Month: October 2020
Zachary is first and foremost the author of the New York Times bestselling The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes. Here is part of a broader bio:
Zach Carter is a senior reporter at HuffPost, where he covers economic policy and American politics. He is a frequent guest on television and radio whose work has appeared in The Washington Post, The New Republic, The Nation, and The American Prospect, among other outlets. Zach began his career at SNL Financial (now a division of S&P Global), where he was a banking reporter during the financial crisis of 2008. He wrote features about macroeconomic policy, regional economic instability, and the bank bailouts, but his passion was for the complex, arcane world of financial regulatory policy. He covered the accounting standards that both fed the crisis and shielded bank executives from its blowback, detailed the consumer protection abuses that consumed the mortgage business and exposed oversight failures at the Federal Reserve and other government agencies that allowed reckless debts to pile up around the world. Since joining HuffPost in 2010, Zach has covered the implementation of the 2010 Dodd-Frank financial reform law, political standoffs over trade policy and the federal budget, and the fight over the future of the Democratic Party. His feature story, “Swiped: Banks, Merchants and Why Washington Doesn’t Work for You” was included in the Columbia Journalism Review’s compilation Best Business Writing.
So what should I ask him?
Alex is very very highly rated by those who know him, but still in the broader scheme of things significantly underrated as a Bay Area tech and finance thinker. Here is Alex on SPACs:
If the best fundraise (IPO included) aggregates as many potential buyers as possible to raise money at the highest price with the least dilution and lowest fees, it’s hard to understand how a SPAC represents an improvement against those constraints. When a SPAC merges with a target (“de-SPACs”), it’s tantamount to an IPO. The SPAC (already publicly traded, with lots of cash on its balance sheet) and the target company agree on a pre-money valuation for the target; the money sitting in the SPAC becomes the “money raised” (IPO equivalent) with typically a PIPE (Private Investment in Public Equity, a further institutional fundraise / large block sale) done at the same time. As an example, a $500M SPAC might merge with a private company, ascribing a $4.5B valuation to the private company, meaning a $5B post-money valuation of the combined entity. How do we know *this* is the fair price? Should a company meet with one SPAC? Two SPACs? Three SPACs or four? Where is the price discovery?
And while the fee structure of SPACs will likely change, right now it is indisputably a more expensive option with less price discovery. Bankers are paid 5%+ for taking the SPAC public; SPAC investors typically get warrants with their investment; the SPAC sponsor typically gets 20% (of the pre-merger value of the SPAC) for finding a target, so 2% in the above example; a banker is normally hired and paid to handle the merger; a mini-roadshow happens to get approval from the SPAC shareholders AND to potentially secure more cash in the form of a PIPE, for which a banker is also paid.
Most of the post is on why IPOs are less inefficient than you might think, informative and interesting throughout.
1. Belief in ghosts.
4. Logistical problems with monoclonal antibodies (NYT, good to see the debate shifting at least toward making them work). C’mon people, let’s not screw up this one!
5. “[Hospitalized] Patients in the study had a 25.6% chance of dying at the start of the pandemic; they now have a 7.6% chance.” This is the sector that is performing well.
Self-recommending, here is the transcript, audio, and video. Here is part of the summary:
Michael joined Tyler to discuss the intellectual challenge of founding organizations, applying methods from behavioral economics to design better programs, how advanced market commitments could lower pharmaceutical costs for consumers while still incentivizing R&D, the ongoing cycle of experimentation every innovator understands, the political economy of public health initiatives, the importance of designing institutions to increase technological change, the production function of new technologies, incentivizing educational achievement, The Odyssey as a tale of comparative development, why he recently transitioned to University of Chicago, what researchers can learn from venture capitalists, his current work addressing COVID-19, and more.
Here is one excerpt:
COWEN: I’ve seen estimates — they’re actually from one of the groups you founded — that a deworming pill could cost as little as 50 cents a year per person in many parts of Africa. So why isn’t deworming done much more?
KREMER: You could say the glass is half empty, you can say it’s half full, or you can say it’s almost three-quarters full. I think it’s about three-quarters full. When I first got involved in deworming, it was testing a small NGO program. We found phenomenal effects of that. The original work found health gains and education gains. Now we’ve tracked people over 20 years, and we’re seeing people have a better standard of living or earning more.
Following the early results, we presented the results of the government of Kenya to the World Bank. Kenya scaled this up nationally, in part with assistance from the World Bank, primarily just in conveying some of that information.
