thread, what did you learn at Burning Man?

ROMER: Sometimes physical presence is necessary to appreciate something like scale. The scale of everything at Burning Man was just totally unexpected, a total surprise for me, even having looked at all of these pictures and so forth. That was one.

Another thing that really stood out, which is not exactly a surprise, but maybe it was the surprise in that group — if you ask, what do people do if you put them in a setting where there’s supposed to be no compensation, no quid pro quo, and you just give them a chance to be there for a week. What do they do?

They work.

For purposes of contrast, here is my first Conversation with Paul Romer.

Wednesday assorted links

1. How much do you need in the way of masks to stop an epidemic?

2. Robot dog herds sheep on a New Zealand farm.

3. Community labs and DIY biology (New Yorker, interesting piece).

4. John Cochrane talk on reopening.

5. Are airplanes actually pretty safe for Covid-19 risk?  (Not endorsing this piece or offering it up as advice, I do not myself know one way or the other.  Any opinions here?)

6. “More generally, the entire Yemeni monetary system has split on the basis of banknote age.”  The older notes of course no longer can be increased in supply and thus, if priced separately, are more stable in value.

7. Sweden is not getting to herd immunity very quickly.  This also seems to imply Swedish policy does not matter very much.

8. On the clustering of coronaviruses, recommended, important.  And more here.

9. How Hong Kong avoided nursing home deaths.

Incentivizing Plasma Donation for Convalescent Therapy

Kominers, Pathak, Sonmez, and Unver apply market design tools to incentivize convalescent therapy:

COVID-19 convalescent plasma (CCP) therapy is currently a leading treatment for COVID-19. At present, there is a shortage of CCP relative to demand. We develop and analyze a model of centralized CCP allocation that incorporates both donation and distribution. In order to increase CCP supply, we introduce a mechanism that utilizes two incentive schemes, respectively based on principles of “paying it backward” and “paying it forward.” Under the first scheme, CCP donors obtain treatment vouchers that can be transferred to patients of their choosing. Under the latter scheme, patients obtain priority for CCP therapy in exchange for a future pledge to donate CCP if possible. We show that in steady-state, both principles generally increase overall treatment rates for all patients|not just those who are voucher-prioritized or pledged to donate. Our results also hold under certain conditions if a fraction of CCP is reserved for patients who participate in clinical trials. Finally, we examine the implications of pooling blood types on the efficiency and equity of CCP distribution.

The idea is quite similar to the “no give, no take” rule for organ donation that I have promoted for many years. Namely, if you don’t sign your organ donor card you go to the back of the queue should you ever need an organ donation. Israel adopted the idea some years ago by giving points to people who signed their organ donor card. As with no-give, no-take, the point of the rules that Kominers et al. promote isn’t fairness per se but rather as an incentive to increase donations and thus increase the supply of plasma.

Covid career advice for young workers

Given COVID-19 and its accompanying economic issues, what do you think people in their early-mid 20s should be doing or thinking about right now in terms of saving, spending, career planning, etc.? What’s overlooked or wrong in the most obvious or common advice? (I.e., “sit tight”, “spend some money at local businesses”, “give to charity”, “learn a new skill”, etc.) Obviously, employment status matters and different skillsets, talents, etc. affect what one can and should do. Candidly, I’m not sure how best to disaggregate young workers in relation to my questions.

That is an email from Gregory Irving.  I am not sure my point here is “overlooked,” but if I had to offer one piece of advice it would be this:

“Right now it is harder than usual to build out your “soft network” of acquaintances, loose ties, and other people who could help you or become your future partners.  You just can’t go out and meet people in the old ways.  Yet in spite of this greater difficulty, virtually everyone’s allocation of time has shifted pretty dramatically.  So there ought to be entrepreneurial opportunities to build up soft networks in ways that would not have been possible pre-Covid.  Try to take advantage of those opportunities.”

What do you all say?