Indian states started doing that, and then the national government of India took this on. They’re reaching — a little bit harder to know the exact numbers — but probably 150 million people a year. Many other countries are doing this as well, so it’s actually quite widely adopted.
COWEN: But there’s still a massive residual, right?
KREMER: That is for sure.
COWEN: What’s your best explanatory theory of why the residual isn’t smaller? It would seem to be a vote winner. African countries, fiscally, are in much better shape than they used to be. They’re more democratic. Public health looks much better. The response to COVID-19 has probably been better than many people expected, say, in Senegal, possibly in Kenya. So why not do deworming more?
KREMER: The people who have worms are pretty poor people. The richer people are less likely to have worms within a given society. Richer people are probably more politically influential.
There’s also something about worms — they gradually build up in your body, and one worm is not going to do that much damage. The problem is when you’ve got lots of worms in your body, and even there, it’s going to take time.
I’ve had malaria. I don’t think I’ve had worms. I hope I haven’t. When you have malaria, you feel terrible. You go from feeling fine to feeling terrible, and then you take the medicine. You feel great afterwards. With worms, it’s much more like a chronic thing, and when you expel the worms from your body, that’s sort of gross. I don’t think, even at the individual level, do you have quite the demand that would be commensurate with the scale of the problem. That’s a behavioral economics explanation.
I think there are political issues and then there are behavioral issues. I would actually say that a huge, huge issue . . . This sounds very boring, but this falls between the Ministry of Health and the Ministry of Education, and each one of them has different priorities. The Ministry of Health is going to be worried about delivering things through clinics. They’re worried about HIV and malaria, tuberculosis, as it should be.
The Ministry of Education — they’re worried about teacher strikes. It’s very easy for something to either fall between the cracks or be the victim of turf wars. It sounds too small to be, “How can that really get in the way?” But anybody who’s spent time working in governments understands those things can very easily get in the way. In some ways, it’s surprising how much progress has been made.
Here’s one way the political economy works in favor. You mentioned democracy — I think that’s a factor. I actually find — and I don’t want to be necessarily a big fan of politicians — but in some ways, politicians hear how much this costs, and they think they can affect that many people for that small amount of money, and they’re like, “Hey, I want to get on that. Maybe this is something I can claim as an achievement.” We saw that in Kenya. We saw that in India.
COWEN: Let’s say the current Michael Kremer sets up another high school in Kenya. What is it that you would do that the current high schools in Kenya are not doing? What would you change? You’re in charge.
KREMER: Right. We’ve learned a lot in education research in recent years. One thing that we saw in Kenya, but was also seen in India and many other places, is that it’s very easy for kids to fall behind the curriculum. Curricula, in particular in developing countries, tend to be set at a fairly high level, similar to what you would see in developed countries.
However, kids are facing all sorts of disadvantages, and there are all sorts of problems in the way the system works. There’s often high teacher absence. Kids are sick. Kids don’t have the preparation at home, often. So kids can fall behind the curriculum.
Whereas we’ve had the slogan in the US, “No Child Left Behind,” in developing countries, education system is focused on kids at the top of the distribution. What’s been found is, if you can set up — and there are a whole variety of different ways to do this — either remedial education systems or some technology-aided systems that are adaptive, that go to where the kid is . . . I’ve seen huge gains from this in India, and we’re starting to see adoption of this in Africa as well, and that can have a very big impact at quite low cost.
In an excellent new video I cover the economics of COVID and how to get vaccines to market faster. Externalities, incentives, market design!
Corey White’s paper on flu vaccinations which I mention in the video can be found here.
Remember that this is just one of the many videos you can use to teach online with our textbook, Modern Principles of Economics.
Denver Post: A concerned passerby dialed 911 to report a sobbing woman sitting alone on a curb in downtown Denver.
Instead of a police officer, dispatchers sent Carleigh Sailon, a seasoned mental health professional with a penchant for wearing Phish T-shirts, to see what was going on.
The woman, who was unhoused, was overwhelmed and scared. She’d ended up in an unfamiliar part of town. It was blazing hot and she didn’t know where to go. Sailon gave the woman a snack and some water and asked how she could help. Could she drive her somewhere? The woman was pleasantly surprised.
“She was like, ‘Who are you guys? And what is this?’” Sailon said, recounting the call.
This, Sailon explained, is Denver’s new Support Team Assistance Response [STAR, AT] program, which sends a mental health professional and a paramedic to some 911 calls instead of police.
…The team has responded to an indecent exposure call that turned out to be a woman changing clothes in an alley because she was unhoused and had no other private place to go. They’ve been called out to a trespassing call for a man who was setting up a tent near someone’s home. They’ve helped people experiencing suicidal thoughts, people slumped against a fence, people simply acting strange.
The STAR team has just started to operate in Denver with a small budget but along with an older co-responder program which pairs mental health professionals with police it seems to be working well. On 350 calls, the STAR team has not yet had to call for police backup once. The benefit is not just that the STAR team is better at handling issues associated with poverty and mental health but also that it frees up police time to focus on crime. A good example of unbundling the police.
A neo-Hayekian approach would seek to reduce the knowledge problem by asking not what outsiders want, but what individual choosers actually do under epistemically favorable conditions. In practice, that question can be disciplined by asking five subsidiary questions: (1) What do consistent choosers, unaffected by self-evidently irrelevant factors, end up choosing? (2) What do informed choosers choose? (3) What do active choosers choose? (4) In circumstances in which people are free of behavioral biases, including (say) present bias or unrealistic optimism, what do they choose? (5) What do people choose when their viewscreen is broad, and they do not suffer from limited attention? These kinds of questions can be answered empirically. An ongoing program of research, coming from a diverse assortment of people, explores these questions, and can be seen to be producing a form of Hayekian behavioral economics – Hayekian in the sense that it can claim to be respectful of Hayek’s fundamental concerns.
In my vision of Hayekian behavioral economics, people draw excessively upon local information, because they did not evolve with technologies that sometimes allow them to see global or at least non-local considerations. The properties of the price system mean this often works just fine, but the corny recommendation to “expand your horizons” is nonetheless often good advice. Also along Hayekian lines, people apply small group norms (atavism!) to large groups settings (Twitter!). “Don’t be so neurotic!’ is thus also at the margin usually good advice.
Overall, I view Hayekian behavioral economics as an underexplored area, so I am very happy to see this paper come into existence.
In this latest Bloomberg column, I am referring in particular to the ages of the victims. The subtext of course is that many of the herd immunity theorists repeat (again and again) that most of the victims are quite old, which is indeed correct. Here is one excerpt:
By contrast [to 9/11], about 3,500 Americans die each year in fires. To repeat: That is each year. Yet Americans have not responded to deaths by fire as they did to 9/11, nor has a major public discussion ensued.
To be clear, the U.S. probably should do more to limit the number of fire deaths. But they do not threaten the nation and constitutional order in the way that terrorist attacks do. How people die is crucial in helping a nation and society scale its response and frame the debate over what to do.
Covid-19 is obviously more like 9/11 than it is like the annual toll of fire deaths. It commands the headlines every day, has created a global economic depression, is reshaping global politics and the balance of power, causes extreme stress for millions and has significantly harmed America’s global reputation. Yes, there have been some anxiety-driven overreactions, but it is inevitable that humans will respond dramatically to a major worldwide pandemic.
To be sure, the number of U.S. victims is high — 220,000 and counting, plus some number of excess deaths from broader causes. But the event itself is so cataclysmic that “downgrading” those deaths by saying many of the victims were elderly doesn’t make a big difference in terms of formulating an optimal response.
And to close:
Pandemics have been civilization-altering events since the beginning of human history, and they still are — especially if we do not respond properly. The need to get the response right, not the relative worth of the young to that of the old, is the main thing that we should be obsessing about.
From a GitHub repository:
This GitHub repository is a back up of my FAERSFix scripts.
The FDA Adverse Effect Reporting System is a horrifically dysfunctional quagmire of shockingly bad data. The data is not just bad for severe epistemological reasons, it is also poorly organized and riddled with flagrant absurd errors.
These scripts smooth over the very messy process of acquiring and basic debugging of the data. At the end of the process a user can arrive at a local repository of the FAERS data that is sane enough to begin to think about some kind of sensible analysis. To understand the disastrous state of the original source data, see the source code of the scripts which is designed to be a readable self-documenting manual demonstrating how to correct this mess.
Since the FDA’s gremlins never rest, these scripts will become obsolete. If you would like to contribute updates or fixes, feel free to send me a patch or a pull request. Good luck!
I thank Chris E. for the pointer.