The new economics of chess

I just finished watching one of’s Magnus Carlsen-affiliated rapid on-line chess tournaments, when today (a day later?) I see that another tournament has started.  And with Magnus himself playing, as well as other world-class players.  Note that Magnus both plays in these tournaments as the #1 attraction, and he owns an equity share in them, albeit with other investors.

So I’ve been trying to model the production of chess services in my mind.

I start with the point that viewers care much more about live, fresh games than games from a week ago.  Many sports of course operate on this same basis.

The second point is that most chess players have a relatively low opportunity cost of time, Rogoff and Kasparov excepted, plus some chess players can substitute into poker for profit (and may have quit chess already).  In fact what they do in their spare time is to…play chess!  Often with each other, and often on-line.  So if you offer to pay them some amount for doing basically the same, they will sign up.  Especially during a pandemic when many of them are trapped under relatively severe quarantines.

It is also the case that a chess player can play many days in the year, perhaps not every day, but you really can play a lot without tearing your rotator cuff.

It then seems the equilibrium is a much higher supply of chess tournaments, especially since on-line play removes some of the previous barriers to entry, such as needing a venue and some physical infrastructure.

You might even end up with a kind of Malthusian equilibrium, where the supply keeps on expanding to meet a fairly low marginal cost.

But this is a “superstars” kind of competition, and so the returns will go to the scarce factor.  That scarce factor is Carlsen himself, who garners far more attention than any other player.  And as noted he is an equity holder in this venture and as a player he has been winning the #1 prize money.  Over time, you might expect the returns of some of the other players — maybe in the top ten but not so famous or glamorous — to approach the Malthusian level.  Perhaps much of the public doesn’t care if Magnus plays #9 or #16, who in any case are only a small number of rating points apart.

Notice how well Magnus Carlsen understands reputation and internet production.  He keeps on posting “Banter Blitz” videos on YouTube, which show him playing speed chess on-line and commenting on the games as they proceed.  He dramatically expanded the supply of chess tournaments, which he earns income from.  He already was “the scarce factor,” and he has dramatically expanded the supply of attention aimed his way.  He understands that successful internet production is frequent production.

On-line chess viewing is way up (NYT) with the pandemic, and also because of these efforts.

Do not underestimate Magnus Carlsen.  He has been #1 in classical chess, rapid, and blitz, all at the same time.  He is a huge YouTube star in chess.  He has won a tournament about chess trivia, and he has been #1 in fantasy football for the whole world (not an easy feat).

And now he is bringing an economic revolution to chess, with himself as the #1 labor and equity earner at the same time.

Will Covid-19 expose the ghost firms?

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

Demand for in-restaurant dining is likely to fall as well, though estimates vary. Since the average small business carries less than a month’s worth of liquid reserves, and the wait for a vaccine is likely to be at least a year, many restaurants will simply be unable to survive the shrinking of the market.

I call these places ghost restaurants because they are still walking around, so to speak, visible to us and listed on Yelp, but not really alive and without much of a future.

In a few months’ time, a significant number of these ghost enterprises will be gone. My drive around Northern Virginia, rather than being rich with culinary choice, will soon become fairly desolate — and the overall economic landscape will indeed be much emptier.

What else in our current capital structure might qualify as “ghost”?

And this:

And while an all-but-certain death awaits some businesses, others can look forward to mere stagnation. If you are a 23-year-old entrepreneur, how easy will it be to build up the network of “soft ties” that will help you launch the next phase of your career?

As many marginal businesses are going under, it is quite possible that the public-health situation will improve. Civic spaces will repopulate as commercial ones depopulate, giving urban landscapes a confusing feel. And because there will be fewer businesses to choose from, it will be all the harder for those remaining to enforce social distancing.

Many Americans have been clamoring lately for more freedom, and those desires are understandable. But as they emerge from lockdown, they might well be disappointed to discover that, above all else, what people will be exercising is the freedom to go out of business.

If you start by using the word “ghost” (better than zombie, in this setting), don’t be surprised if the column turns out a bit gloomy!