I’ve tried it a few times, and I think it will become “a thing.” You can read about it here, though it is time someone did a more current article. It is the best forum invented to date for mid-size, friendly, intellectual chats. Broadly speaking imagine a Zoom call, with competing topic-named rooms, the video turned off, and better queuing and calling upon people procedures. It doesn’t seem to induce fatigue the way Zoom calls do. The software has a fluidity and ease of use that I hardly ever see, as usually I hate new apps that people tell me to try.
I don’t know that it will ever be “my thing,” mostly because I can read so quickly, which raises my opportunity cost of consumption. (Though you can read with it on in the background — is it ever the case that no one in the audience is listening? Would that even matter?) In any case, I suspect it will take some real mind-share away from Twitter and Facebook, and now is the time for you to start learning about it.
So far it is invite-only, though I assume it will be opening up more broadly. Furthermore, an invitation is not so difficult to get. Arguably there is a problem with who gets invited or deplatformed, though so far this seems to bother the (non-participating) people on Twitter more than it disturbs anyone performing on Clubhouse itself.
It is much more Tiebout-like than Zoom, so someday this also may be an incredible data source on what leads to useful conversations, which are the best governance rules, and so on.
The accelerated economic growth also accelerated our path along the inverted-U shape of risk. Faster growth means people are richer sooner, so they value life more sooner, so society shifts resources to safety sooner—and ultimately we will begin the decline in risk sooner. As a result, the overall probability of an existential catastrophe—the area under the risk curve—declines!
…The model also suggests a broader insight. Making people richer doesn’t improve their well-being, but it can also change what they value. In this case, people value life more as they grow richer, and valuing life more leads them to care more about reducing existential risk.
That is from a very useful essay by Leopold Aschenbrenner. It is from the newly appeared second issue of Works in Progress, an excellent on-line journal. And here is Samuel Hughes defending pastiche.
2. Markets in everything: breathable bacon mask edition.
4. New Yorker Eugene Scalia profile, just turn the negatives into positives. If you find that stricture appalling, ask yourself a simple question: what is your plan to increase the quantity of capital invested per worker? Is it better than his plan?
6. State-level data show the Phillips Curve to be flat. And the new relevant data set for state-level inflation rates, important stuff many more papers will be written from this.
That is the new book by Nicholas McDowell, and it is one of my favorite non-fiction works this year. Milton is today more relevant than he has been in a long time, excerpt:
Milton’s political development is shaped by his evolving understanding of the ways in which ‘tyranny’ — defined initially in ecclesiastical and clerical terms but which grows to encompass political organization — retards the intellectual and cultural progress of a nation. This understanding was shaped not only by historical experience of the unprecedented political turbulence of mid-seventeenth-century Britain, but by the interaction between that experience and his intellectula life. Milton’s period of intensive and almost entirely orthodox reading in political and religious history in the mid-1630s, the record of some of which survives in the notebook that was rediscovered in 1874, revealed to him how clerical censorship and heresy-hunting had suppressed intellectual and literary life in other countries. Milton regarded the cultural decline of Italy under the Counter-Reformation and Inquisition from the glory days of Dante and Petrarch, two of his pre-eminent post-classical models of the poetic career, as the starkest instance of this process. His tour of Italy in 1638-9 confirmed the lessons of his reading: that in nations where ‘this kind of inquisition tyrannizes,’ as he put it in Areopagitica, learning is brought into a ‘servil condition’ and the ‘glory ‘ of ‘wits’ is ‘dampt.’
Recommended! Every page is enjoyable, and you can profit from this book no matter your prior knowledge of Milton may be. A sure thing for the year end’s “best of” list.
You can pre-order here.
Fleetwood Mac’s Rumours is a top 10 album this week — more than four decades after its release — thanks to a viral TikTok video that’s had everyone vibing along to “Dreams.” Rumours now ranks seventh on the Billboard 200 chart, the publication announced last night, the album’s first appearance in the top 10 since 1978, a year after it debuted.
Rumours’ newfound popularity is thanks to a viral video from Nathan Apodaca, who goes by 420doggface208 on TikTok, that shows him skateboarding down a road and sipping cran-raspberry juice straight from the jug, while “Dreams” plays over top. It’s been viewed more than 60 million times since being posted at the end of September, and it’s even inspired both Mick Fleetwood and Stevie Nicks to sign up for TikTok over the past two weeks. Fleetwood recreated the viral video himself, while Nicks posted a video of herself lacing up roller skates and singing along. They have a combined 35 million views.
Here is the full story, via Fernand Pajot.